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Debate Club
DEBATE CLUB 2/21/05

Can Your Town Take Your Home?

Richard A. Epstein and J. Peter Byrne debate.

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This week, the Supreme Court hears the case of Susette Kelo and her neighbors in the Fort Trumbull neighborhood of New London, Conn. The city intends to evict these residents and develop their waterfront neighborhood claiming that doing so will enhance the city's tax-base.

The Fifth Amendment describes the power of eminent domain as a taking for public use with fair compensation. Kelo and her neighbors argue that expropriation of their property for a redevelopment project cannot be a "public use" if private developers eventually will possess the land.

Is New London taking the principle of eminent domain too far?


Richard A. Epstein is James Parker Hall Distinguished Service Professor of Law at the University of Chicago. J. Peter Byrne is Professor of Law at Georgetown University.

Epstein: 2/21/05, 09:05 AM
First, let me begin less with a limp disclosure and more with a proud proclamation: I wrote an Amicus Curiae brief for the Cato Institute on behalf of Susette Kelo and her fellow tenants to fight the eviction notice that the City of London issued to go forward with a so-called redevelopment project, which will accomplish, at most, nothing. One might have thought that the constitutional requirement that all takings of private property (even with payment of just compensation) be for a public use would rule out taking one private home in the off-chance that a fancier home might be built there in the future.

Alas, constitutional law has its strange twists. Unfortunately, what looks like the quintessential private use may—by Supreme Court alchemy—be transformed into a public use. The mischief started 50 years ago when our Supreme Court in Berman v. Parker held that the urban renewal program in Washington D.C. could rip down a perfectly serviceable department store as part of a larger slum clearance project. It compounded the error in 1984, in Hawaiian Housing Authority v. Midkiff, by allowing Hawaii to order a large landlord to convey individual units to tenants who were prepared to pay the requisite amount of compensation, holding that any "conceivable" public benefit could justify the state's action.

Both these decisions come out of that strand of the Progressive tradition that sees the use of local government power as an invariable force for good, and thus demands that courts defer to local land use planning decisions. Peter, I know you may not agree, but if building up the tax base counts as a "public use," then no one's home is safe. After all, the local government only has to project higher revenues from the newer use, without having to substantiate the claim. Although New London's brief tries to gloss over the massive deficiencies of this ill-conceived plan, it's worth noting that this redevelopment project has thus far consumed $73 million in Connecticut money to perform feasibility studies, do environment cleanup, and install infrastructure. But New London still hasn't found any viable projects to put on the nearly 90 acres of prime property it already owns. Why it feels driven to take about 1.54 acres owned by Ms. Kelo and her neighbors is anybody's guess. New London doesn't need their land for some essential public facilities. It doesn't even need that land to stop private holdouts from blocking a real urban renewal plan. Let's postpone asking whether other economic development plans past muster so long as we can agree that this overblown-redevelopment-plan-on-steroids doesn't.

Byrne: 2/21/05, 03:09 PM
Well, I suppose readers may find some disagreement here.

I, too, need to disclose that I co-authored an Amicus Curiae brief, for the National League of Cities, in support of New London. I did this because I am convinced that cities need to retain the power to take private property, upon payment of compensation, to spur economic and social revitalization. That does not mean that I would support every scheme any city might propose. In fact, I think support for existing neighborhoods usually the best policy for urban health. Nonetheless, cities must retain authority under the federal constitution to use eminent domain for strategic economic projects. That is what this case is about.

Why do cities need this power? Our cities house the majority of our poor citizens but a declining minority of economic activity. Modern transportation, communication, and power transmission allow most businesses to locate nearly anywhere. Cities find it hard to compete with rural, green field sites for large private investments that provide employment and a local tax base. One reason for this is that land in older towns is divided into many small plots containing aging buildings. Cities can overcome this disadvantage through using eminent domain to assemble large tracts at strategic locations where new economic development can occur.

As you point out, Richard, the Supreme Court unanimously has broadly permitted eminent domain for such purposes for at least 50 years. Actually, eminent domain has been used for a variety of economic development goals throughout the history of our country—railroads, canals, and irrigation ditches, for example—and the Supreme Court never has held a state or local exercise of eminent domain to violate the "public use" provision of the Constitution. Yet, we have enjoyed a thriving and secure private property system.

