Our Constitution places the ownership of private property at the very heart of our system of liberty. — Barack Obama1
The right to private property is a central part of the American constitutional tradition and of our political culture. Politicians, judges, business leaders, activists, and ordinary citizens all claim to support it—at least in principle. But for many decades, federal courts—and especially the Supreme Court—have given constitutional property rights far less protection than that routinely granted to other constitutional rights. To a large extent, they have left those rights at the mercy of the very government officials that they are supposed to protect us against. This trend was usually tolerated and sometimes actively supported by politicians in both parties and by influential business interests. And, despite occasional protest, it was for many years largely ignored by the general public. Nowhere was the low status of constitutional property rights more clear than in the court’s and society’s toleration of the government’s use of eminent domain to take private property and transfer it to other private interests, on the theory that such policies might provide often vague and uncertain benefits to the public.
In The Wealth of Nations, Adam Smith famously argued that private property and decentralized market transactions generate prosperity as if “by an invisible hand.”2 The use of eminent domain to promote “economic development” is based on the exact opposite assumption: that resources will often fail to generate as much wealth as they should unless their allocation is controlled by government. Instead of the invisible hand of the market, eminent domain relies on the grasping hand of the state. Over the last century, state and local governments have greatly expanded their use of that grasping hand. The expansion was significantly facilitated by judicial decisions that reinterpreted state and federal constitutions to allow the condemnation of private property for almost any purpose.
Kelo and the State of Constitutional Property Rights
The contradiction between our supposed devotion to constitutional property rights and the federal courts’ reluctance to enforce them was laid bare to much of the public by the Supreme Court’s 2005 decision in Kelo v. City of New London,3 the subject of this book. The Court ruled that it was permissible for the government to condemn private property and transfer it to other private parties in order to promote “economic development,” despite the fact that the Fifth Amendment’s Public Use Clause permits takings only for “public use.”4 So long as the government paid “fair market value” compensation, it could take private property for almost any purpose that might create some sort of public benefit. The Court therefore upheld the condemnation of fifteen residential properties in order to facilitate a private development project in New London, Connecticut.
Ironically, the Court’s ruling in Kelo came at a time when protection for property rights was experiencing a modest revival in the federal judiciary and a more significant one at the state level. The very fact that Kelo was a close 5-4 decision was itself an important sign of change. Twenty or thirty years earlier, the outcome would probably have been far more lopsided, perhaps even a unanimous victory for the government. Justice Sandra Day O’Connor, author of the principal dissent in Kelo, had previously written a leading decision where a unanimous Court had allowed government to condemn property for almost any reason “rationally related to a conceivable public purpose.”5 As we shall see, even the majority opinion in Kelo was slightly more protective of property owners than previous precedent, which had already largely gutted the Public Use Clause as a meaningful constraint on takings.6
Even so, by holding that government could condemn property for virtually any “public purpose,” without having to provide any substantial evidence that the supposed public purpose would actually be achieved,7 Kelo perpetuated the Court’s long-standing failure to enforce the Public Use Clause of the Fifth Amendment and the more general second-class status of constitutional property rights. While the Court ruled that the clause gives property owners a right not to have their property taken for other than a “public use,” it left the definition of “public use” almost entirely up to state and local governments.
Few, if any, other rights protected by the Bill of Rights have been so completely left to the tender mercies of the very governments that they are intended to protect us against. As Justice Clarence Thomas put it in his dissenting opinion, federal courts protect individual rights “when the issue is only whether the government may search a home. Yet today the Court tells us that we are not to ‘second-guess the City’s considered judgments,’ . . . when the issue is, instead, whether the government may take the infinitely more intrusive step of tearing down . . . homes....
Though citizens are safe from the government in their homes, the homes themselves are not.”8
The aftermath of Kelo was in some ways even more striking than the decision itself. The ruling led to an unprecedented political backlash. Polls showed that over 80 percent of the public disapproved of the Court’s ruling, and it was also denounced by politicians, activists, and pundits from across the political spectrum.9 In the years following the decision, both the federal government and forty-five states passed new laws limiting the using of eminent domain. No other Supreme Court decision has ever led to such a broad legislative reaction. And, arguably, none has been so widely unpopular. The decision was also negatively received by most of the state Supreme Courts that have considered whether Kelo should served as a guide to the interpretation of their state constitutions’ public use clauses, many of which have wording similar to the federal one.10
At the same time, however, many of the new state laws supposedly limiting the use of eminent domain turn out to impose few or no genuine constraints on governments’ power to condemn property. The Kelo backlash led to significant gains for property rights but not nearly as many as first appears.
