The Kelo Decision - One Year Anniversary
May 9th, 2006When the Supreme Court, in June 2005, upheld a lower court’s decision allowing the 
City of New London, Connecticut to proceed in seizing property from private owners to facilitate a redevelopment project by private developers, it set off a firestorm that shows no sign of abating.
The decision, Kelo v. New London concerned 15 homeowners contesting the seizure of their properties in the economically troubled Connecticut city on river adjacent property that also abutted a huge new R&D facility occupied by Pfizer Pharmaceuticals. There was no claim that the property was blighted, just a solid blue collar neighborhood. The City seized the property under Eminent Domain proceedings on the grounds that redeveloping the area into a mix of office, retail, and higher end residential properties would benefit the public by providing jobs and increasing New London’s tax base.
By a 5 to 4 vote the Supreme Court supported that rationale while issuing a broad invitation to local governments to review their own eminent domain procedures. U.S. Senators and Congresspersons have introduced 47 pieces of legislation having to do with the Kelo decision. Some are resolutions condemning the Supreme Court ruling, other are laws attempting to limit the abilities of government to take private land for private purposes. However, few have made it out of committee.
On the state level a total of 33 bills were introduced last year in 13 states. Most proposed legislation followed a similar line of reasoning; the government should not be allowed to take property from private landholders even if the end result would be to generate additional revenues and that property should never be turned over to another private interest regardless of the eventual public good.
Some of the bills have an exception for blighted properties, a few, in California and Ohio, mandated a temporary moratorium on eminent domain proceedings or at least those for private purposes to allow time for more study. Only a few of the thirteen bills have passed. Here is the roll call for 2005 Texas enacted standard legislation while defeating two other bills. However, the successful bill which was quickly enacted after the Kelo v. New London decision was handed down, contains a few exceptions to the private use concept. One of these is the taking of private property to build the new Dallas Cowboy stadium. So far in 2006 20 states have introduced nearly 60 pieces of eminent domain legislation, most of which are in the early stages of study and review although some may have recently been enacted.
This information comes from the National Conference of State Legislatures. For a complete list of states and a brief summary of legislation for both 2005 and 2006, see http://www.ncsl.org/programs/natres/emindomain.htm.
A recent article on Inman News goes into a bit more detail.
Private property rights activists were horrified nearly a year ago when the U.S. Supreme Court ruled that federal law doesn’t prohibit local governments’ use of their eminent domain power to seize individual homes and businesses for commercial redevelopment projects. The high court’s decision in Kelo v. City of New London ignited a firestorm of debate and protest, but many homeowners, including those in two of the nation’s most populous states, still don’t have adequate protection from government takings of their homes for private commercial purposes.
In California, a Democrat-backed proposal is pending in the legislature while a Republican-supported initiative that would amend the state constitution appears to be headed toward a popular vote on the November ballot. This unfortunate cross-purposes situation isn’t surprising in a state that’s known for its bizarre politics and where the ballot initiative was invented nearly a century ago. Yet all the same, it’s unfortunate that no concrete action has been taken by the legislature to counter Kelo and protect the state’s homeowners.
In New York, the state bar association has called for a commission to study proposed changes to the state’s eminent domain laws. The primary beneficiaries of a study would appear to be the attorneys themselves, who should be familiar enough with the state’s laws to explain what would be needed to protect homeowners from Kelo-like situations without the distraction of a government-funded study. Indeed, the state bar already has convened its own task force on the subject of eminent domain. What’s needed is not another study, but action.
Granted, California and New York are the most populous states in the country and they contain some of the nation’s most densely packed urban areas, characteristics that make property rights and appropriate redevelopment particularly complex.
There is a risk that new laws could make eminent domain cases even more complicated and onerous for homeowners, who rarely have the financial resources and access to the legal system that’s necessary to challenge such government powers.
There is also a risk that responses to Kelo could err in the opposite direction and make it impossible for government authorities to condemn property that would meet almost anyone’s definition of blight and that was needed for redevelopment projects that clearly would serve the public interest, regardless of whether private companies also might be involved. Yet the risk of excessive constraints against government takings seems small compared with the harm homeowners could suffer in states where the wild permissiveness of Kelo hasn’t been curtailed.
Elsewhere, progress has been made. Hundreds of legislative proposals to counter Kelo have been introduced in more than 40 states, and some dozen states have enacted new limitations on government powers, according to a recent newspaper report. That outcome is exactly what the Supreme Court decision in Kelo envisioned. Most of these new state laws prohibit the use of eminent domain powers to further economic development or increase the tax base while others prohibit condemnation of property that isn’t deemed to be “blighted.”
Legislation that’s pending in Illinois and has the support of the state Realtors association attempts to strike a balance. Municipalities would be forced to prove an area was blighted before they could compel owners to sell their property for private development projects. Government seizures of property for private development would require a written agreement with a developer or an established plan to eliminate blight and a written agreement or deed restriction that would ensure the property was used for the stated purpose. Government entities would be required to pay relocation costs for displaced residents consistent with federal law in all eminent domain actions. And attorney’s fees would be awarded on the basis of the net benefit gained by property owners who made a good faith settlement offer and successfully challenged the government’s last and best offer for their property.
The bottom line is that state laws need to balance communities’ needs for development and homeowners’ property rights in ways that don’t result in greater confusion and endless legal wrangling between the two sides. On the margin, laws should err in favor of private homeowners, not commercial development or the interests of eminent domain attorneys.
While California debates and New York studies, local developers and their government cronies surely have their eyes on both campaign coffers and private residences that occupy prime real estate. Homeowners deserve better protection from the type of indefensible government takeover that Kelo seemingly condoned.
National foreclosure filings continued to climb in the first three months of 2006, evidence that more U.S. homeowners are struggling to stay current on their monthly mortgage payments.
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Identity theft and other borrower-based fraud techniques are becoming increasingly more sophisticated, exacting a much greater toll on profits for mortgage lenders. Compliance and misrepresentation tools alone are no longer adequate to address these threats. In response, CoreLogic, the leading provider of mortgage risk assessment and fraud prevention solutions, has developed IdentityPro to help clients better manage borrower fraud. IdentityPro assesses a borrower’s likelihood to commit the type of mortgage fraud most likely to cause financial loss by using state-of-the-art behavioral analysis that reveals suspicious patterns.“It’s a more robust engine than other products out in the marketplace right now, because it goes beyond the basics of Social Security number verification and identifying misrepresentation.†said Felice Kesselring, director of product development for CoreLogic. “It diagnoses a borrower’s buying and living patterns, looking for the type of activity that can be correlated to the risk associated specifically with fraud for profit.“
Freddie Mac has agreed to contribute funds towards the $1 million to the NeighborWorks Center to create a multi-pronged effort to boost the industry’s capacity to provide effective foreclosure avoidance counseling, undertake new research and work with different public and private organizations to educate the public about foreclosure alternatives.
In an interesting turn of events, Wal-Mart may have its land condemned by the city. From the article:
According to 
