Friday, June 24, 2005

Not Condemned to a Slow Death

On Tuesday, the Baltimore Sun had a story about one developer's difficulty in acquiring the last parcels necessary to commence work on a projected $150 million condominium and retail project in a neighborhood near Johns Hopkins University called Charles Village. It seems that the final holdout sold his row house to the developer for $1.1 million. At the beginning of the property acquisition process, similar homes were purchased by the developer for $100,000. As time went on and word of the project got out, prices increased. Most of the homes were purchased for $250,000.

On Wednesday, the Supreme Court handed down its opinion in Kelo v. New London. That decision affirmed the right of state and local governments to condemn property even if the property is ultimately conveyed to another private party, so long as the future use by the public is the purpose of the taking. The Court the interpreted the phrase "public use" to include use for any "public purpose." The Court explicitly endorsed the concept that "[p]romoting economic development is a traditional and long accepted function of government." Thus, promoting economic development would be a valid public purpose sufficient to support a property condemnation even if the condemned property were subsequently conveyed to a private developer.

Under the Court's decision, the city of Baltimore could have acquired all of the real estate via condemnation, including the owner of the "last parcel," and then sold the entire parcel to the developer. The Court in Kelo made it clear, however, that the purpose of the acquisition could not be merely to convey the acquired property to a particular developer. Such an acquisition would constitute a "private purpose" and would be forbidden under the Fifth Amendment.

Apparently, the right-wing bloggers are all in a dither about Kelo. However, the facts surrounding the Charles Village acquisition, which became public only the day before the opinion was handed down, underline the practical necessity to allow state and local governments to have such broad condemnation powers. While it's true that the Charles Village project was put together by a private concern, without any assistance from the government with respect to the property acquisitions, the project has been delayed for over a year. Additionally, the real estate acquisition costs escalated significantly over original estimates. There is no knowing how many urban real estate redevelopment projects are not undertaken because the developers face similar difficulties. Furthermore, it would appear that some real estate holders got a bad deal, while others, who could hold out, got very rich deals.

I am not unmindful of the potential for abuse that Kelo poses. I am skeptical, for instance, that the process by which the fair value of property is determined will in all cases adequately compensate sellers who are forced to sell. This is particularly true if the sellers are old or have lower incomes. Such individuals may not be able to successfully fight city hall. However, this problem can be mitigated in a number of ways. (How about the ability of a property owner to retain an attorney and pay a contingent fee based upon the difference in the government's initial offer and the final price paid. You think that conservatives who rail against contingent fees in tort cases might now have some second thoughts?)

And, even the Court allowed that there was a possibility that there could be cases in which the ostensible public purpose was merely a smokescreen to allow a taking for a private purpose. However, such hypothetical cases could "be confronted if and when they arise." Thus, this mere possibility of abuse presented no need to embrace a blanket prohibition on takings that ultimately found their way to other private owners.

Perhaps the underlying rationale for Kelo was stated best by a proponent of the Charles Village project:
"Why should one person hold out for so much and stop something the community wants?" asked Charles Village Association President Beth Bullamore.


Joel S. said...


I don't consider myself to be right-wing in any way, shape or form, but I have a pretty major problem with the Kelo decision. All of your practical arguments make sense, but I don't even reach them -- if you expand "public use" to include use for any public purpose, you have in essence read a requirement out of the Fifth Amendment (since the state will ALWAYS be able to come up with a public purpose, no matter how ridiculous or tangential).

We can also swap anecdotes -- I'll see your Charles Village anecdote, and raise you with the story of my cousin in Cincinnati, who was forced out of her beloved home so that some developer could throw up a few condos.

JimM said...

Sorry, I cannot accept your position or that of the developer. The simple (and not oversimplified) answer to the developer's question is: one property owner can hold up a project the "citizens" want because he owns his property, and he can. One can question how much the developer knows about what "citizens" want-what he is really saying is, "how can one person hold up what I want and stop me from making a lot of money?" Your argument seems to say that whatever developers want they should get, and get cheaply, and we should ignore the rights of private property owners. I am not willing to give up private property rights just because the community wants something. They tried that in Russia for a long time and it did not work too well.

Jim M

Anonymous said...

Yo tax boy. Your argument makes no sense.

All the Charles Village properties were occupied. It has been a vibrant, functioning neighborhood. One extremely well connected developer comes in and says I can do more. Under Kelo, connections may mean more than sound planning or need. The threat of condemnation can dissolve opposition and debate. Indeed, this developer threaten condemnation before Kelo.

And the community organization. Who are they and do they represent the community? Are they new arrivals, not affected by the taking, who see dollar signs in increased property values? By requiring some broader public planning process before finding a public use (purpose), a full debate and pulic accountability would replace the whim of an individual well connected developer.

Simply labeling this as a liberal/conservative, blue vs. red issue adds nothing to understanding the public policy ramifications of this case.

Yupification is not a pulic purpose.