New London's plan here involves redevelopment of 90 acres near the Thames River for offices, hotels, residences, shops, and services, which the city expects will create hundreds of jobs and substantial new tax revenue. I do not know if it will work. I do know that the plan has been studied and publicly debated since 1998 and expressly approved by the city council and numerous state agencies, which have devoted millions in public funds for planning and acquisition. Every owner will be paid more than the constitution requires. Judgments about the wisdom of the project should be left to the people of Connecticut and New London, where the constitution places it.

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Epstein: 2/22/05, 09:00 AM
Peter, you offer a two-fold defense of the City of New London's actions, both of which I think fail at both a practical and a constitutional level.

First, on the practical level, giving cities blank checks over the property they condemn won't improve their decisions. Local governments can conduct all the hearings they want, but that doesn't prevent political intrigue from dominating their decisions. Peter, you speak about the need to assemble large contiguous plots of land. But this the City already has with over 90 acres in hand and it can't figure out what to do with them because the local economy doesn't support its grandiose ambitions. Yet when politics intervene, it will craft a convenient exception from the grim urban reaper. Hence the Italian Dramatic Club is spared from condemnation when the Brelesky house that abuts it is not.

In any event, redevelopment for residential purposes takes place all the time without this heavy-handed intervention in towns that do every bit as well, or indeed better, than New London, which has only entered into this unfortunate caper because of the state funds that it has received and spent. There are all sorts of ways to spur development. The relaxation of zoning restrictions and misguided building codes, for example, don't require local governments to throw out long-term residents for a lark.

Yes, there is a Constitution, that talks about taking for public use. That term "public use" has been expanded to allow the state to condemn vacant scrub land so that an overhead tram can carry ore down to the railroad. But as Tom Merrill (who wrote on behalf of the American Planning Association, alas) has pointed out, that case, and those like it, involved serious holdout problems on the one side and real lack of subjective value on the other. Peter, we are light years away from this. New London's brief seeks to invoke that image by branding these homeowners "sentimental holdouts." That just doesn't cut it. What they really are is individuals who don't want to be shoved off their land so that New London can expand its empty empire by another one and a half acres.

So often the law involves trade-offs and balances. The Constitution does not leave this judgment entirely to the people of New London and Connecticut, as you suggest. It places some limitations on majority rule. New London can say that redevelopment program will "create hundreds of jobs and substantial new tax revenue." But saying it doesn't make it true—or even plausible. Let the Court probe even an inch below the surface and Susette Kelo and her co-plaintiffs will be allowed to remain in their own homes.

Byrne: 2/22/05, 07:32 PM
I attended the oral arguments at the Supreme Court this morning. The Court seems poised between concern for the loss of her home suffered by Ms. Kelo and a conviction that a depressed city can take property to try to provide jobs for its citizens and tax revenue for government services. Richard, only Justice Scalia expressed any enthusiasm for your argument to limit "public use" to actual use by the public. Others insisted that it requires only contributing to some public benefit, like any legislative action. Some explored whether the Court could develop a judicial standard to look into whether a redevelopment plan involving takings would actually generate any public benefits, perhaps a "reasonable assurance" standard—something that you have argued for in these postings, Richard. But they seemed pessimistic that judges could appropriately or competently conduct these inquiries, which do involve second-guessing the wisdom of legislative decisions.

Interestingly, Justice Kennedy began a discussion, in which several other justices joined, about whether the problem here wasn't that homeowners do not receive enough compensation under the Court's interpretation of the requirement that condemnees receive "just compensation." As you know, the Court has long held that in most cases this requires only the payment of market value—what a willing buyer would pay a willing seller. But Mrs. Kelo is not just losing real estate of a certain value; she is losing a home that has strong personal value to her, as well as neighborhood social connections. She also does not share in the increase of value from the government's development efforts. If she received compensation for some of these, payments would come closer to making her whole, and the government would have to take such costs into account in deciding whether using eminent domain makes sense. While this issue cannot technically be decided in this case, I suspect that increasing the compensation paid to homeowners eventually may resolve the conflict of values in these cases.

I was struck anew by the disconnect between the uncompensated loss someone like Mrs. Kelo suffers and her lawyers' suggestion that it be remedied by limiting the public purposes for which her land could be taken. She would suffer the same uncompensated loss if her home were taken for a highway, which everyone agrees constitutes a public use, or for a privately operated shopping center. A compensation rule that focuses on her loss seems more responsive without unnaturally limiting the power of local governments. What do you think?

