Institute for JusticeThe
use of eminent domain to seize mortgages from investors has been in
the news
recently. But, because of efforts to rescind protections
enacted by state courts and legislatures, we’re likely to hear more
about traditional eminent domain abuses: the seizure of modest,
well-maintained homes and businesses to benefit wealthy,
politically connected developers.  

Eminent domain abuse has dropped off considerably since its
high-water mark in 2005 when, in Kelo v. New London,
the Supreme Court ruled that local officials can condemn property
solely because they can imagine an alternate use for it that might
generate greater tax revenue.

Faced with outraged electorates, legislators in some 45 states
have now rewritten their eminent domain laws to protect property
owners from grabby local governments, or at least give the
appearance of doing so. Some of the most abusive states—Florida,
California, and Ohio—have enacted the strongest reforms by statute,
initiative, or court ruling.

There is no doubt that the economic downturn played a role by
dampening developers’ appetites for property. Even in states like
New York, which have done precisely nothing to rein in abuse
post-Kelo, new takings are rare. But as the economic
recovery gains steam, Kelo-style takings threaten to
re-emerge.

In March, Alabama reneged
on its reforms, which had provided significant protections for
property owners. Lawmakers, perhaps inadvertently, included
condemnation authority in a statute that expands tax subsidies for
industrial parks.

In California,
under the guise of promoting “transit-oriented development” and
affordable housing, legislators are plotting to revive eminent
domain authority for private projects. The effort failed this fall
but will be taken up again in January.

A bill in New
Jersey (A3615) that would weaken protections for property
owners sailed through the legislature, bolstered by support from
the New Jersey League of Municipalities and the New Jersey Builders
Association. Governor Chris Christie signed it into law last month.
According to the bill’s authors, the law codifies two state
court rulings requiring cities to prove that property is a threat
to public health and safety before seizing it and also provide
“fair and adequate” notice to property owners when eminent domain
is authorized.

In reality, the law attempts to remove the protections
proponents say it codifies. “This law is transparently an attempt
to go back to the old way of doing business,” says Peter Dickson, a
New Jersey-based land-use attorney.

For instance, far from demanding cities prove a property is a
threat to health and safety, the law says officials need only
assert that the property somehow impedes land assembly—a standard
that puts virtually every property in the state at risk.

The law also allows for the creation of “non-condemnation
redevelopment areas” where officials do not have eminent domain
authority—unless a property owner refuses to sell. In the case of
such refusal, a non-condemnation area can be transformed into a
condemnation area. The intended effect of the provision is to
confuse property owners.

“If you’re in a non-condemnation area,” says Dickson, “you’re
going to say, ‘why should I go hire a lawyer and spend tens of
thousands of dollars to challenge this designation if it doesn’t
put me under eminent domain?’” But failing to challenge the
designation within 45 days means you lose the right to challenge
it, even if condemnation occurs many years later.

In New London, Connecticut, the site of Kelo, after
tens of millions of dollars in public spending, the redevelopment
zone is a barren waste. Pfizer Inc., the intended beneficiary of
the plan, abandoned the city after its tax incentives expired.
“Successful” projects still rely on public subsidies for years
after completion, and their contribution to the tax rolls remains
debatable at best.

As a new chapter in urban renewal history begins,
post-Kelo and post-recession, there is some cause for
optimism. People across the political spectrum despise eminent
domain abuse. And, when legislators have yielded to powerful
interests, state courts are increasingly skeptical of calling
private development a public use. But without effective safeguards,
this chapter may look suspiciously like the last.