Real estate has many failings when it comes to our collective belief in the free market. Are you in favor of externalities and market failures?

Huh?

I second that "huh?" And given the Michigan Supreme Court's recent backtracking on Poletown, which for decades was the leading case in Takings Clause jurisprudence, I have to think there's a fair to good chance their federal counterparts will follow suit.

I'm still trying to figure out how you get from "don't take private property" to "supporting market failures"

perhaps he's making a veiled aside to the govt-supported status of real estate, i.e. the federal tax sudsidy.

or perhaps not.

As near as I can tell, he seems to think the government should control the real estate market because the free market can't.

But I can't be sure.

Real estate is intrinsically different than personal property. Its value is dependent not only upon the materials that are present on the property, but also upon its location.

What is the relevancy of location with respect to this discussion? The most obvious example is access. We want to be able to gain access to our property. We want to travel to other property. Thus, we have public roads. That's right, public roads. Public roads are antithetical to the free market, are they not? But I dare say that no one who has posted comments would say that we should get rid of public roads. In addition, location is not something that can is easily replaceable. If I need some steel, it doesn’t matter from where or from whom I get the steel, it only matters that I get the steel. But if I need a 32 acre piece of land for a factory, it does matter where I get that 32 acres. 32 acres in the Outback of Australia ain’t the same as 32 acres in New London, CT. The response may be, well if you pay enough money, the free market will provide you with the 32 acres. But that is obviously not true, is it, because New London is in the Supreme Court.

Another intrinsic difference between real and personal property is that our uses of real property have lots of externalities. Both statutory and common law are replete with well-established property conditions/uses that are nuisances and thus impermissible. And uses/conditions that were not nuisances when they were first created can become nuisances because of other encroaching users. (i.e. a rooster breeder that has become surrounded by suburban homes, see also http://www.cortland.edu/polsci/boomer.html).

Third, and finally, a healthy, vibrant, livable community requires different uses. You wouldn't want a community with only homes or just gas stations. Many people make the argument, that the free market will correct those uses. And to a certain degree, yes, the free market will work towards a balance. But not always. The free market makes mistakes, lots of mistakes. And mistakes made regarding real property are not easily corrected by the free market. For example, a shopping mall built in a location that cannot sustain it and is doomed to failure, will sit vacant, because it is too expensive to operate. And the owner, having sunk millions of dollars into it, will hold it for years if not decades waiting the best time to reopen it or sell it. Meanwhile, the community is left to suffer the effects of carcass that is the shopping center.

In addition, some uses or improvements to real property are not mistakes at the time they are made, but there failure to be updated becomes a failure. For example, houses that were built in the 1930s, 40s, & 50s are completely different in design than houses constructed today. But those houses will not be renovated or demolished and rebuilt until the neighborhoods have become completely bombed out.

So, what does this have to do with the Kelo case. Because of externalities and market failures, the Kelo's use of their property cannot be viewed in a vacuum, isolated from changes in the economy, surrounding land uses, building standards/construction. For society to effectively deal with externalities and the market failures of real property, eminent domain may have to be used when all other land use regulations (i.e. zoning, nuisance, etc.) have failed.

Frankly, all of the issues that I've discussed are the underpinnings of zoning, nuisance, urban renewal/community redevelopment programs. If you accept the legality/necessity of eminent domain for those land use programs, making the leap to the economic development program put in place by New London is not that hard.

I feel that much of the backlash against eminent domain comes from the failure to understand that real property is not like personal property.

That doesn’t mean I don’t think that the Kelo’s aren’t entitled to substantial compensation.

Does anybody who posted a comment work for a local government?

Bingley & Summers,

Regarding "govt-supported status of real estate, i.e. the federal tax sudsidy" Not at all. Actually, I hate subsidies. And governments are really bad being real estate developers. But I do think that governments are, in many instances, the only instruments that can correct market failures.

yes, i figured you were against the interest deduction.
i don't think the kelos are entitled to substational compensation; i think they're entitled to their property. the government has no justification to take their property and give it to a private corporation. none. they are not kulaks. yes, free markets make lots of mistakes, but state planning agencies make more, and one of the gifts of freedom is the freedom to be wrong (i exercise it a lot).

For example, houses that were built in the 1930s, 40s, & 50s are completely different in design than houses constructed today. But those houses will not be renovated or demolished and rebuilt until the neighborhoods have become completely bombed out.

not at all. in many instances people like these older houses and take great pride in restoring them; in other instances people buy these houses for the property and tear them down to rebuild (in a crappier style, generally), putting a lot more money into the local economy and making the towns very happpy when they reassess proiperty values.

Fluffy, I don't have time to respond adequately this evening, so I will try to respond tomorrow, probably in a separate post. I think many of your points are wrong (IMHO) but certainly worthy of discussion in more detail than I can do tonight.

I look forward to more exchanges :)

"Does anybody who posted a comment work for a local government?"

Not that I know of, but I worked for Florida Legislature. Like Ken, response to follow in the morning: I don't even know where to start right now, but believe me, I will.

Bingley,

You are right that a lot of older houses do get renovated. Personally, I can't get enough of this old house. And often, the older houses are part of the fabric of a community, adding to its sense of place and its history.

But there are a lot of communities where the houses or buildings or whatever will not be renovated, and as a result those properties end up dragging down the rest of the community.

I'm not denying that it is their property. But governments (local, state, & federal) take a lot of property for roads and parks and municipal garages and urban/community redevelopment. As Justice O'Connor pointed out yesterday, making a leap from those eminent domain proceedings to the New London case is not that far (I don't think the Kelo's counsel addressed that point very well either). Furthermore, zoning regulations and nuisance regulations also "take" property. It's just a matter of degree. Frankly, I think that the answer to many of the questions and conflict can be found in nuisance law, and that is a reasonableness standard.

Just for some perspective. I am an attorney in New York. I work with communities across the State on community redevelopment issues, and many of them are suffering severe economic distress. They are on the verge of financial collapse after decades of declining property values. (This leads into an ancillary discussion of whether property taxes are the best way to fund local governments, but that's a discussion for another day.)

Also, in New York State, a local government could not do what New London did, because there is not statutory authority. "Economic condemnation" in New York is limited to urban renewal or community redevelopment programs that are carried out according to the statutorily defined procedures. In addition, the State's Municipal Redevelopment Law has some built in safegaurds to protect property owners. In addition, there are Industrial Development Authorities that have condemnation powers. Frankly, I think that they are ineffective.

I look forward to hearing from you all.

FB, in case you are only checking directly back to this post, I have a much longer post here. Hope to see you there.