Reason Foundation

The Tragedy of Urban Renewal

Posted on October 2, 2011, 8:07pm | Samuel Staley

Reason.tv has just released an excellent six minute video on urban renewal, focusing on several blocks of Manhattan's Upper West Side (around 99th street) bulldozed to make way for new development. It's definitely worth spending some time watching. Of course, eminent domain was used to clear the slums. Another, complimentary video showing how eminent domain for redevelopment can be avoided, using Anaheim, California, as a case study (Drew Carey Video #5) can be found here. (See also the video on eminent domain abuse in National City, California here.)

For those looking for something a bit meatier, check out Florida State University economist Bruce L. Benson's recent (2010) book on Property Rights: Eminent Domain and Regulatory Takings Re-Examined. This book may be the most up to date free-market view of eminent domain, takings and redevelopment on the market.

California Finally Seems Ready to Reign in Eminent Domain Abuse

Posted on April 23, 2011, 2:55pm | Samuel Staley

The California courts seem to be stepping up to the plate to provide property rights protections to homeowners and business owners threatened by eminent domain abuse. On April 21, 2011, a California Superior Court judge ruled against National City, California is its efforts to seize a successful youth center serving underprivileged kids under the state's so-called urban blight provisions. The City wanted to give the property to a private developer so he could build luxury condos. According to the Institute for Justice, the nonprofit public interest law firm defending the youth center,

"The Court struck down National City’s entire 692-property eminent domain zone in the first decision to apply the legal reforms that California enacted to counter the disastrous U.S. Supreme Court Kelo decision in 2005.  This ruling, which found that National City lacked a legal basis for its blight declaration, reinforces vital protections for property owners across the state, and underscores why redevelopment agencies should be abolished.

"The Court also ruled that National City violated the Due Process clause of the U.S. Constitution in failing to provide the CYAC with statutorily required information prior to an important public hearing.

"Finally, in a holding with implications well beyond redevelopment law, the Court also held that when the government retains a private consultant to perform government functions—in this case, documenting the existence of alleged “blight” in National City—documents that the private consultant produces are public records subject to disclosure under the California Public Records Act.  The Court also set a clear standard for what government agencies have to do in searching the records of their private consultants in response to a Public Records Act request."

This is a very important case because courts have traditionally given cities vast discretion and lattitude over designating properties blighted. Often, the process for determining blight is so vague that the procedures are little more than legal formalities used to justify seizing property for redevelopment. In the case of the Community Youth Athletic Center in National City, the property and business was thriving, but the city wanted to see luxury condos replace it (and other businesses).

Reason has been critical of blight designations to seize property via eminent domain and published one of the most extensive policy analyses to date on the subject. Our complete work on eminent domain can be found here.

Also, an excellent new book edited by economist Bruce L. Benson and published by the Independent Institute takes a hard, critical look at how eminent domain has been used and abused by governments along with recommendations for constraining its use and protecting property rights.

New Book on Eminent Domain and Property Rights Available

Posted on July 8, 2010, 10:45am | Samuel Staley

The infamous Kelo decision in June 2005 sparked renewed interest in eminent domain use and abuse. Dozens of state initiated reform efforts, most focused on reining in the power of government to confiscate private property. Now, Florida State University economist Bruce L. Benson has edited a collection of essays just published by the Independent Institute and Palgrave-McMillan publishing that investigate a wide range of legal, theoretical, empirical, political and economic issues relating to eminent domain and the political economy of its use.

Property Rights: Eminent Domain and Regulatory Takings Re-Examined includes articles by Steven Eagle, Ilya Somin, Scott G. Bullock, Peter Boettke, Jonathan Adler, Rick Stroup, Ed Stringham, and many others. My contribution scopes out "The Proper Uses of Eminent Domain for Urban Redevelopment," asking whether its even necessary as an economic development strategy by examining real-world cases in Arizona, Ohio, New Jersey and the Kelo case. The chapter draws on Reason Foundation's recent work on eminent domain as well as the in-depth policy study we published just months prior to the Kelo decision in 2005.

For Singles Suburbia Reigns

Posted on April 19, 2010, 1:04pm | Samuel Staley

A new survey of home purchases by singles turned up something surprising for city watchers: 52 percent chose suburbs over urban or rural areas. The survey reveals a couple of other interesting tidbits as well:

• "Fifty-five percent have less than a 30-minute commute to their office or work from home, and 40 percent live less than 30 minutes or even in the same neighborhood as their parents or extended family. In fact, an additional 12 percent live with at least one family member."

Essentially, the survey is confirming the "Law of Constant Travel Time" where people tend to locate close to their jobs and home. They will move to accomodate a commuting trip of about 30 minutes. Adrian Moore and I talk about this in our book Mobility First and how it fundamentally is changing travel patterns and should be incorporated into our regional transportatino planning.