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Epstein: 2/23/05, 09:12 AM
Peter, it is a lot easier to get to attend a Supreme Court argument from Washington than it is from Palo Alto, but I much appreciate your balanced account of the argument, which jibes with that which I have heard from my friends on the other side. But let me offer a few reactions to the particulars.

(1) How could anyone not be upset about the raw deal that has been handed to Mrs. Kelo and her friends? The subjective losses are enormous and the public gains from this particular misadventure are nil.

(2) I think, Peter, that you misstate my position when you align me with Justice Scalia in insisting that under "public use" we can only allow takings for the use of the public. That position went by the boards well over 150 years ago. It will not be revived today; nor should it. There are cases of acute holdout difficulties where the property owner has little or no subjective value to his scrub land, but wants to prevent a mine owner from getting his ore to the railroad. In analogous cases, courts have long denied injunctions against trivial nuisance-like invasions by gas or smell if shutting down a power plant or steel mill causes massive economic dislocation. In effect they have allowed the private power of eminent domain. But here, we are light years from this situation because the equities are completely reversed: huge private loss, no public gain.

(3) It is hard to find a clean test that allows for a sensible balance, which is why Kennedy and company were a bit stymied. But, Peter I think you agree they can dispose of this case for Kelo and company without breaking a sweat by simply saying that the state must actually show what it hopes to do with this land before taking it. Warehousing never cuts it. More generally, I think that they should make the same kind of balancing tests that were used for the old injunctive relief cases, which means that most urban redevelopment plans go by the boards—a good thing since they tend to be economic losers, big time.

(4) You make the right point about the relationship between compensation and public use. If New London wanted to put up an Esplanade on the site of these homes, there would be an admitted public use, even if the landowners could show conclusively that there was huge public disutility from the venture. Their only protection is just compensation, which is undersupplied in all these takings cases. Ratchet compensation up to the right level, where folks get something for subjective value, moving expenses, good will, appraisal fees and the like, and the price disincentive will help out by dulling the taste for new land. But even here, we have to be careful. This last argument proves too much for it suggests that the public use language is a dead letter. And yet we need it because local government misbehavior takes so many protean forms that no single barrier can keep it in check.

Over to you Peter.

Byrne: 2/23/05, 07:28 PM
Richard, your interesting posting points both to where we agree and disagree. We agree that a significant problem stems from courts awarding home owners only the fair market value of their real estate and not awarding them anything for the "subjective losses" they suffer, such as being wrenched from a familiar and loved home and loss of a functioning community. Of course, there a problems measuring such losses and awarding compensation for them would give every resident an incentive to claim an undying desire never to leave even the most banal townhouse development. A court could handle this by requiring some reasonable compensation for such losses and allow states to enact statutory formulas that roughly approximate the loss, such as a percentage of the value of the home with a minimum dollar amount, as the English do in statutory "home loss" payments. Such an approach would address what I believe to be a major injustice: renters typically get little or nothing in compensation even though their personal attachments to their home may be much greater than their landlord's. I do not know if you would agree with all this and would be interested in your thoughts.

Where we disagree most starkly is in our comfort with democratic lawmaking. You see protean misbehavior by local government—which needs to be corrected by judicial supervision—everywhere. I see self-government, which while never pure, gives most of us a voice and is capable of innovation. Courts can protect rights and prod legislatures, but cannot address novel social or economic problems. In our case, you are clear that even if we can protect Ms. Kelo through full compensation, courts still need regularly to supervise local government to protect them or us from corrupt or monumentally stupid decisions. I think that the democratic process provides the best and most legitimate accountability, especially if it is amenable to reform from above, as municipal decision making is by state statutes. The abuses in eminent domain can be addressed through statutes improving procedures and changing the measure of compensation.

Not incidentally, I think New London's plan here is quite reasonable, so far as I understand it. They are redeveloping some 90 acres, strategically located between a new Pfizer research facility—the largest private investment in New London in many years—and the water; they are constructing a new park and providing substantial infrastructure and environmental remediation in their best shot to encourage private development of offices, hotels, and residences. The plaintiffs' property lies in the middle of the 90 acres and in a flood plain. The elevation of the land needs to be raised for development and that cannot be done with functioning inholdings. This is not warehousing, but a sensible, long term development plan, which the people of New London have knowingly approved and financed.

