The Supreme Court's 2005 decision in Kelo v. City of New London generated a record political backlash. Kelo upheld the condemnation of private property for transfer to other private owners in order to promote "economic development." The case inspired widespread outrage. Polls show that over 80% of the public opposes economic development takings. As a result, 44 states have enacted eminent domain reform laws that restrict the condemnation of property for the benefit of private interests.
The most recent state to react to Kelo is Mississippi. On Tuesday, Mississippi voters adopted Measure 31 by a decisive 73% to 27% margin. The new law will make taking property for economic development unprofitable by forbidding most transfers of condemned land to a private party for 10 years after condemnation. The measure is a major victory for both property owners and the state's economy.
Economic development condemnations are often used by powerful interest groups to acquire land for themselves at the expense of the poor and politically weak. Prior to Kelo the most famous economic development taking in American history was the 1981 Poletown case, in which some 4,000 people were forcibly expelled from their homes in order to transfer the land to General Motors to build a new factory. In Kelo itself, the taking was in large part the result of lobbying by the influential Pfizer Corporation. In Mississippi, recent condemnations have transferred land to big auto firms such as Nissan and Toyota.
Mississippi Governor Haley Barbour and others claim that these takings are needed to promote economic growth. In reality, economic development condemnations often destroy local economies by wiping out neighborhoods, small businesses and schools. Moreover, the new owners are usually not required to actually produce the development they promised. In the Poletown case, the new factory produced only about half as many new jobs as were promised. In Kelo, nothing has been built on the condemned property six years after the Supreme Court upheld the takings.
Private developers who have a genuinely valuable project should be able to acquire the land they need through voluntary purchase. One of the strongest indications that their proposed project really is more valuable than current uses of the same land is their willingness to pay the current owners a price high enough to persuade them to sell. Economic development takings also undermine growth by reducing the security of property rights. If landowners fear that their land might be condemned, they are less likely to invest in it.
Unfortunately, many of the post-Kelo reform laws fall short of expectations. Legislators have found various ways to produce bills that have major loopholes. The most common tactic is that of allowing economic development condemnations to continue under the guise of alleviating "blight." Many states define "blight" so broadly that almost any neighborhood qualifies and is therefore subject to condemnation. Such unlikely areas as downtown Las Vegas and New York's Times Square have been declared "blighted" for the purpose of justifying condemnations. Fortunately, Measure 31 prohibits the transfer of so-called blighted property to private parties unless the properties are severely dilapidated or pose a direct threat to health and safety.
Politicians enact ineffective reform laws in part because it is difficult for voters to tell the difference between a real "anti-Kelo" bill and one just for show. A 2007 Saint Index survey found that only about 13% of Americans knew whether or not their state had passed an effective post-Kelo reform law. Referendum initiatives like Measure 31 tend to be stronger than reforms adopted by state legislatures because many of them are drafted by activists rather than by politicians. The vast majority of post-Kelo referenda adopted by voters impose tough restrictions on takings.
Unlike state legislators, the property rights activists who wrote most of the citizen-initiated anti-Kelo ballot initiatives had no need to appease powerful pro-condemnation interest groups in order to improve their re-election chances.
Fortunately, anti-Kelo referendum initiatives are not only effective, but politically popular. No anti–Kelo referendum initiative has ever been defeated except in cases where a ban on Kelo-style "economic development" takings was packaged with some other, much less popular policy. By contrast, all 12 "clean" anti-Kelo measures have passed, usually by lopsided margins, though a few of them fail to provide genuinely effective protection for property owners.
Far from promoting growth, economic development takings destroy more value than they create. More states should give property owners genuine protection against eminent domain abuse by adopting referendum initiatives like Measure 31.