States Left to Respond to Eminent Domain Abuse

In Norwood, Ohio takes property that is "deteriorating"

Last June, the U.S. Supreme Court, in the Kelo v. New London case, upheld the taking of private property by a local government even when it intended to give it to another private party for economic development purposes. Reaction to the case drew significant media attention as property owners became outraged at the thought of the government taking property for the private gain of others.

The Fifth Amendment to the U.S. Constitution permits the taking of private property with just compensation only for “public use.” Traditionally, the exercise of eminent domain authority by government entities has been restricted to actual public uses, such as building roads or public schools. Over the years, courts began to permit government takings even if the property was eventually transferred to a private entity, provided the taking served a public use or purpose, such as the building of a railroad or the elimination of a slum.

The Kelo decision effectively did away with the “public use” limitations on eminent domain authority altogether. Under the court’s new doctrine, if a private developer can convince a locality that the developer can put property to “better” use than the current owners, including generating more tax revenue, the local government entity has a green light to condemn the property. The Kelo case has energized the growing trend across the country of local governments forcing the sale of private property for transfer to private entities in the guise of economic development.

The majority in Kelo, fortunately, said states have the authority to place their own limits on eminent domain, acknowledging that “many states already impose public use requirements that are stricter than the federal baseline” as a “matter of state constitutional law.” It is up to the respective state courts, they said, to determine what is an acceptable public use or purpose to justify a taking. The first test of that freedom is playing out now before the Ohio Supreme Court.

In Ohio, the city of Norwood, a suburb of Cincinnati, sought to force the sale of several homes and businesses on behalf of a private property developer so he could build a multimillion dollar complex of offices, rental apartments and chain retail stores. By all accounts, the homes and businesses in the area were well kept and the neighborhood was in good condition.

There was no suggestion that the neighborhood is a slum or blighted as most people think of the term. The neighborhood didn’t have high crime, large numbers of abandoned buildings, or poor. Indeed, the city doesn’t even claim the neighborhood was blighted in this sense. It said the neighborhood was “deteriorating” because, in essence, it was an older neighborhood, and that was enough to justify a public taking.

Norwood relied on such factors as “high diversity of ownership of property” and an “increase in traffic congestion” in the area. Such factors exist in thousands of areas across Ohio. Will private property in all of these neighborhoods now be subject to government taking? That outcome will be much more likely if the Ohio Supreme Court follows the U.S. Supreme Court.

After Kelo, concerned citizens across the country formed coalitions and went to their respective state capitols in an attempt control eminent domain abuse. About forty states are currently considering legislation to limit the use of eminent domain as a result.

As outrage over Kelo dissipates over time, however, it is unclear whether state legislatures will place real limits on eminent domain abuse. Special interests that benefit from the expansive use of public takings, including local governments, chain retailers, and private developers, put immense pressure on state legislators to permit the broad use of eminent domain authority.

Retiring Justice Sandra Day O’Connor crystallized the concerns of property owners in her dissenting opinion, pointing out that “under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner.” O’Connor concluded the beneficiaries of the Kelo decision are “those citizens with disproportionate influence and power in the political process, including large corporations and development firms,” at the expense of individual property owners.

Oral arguments in the Ohio case were held this week and a decision is expected this spring. By ruling in favor of the property owners, the Ohio Supreme Court can provide a roadmap for other state courts to protect private property rights and reverse the trend of eminent domain abuse that the U.S. Supreme Court legitimized in Kelo.

David J. Owsiany is a legal policy analyst at Reason Foundation.