What is motivating these suburban home purchases? Perhaps forward thinking women:

• "More single women (27 percent) said that the number of bedrooms was the most desirable feature in a home, than did men (18 percent)."

Woman may be thinking about space needs as their family grows, or their network of friends neeeding a safe place to stay expands. 

Thus, suburbia is far from dead; it's alive and kicking as I discussed in a Planetizen.com blog post recently. Ironically, these results confirm something I said more than 10 years ago in my policy study The Sprawling of America: In Defense of the Dynamic City. Suburbs have become cities in and of themselves. They have the social networks, mobility, and increasingly even the densities to take on true urban functional characteristics (e.g., access to jobs and services) if not the built form of past cities (high density clusters of housing and businesses).

NYT Forum Debates Eminent Domain

Posted on November 16, 2009, 8:34am | Samuel Staley

Last week, the drug maker Pfizer announced it would close its research and development facility in New London, Connecticut. The Pfizer facility was at the heart of the city's decision to use eminent domain to seize and raze an entire neighborhood to make way for the development project and prompted the now infamous Kelo v. City of New London. According to the New York Times:

"Pfizer said it would pull 1,400 jobs out of New London within two years and move most of them a few miles away to a campus it owns in Groton, Conn., as a cost-cutting measure. It would leave behind the city’s biggest office complex and an adjacent swath of barren land that was cleared of dozens of homes to make room for a hotel, stores and condominiums that were never built.

"The announcement stirred up resentment and bitterness among some local residents. They see Pfizer as a corporate carpetbagger that took public money, in the form of big tax breaks, and now wants to run."

The Kelo case is named after Suzette Kelo, who argued with the help of the Institute for Justice in Washington, D.C. that the government simply couldn't seize her property and hand it over to another private party because their intended use would be more profitable. The U.S. Supreme Court disagreed, and said, in effect, that as long as the city officially said seizing her house (and others in the neighborhood) served a public purpose that's all they needed to use eminent domain. The decision effectively gave a green light to takings for economic development purposes, and the Institute for Justice has been documenting rising levels of abuse since then.

Well, now the entire project in New London has gone down the tubes. The failure of the economic development project and the implications for using eminent domain for economic development purposes were the subject of a New York Times forum "Room for Debate" last week and has prompted nearly 200 responses.

Among the formal contributions include law professors that argue that the Constitution really was never meant to restraint government's taking of private property anyway as long as compensation is paid to the victims. Interesting, most of the formal responses focus on the political ramifications rather than the abandonment of private property protections by the judiciary and elected officials.

More on Reason Foundation's work on eminent domain and regulatory takings, including our amicus brief on Kelo, can be found here.

Quiet Victories on the Regulatory Takings Front

Posted on October 13, 2009, 9:10pm | Leonard Gilroy

I recently ran across two interesting news articles on the regulatory takings front, but they need a little background to put them into context. As I discussed at length in this study, regulatory takings are essentially the flip side of eminent domain, where the uses of private property are restricted not through a wholesale acquisition of the property by government (as in eminent domain), but rather are effectuated virtually by regulations like development codes and environmental mandates.

In essence, rather than taking a landowner's property outright, governments routinely pass regulations that restrict the use of private property (such as local zoning laws, farmland preservation ordinances or the Endangered Species Act, for example) to the extent that it represents a virtual "taking," a major loss in economic value due to government restrictions on land use.

When a landowner has paid full market value for a property, and that value is based on the development potential at that time, government effectively pulls the rug out from under that landowner when it changes the rules of the game later such that the potential value can no longer be achieved. When private landowners bear the burden of providing public benefits in this manner—and when that economic loss to the landowners merits compensation from the government—it's known as a "regulatory taking."

As I discuss in the study referenced above, the courts haven't exactly been helpful on regulatory takings. Essentially, over the years they've validated the idea that there are such things as regulatory takings that merit compensation. But beyond that, the courts haven't done much to offer clear guidance on what actually constitutes a regulatory taking. Even worse, the court system is essentially rigged to keep potential regulatory takings cases bouncing around in an infinite administrative loop such that it becomes very difficult—and costly—for an aggreived landowner to even get a case into the legal system to begin with, much less receive any compensation for adverse government regulatory action.

