Supreme Court Rulings a Blow to Property Owners; States React with Flurry of Legislation
In a serious blow to property rights advocates, the Supreme Court failed to take the opportunity to clarify muddled and ambiguous property rights law and instead delivered two end-of-term decisions that are certain to add to the confusion.

On June 20, the Court announced a decision in San Remo v. City and County of San Francisco that effectively precludes a property owner from bringing a federal takings claim in federal court while failing to resolve the fundamental property rights issues involved in the case.

In a concurring opinion joined by Justices Sandra Day O’Connor, Anthony Kennedy and Clarence Thomas, Chief Justice William Rehnquist said that a future case is needed to redefine the Court’s 1985 Williamson County decision requiring property owners to “ripen” their takings claims by litigating in state court.

“In an appropriate case, I believe the Court should reconsider whether plaintiffs asserting a Fifth Amendment takings claim based on the final decision of a state or local government entity must first seek compensation in state courts,” Rehnquist wrote.

On June 23, the Court made headlines with a decision in Kelo v. City of New London that appears to give local government unlimited power to condemn private property for the “public purpose” of promoting economic development.

Though hailed in the media as a victory for “wealthy developers,” NAHB and its membership were on the home owners’ side and hoped the case would result in an objective test for the review of public-private takings.

In dissent joined by Justices Rehnquist, Antonin Scalia and Thomas, Justice O’Connor made it clear that she expects the seemingly unlimited eminent domain powers now afforded to local governments to benefit private citizens with the means to exploit that power.

“Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random,” O’Connor wrote. “The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more.”

With the Supreme Court abdicating its responsibility “to enforce properly the Federal Constitution,” O’Connor wrote that property owners will now have to turn for protection to the states, “who may or may not choose to impose appropriate limits on economic development takings.”

The San Remo decision, Howard said, “leaves for another day the question of whether a property owner asserting a Fifth Amendment takings claim can have that claim heard by a federal court.” He said that it could be years, or even decades, before an appropriate test of this question again comes before the Court.

And in Kelo, he said, “the Court left it to state courts, and perhaps to the voters themselves, to protect property owners from the exceedingly broad power of condemnation now granted to local governments.”

At least 25 state legislatures are weighing legislation that would curb the use of eminent domain authority by local governments.  Utah appears to be the first state to take legislative action to limit the use of eminent domain.  Utah Governor Jon Huntsman Jr. (R) on March 17 signed into law Senate Bill 184, effectively preventing the exercise of eminent domain authority by redevelopment agencies, which otherwise had the power to transfer land from one private entity to another.  Local governments in Utah may still use eminent domain for more traditionally defined and understood “public purposes”.

The use of eminent domain by local governments has grown over the past 30 years, as cities have taken private property from one owner to give or sell to another private owner whose proposed use promises increased tax revenue or other economic benefits.

The Michigan Supreme Court ended the practice there in July 2004 by reversing the infamous 1981 Poletown decision, which had allowed a Michigan city to remove more than a thousand private homeowners from land that was then given to General Motors.

For more information on San Remo, e-mail Tom Ward at NAHB, or call him at 800-368-5242 x8230. For information on Kelo, e-mail Mary Lynn Pickel, or call her at x8485, and for information on state legislation, e-mail Sam Leyvas, or call him at x8584.
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