Will Eminent Domain Reform Cause a Development Doomsday? New Report Says, “No Way”

February 1, 2008

By Dick Carpenter

Download: Doomsday? No Way

Since the infamous Kelo ruling, eminent domain apologists—politicians, planners and their developer friends—have tried to block reform by predicting an economic doomsday if eminent domain abuse were reined in. Former Riviera Beach, Fla., Mayor Michael Brown, for example, intoned, “[I]f we don’t use this power, cities will die.” Others predicted massive job loss, decreased tax revenue and depressed economic development.

The Institute for Justice was skeptical of the apocalyptic hand-wringing, so we put it to the test. The results are available in IJ’s newest strategic research report: Doomsday? No Way: Economic Trends & Post-Kelo Eminent Domain Reform.

Using rigorous statistical models, we examined economic indicators closely tied to reform opponents’ forecasts—construction jobs, building permits and property tax revenue—before and after reform across all states and between states grouped by strength of reform. We controlled for broader economic conditions and used more than three years of data (2004 to early 2007).

The results confirmed our skepticism.

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 eminent domain reform opponents. In fact, as Curt Pringle, mayor of Anaheim, Calif., documented in Development Without Eminent Domain: Foundation of Freedom Inspires Urban Growth (also published by IJ), significant economic activity is possible and often more profitable through market forces and the protection of property rights. Anaheim declared eminent domain “off the table” when beginning its redevelopment efforts. This private sector approach led to a quadrupling of property values, billions in private investment, increased demand for high-end office space, 7,000 new homes and a variety of new restaurants and retail outlets.

In short, economic growth and property rights go hand-in-hand. Post-Kelo reforms have provided greater protection to homes and small businesses without sacrificing economic health. With no ill economic effects—and with the substantial benefits strong reform provides to the rightful owners of property and society as a whole—legislators nationwide should be encouraged to keep good reforms in place while pursuing new and stronger safeguards against eminent domain abuse.

Of course, despite the success of reform efforts spearheaded by IJ’s Castle Coalition, the battle against eminent domain abuse is far from over. But these new findings provide essential evidence to, among other things, encourage legislators nationwide to protect property owners against eminent domain for private profit.

Dick Carpenter II is IJ’s Director of Strategic Research.

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