The Politics of Land Grabbing

The Supreme Court's June 23 decision to allow the city of New London, Conn. to condemn its citizens' homes simply to generate more municipal tax revenue offended the vast majority of Americans, myself included. In a blistering dissent, Justice Sandra Day O'Connor declared, "Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall or any farm with a factory."

That's the bad news.

The good news is that the Court's decision does not prevent states and localities from adopting a different approach. "We emphasize that nothing in our opinion precludes any state from placing further restrictions on its exercise of the takings power."

The eminent domain debate now returns to the local and state level, where it ultimately belongs. All states have statutes or constitutional provisions governing the conditions under which governments can take private property. Michigan, New Hampshire, New Jersey, South Carolina, Arkansas, Missouri, Kentucky and California significantly limit that authority. A 1976 California court opinion describes their approach. Eminent domain "never can be used just because the (city) considers that it can make better use or planning of an area than its present use or plan. ... (I)t is not sufficient to merely show that the area is not being put to its optimum use, or that the land is more valuable for other uses" to justify condemnation of property.

The laws of Kansas, Maryland, Minnesota, New York, North Dakota and Connecticut, conversely, grant local and state governments much broader leeway.

The debate about eminent domain centers on two questions. When can government take private property? What should it pay for that property?

The Supreme Court decision focused on the first issue, the definition of "public use" under the 5th Amendment. At the state and local level, we might more profitably initiate the conversation by focusing on the second, the definition of "just compensation."

Under current laws, "just compensation" means current market value. If government condemns two identical houses in the same neighborhood it pays the owners an identical amount. This is true, even if, as was the case in New London, one family had lived in its home for several generations while another was renting on a short-term lease.

Common sense, however, tells us that the value of a place to the occupant is related to the amount of time he or she lives in it. And the value of the tenant, whether a person or a business, to the neighborhood also increases with the length of occupancy. Intangibles are involved here, costs and benefits difficult to quantify but indisputably real.

The central question before us, then, is how do we value community? Here is my suggestion:

• All owners receive the current market value of the real estate.
• Government adds a premium based on the length of time the family or business has occupied the land, or perhaps, lived within the immediate neighborhood. Businesses are included because locally owned, long-lived businesses constitute an essential node in a strong community network.
• The premium paid increases by 1 percent of the market value for every year of continued occupancy, kicking in after a minimum of 10 years.
• The premium is paid not to the owner, but to the occupant. This is fairer, because it is the longevity of the occupancy, not the longevity of ownership, that strengthens the sense of community. It is also more equitable, because renters tend to be poorer than owners.

In sum, the appreciated market value of the property goes to the owner. The appreciated community and social value of the property goes to the occupant. Such a policy begins to internalize the social value of property into the cost-benefit equation. That is as it should be. A municipal corporation, unlike a private corporation, should take into account the costs of dislocation to the individual and the neighborhood.