Wednesday, March 02, 2005

Thinking about Eminent Domain

The Manhattan Institute’s
Center for Rethinking Development
Ideas that shape the city’s planning, housing, and development

A Monthly Newsletter by Julia Vitullo-Martin, MI Senior Fellow

Thinking about Eminent Domain

Julia Vitullo-Martin, February 2005

The question of whether government has the right to condemn private property—and, in the name of a public purpose, turn it over to private developers—is once again before the U.S. Supreme Court in Kelo v. New London. And though the case is from Connecticut, New York City's lawyers have been prompt on the scene, quick to support yet another expansion in the government's arsenal of property takings. "The City of New York has been in the forefront of the urban renewal movement," boasts Michael Cardozo, Corporation Counsel, in the first sentence of the city's friend-of-the-court brief.

Indeed it has been, although that seems an odd thing to boast about. In The Federal Bulldozer Martin Anderson concluded that through 1962 New York State alone accounted for 32.4% of the entire country's federally funded urban renewal construction activity—virtually all in New York City. New York neighborhoods are only now recovering from the depredations of urban renewal, which condemned enormous swaths of property throughout the five boroughs, demolishing their buildings and leaving vacant lots where homes and businesses had once stood. Some neighborhoods, such as East Harlem, where urban renewal cleared one-third of the land to build the Wagner, Jefferson, and Taft public housing projects, have not truly recovered and probably never will—at least until the blight caused by urban renewal is undone.


Although the courts have repeatedly said that governmental takings of almost any kind are legal so long as just compensation is paid, the issue of public takings for private benefit has not gone away for many reasons. First, it just strikes many Americans as wrong. Why should tax dollars be used to forcibly take private property from one owner in order to turn it over to other private owners for their own profit? Second, the takings seldom result in the promised public benefits. Urban renewal, for example, did not eliminate slums, as promised, or even provide superior housing to most of the millions of poor people displaced from their homes. Third, when economic development is the given public purpose, the wealthier and more powerful private entity will inevitably win over the smaller and poorer. Eminent domain acts as a redistributive tax system, taking from the poor and giving to the wealthy, with no controls other than vague assurances of the public welfare. Fourth, state and local governments—with New York City and State in the lead—have become ever more aggressive and expansive in their assertions of public purpose, a phrase that doesn't appear in the constitution. (The Fifth Amendment allows governmental taking of private property for a "public use" after paying just compensation. Until Berman v. Parker in 1954, public use had been interpreted pretty literally as bridges, highways, schools, railroads.)

So-called public purposes these days include headquarters for multinational corporations, sports arenas for national franchises, private research facilities, shopping centers, casinos, private office buildings, etc. It's hard to think of an economic activity that is not now encompassed by some government entity's understanding of "public purpose."

New York City, usually with the help of New York State, is actively engaged in taking prime property in good neighborhoods away from private owners, in order to turn it over to wealthier and more powerful owners. In Times Square, for example, which is itself the product of one of the 20th century's largest land condemnations, the city and state condemned property on 43rd Street in order to turn it over to Forest City Ratner to build the new headquarters of the New York Times. Similarly, the state plans to condemn the property of hundreds of homeowners and businesses in downtown Brooklyn to make way for a 19,000-seat basketball arena for the Nets and 5,800 housing units also developed by Ratner. Other recent takings include the condemnation of several Wall Street buildings to expedite the expansion of the New York Stock Exchange, on which the exchange reneged, and the condemnation of a dozen businesses in Harlem to make way for a Home Depot.

To add insult to injury, the new private owners not only get someone else's property they invariably also get substantial state and local tax breaks, subsidies, and a bypass of the city's usual land use review procedures. The Ratner development in Brooklyn, for example, will receive something between $10 million and $1 billion in government subsidies (its estimate), and will bypass the standard public review processes required of all normal private development. But, of course, this is not normal private development, because Ratner's partner is the state of New York—the Empire State Development Corporation, successor agency to the old Urban Development Corporation.


In his amicus brief, Cardozo proudly cited such past urban renewal achievements as the World Trade Center, which he says "revitalized acres of lower Manhattan and led to the private development of an entirely new mixed-use neighborhood—Battery Park City." But in fact, the condemnation of property to build the World Trade Center wiped out hundreds of businesses and depressed the downtown real estate market for most of the 1970s and 80s. And Battery Park City is an example not of private development but of state-sponsored development. Yet this gross misjudgment is touted by government as proof of the benefits of eminent domain.

Clearly the writing is on the wall: the city and the state intend to continue on this path of ever greater condemnations benefiting ever more important recipients. The only sure test any city has for controversial projects is the market. But when the market is undermined by government condemnation of private property combined with subsidies for the governmentally sponsored project the justification for a project is no longer economic demand but political favoritism. That was no way to restore neighborhoods during the terrible decades after World War II when urban renewal first reigned. And it's no way to restore neighborhoods today.


The Supreme Court is expected to hand down its decision in late May or early June. In the meantime, local enterprises hoping to use eminent domain will be weighing their options. Columbia University, for example, obliquely denies that it intends to use state condemnation powers to expedite its expansion in West Harlem, saying such things are up to the state. New Yorkers should be watching the New London case carefully. If New London loses, governmental abuse of eminent domain will be restricted. If it wins, New Yorkers will have only the local political process—and elections—to halt a new wave of urban renewal.

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