Moreover, many jurists and a substantial majority of constitutional law scholars continue to believe that Kelo was rightly decided and that a contrary decision would have been wrongheaded and dangerous. Many academics and land-use planners also contend that Kelo-like takings are a valuable tool for alleviating blight and promoting development.
The debate over property rights stimulated by Kelo continues and shows no sign of definitive resolution. This work is the first book-length treatment of that debate by a legal scholar.11 While giving serious consideration to opposing views put forward by many respected jurists and scholars, I conclude that the Kelo decision was a major error that the Court should eventually overrule. Both originalist and many “living Constitution” theories of constitutional interpretation point in that direction.
I also argue that stronger judicial enforcement of public use limits on takings has important practical benefits. In many cases, it is the only way to protect poor and politically weak property owners against takings instigated by politically powerful interest groups. The property saved often has great value for its current occupants that goes well beyond its market price. Such is regularly the case with homes, small businesses, houses of worship, and other types of property that are often targeted by economic development and blight condemnations.
Far from being essential to development, Kelo-style condemnations often harm communities more than they benefit them. By destroying homes, small businesses, schools, and other preexisting uses of land, and by undermining the security of property rights, economic development takings routinely destroy more economic value than they create. As we shall see, such has been the fate of the Fort Trumbull neighborhood in New London, where the condemned land still lies empty some ten years after the Supreme Court ruled that the homes that once stood there could be taken as part of what Justice John Paul Stevens’s majority opinion called a “ ‘carefully considered’ development plan” intended to boost the local economy.12 Most of the time, private property rights and economic development are not competing values, but mutually reinforcing ones. A major lesson of modern development economics is that secure property rights are an essential building block of long-term growth.13
This book does not attempt to provide a comprehensive theory of constitutional property rights. It also does not examine all aspects of the Takings Clause of the Fifth Amendment, which states that “nor shall private property be taken for public use, without just compensation.”14 For example, I do not address the question of what kinds of government restrictions on the use of property qualify as “takings” that require compensation under the amendment.15 Instead, I use the Kelo case as a vehicle for examining the more limited but still vital issue of what kinds of takings are forbidden by the federal Constitution because they are not for a “public use.”
To avoid terminological confusion, I will use the term “Takings Clause” to refer to the takings provisions of the Fifth Amendment as a whole, including the requirement of just compensation for takings of private property and the requirement that any taking be for a public use. I utilize
“Public Use Clause” to specifically indicate the prohibition against takings that are not for a public use.
Outline of the Book
Chapter 1 describes the origins of the Kelo case. It briefly tells the story of how the use of eminent domain for a development project in a small Connecticut city led to a case that reached the Supreme Court and became a national sensation. I do not attempt anything close to a complete retelling of every aspect of the Fort Trumbull story.16 But it is important to understand why the New London authorities sought to condemn the property in question, why the owners decided to resist, and how they were able to continue the fight all way to the Supreme Court.
The New London Development Corporation, a government-sponsored nonprofit agency granted the power of eminent domain by the city, sought to condemn the properties because they genuinely believed that it would benefit the community to transfer the land to a private developer who might then build new office space and other facilities that might promote economic development in the area. At the same time, however, the nature of the plan was greatly influenced by Pfizer, Inc., which hoped to benefit from the condemnation, and with which NLDC leaders had close ties.
Most accounts of the Kelo litigation and other takings cases focus on those property owners who choose to resist condemnation and fight the issue in court, while largely ignoring those who “voluntarily” choose to sell under threat of eminent domain rather than resist. But it is also important to consider the latter. In many cases, their decision was anything but genuinely voluntary. New London authorities used a variety of pressure tactics to compel owners to give up their land without a fight.
Seven of the targeted property owners nonetheless chose to resist the takings. They rejected the NLDC’s offers because they preferred to keep their land, and believed that the process by which the condemnations were decided on and implemented was unjust. Despite their dedication and commitment, the resisters would almost certainly have had to give in quickly if not for the intervention of the Institute for Justice, a libertarian public interest law firm with a long-standing commitment to property rights issues. It was IJ’s involvement that enabled the targeted owners to contest the takings in state court and in the court of public opinion, and ultimately to reach the federal Supreme Court.
Chapter 2 steps back from the immediate circumstances of Kelo and traces the process by which we got to a point where most experts believed that the federal courts would not and should not provide effective protection for the Kelo plaintiffs and others like them. At the time of the Founding, the dominant view was that there are strict limits to the power of government to condemn property for transfer to private interests. This was even more clearly the case at the time the enactment of the Fourteenth Amendment made the Bill of Rights—including the Fifth Amendment—applicable against state government in 1868.