Hence, it was interesting to see the recent news alert from the Nossaman law firm on some recent developments on this front in the federal courts:

"All bark and no bite." Typically, that is a fair description of regulatory takings litigation: the litigation generates a lot of noise and gnashing of teeth but, at the end of the day, rarely are government agencies bitten with an order that they pay compensation. But a new opinion from the federal Ninth Circuit Court of Appeals, Guggenheim v. City of Goleta (Sept. 28, 2009, Case No. 06-56306), demonstrates that regulatory takings litigation can have teeth. In Guggenheim, the Ninth Circuit holds that the City of Goleta's rent control ordinance on mobile home parks went too far and that the City will have to pay the park's owners just compensation. This case, particularly coupled with two other recent regulatory takings cases, Monks and Casitas, suggests that agencies may now need to pay close attention to their regulations if they hope to avoid a regulatory takings bite.

The other article to highlight comes from Flagstaff, Arizona. For context, Arizona voters passed Proposition 207 in 2006, which not only tightened the state's eminent domain laws to prevent abuse, but also required governments to either offer compensation to landowners or issue waivers related to any new land use regulation (outside of those enacted to protect public health and safety) that lowers current landowners property values. The Goldwater Institute's Clint Bolick wrote an excellent overview of Prop 207 in Reason Foundation's Annual Privatization Report 2009 that's well worth a read.

As Bolick writes, there have been a number of property rights victories in the wake of Prop 207, and governments now have to clearly think through the potential economic impact of any proposed land use regulations before they consider passing them, lest they open themselves to numerous Prop 207 claims. The latest example comes from an Arizona Daily Sun article discussing how Flagstaff is considering a new form-based code to guide the future development of its downtown area, but they're structuring it as an optional code so as not to trigger Prop 207 challenges:

Roger Eastman, the city's zoning code administrator who is overseeing the overhaul, said the form-based codes will encourage incremental changes in the city's urban core while preserving its historic character. [...]

Under the new proposed zoning codes, which have not been approved by the Flagstaff City Council, a developer could conceivably erect a three-story building covering most of the property, including over the existing parking lot, in exchange for following the form-based codes.

The current zoning would not allow for such a large building because the owner would likely need to provide for more on-site parking, not less.

But Eastman said a form-based code would not require on-site parking if the downtown parking plan includes a parking garage. He said the city can offer incentives like less parking, smaller setbacks and a streamlined approval process to encourage developers to use the form-based codes.

Eastman points out that even if the proposed zoning is approved by the City Council, it would be entirely optional for property owners.

A state law passed in 2006, better known as Prop 207, has made the city of Flagstaff reluctant to rezone private property without the owner's consent. The law requires cities to compensate property owners for any value lost due to new regulations.

Property owners could continue to use the underlying zoning already in place for any development plans, Eastman said.

This says a few important things. Despite the false, "sky is falling" rhetoric one usually hears from urban planners about how regulatory takings reform will bankrupt governments and decimate planning, it doesn't actually work that way in practice. Flagstaff is on the verge of passing a large-scale planning overhaul involving form-based codes, one of the trendiest regulatory approaches among professional planners right now. All they had to do to make it kosher from a property rights/regulatory takings perspective was to make it optional. Then you're not taking anyone's current rights away but creating a parallel mechanism offering a streamlined, revamped regulatory system for those who choose to take advantage of it. Win-win; property owners win, planners win.

What this demonstrates is that it's far easier to graft property rights into current planning systems than the professional planning community assumes or acknowledges. Regulatory takings reform in Arizona prompted planners and policymakers in Flagstaff to think twice before proposing a blanket form-based code to replace the existing zoning. Considering the property rights implications upfront caused them to adjust the model slightly to make it more landowner-friendly, flexible and dynamic.

With the tough economic times that cities are facing these days, I'd argue that the more dynamism and flexibility on the land use front, the better.

» Reason Foundation's Eminent Domain and Regulatory Takings Research and Commentary

Report: Widespread Eminent Domain Abuse in New York State

Posted on October 8, 2009, 12:57pm | Leonard Gilroy

The Institute for Justice has released a new report detailing eminent domain abuse in New York State, one of the handful of states that failed to see any racheting back of its condemnation laws in the wake of the U.S. Supreme Court's Kelo vs. City of New London in 2005. In that decision, the Court upheld governments' use of eminent domain to take private property from one owner and give it to another private owner, not for the development of legitimate public uses like highways or schools, but purely for the purposes of economic development and tax revenue generation. This controversial decision set off a property rights firestorm that led to more than 40 states passing legislation, constitutional amendments or ballot measures to rein in the practice (to be fair though, less than 10 states actually passed reforms with teeth).

From the IJ press release:

New York is one of the worst states in the nation when it comes to abusing eminent domain for private gain, according to the Institute for Justice, which tracks such abuses nationwide.

The Institute for Justice, which litigated the infamous Kelo eminent domain case before the U.S. Supreme Court, today released a report that documents example after example where government officials across the Empire State used eminent domain not to create projects that would be owned and used by the public—such as a courthouse or post office—but, rather, to create private development that would financially benefit politically powerful private developers.

