Supreme Court: Eminent Domain OK for Economic Development

By: Kelly Quigley: REALTOR® Magazine Online
In an important eminent domain case, the U.S. Supreme Court ruled on Thursday that local governments may seize homes and businesses to make way for private projects that serve a public purpose by promoting economic development.

In a 5-4 ruling, the high court decided that the city of New London, Conn., did not violate constitutional rights by condemning non-blighted properties so a private mixed-use project could take shape.

The city made the case that the riverfront project would provide a much-needed boost to the ailing local economy, thus benefiting the public. But the property owners involved in Kelo vs. City of New London argued that eminent domain should never be used for economic development or, alternatively, only used when there is a reasonable certainty that the government will receive the public benefits expected from the taking.

Justice John Paul Stevens, writing for the majority, said local officials know best in deciding whether a development project will benefit the community, adding that states can pass additional laws restricting the use of eminent domain.

"The city [of New London] has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including—but by no means limited to—new jobs and increased tax revenue," Stevens wrote. The development plan calls for a mix of residential, retail, commercial, and recreational uses.

In a dissenting opinion, Justice Sandra Day O'Connor countered that government shouldn’t have power to take ordinary private property in order to convert the property from one use to another chosen by the government, even if the owners are compensated, and she expressed concern that wealthy developers would benefit the most.

"The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms,” she wrote.

The NATIONAL ASSOCIATION OF REALTORS® and the National Association of Home Builders in December filed a joint friend of the court brief supporting the property owners.

The brief argued that if economic development is the sole justification for public use, the door is left open for local governments to abuse their eminent domain powers.

Susette Kelo and other homeowners in New London filed the suit in 2000 after city officials announced plans to tear down their homes for the mixed-use development.

“I am very disappointed that the court sided with powerful government and business interests, but I will continue to fight to save my home and to preserve the Constitution,” Kelo said Thursday in a statement issued by the Institute for Justice, the Washington, D.C.-based law firm representing the New London homeowners.

To read more about the ruling, the 58-page Supreme Court opinion is available in PDF format.