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Epstein: 2/24/05, 08:50 AM
Peter, I much enjoyed your last posting and agree with you on the first point about the levels of compensation that should be paid in these cases, but disagree with you on both what I regard as the extraordinary deference to local governments and their democratic processes and your rather cavalier whitewashing of what is in fact a misguided and overblown redevelopment plan. I'll take the points in order.

There is no doubt that you're correct to note that cracking the subjective value nut is not easy to do. In world without eminent domain, we know that people attach subjective value to their homes for the simple reason that they do not put them on the market. Why should they if the subjective value is higher than any fair market value they could fetch. That fact alone suggests in this case subjective value is positive, even if we can imagine other cases in which it is not. But how much higher becomes a harder question: no doubt that folks will have an incentive to hold out for huge sums if they thought they could get it. But again, here that is not the issue: these folks have not asked for a dime and would, I suspect, make a solemn vow never to seek condemnation or compensation if they were left alone. But in those cases for admitted public use, we have to set a premium, and I think that a statutory premium in the order to 10 or 15 percent plus moving costs, appraisal fees, and, for business, loss of good will is called for. My bill is probably a bit steeper than yours, but there's no yawning gulf.

On the democratic lawmaking side, I am baffled by any claim that democratic processes provide "the best and most legitimate protection." The issue here goes far beyond the public use question in Kelo. It covers the incredible amount of factional intrigue that is routine in zoning decisions, variances, and any land use decision. The political power of faction is so great than those with influence will regrettably have their way. And yet our courts stand aside as if the legislature were composed of angels.

This case illustrates the corrupt (or at least monumentally stupid) decisions that local governments can make. Virtually all of the 90 acres are already in public hands. The mess-up with the hotel which was supposed to serve the Pfizer plant has nothing to do with Susette Kelo and company. It reflects an ossified public process that moves so slowly that Pfizer has found other places to house people who use its facility. The park and remediation of an extravagant scale can take place without condemning these homes. The Italian Dramatic Club lies in the middle of this supposed flood plain and yet is spared, while the Brelesky house that abuts it is taken over. Most of the other houses are off to the side and out of harm's way. The tax projections are overinflated because of all the new development, done without eminent domain, located outside city limits. "Quite reasonable," Peter, no way. This is urban renewal at its worst.

Byrne: 2/24/05, 06:37 PM
How pleasant to blog while Washington shuts down under two inches of snow!

Richard, your concern for Ms. Kelo is exceeded only by your misanthropy over democracy, especially in local government. Indeed, these questions do go far beyond the meaning of public use. Your use of the invective, "faction," invokes Madison's argument in Federalist 10 that smaller units of government can be swayed more easily by passionate or well-organized narrow groups than large units like the federal government. There is some realistic wisdom in that, and, on balance, I am glad that municipal governments are subject to state legislative control. (I know of no such faction in New London, however, other than those alarmed at its economic prospects.) But local government also facilitates participation and reflects people's serious stake in their homes and communities, yet permits easy exit by moving to another town. Polls show Americans prefer and have more trust in their local governments than in state or national government.

It troubles me that you would inflate vague property rights to limit severely local self-government. If I had to live in an Epsteinian universe, I would feel more comfortable doing so if it had been adopted by a majority vote than if it was imposed by a judge, however angelic his purposes. Courts can enforce rights, but we are now assuming that Ms. Kelo's right to just compensation can be fully vindicated.

As to the meaning of the key disputed term, "public use," it seems persuasive to me that it is a synonym for "eminent domain," and was not intended to provide a normative limit on when eminent domain can be used. The clause only requires that compensation should be awarded in takings by eminent domain, but need not be in other takings, such as forfeitures and taxes. The syntax of the takings clause supports this, as well as the fact that there is no evidence of controversy at the time of the bill of rights concerning the scope of the power of eminent domain. The first state constitutions protected citizens only against takings without legislative consent. Thus, eminent domain is a legislative power, generally limited by only the loose standards of public welfare of the due process clause. Happily, this fully accords with the conclusion of Berman and Midkiff that the scope of public use and that of the police power are coterminous. Don't you think that an argument that tidy must be right?

