Property Owners Score Major Victory in Ohio

Eminent domain decision could set post-Kelo national trend in state courts

Last summer, the U.S. Supreme Court ignited a firestorm of controversy over eminent domain that continues to burn through the nation’s statehouses and court systems. The most recent flare up, with potentially profound national implications, came from Ohio this week where the state Supreme Court stripped cities of their power to seize homes and business solely for the purpose of economic development.

It was a Michigan high court decision in the mid-1980s that lit the slow burning fuse that is now a national debate over eminent domain and the how far governments can go before they seize private property for public use. In that decision, the Michigan Supreme Court ruled that the city of Detroit could condemn and bulldoze the entire neighborhood of Poletown to make way for an automobile plant. Many state courts throughout the country followed suit, giving local governments broad latitude to take land from one private party for the benefit of another.

The U.S. Supreme Court didn’t jump into the controversy until last year when, in Kelo v. New London, five justices essentially gave local governments carte blanche under the U.S. Constitution to seize private property through eminent domain for economic development-such as to generate more tax revenue. So as long as cities could muster a majority on city council, and they followed proper procedures, the Court said it wouldn’t question local government decisions to throw people out of their homes.

In a strong challenge to that reasoning, Ohio’s justices unanimously ruled that economic development alone couldn’t justify condemning and seizing private property by government. They said the city of Norwood could not take three private homes to make way for a new commercial and residential development merely because it wanted to enhance tax revenue or to promote economic development.

Every business and homeowner provides benefits to the economy in some way, the justices noted. So, if economic development alone were to be considered a justification to seize property, essentially any private land could be taken by government and handed over to another private party.

Of course, for most Americans, that’s common sense. Most were bewildered when the U.S. Supreme Court ruled that almost anything could be considered a public purpose as long as the majority on city council said it was. That’s why 30 states have adopted some form of reform legislation to rein in overzealous governments.

And because the decision in Norwood goes even further in restricting the use of eminent domain, the Ohio reasoning may well lay the foundation for other state courts, much like the Poletown case did two decades ago.

The Ohio decision struck down key provisions of a law that gave cities more and more discretion over how neighborhoods were labeled “blighted.” In most states and cities, blight designations are the main triggers for the use of eminent domain.

Common sense and experience suggests that a blighted neighborhood would be one with run down houses, abandoned properties, high crime rates, persistent poverty, and virtually no real chance of turning around.

But, that’s not how most state laws define blight. It’s also not the way local officials use the blight statutes to trigger eminent domain to promote their version of redevelopment.

Over time, state statutes were modified so that neighborhoods just had to be “deteriorated”—older and more run down compared to others areas of the city, not blighted. Then, state statutes like Ohio’s broadened this criteria to say neighborhoods didn’t even have to be deteriorated. They only had to be “deteriorating.” As a practical matter, neighborhoods can be functioning well and healthy and still be considered legally blighted if an expert can write a report saying the neighborhood is or might start running downhill. They just have to be “in danger” of becoming blighted sometime in the future.

Guess what? Just about any neighborhood except the newest or most expensive can qualify as blighted under these definitions.

As unbelievable as that seems, it’s all too real for the people subjected to eminent domain proceedings in urban areas whether they live in Ohio, New Jersey, Arizona, or California. In Norwood, the Ohio court wrote, “The buildings in the neighborhood were generally in good condition and the owners were not property-tax delinquent. There is no suggestion that the area was vermin-infested, was subject to high crime rates, or outbreaks of disease, or otherwise posed an impermissible risk to the larger community.” The Ohio court properly concluded the blight criteria were so vague, and their application so loose, that they had become “standardless standards.”

While municipal officials, planners, and developers will likely lambaste the decision, most Americans will sleep a little easier knowing that it will take more than a majority vote on city council for their homes and businesses to be bulldozed by a private developer. Whether citizens outside of Ohio will sleep as soundly will depend on the legislatures and courts in their own home states.

Samuel Staley is director of urban growth and land use policy at Reason Foundation. An archive of his work is here and Reason’s eminent domain research and commentary is here.