A recent decision by the United States Supreme Court regarding private property and the right of governments to seize it under the principle of "Eminent Domain" has many property owners and investors worried about the future of private property in America. In case you are not very familiar with what happened as a result of this court decision, let me quickly outline the main points.
In New London, Connecticut, the local city government was approached by a large private company that wanted a piece of waterfront on which to build a new commercial facility. With New London economically depressed and in need of more jobs and more tax revenue for the city, the local government decided that this new project would be of "public benefit" and therefore should proceed. Just one problem, there were already a number of private homes on this waterfront property. All but 6 homeowners agreed to the terms of a buyout that would take their homes and demolish them to make way for new construction.
The remaining 6 owners fought a long and expensive legal battle just for the right to stay in their homes.
The long court battle finally ended with a Supreme Court ruling in June 2005. The Supreme Court ruled that governments have the power to confiscate private property, including businesses, for any "public purpose," even if the "public purpose" is actually a private, for-profit project. With that decision, the court expanded the definition of "public benefit" to include any project that can raise tax revenue. This caused outrage in the real estate community over the definition of "Eminent Domain" and its original intent and purpose.
But what is “Eminent Domain”? and how should it be used? Here's how my 10-year-old Realtor Licensing Manual defines "Eminent Domain" (aka "Police Power"):
"The right of the government to take ownership of privately held real estate regardless of the owners' wishes. In this way, land is acquired for schools, highways, streets, parks, urban renewal, public housing, and other social and public purposes. Quasi-public organizations, such as energy companies or railways, they can also acquire land needed for power lines, pipelines and tracks...”
Note the reference in the paragraph above to urban renewal and public housing. Before the 1950s, even this purpose was not considered a "public benefit". Until a 1950 Supreme Court ruling that allowed governments to seize land from so-called "slum lords" in inner cities for urban renewal projects, only roads, parks, highways, and other truly public uses were considered eligible for confiscation of private property. under the Eminent Domain concept.
Now we have another court that expands the state's police powers even further. But is there really a problem? Will we all lose our home or commercial property because of this judgment?
I think the real problem is the slow erosion of our private property rights. Like water flowing through a grand canyon or wind rushing through a monumental valley, everything seems normal and unchanging. But as with erosion by rain and wind, over the years our property rights are slowly being eroded and replaced by a new way of thinking that says the government knows best what to do with all the property under its jurisdiction.
I don't expect anything sudden or dramatic to happen, but make no mistake, the erosion of your right to own property will continue. My biggest concern is that in the next generation, people will begin to lose the concept of private property ownership and develop the mindset that the government knows best how to control everything.
Communist countries already live under the principle that the state knows best. In the old USSR, under socialism, people were allocated a place to live and a job so they could work. It was an "efficient use of state resources". Communist China would certainly agree that taking over property for the good of all is efficient and facilitates the solution of planning and growth problems. After all, in China, the state has decided that it is in the "best interest of the public" to allow each family only one or two children. If you exceed this number, it is in the public interest to exterminate these additional cubs. So, even your children can be confiscated in China today. But don't worry, everything is in the best interest of the public.
There is no power more dangerous to the concept of individual rights and private property than a government that needs money. Add to this the growing belief that people should give up individual rights for the good of society as a whole. Heck, I can see how the city of Atlanta might find it useful and in the public interest to seize all private property in the city and redistribute it so that all the homeless have a place to live. We can end homelessness right now if all the investors who own inner city properties just give them up so we can use them to help those less fortunate. Would that help us all?
That probably won't happen next week, but give it 10 or 20 years. Once this kind of thinking takes hold and more local governments find themselves in dire financial straits, individual property owners become the "bad guys" who impede progress and hinder the public good. Today it's 6 homeowners in New London, Connecticut, tomorrow it could just be you or your kids. Then it will make “perfect sense” to eliminate private property “for the public good