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Epstein: 2/25/05, 08:54 AM
Peter, I prefer the gray of Palo Alto (which has few peers in oppressive land use regulation) to the snow of Washington. But as a man with a perpetually sunny disposition, I am puzzled at the use of the term "misanthropy" to describe my attitude toward democracy. My invocation of Madison on "faction" is not invective. It's description.

Indeed, you share my fears. If popular democracy worked as smoothly as you imagined, then why impose a just compensation requirement on takings? Instead leave it to the community at large deliberate over whether to exile some of its members in order to advance others. That is done all the time with zoning restrictions that cost owners and society thousands of dollars, and yet somehow local government never offer compensation unless their feet are held to the fire.

Let me test with you an analogy about both the use and the limits of democratic institutions. Lots of individuals live in condominiums and gated communities, all of which have to resolve the tension between matters for the association and those left to individual owners. The internal democratic processes determines assessments, just as local government determine taxes. But in both cases the taxing authority can choose the rate, but can't make arbitrary assessments of the value of the individual homes. That's a sensible accommodation between vested rights (on proportions) and collective deliberation (on total amounts). In addition, the condo or community association can decide on matters of dècor, on traffic rules, on exterior design and the like. But the nondemocratic constraint is a powerful nondiscrimination rule that blocks the dominant faction from picking on some isolated minority.

So what's the proper analogy to Kelo? It is a majority of the condo members throwing out by democratic processes individual homeowners after buying out their units because they want fancier tenants in the building. That never happens in a private association, why on earth allow it in political settings when there is no clear infrastructure need or holdout problem. All democracies are constitutional democracies. We just disagree about the limits.

Nor, textually, will your last ditch attempt to treat public use a synonym for "eminent domain" save the day. "Nor shall private property be taken by eminent domain without just compensation" is not equivalent to the real Fifth Amendment. For one thing it suggest that the takings clause has no role in dealing with regulations, e.g., zoning, that fall short of eminent domain, which is clearly wrong. For another it converts a clear limitation on the state power to take into a primer on how to exercise that power. Even this Supreme Court says that the eminent domain power does not allow a naked taking from A to B. Your reading allows that to happen. And it misses the key point that voluntary transactions are often allowed when coerced transactions are not. Don't read an essential limitation out of the clause.

As to the history, well it is very sparse. Originally the federal takings clause did not govern the states at all, so we don't quite know how anyone thought it might play out in the context of local government. And even with respect to the use of federal power, we have virtually no coherent legislative history on a provision thought fully justified on natural law grounds. But if we understand how private voluntary organizations limit democratic power with vested rights, then to use your words, "don't you think an argument that tidy must be right?" If so, then the Supreme Court is sadly naïve about how to reconcile collective responsibility with individual rights, which is why jaws drop when people read the facts in Kelo.

Byrne: 2/25/05, 04:59 PM
Richard, I think the analogy to the gated condo association doesn't work—and for interesting reasons. First, you question whether an association would buy out a member because they want a "fancier" member. New London's is doing something quite different. It is restructuring the ownership, physical character, and use of 90 acres to create jobs and revenue. There is no judgment about Ms. Kelo as a person or citizen.

Second, a city is far more complex than a condo association. It serves a far wider range of citizens and must do so whether they can pay their condo fees or not. Our cities, in fact, contain the greater part of the nation's poor and unemployed. At the same time, they contain a shrinking percentage of national employment. Many social observers have decried the consequences of this isolation of the urban poor from new employment opportunities and successful neighbors and have noted the heavy burden of the social services that cities need to meet. Our national government does far less for cities and the poor than formerly.

There is a painful irony here. Admittedly, in economic redevelopment projects, the poor are more likely to be displaced than the rich, because they often live in those areas with the lowest economic value. But the urban poor also benefit from new jobs and increased municipal revenues that support school and other services. Cities are the most plausible governmental champions of the poor in our current political configuration, because their voices can be heard there. Barring depressed cities from using eminent domain for redevelopment would harm the poor more than any other segment of society.

A fair appraisal of New London's plan, process, and actions will lead the Supreme Court to uphold the exercise of eminent domain in this case. The Court may well express concern about some other shoddy, unplanned takings that have stirred legitimate concern. But the power of cities to act to preserve their economic futures must and will be affirmed. Legitimate concerns can best be addressed through state statutes mandating fuller compensation and better process. Richard, I look forward to seeing what will rise at Fort Trumbull.

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