Via Nealz Nuze.
Friday -- June 24, 2005
THE END OF PRIVATE PROPERTY RIGHTS
I cannot remember being more dismayed at a court ruling, and this includes the occasional ruling against me when I was practicing law. What ruling? Just in case you don't already know, the United States Supreme Court yesterday issued a ruling that goes a long way toward destroying private property rights in this country.
Background. The Fifth Amendment to our Constitution restricts the government's right of eminent domain. It does not, as I heard so many commentators say yesterday, grant a right of eminent domain, it restricts it. The right of eminent domain was assumed as a basic part of English Common Law. The Fifth Amendment merely said that government could not exercise this right for a public use without paying for it. The exact working is "nor shall private property be taken for public use without just compensation."
For hundreds of years the term "public use" was interpreted to mean use for something like a school, library, police or fire station, power transmission lines, roads, bridges or some other facility owned and operated by government for the benefit of the general population. As politicians became more and more impressed with their own power they started to expand this definition of public use.
The new theory is that increasing the property taxes paid on a parcel of property is a public use. Increasing the number of people who can be employed by a business located on a particular piece of property can also be a public use. This would mean that government would be free to seize private property if it can be handed to a developer who will redevelop the property so as to increase the property taxes paid or the number of people employed. This is the theory that was validated by the Supreme Court yesterday in its ruling approving just such a private property seizure in New London, Connecticut. As Justice Sandra Day O'Connor said in her dissent, this decision renders virtually all private property vulnerable to government confiscation.
Bottom line: If you own property, and the government wants that property --- you're screwed. You now own your private property only at the pleasure of government; and that means that you own your property, be it your home, your business or a piece of investment real estate only at the pleasure of the local controlling politicians.
Let me give you a few real-life examples of just how politicians can now use this Supreme Court decision. In considering these examples, please remember one of the first rules of politics: There is absolutely no limit whatsoever to a politician's desire for more tax money to spend.
First let's consider our lovely Southern Belle producer Belinda. Belinda and her husband recently purchased a tract of land behind her new home. That tract of land contains one rather small and old house plus some empty acreage. Belinda will rent the home for just enough to cover her debt service and property taxes on the new purchase ... maybe. Now, here comes a developer. He wants Belinda's land because he can build at least three, maybe four new homes on that property. Belinda says no. She likes not having houses abutting her back yard and appreciates the investment value of the land she has purchased. So .. the developer wanders off to the Capitol to talk to some politicians. He tells them that he can increase the property being paid on that tract of land tenfold if he could just get in there and build some houses, but the owners just won't sell the property to him. Under this Supreme court ruling the city can just seize the property from Belinda and hand it over to the developer to build those homes. Belinda has no way to stop this action. The city will have to play Belinda "just compensation," but that compensation will never match what Belinda might have earned by selling the property herself. Besides ... she didn't want to sell in the first place. It was her property, and she wanted to keep it. Now it can be taken ... just like that.
Another example. This time we'll use me. About two years ago I brought a building lot in the Northeast Georgia mountains. It's a lot in a mountain resort community. Before I bought the lot I made sure that there were no covenants or regulations that would require me to build a home on that lot before I was ready to do so. At present it is not my intention to build a home. I bought the lot as an investment. Now, since there is no home as of yet the property taxes are rather low. Along comes a developer. He wants to build a home on my lot. I tell him the lot is not for sale. He waltzes off to the local county commission to complain. He wants to build a house, I won't sell him the land. If he could build the house the property taxes would jump on that parcel of land. The county commission then sends me a letter telling me that if I don't sell my land to that developer to build that home they are going to seize the land and turn it over. Thanks to the Supreme Court, I'm screwed.
Now take the situation in New London. This is the case the court was considering. The targeted neighborhood is populated by middle class residents. The homes are old, but very well kept. One couple now slated to have their property seized is in their 80's. They celebrated their wedding in that home. They raised their children in that home. They held their 50th wedding anniversary party in that home. Now they're going to lose that home because a developer wants the property to build a hotel, some office buildings and a work out center. This is America. This shouldn't happen in America. That couple shouldn't be kicked out of their home just because a new development would pay more in property taxes.
There are also small businesses located on this tract of land. They're history. The big boys are in town, and the big boys can use eminent domain to get your property.
No society ostensibly based on economic liberty can survive unless that society recognizes the right to property. The right to property has been all but crippled by this decision from the Supreme Court. That right is now subject to the whims of politicians and developers.
I'm not through ranting. Read on.
Considering this ruling, how likely are you to invest in real estate at this point? If you saw a tract of land that was placed squarely in the path of growth, would you buy that property in hoes that you could later sell it for a substantial profit? I wouldn't. I wouldn't be interesting in investing in that property because I know that when it came time to sell the potential purchaser would lowball me on the price. I would never get a true market value based on the highest and best use of that property. And why not? Because the developer wanting that property would simply tell me that if I didn't' accept his lowball offer he would just go to the local government and start the eminent domain process. This ruling also means that virtually every piece of raw land out there has decreased in value. The threat of eminent domain for private economic development has severely damaged in most cases, and destroyed in many others, the American dream of investing in real estate.
Another element of the New London case. These middle class homes and small businesses were located on a waterfront. Everybody knows that middle class people and small businesses have no right to live on prime waterfront property. This property should be reserved for expensive homes and for big businesses with powerful political connections .. businesses like Pfizer Pharmaceutical company. Pfizer will be one of the beneficiaries of the New London seizures. This hideous Supreme Court ruling is going to result in a disgusting orgy of wealthy developers and politically powerful business interests using their political connections to ride roughshod over the property rights of poor and middle class property owners. I doubt seriously that you'll ever hear of some politician invoking eminent domain to seize property from a wealthy individual or business to make way for a low income housing project.
There's another element I want to add to this rant. I believe this Supreme Court decision to be a victory for the dark side in the war against individualism. Sadly, sometimes I think that I'm the only one out there who realizes that this war is being fought ... the only one on the side of individuality, that is. How in the world can leftist icon Ted Kennedy make say that "we are engaged in a war against individuality" without at least a few people in the media asking him what in the world he's talking about?
The concept of individuality is a very troublesome one for liberals. Recognizing the concept of the individual brings with it a whole lot of baggage that liberals don't want to carry around. When you acknowledge the existence of the individual you then have to recognize that the individual has rights. Among those rights would be the right to property. Liberals aren't friendly with the idea of property rights. They're fond of chanting such absurdities as "human rights, not property rights." Well, truthfully speaking; property has no rights. People have the right to property .. and those rights have been severely damaged.
Now ... is there a bright side? Is there anything good in the ruling? Yes, there is, and this is where you come in. Even though the Supremes approved these government confiscations of private property, the five justices who voted with the majority did say that they didn't like it. They encouraged local jurisdictions to pass laws severely restricting these seizures. There are eight states in the nation where the use of eminent domain for private development is all but prohibited by law. Those states are Washington, Montana, Illinois, Kentucky, Arkansas, Maine, South Carolina and Florida. If your state is not on this list, it's time for a little political activism. Start the movement now. Let your legislators know that you want your private property rights restored, and that your decisions on election day will be governed by their willingness to act to preserve your rights.
The Supreme Court decision is a horrible blow to private property rights. Whether or not it is a death-blow will be up to you.
What can you do? Visit Institute For Justice & the Castle Coalition. There is also a blog that focuses on eminent domain issues.