"We Shall Not Be Moved": Urban Communities, Eminent Domain and the Socioeconomics of Just Compensation

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INTRODUCTION

The current debate over eminent domain as a tool to facilitate economic development shifts between two starkly unattractive alternatives. Property rights advocates insist that if strict limitations are not placed on the ability of governments to condemn private property and transfer it to private parties, then homes, small businesses, and entire communities face capricious annihilation by state and local politicians and their well-heeled patrons.1 Their slogan "a man's home is his castle" expresses the inviolability of all private property rights as the fundamental check on authoritarianism.2 Defenders of local governments, on the other hand, warn that elimination of eminent domain as an effective redevelopment tool will isolate older communities by thwarting any efforts to coordinate investment.3 In their view, the mobility of residents and businesses forces local jurisdictions to act as entrepreneurial as Fortune 500 companies in their recruitment and retention of taxpayers.4

Both views speak to the survival of urban neighborhoods, but neither offers a paradigm of land ownership that fosters authentic community development. The social and economic health of an urban neighborhood necessitates a certain amount of collective action that reflects both the interdependence of its stakeholders and its symbiosis with other parts of the region.5 Residents' contributions to their own homes and to the community at large are secured by their private ownership of those investments, and ultimately by their uninhibited choice to remain part of or exit from those communities.6 For reflective community advocates then, the conceptual dichotomy of the neighborhood as either a confederacy of castles or an expendable division of a municipal corporation fails to offer a satisfactory model for true community development.

By a 5-4 margin, the Supreme Court recently upheld the exercise of eminent domain at issue in Kelo v. City of New London,7 dashing the hopes of many private property rights advocates for a revival of the federal public use restriction. The political backlash against that decision, however, has spawned a swarm of federal and state legislative initiatives to curtail condemnation for transfer to private parties.8 As the Kelo opinion itself implied, protection of condemnees against undue hardship should come from the States' enactment and application of their own statutes and constitutions.9 Unfortunately, many of the bills currently pending amount to little more than hamhanded attempts to overrule Kelo legislatively.10 Legislatures can be more proactive, precise, and comprehensive than courts in their legal pronouncements.11 Statutory acts can balance the legitimate public needs for land acquisition against "the hardship that condemnations may entail, notwithstanding the payment of just compensation."12 Drafting appropriate statutory solutions, however, requires a thorough understanding of the common principles of market liquidity that underlie both the condemnor's insistence on compulsory transfer and the condemnee's assertion of irreparable harm.

In theoretical terms, eminent domain is the government's assertion that all private property rule entitlements must yield to liability rule liquidation in the face of public need.13 The condemning authority's use of condemnation makes sense when the public goal, by its nature, involves the placement of land into a public trust. On the other hand, when a public objective can be satisfied by less coercive means, it is the liability rule of compensated compulsory transfer that may need to give way. In such situations, a more robust understanding of the just compensation requirement would move beyond computation of cash awards and shape the way in which government achieves public objectives when condemnation would cause irreparable harm.14 Courts and legislatures evaluating and fixing the property rule/liability rule boundary for land rights as against the government must look not only to the public need for eminent domain but also to the nature of the loss imposed on condemnees. …