An Unnecessary Abuse

By DICK CARPENTER
January 15, 2008

The widespread abuse of eminent domain across New York is giving new life to the nickname the Empire State. Virtual empires benefiting private interests — secured through government force — are springing up especially across New York City. For example:

• Columbia University seeks land that rightfully belongs to its West Harlem neighbors so it can expand its campus.

• Developer Bruce Ratner has received carte blanche from the city to seize properties that stand in the way of his Atlantic Yards, an unpopular cluster of skyscrapers and a "public" arena, which the city will lease to Mr. Ratner for $1 for 99 years with Mr. Ratner reaping all the profits.

• After decades of refusing to provide basic municipal services, the city is now considering a proposal to condemn more than 200 thriving businesses in Willets Point in Queens to give the land to a private developer.

Thanks to vocal beneficiaries of eminent domain abuse, like Mayor Bloomberg and his developer friends, New York is one of the few states that has not passed any meaningful eminent domain reform, this despite leading the nation in takings for private gain.

Eminent domain enthusiasts defend their position by predicting economic doomsday if their power of eminent domain is in any way restrained. Despite countless examples to the contrary, Mayor Bloomberg insists, "You would never build any big thing any place in any big city in this country if you didn't have the power of eminent domain." It's that kind of hyperbole that has led New York City officials to use eminent domain for the private gain of politically connected developers over hard-working, tax-paying New Yorkers.

New research released this week, however, demonstrates Mr. Bloomberg's dire warnings regarding eminent domain are not to be believed.

The Institute for Justice examined economic indicators closely tied to reform opponents' forecasts — construction jobs, building permits, and property tax revenue — before and after eminent domain reform across all states since more than a year before the infamous 2005 Kelo decision.

Because 21 states have passed more substantive reform than others, we also looked at data between states grouped by strength of reform. Finally, we controlled for broader economic conditions, used more than three years of data, between 2004 and early 2007, and employed rigorous statistical models.

The results reveal that state trends in all three economic indicators were essentially the same after reform as before. Even states with the strongest reforms saw no ill economic effect compared to states that failed to enact reform. Trends in all three indicators remained similar across all states, regardless of the strength of reform.

Simply stated, the results bear no resemblance to the Chicken Little predictions of those who benefit from eminent domain's abuse: politicians, planners, and developers. In fact, cities like Seattle and Anaheim demonstrate that significant economic activity is possible, and perhaps more profitable, through market forces and the protection of property rights.

In the early 1990s, Seattle redeveloped a portion of its downtown without the use of eminent domain. The one million square-foot Pacific Place retail center created a 15.8% increase in taxable sales and a 4.4% increase in retail jobs.

For its part, Anaheim declared eminent domain "off the table" for its redevelopment efforts. The city's private sector approach led to a quadrupling of property values, billions in private sector investment, increased demand for high-end office space, 7,000 homes, and a variety of restaurants and retail property.

With no ill economic effects, and with the substantial benefits strong reform provides the rightful owners of property and society as a whole, legislators in New York and nationwide should ignore the apocalyptic hand-wringing of eminent domain abusers and reform their state's eminent domain laws to curb its use for private development.

Mr. Carpenter, director of Strategic Research for the Institute for Justice, is the co-author of "Doomsday? No Way: Economic Trends and Post-Kelo Eminent Domain Reform."

An Unnecessary Abuse

Reader comments on this article