There’s good news on property rights from New Jersey, of all places.
The New Jersey Supreme Court, in Gallenthin Realty v. Borough of Paulsboro, has just limited takings of private property for redevelopment, ruling that under the state constitution, property cannot be seized by the government merely because it is not being used in the most economically productive possible manner. Instead, the property has to be blighted to justify seizure.
This ruling limits the effect of the U.S. Supreme Court’s bad decision in Kelo v. New London, which held that the federal Constitution doesn’t prevent private property from being seized for redevelopment whenever the government thinks that doing so might benefit society through increased tax revenue or economic activity.
On eminent domain issues, New Jersey has historically been one of the worst states in the country. New Jersey towns have often seized property from homeowners and small businesses to give it to politically-connected businesses and developers. Sometimes, a town will seize a business’s property in order to give it to its direct competitor, thwarting competition.
And the New Jersey Supreme Court has historically been among the least friendly state supreme courts in enforcing property rights.
So this is a remarkably positive development, even though the court’s decision still doesn’t give property rights as much protection as they enjoy in some other states like Michigan, whose Supreme Court banned takings for redevelopment in Wayne County v. Hathcock (2004). (The New Jersey Supreme Court still allows property to be seized if it is “blighted,” and it defines “blight” broadly enough to include an awful lot of property).
The New Jersey Supreme Court was right to reject seizure of property just because the government thinks it can come up with a more “productive” use.
As Justice O’Connor noted in her 2003 Kelo dissent, if the government can seize property merely because it’s not being used in the most economically “productive” manner, then “the specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”
After all, a non-profit institution like a church or school doesn’t generate as much income (much less property taxes) as a commercial establishment.
And a poor person’s home doesn’t have as much economic value, or generate as much property tax revenue, as it would if it were bulldozed and replaced by a more expensive home occupied by a rich person.
In practice, government seizures of private property for redevelopment amount to corporate welfare. It is easy for the government to claim it knows best how to use the land.
But in many cases where the government seizes private property for the supposed “greater good,” no benefits ever materialize, owing to inept planning by government officials who don’t grasp basic economics. Often, existing businesses or neighborhoods are destroyed, but little economic activity takes its place. The only beneficiary of the property’s seizure ends up being the developer who received the property from the government after the seizure.
That’s what happened in the 1981 Poletown case in Michigan. In that case, a neighborhood near Detroit that contained many small businesses was seized and destroyed by the government to make way for a factory which produced only half the jobs the government claimed it would create (about 3,000 jobs — fewer than the number it destroyed), at a cost of more than $300 million in government subsidies.
The Michigan Supreme Court repudiated that seizure in 2004, recognizing that it had erred in allowing such seizures in its 1981 Poletown decision.