The report, "Building Empires, Destroying Homes: Eminent Domain Abuse in New York," states, "Over the past decade, a host of government jurisdictions and agencies statewide have condemned or threatened to condemn homes and small businesses for the New York Stock Exchange, The New York Times, IKEA, Costco, and Stop & Shop. An inner-city church lost its future home to eminent domain for commercial development that never came to pass. Scores of small business owners have been threatened with seizure for a private university in Harlem and for office space in Queens and Syracuse. Older homes were on the chopping block near Buffalo, simply so newer homes could be built. From Montauk Point to Niagara Falls, every community in the Empire State is subject to what the U.S. Supreme Court has accurately called the 'despotic power.'" [...]

In addition to documenting examples of eminent domain abuse across New York, the report also spotlights problems in New York state law when it comes to eminent domain and suggests solutions the courts and the Legislature can implement to ensure everyone keeps what is rightfully theirs to own.

The report warns, "New York law not only makes it easy to condemn property, it actively encourages city agencies to do so. A variety of incentives are in place to motivate cities to create redevelopment zones, and to invite private developers to use government force to obtain the private properties contained in them, instead of negotiating in the free market. In this perverse system, city agencies and private developers are actually encouraged to team up together against local property owners." [...]

"The rate of eminent domain abuse in New York is simply staggering," said Christina Walsh, the Institute’s director of activism and coalitions. "We have worked with property owners statewide to fight the most egregious abuses, but state and local government officials seem to have no limit on their ability to dream up ways to abuse eminent domain."

Download the full report here. It couldn't have come at a more opportune time, as the state Court of Appeals is going to hear arguments next Wednesday on Goldstein v. New York State Urban Development Corporation, the first post-Kelo eminent domain case heard by the state's high court. IJ offers some background on that case here, and the amicus brief it filed in the case is here.

For other recent headlines on the property rights front, see Reason Foundation's Annual Privatization Report 2009.

In Oregon, Posthumous Court Victory for Measure 37 "Poster Child"

Posted on April 30, 2009, 8:06am | Leonard Gilroy

Dorothy English, the late Oregon widow whose fight against regulatory overreach helped prompt a statewide policy shift on private property rights, has finally been made whole in the courts. Per The Oregonian:

Property rights advocates called it a bittersweet win. The Oregon Court of Appeals ordered Multnomah County to pay a $1.15 million judgment to the estate of Dorothy English, but the "poster girl" of the state's land-use argument isn't around to enjoy it.

English, who died in 2008 at age 95, fought the county in court for four years in an attempt to develop her property off Northwest Skyline Boulevard outside of Portland. She ultimately won a judgment for compensation, but the county maintained it had discretion whether to pay or not. A Circuit Court judge sided with the county, but the appeals court emphatically reversed that decision and ordered the county to pay. [...]

"It's a great ruling," said Dave Hunnicutt, president of the property rights group Oregonians in Action. "The Court of Appeals was very clear. Final means final, is what they were saying."

Oregonians in Action sponsored Measure 37 in 2004 and portrayed English as a victim of unfair land-use rules: an elderly widow and longtime property owner not allowed to develop her land. Voters approved the measure, which gave property owners the right to develop their land in a way that was permitted when they bought it. English, alternately wry and profane, endorsed Measure 37 in campaign ads.

About 6,500 property owners filed development claims after Measure 37 passed, many with the stated intent to build large rural subdivisions. The prospect of such development was a major factor in voters passing Measure 49 in 2007. It rolled back development rights, and most of the claimants settled for a process that will allow them to build one to three homes.

But English was not among them. She wanted to split her 20 acres into eight homesites for her family. But that wasn't permitted because the county had rezoned the property after English and her late husband bought it in 1953. English filed a Measure 37 claim, and the county agreed to let her develop eight lots in lieu of paying compensation. But the county loaded its approval with conditions. English's attorney responded that such standards and procedural rules didn't exist when English bought the property.

For more of the backstory on Measure 37 and Ms. English's role in it, see my 2005 study here. Measure 37 was subsequently watered down, as discussed in the "Land Use and Environment" section of Reason's Annual Privatization Report 2008.

Still, Oregon landowners owe a great deal to Ms. English, as their property rights are more secure today than they were a decade ago (though there's still a long way to go). And she helped raise public awareness of the importance of protecting private property rights and the myriad of ways in which they are threatened under Oregon's top-down, state-driven land use regulatory system. While eminent domain reform is certainly important and worthy of attention, we should never forget that regulatory takings are no less of a threat to private property rights.  

» Reason's Eminent Domain & Regulatory Takings Research and Commentary