This blogpost was coauthored by Cato legal associate Trevor Burrus, who also worked on the brief discussed below.
Rent control is literally a textbook example of bad economic policy. Economics textbooks often use it as an example of how price ceilings create shortages, poor quality goods, and under-the-table dealings. A 1992 survey revealed that 93 percent of economists believe that rent control laws reduce both the quality and quantity of housing.
As expected, therefore, New York City's Rent Stabilization Law—the most (in)famous in the country—has led to precisely these effects: housing is scarce, apartment buildings are dilapidated because owners can't charge enough to fix them, and housing costs have only increased (in part because costs are transferred to non-rent mechanisms such as "non-refundable deposits"). Yet the RSL persists, benefiting those grandfathered individuals who rent at lower rates but hurting the city as a whole.
Harmon v. Kimmel challenges New York's law on the grounds that it is an arbitrary and unsupportable regulation amounting to an uncompensated taking that violates the Fifth Amendment.
Jim Harmon's family owns and lives in a five-story brownstone in the Central Park West Historical District. The Harmons inherited the building—and along with it three rent-controlled tenants. Those tenants have occupied apartments in the building for a combined total of 91 years at a rate 59 percent below market. In their lawsuit, however, the Harmons face many unfriendly precedents that have given states free reign to regulate property, to the point that it is occupied on an essentially permanent basis while surviving Fifth Amendment scrutiny.
One way to challenge some of these laws is to argue they are so arbitrary and poorly justified that they violate the Fourteenth Amendment's Due Process Clause. Because this is an especially difficult type of challenge to bring, Cato joined the Pacific Legal Foundation and the Small Property Owners of San Francisco Institute on a brief supporting the Harmons' request that the Supreme Court review lower-court rulings against them. Although the Court has ruled that the Takings Clause does not permit challenges based on claims that the alleged taking fails to "substantially advance legitimate state interests," the Due Process Clause is an independent textual provision.
We thus clarify the relationship between property rights and due process, arguing that a law which advances no legitimate governmental purpose can be challenged under the Due Process Clause. To hold otherwise would be to deny property owners any meaningful avenue for defending their property from onerous and irrational regulations.
One of the unambiguously good results from last Tuesday's off-year elections came in Mississippi, the state I called home the year before I moved to D.C. By the impressive margin of 73% to 27%, voters in the Magnolia State took a stand against judicially sanctioned eminent domain abuse, specifically the government's taking of private property in the name of so-called “economic development.”
By passing Measure 31, which prohibits most transfers of condemned land to private parties for 10 years after condemnation, Mississippi joins 44 other states in enacting legislation that strengthens property rights in the wake of the Supreme Court's horrific ruling in Kelo v. New London. In Kelo (2005), you'll recall, the Court held that state and local governments can condemn private property not for some sort of public project like a highway or military base nor because it is a "blight" that creates a health or safety risk, but simply to transfer to another private party who claims to put it to better economic use.
We at Cato are all in favor of economic development, of course, but not if that development comes via raw government power that treads on constitutionally protected individual rights. If a developer thinks he can put a given piece of land to a higher-value use, let him buy that property fair and square from the owner rather than effectively forcing a sale at below-market value.
Indeed, Kelo’s holding was flawed precisely because its rationale that transferring ownership of "economically blighted" property would promote economic development is bad economics. If a proposed project were actually a better use of a given property, the developer would be willing to pay a price sufficient to induce the current owners to leave.
Kelo also undermines property security, making owners less willing to invest in their property and use it productively, lest the government swoop in, declare it “blighted,” and sell it to someone else. And securing property rights is not just a good thing economically. It also helps prevent powerful private interest groups from undercutting the property rights of minorities and other groups who may be vulnerable due to prejudice or political disadvantage.
And the American people agree: Kelo turned out to be a Pyrrhic victory for developers and their public-official cronies, such that most of the country is now better protected against eminent domain abuse than it was before Kelo. Notably absent from the list of states where property rights are better off, however, is New York (see my comment on a recent instance of eminent domain abuse in the Empire State).
The judiciary’s abdication of its role as a protector of property rights is bad enough, but our elected officials haven’t done much better. Tellingly, the drivers of successful anti-Kelo legislation have tended not to be state legislators (with some exception) but rather citizen-activists. While special-interest groups, such as big car companies in Mississippi, may pressure legislators to avoid anti-Kelo legislation, even as referenda show that popular opinion is on the side of the property rights activists.
Measure 31 is not perfect, but it is a step in the right direction. The Founders took care to protect private property rights in the Constitution, and it's heartening to see citizens taking an active role to vindicate those protections even when the Supreme Court abdicates its duty to do so.
For more commentary on the Mississippi vote, see Ilya Somin's recent op-ed.