Although expert opinion was far from unanimous, the majority of state supreme court decisions of the era ruled that “public use” encompassed only condemnation of property for government-owned facilities or private ones that the general public had a legal right to utilize, such as common carriers or public utilities. Leading nineteenth-century legal treatise writers, such as Michigan Supreme Court Justice Thomas Cooley, held similar views. In addition, allowing states to condemn property for any purposes they wanted was profoundly antithetical to the main reason why the framers of the Fourteenth Amendment sought to apply the Takings Clause to the states in the first place: the fear that hostile southern state governments would otherwise violate the property rights of African Americans and white Unionists in the south.
Late nineteenth and early twentieth century federal court decisions were also largely consistent with a narrow view of “public use.” This point is much misunderstood, because both the Kelo Court and some academic commentators have mistakenly conflated “public use” decisions with cases where takings were reviewed under the Due Process Clause of the Fourteenth Amendment. In the early twentieth century, the Supreme Court had not yet concluded that the Fifth Amendment applies to state governments. So cases challenging state takings in federal court could only proceed on the basis of claims that they violated the Due Process Clause’s prohibition on state action depriving individuals of “life, liberty, or property” without “due process of law.”17 The early twentieth-century Court was often deferential to the states in assessing such claims. But it was much less deferential in assessing federal government takings, to which the Fifth Amendment did apply.
By the mid-twentieth century, however, the Supreme Court had reinterpreted the Public Use Clause as allowing almost any condemnations authorized by the legislature. This change reflected the devaluing of property rights brought on by the rise of Progressive and New Deal ideology, and the experience of the Great Depression. The new consensus on public use was not seriously challenged for many years. Nonetheless, the previous history suggests there is a strong originalist case for a less deferential judicial approach to public use issues. Scholars and jurists who believe that the Constitution should be interpreted in accordance with its original meaning at the time of enactment should be sympathetic to the idea of overturning Kelo.
Chapter 3 explores the real-world effects of a broad interpretation of “public use,” which gives free rein to economic development takings and “blight” condemnations. Such condemnations have allowed politically influential interest groups to forcibly displace hundreds of thousands of people, most of them poor or politically weak. In addition, they often create more harm than benefit from the standpoint of promoting economic development. Some blight and economic development takings might be defensible on the grounds that they are needed to overcome “holdouts” who would otherwise block beneficial development projects. On the whole, however, they tend to destroy far more than they create.
The real-world effects of economic development and blight condemnations suggest that there is a strong “living Constitution” case for overruling Kelo, as well as an originalist one. Many judges and legal scholars who reject originalism have good reason for rejecting Kelo as well.
There are a number of different variants of living Constitution theory, not all of which have the same implications for public use doctrine. But some of the most influential versions emphasize the need to use judicial review to protect groups that lack influence in the political process, especially when they are threatened with severe harm by government policy.18 Others emphasize the need to adjust judicial doctrine to modern conditions by taking due account of new information and societal change, much as courts make similar adjustments in common law cases.19 Under either or both of these approaches, there is a strong argument for enforcing tighter limits on economic development takings and blight condemnations. Such takings have seriously harmed the poor, racial minorities, and the politically weak. And modern experience increasingly suggests that they cause more harm than good and that the political process cannot control them on its own.
There is also a strong case against Kelo from the standpoint of “popular constitutionalism,” the theory which holds that constitutional interpretation should be influenced by public opinion and social movements;20 few if any Supreme Court decisions have generated as much sustained public opposition as Kelo. Similarly, there is a strong living constitution argument against Kelo based on Ronald Dworkin’s influential view that the Constitution should be interpreted in light of liberal moral theory.21
In chapter 4, I consider the reasoning of the Supreme Court’s majority, concurring, and dissenting opinions in Kelo. While the decision was in line with existing precedent, it had few other virtues. Much of its reasoning is flawed, internally contradictory, or fails to take account of the way eminent domain functions in the real world.
Surprisingly, even Justice John Paul Stevens, author of the Court’s opinion has admitted that his ruling was in part based on an “embarrassing to acknowledge” error: conflating nineteenth- and early twentiethcentury Due Process Clause cases with Public Use Clause precedents.22 While Stevens continues to believe the outcome in Kelo was justified on other grounds, his admission undercuts the claim that the ruling was required by adherence to “a century” of precedent.23 Justice Anthony Kennedy’s crucial concurring opinion also has important shortcomings. The dissenting opinions of Justices Sandra Day O’Connor and Clarence Thomas make some important and valid points. But they are not without noteworthy flaws of their own, especially in the case of Justice O’Connor’s efforts to reconcile her position in Kelo with her own opinion for the Court in the 1984 Midkiff case.
