How Eminent Domain Abuse Harms the Poor
This June is the tenth anniversary of Kelo v. City of New London. The controversial Supreme Court decision held that it is permissible for the government to use eminent domain to take private property and transfer it to other private interests in order to promote “economic development.” Not surprisingly, the ruling was opposed by libertarians and conservatives because it undermines property rights. But it has also met with strong criticism from many on the left, including Ralph Nader, the NAACP, and former president Bill Clinton.
This unusual cross-ideological coalition arose because takings that transfer property to private interests often tend to victimize the poor, racial minorities, and the politically weak. As Hilary Shelton of the NAACP put it in testimony before the Senate Judiciary Committee, “allowing municipalities to pursue eminent domain for private economic development [has] a disparate impact on African Americans and other minorities.”
His point is backed by much painful historical experience. Since the 1940s, “blight,” urban renewal, and economic development takings have forcibly displaced several million people in the United States, most of them poor and racial minorities. In the 1950s and 60s, urban renewal condemnations were sometimes called “Negro removal” because of their tendency to target blacks.
Most of the people displaced were left even worse off than they were before. The condemned property was often transferred to politically influential developers and business interests. While such condemnations are less common in recent years, blight takings still disproportionately occur in poor and minority neighborhoods, and still inflict great harm both on their victims and on the surrounding communities.
Unlike in the 1940s and 50s, overt racism is rarely a factor in modern takings, though some scholars contend that unconscious bias plays a role. In most cases, the poor and minorities suffer not because officials are hostile to them as such, but because these groups often lack the resources and political influence to resist effectively, especially when faced with more powerful interest groups on the other side.
Defenders of blight and economic development takings argue that they are a necessary tool for promoting economic growth in poor areas. But in reality, such condemnations often destroy far more economic value than they create. Developers and local governments have strong incentives to overstate the benefits of condemnation-driven projects, and ignore costs. By the time their true effects become evident years later, public attention has usually moved on to other issues. Voters rarely punish officials who authorize dubious takings. In the Kelo case itself, the condemned property remains empty a decade after the Supreme Court decision.
Cities that make aggressive use of eminent domain to promote private development projects often end up undermining their economies rather than enhancing them. The bankrupt city of Detroit is a striking case in point. For many years, Detroit made extensive use of takings for the benefit of politically connected business interests. In the notorious 1981 Poletown case, it forcibly displaced some 4,000 people and numerous businesses in order to transfer the property to General Motors for the construction of a new factory. That taking failed to provide anything close to the promised 6,000 new jobs. The destruction of numerous homes, businesses, and schools, and churches predictably damaged the local economy. Ultimately, eminent domain abuse was a significant contributor to the city۪s economic decline.
Aggressive use of eminent domain also damages the social fabric of poor communities because the displacement of residents, businesses, and churches undermines social ties. In 1960s Detroit and elsewhere, race riots tended to be more severe in areas that had undergone extensive urban renewal takings; the condemnations had weakened the social ties and institutions that ordinarily tamp down violence.
When advising the governments of underdeveloped nations, American foreign aid agencies emphasize that secure and stable property rights are critical for long-term economic development. We would do well to apply the same wisdom at home. In the long run, protecting property rights helps stimulate investment and the creation of social capital crucial for genuine development and poverty alleviation.
The Kelo decision generated a massive political backlash that led 45 states to enact eminent domain reform laws. A number of states, such as Arizona and Florida, have adopted strong, effective reforms. But, sadly, many others passed laws that only pretend to limit economic development takings, while actually allowing them continue under other names. And all but a handful of states still permit condemnation of property for private development in “blighted” areasneighborhoods of the sort often inhabited by the minority poor.
Nonetheless, real progress has been made since Kelo. Eminent domain abuse has come under fire from critics across the political spectrum. And there is growing recognition that we need not condemn economically troubled neighborhoods in order to save them.
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Ilya Somin is a law professor at George Mason University and an adjunct scholar at the Cato Institute. He is the author of The Grasping Hand: Kelo v. City of New London and the Limits of Eminent Domain (University of Chicago Press, 2015), on which this article is partly based. Follow Ilya on Twitter at @IlyaSomin.
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