Economic Opportunity

Kelo Ten Years Later: Cause for Concern, Not Celebration

June 23, 2015

This content is the opinion of the author and not necessarily representative of the Charles Koch Institute or Charles Koch.

Today marks the tenth anniversary of the Supreme Court’s decision in Kelo v. City of New London. Kelo was an important property rights case, where Susette Kelo, and fellow New London residents, challenged the small Connecticut city’s decision to take her home. The decision dramatically expanded the government’s power of eminent domain to forcibly transfer privately owned property from one citizen to another. While the Fifth Amendment only permits the taking of private property for “public use,” the Supreme Court ruled that a Connecticut city could condemn residential properties and transfer to a private owner for purposes of economic development. Today, Kelo provides a stark example of the profound problems associated with the use of eminent domain for economic development purposes.

Although the Kelo ruling undermined the right to private property by providing judicial approval to a radical expansion of government “takings” power, there was a silver lining. The case significantly raised public awareness of the problems associated with eminent domain. As a result, citizens in many states became unwilling to tolerate this abuse of well-established rights and demanded legislative change. In the years that followed, 44 states enacted measures making it more difficult for the government to take property through eminent domain. Furthermore, a number of state supreme courts have explicitly repudiated Kelo, a further blow to the case’s legitimacy in defining the boundaries between the rights of individuals and the proper use of state power.

The fate of the disputed properties themselves provide one of the strongest indictments of the Kelo ruling. The bulldozed land stands vacant to this day, while Pfizer, the target of New London’s corporate welfare development package, walked. Equally disturbing is the fact that the practice of eminent domain persists nationwide which should trouble any American citizen. The practice empowered government planners and bureaucrats, the well-connected, and special interest groups at the expense of those without political connections or significant resources to protect their property rights; interfered in the market; and dramatically expanded the notion of “public use” to include speculative economic development projects.

There are a number of recent cases that highlight why any American citizen should be troubled by the practice. These cases also highlight the fact that the legislative measures passed in the wake of Kelo have not been uniformly successful in restraining this disturbing practice. In November 2014, a bid by the New Jersey government to support the gambling industry through property condemnations received judicial approval from the Superior Court of New Jersey. When it came to individuals’ rights to their homes, the plans of the Casino Reinvestment Development Authority took precedence. A similar case in 2009 saw New York state’s highest court approve the city’s condemnation and immediate transfer of property to private developer Bruce Ratner. Ratner intended to build high-income housing and a stadium for the New Jersey Nets, the basketball team Ratner owned at the time. Awarding property belonging to others to the wealthiest in society flips the very notion of public purpose on its head.

These cases emphasize that ten years after Kelo, the incentives for the government to condemn property and award it to crony business developers are still strong. The ability to seize property for any public purpose is questionable in its own right, but the tortuous construction of public purpose to include shopping malls and casinos is a reprehensible and unacceptable violation of property rights. In recent cases, courts have not even required plans for the specific uses to which a condemned property will be put. Even worse, the individuals whose properties are condemned are often impoverished and unable to contest the seizure. It is one thing for property developers to take risks with their own money. It is quite another for these wealthy individuals to use their influence with the government to effectively turn the property rights of some into poker chips and glitzy condos for others. Public purpose indeed.

Eric Alston is a Senior Policy and Research Analyst at the Charles Koch Institute. Jordan Campbell, policy fellow in the Koch Fellow Program at the Charles Koch Institute, contributed to this report.