Chapter 5 considers the dramatic political reaction to Kelo, which generated a wider backlash and more state legislation than almost any other decision in modern Supreme Court history. The massive political and legislative reaction to Kelo was an important boost for the cause of property rights. The issue attracted more public attention than ever before, and a number of states passed strong reform legislation, particularly those that enacted it by referendum. But a majority of the new reform laws actually did little or nothing to meaningful constrain economic development takings, despite overwhelming public support for banning them.
In chapter 6, I address the question of why the legislation inspired by public revulsion against Kelo was often ineffective. Several factors account for this result. But a particularly important one was widespread political ignorance. Survey data shows that the vast majority of voters had little understanding of the reform laws passed in their states. This enabled legislators to pass off cosmetic reforms as genuine constraints on eminent domain, an opportunity that many were inclined to take so as to simultaneously satisfy both the demands of the public and those of influential interest groups who benefit from relatively unconstrained use of eminent domain. As we shall see, political ignorance also helps account for two other important aspects of the Kelo backlash: the fact that it happened at all, and the relatively greater effectiveness of reforms enacted through the referendum process, as opposed to ordinary legislation. The history of the Kelo backlash undercuts long-standing claims that judicial intervention is not necessary to ensure protection of constitutional rights that enjoy broad majority support.
Chapter 7 focuses on the judicial reaction to Kelo in state and lower federal courts. Although less well known than the high-profile political backlash, the judicial reaction has important implications for the future of property rights. Since Kelo, several state supreme courts have considered whether or not that decision’s interpretation of the Public Use Clause of the federal Constitution should guide their own interpretations of similar clauses of their respective state constitutions. Overwhelmingly, the answer has been “no.” The supreme courts of Ohio, Oklahoma, and South Dakota have all repudiated Kelo and endorsed narrower interpretations of public use.24 Post- Kelo state supreme court decisions in several other states have imposed tighter constitutional scrutiny on takings than Kelo does, even though they did not directly repudiate it. This reaction is in sharp contrast to the reception that greeted earlier Supreme Court decisions interpreting public use broadly, most notably the 1954 case of Berman v. Parker,25 which was soon adopted by many state courts as a guide to interpreting state public use clauses.
State and federal courts have also struggled to make sense of Kelo’s admonition that “pretextual” takings are unconstitutional, since the government is not “allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit.”26 The Kelo Court was extremely vague on the question of how judges are to distinguish a pretextual condemnation from a legitimate one. Since 2005, state and federal decisions have come up with at least five different approaches to this issue. Each of them has notable shortcomings. Eventually, the division of judicial opinion on this issue will probably have to be resolved by the Supreme Court. It could well be the vehicle for bringing the Public Use Clause back to the high court once again.
In chapter 8, I consider some possible strategies for alleviating eminent domain abuse. Scholars and others have proposed a variety of ways to curb harmful and inefficient takings without categorically banning blight and economic development condemnations. These include increasing the compensation paid to property owners whose land is taken, subjecting such condemnations to “heightened scrutiny,” giving homes greater protection against takings than that extended to other property owners, and giving local communities a stronger say in condemnation decisions.
Many of these reform proposals have merit. But a categorical ban on economic development and blight condemnations is still likely to be better than any of them. Some of the proposed alternative reforms might also have unanticipated negative side effects. For example, increasing compensation too much could lead politically influential property owners to actually lobby for the condemnation of their land.
In contrast to critics who argue that a ban on economic development and blight condemnations goes too far, some contend that it is likely to do little good because it does not go far enough, thereby enabling government to engage in much the same kinds of abuses by other means. I contend that such criticisms are too pessimistic. While banning blight and economic development takings will not end all harmful uses of eminent domain, it would be a major improvement over the status quo.
The conclusion summarizes the key lessons of the Kelo story and its implications for the future of constitutional property rights. Although the Kelo decision was a significant setback for property rights supporters, it was also an important sign of progress for them. Critics of Kelo have not won a definitive victory in the ongoing debate over public use and still face strong opposition. But the question is now a live controversy among scholars, judges, and other experts. Among the general public and a wide range of activist groups, opposition to Kelo is both broad and deep. It is one of the rare issues that cuts across racial and ideological lines. Since Kelo, it can no longer be said that the revival of public use constraints on takings is a hopeless cause supported only by a few quixotic extremists. The decision and its aftermath also reinforce the important lesson that effective constitutional reform movements require both litigation and political action. The two are mutually reinforcing rather than mutually exclusive strategies for change.
The debate over Kelo, property rights, and public use will surely continue. This book is unlikely to definitively resolve a conflict that has continued in various forms for some two hundred years. But I hope it will make a contribution to the discussion.