For over a century, Montana citizens have used non-navigable streambeds along their properties for various purposes without objection from the state government. The hydroelectric energy company PPL Montana and thousands of other private parties exercised their rights over these non-navigable stretches that the state never claimed.
Last year, however, the Montana Supreme Court overturned well-settled state property law by effectively converting the title in hundreds of miles of riverbeds to state ownership. The majority of the court ruled that the entirety of the Missouri, Clark Fork, and Madison rivers were navigable at the time of Montana's statehood, producing a broad holding that eradicates the right to use rivers and riverbanks that Montanans had enjoyed for over a century.
PPL Montana thus asked the U.S. Supreme Court to review the state court’s decision; Cato filed an amicus brief supporting that request, which the Court granted. Now that the case is before the Court, Cato has joined the Montana Farm Bureau Federation, American Farm Bureau Federation, and National Federation of Independent Business on a brief supporting the property owners.
We are chiefly concerned with two parts of the Montana Supreme Court’s ruling: First, the court incorrectly evaluated navigability for the purpose of establishing title -- finding the entirety of the rivers at issue navigable (and thus belonging to the state) because portions of them are -- contravening the legal standard established by the U.S. Supreme Court in United States v. Utah (which analyzed the riverbeds section-by-section to achieve a “precise” assessment of navigability). Second, the court effectively transferred a substantial quantity of land from private owners to the state -- a judicial taking that violates either the Fifth or Fourteenth Amendments (as the Court described in the recent Stop the Beach Renourishment case, in which Cato also filed a brief).
In short, the Court should reaffirm the Utah standard for navigability in the context of establishing title and protect private property owners against judicial takings. By doing so, it would send a strong message to state courts across the nation that judicial usurpations of property rights are just as unconstitutional as those undertaken by other branches of government.
The Court will hear the case of PPL Montana, LLC v. Montana late this year or in early 2012. Again, you can find Cato's brief here.
Last month, I wrote about a major eminent domain struggle in National City, California. City officials had decided to declare almost seven hundred properties blighted even before conducting any sort of blight study, which eventually turned out to be riddled with errors.
At the center of the fight is a private, nonprofit boxing gym that has helped keep hundreds of at-risk kids in school and off the streets. The city wanted to bulldoze the center so a wealthy developer can build luxury condos and stores.
In 2007, the Institute for Justice teamed up with the gym and filed suit to stop the city from taking the property, and here's video about their legal fight:
Four years later, IJ scored a knockout blow against eminent domain abuse: Last Thursday, the Superior Court of California struck National City's entire 692-property eminent domain zone and found that National City lacked a legal basis for its blight declaration.
This is a major victory for California property owners, and the first case to apply the property reforms that the state enacted to counter the 2005 Kelo decision. Learn more about the victory here.
I previously wrote about eminent domain shenanigans here and you can read more from Cato on property rights here.
This is a big week for private property rights. Two epic eminent domain struggles are playing out on opposite sides of the country.
First, National City, California, is ground zero for eminent domain abuse. City officials declared several hundred properties blighted even before conducting a blight study that was riddled with problems. The city wants to seize and bulldoze a youth community center (CYAC) that has transformed the lives of hundreds of low-income kids, so a wealthy developer can build high-rise luxury condos:
CYAC has numerous volunteers, including local law enforcement officers, providing free mentoring in boxing as well as academics. The gym is famous for getting kids off the street and back into school. As Rick Reilly explained in a feature in Sports Illustrated (boy, how I miss his inside-back-page column):
You know what, Mayor? National City doesn't need more luxury condos. It needs good men like the Barragans teaching kids respect for neighbors and property, manners you could use a little of yourself.
And if you kick the Barragans out so some slick in Armani can buy a bigger yacht, I hope your car stereo gets jacked—weekly—by a kid who would've otherwise been lovingly coached on their jabs and their math and their lives.
Question: Can you declare politicians blighted?
This week, the gym’s battle is in trial before the Superior Court of California. Represented by the Institute for Justice (who else?), a victory will help protect private property far beyond National City and clarify the use and misuse of blight designations.
Second, moving to the other side of the country, we go to Mount Holly, New Jersey:
Mount Holly is another classic case of "Robin Hood-in-Reverse." Officials have been dismantling a close-knit community known as the Gardens for the last decade so a Philadelphia developer can bulldoze the area and build more expensive residential properties.
Homeowners in the Gardens are primarily minorities and the elderly. The row-style houses are being torn down while still attached to occupied homes, and officials refuse to offer the remaining homeowners replacement housing in the new redevelopment. Further, owners are being offered less than half the amount it would cost to buy a similar home blocks away.
Here, IJ just launched a billboard campaign and did a study that concludes the eminent domain abuse project may result in a loss of a million taxpayer dollars a year, or one-tenth of the Township’s budget.
I previously wrote about eminent domain shenanigans here and you can read more from Cato on property rights here.
