Property Rights Update
January 19th, 2010 - 42 Comments
With the Supreme Court now weighing a decision in yet another property rights/eminent domain case, Smeal’s Austin Jaffe explains the concepts behind the Fifth Amendment’s Takings Clause and recent developments in property law:
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In recent years, thousands of property rights disputes involving eminent domain claims by governments seeking to convert private property into something else have appeared. Traditionally, the cases dealt with government plans to limit, alter, or suspend private usage for which property owners typically claimed that these plans constituted a taking. There is a fundamental difference between “takings” and “regulations”: only the former are compensatory under the Fifth Amendment of the U.S. Constitution. Every government agency generally tries to argue that their action was regulatory; every citizen argues that it was a taking of private property.
Historically, the debate was generally about what constituted a taking. “Just compensation” was required to be paid if it was a taking and the power of eminent domain could only be used for takings when there was a “public use” involved. This is the literal language in the Fifth Amendment.
In 2005, Kelo v. New London shifted the focus away from the issue of public versus private usage. In an amazingly unpopular and yet far-reaching 5-4 decision (e.g., to date, most states have banned or eliminated eminent domain usage for economic development via legislation or court decisions), the U.S. Supreme Court allowed governments to take private property and hand it over to other private owners if they were expected to redevelop the site and increase its value. So much for the importance of private ownership protected by the Constitution.
Pfizer Corporation planned for a $270 million research facility on 26 acres. According to The New York Times, Pfizer also negotiated with city officials to get an 80 percent reduction in property taxes for ten years on its existing facility. Tax concessions as part of development plans are par for the course now, even when the government is converting other people’s property.
It turns out that Pfizer recently decided to decline to build the new facility and is moving out of New London entirely only a few years after the controversial taking. The neighborhood is gone and Pfizer never built the new facility. Instead it has decided to move out and terminate operations.
Only seven states use the Kelo case as a precedent for takings, including New York, New Jersey, and Florida. A growing controversy involves the New York State Urban Development Corp., who wants to condemn a dozen business and home sites in Brooklyn in order to give the owners of the New Jersey Nets space to build a new arena. To paraphrase the famous Michigan Poletown case, “Kelo Lives!”
The latest Supreme Court property rights case is Stop the Beach Renourishment v. Florida Department of Environmental Protection. Beginning in 2003, according to reports in The Wall Street Journal, homeowners objected to the state changing their property lines under a “beach renourishment” program. After adding sand to the beach front, typically due to erosion, the State of Florida claimed itself owner of the area where the sand was brought in and thus owned an area in between the waterfront property and the ocean. In a 5-2 decision, the Florida Supreme Court upheld the right of the state based upon their interests in protecting natural resources and promoting recreation areas.
The Journal reported on oral arguments in December. New Justice Sonia Sotomayor is quoted as saying, “None of your actual use rights, pleasure rights, or anything else has been changed.” However, the more conservative justices are more likely to see a taking. “Suppose that a city … wanted to attract more students who were going to the beach in Florida for spring break, and so therefore it decided to create a huge beach in front of privately owned homes,” Justice Samuel Alito proposed. “You could have televised spring-break beach parties in front of somebody’s house.”
As with other split-decision cases, Justice Anthony Kennedy may hold the key vote. The Journal notes that with Justice John Paul Stevens recusing himself since he is a property owner in Florida, there are likely three liberal and four conservative leanings. If Kennedy joins the liberal wing, the lower court ruling will stand. If he sides with the conservatives, it will stop the compressing of private property rights since the Kelo decision.