Throughout history, people have fought over beaches, including in the legal arena. In the latest case in which Cato has filed an amicus brief, a state has once again redefined property rights to take possession of highly-valued beachfront property.
In 2003, Hawaii passed Act 73, which took past and future title to accretions (the slow build-up of sediment on beaches) from landowners and gave it to the State, changing a 120-year-old rule. While waterlines are unpredictable, the original rule — common to most waterfront jurisdictions — helped establish legal consistency. Indeed, without such a rule, beachfront property becomes beachview property in just a few years.
In response to Act 73, homeowners sued the state, claiming that the law violated the Takings Clause of the Fifth Amendment or, in the alternative, the Due Process Clauses of the Fifth and Fourteenth Amendments. The state appellate court held that compensation was owed only for the accretions that had accumulated before Act 73's enactment because the right to subsequent accretions had not "vested" (the legal term for when an expectation becomes an actual property right). Hawaii's Supreme Court declined to review that ruling, so the property owners asked the U.S. Supreme Court to do so.
Cato, joined by the Pacific Legal Foundation, filed a brief supporting that petition and argues that the appellate court's decision was contrary to long-standing definitions of waterfront property rights. Our brief highlights the increasing need for the Court to establish and enforce a judicial takings doctrine.
More and more states are using backdoor tricks — like legislative "guidelines" and judicial creativity — to take property in violation of constitutional rights: This Hawaii case is distressingly similar to last term's Stop the Beach (in which Cato also filed a brief). In that case, Florida took property by adding sand to the beach and then laying claim to the newly created land — in essence asserting that property that was defined by contact with the water (in technical terms, "littoral" or "riparian") had no right to contact the water. The Court ruled that while Florida's actions did not rise to the level of a judicial taking, a large enough departure from established common-law rules could constitute a constitutional violation.
In this latest brief, we highlight both the largeness of Hawaii's departure from established law and the spate of such actions in recent years — which circumstance calls out for Supreme Court review. The case is Maunalua Bay Beach Ohana 28 v. Hawaii and the Court will decide later this fall whether to take it up.
Yesterday I blogged about the Florida property rights case, which I now consider the best unanimous opinion against my position I could ever imagine. Although the property owners lost, four justices stood for the idea that courts no less than legislatures or executive bodies are capable of violating the Takings Clause (Fifth Amendment), while two others endorsed remedying such violations via Substantive Due Process (Fourteenth Amendment), and the remaining two didn't express an opinion one way or the other. For more on the case, see the blogposts of Cato adjunct scholars Tim Sandefur, Ilya Somin, and David Bernstein.
An interesting side note involves Justice Scalia's excoriation of Substantive Due Process (and Justice Kennedy's use of it):
Moreover, and more importantly, JUSTICE KENNEDY places no constraints whatever upon this Court. Not only does his concurrence only think about applying Substantive Due Process; but because Substantive Due Process is such a wonderfully malleable concept, see, e.g., Lawrence v. Texas, 539 U. S. 558, 562 (2003) (referring to “liberty of the person both in its spatial and in its more transcendentdimensions”), even a firm commitment to apply it would bea firm commitment to nothing in particular.
The great attraction of Substantive Due Process as a substitute for more specific constitutional guarantees is that it never means never—because it never means anything precise.
Scalia also calls Kennedy's method "Orwellian" -- after having said that Justice Breyer uses a "Queen-of-Hearts" approach "reminiscent of the perplexing question how much wood would a woodchuck chuck if a woodchuck could chuck wood?" Really, this is classic Scalia, a delight to read (and you should, here).
The problem with what Scalia says, as Josh Blackman points out, is that the Court is about to release its opinion in the Chicago gun case, McDonald v. Chicago and, based on the oral argument, is about to incorporate the Second Amendment via Substantive Due Process. If SDP is so bad, how can Scalia (endorsed by Chief Justice Roberts and Justices Thomas and Alito) use it to protect a "new" right? -- particularly when the Privileges or Immunities Clause was created for just this purpose! One answer is that, to Scalia, "babble" -- his term for SDP -- is still worth more than "flotsam" (his term for P or I), as I discuss here. Another is that, to put it bluntly, Scalia is a results-oriented non-originalist, as Josh and I discuss here.
Speaking of Blackman-Shapiro collaborations, for the correct way to apply the right to keep and bear arms to the states, see our law review article called "Keeping Pandora's Box Sealed." And Tim Sandefur, who authored Cato's McDonald brief (read a summary here) just published a fascinating related article called "Privileges, Immunities, and Substantive Due Process." I haven't read it yet but am very much looking forward to it.
Tim also recently wrote a book defending economic liberties (which Justice Scalia also disparages in his Stop the Beach opinion), called The Right to Earn a Living: Economic Liberty and the Law. I hear it makes for good beach reading.