Eminent domain helps affordable housing, for now

By Bendix Anderson

The banner shouts its message in giant hand-painted letters: “STOP EMINENT DOMAIN ABUSE!” Nearly 20-feet long, the sign hangs off the cornice of a Brooklyn townhouse. The brick house stands in the footprint of Forest City Ratner Cos.’ planned Atlantic Yards project, which could include as many as 7,300 mixed-income apartments and condominiums.

But to build these apartments, the developer, with the help of the city’s powers of eminent domain, needs to get possession of several properties from owners who are refusing to sell.

The city’s ability to seize these properties using eminent domain was recently affirmed. On July 23, 2005, the U.S. Supreme Court said in Kelo v. New London that local governments may force property owners to sell to make way for private economic development when city officials decide it would benefit the public – even if the property is not blighted and the new project’s success is not guaranteed.

The court case is important because eminent domain has been used to help affordable housing developers and others get land for their projects.

The Atlantic Yards development would bring thousands of new jobs and affordable apartments to a community that needs both, according to the developer, who hopes to begin demolition work this year. Of the 4,500 planned rental apartments, roughly half will carry income restrictions at a variety of levels, including 900 apartments set aside for very low income families.

As this project fights its way forward, resistance is growing nationwide to the use of eminent domain. Virtually every state is considering legislation this year in response to the court case, and five states – Alabama, Delaware, Ohio, South Dakota and Texas – already passed laws in their 2005 legislative sessions, according to the National Conference of State Legislatures. The laws range from restrictions on the government’s eminent domain powers to outright moratoriums.

Affordable housing experts across the country fear that if these bills pass, the effect might stop more than just a few big mixed-income projects.

“We could end up throwing the baby out with the bathwater,” warned Dan Kildee, chairman of the Genesee County Land Bank.

Eminent domain is a workhorse that helps to power programs that claim and clean up vacant and abandoned properties in several cities.

For example, Philadelphia, which until recently had more vacant and abandoned homes than any other place in the country, uses eminent domain to claim properties, assembling narrow lots into larger parcels that can be redeveloped.

Smaller cities also rely on eminent domain. The Housing Department in Savannah, Ga., has claimed 80 properties through eminent domain, mostly in the northern part of the city. Only two owners contested the seizures.

About two-thirds of Savannah’s abandoned houses are “heir properties,” according to Martin Fretty, director of Savannah’s Housing Department. The term refers to people whose heirs could not be located.

Eminent domain allowed Savannah to cut through the tangle of legal questions left over by uncertain ownership. Before the city claimed the buildings, these homes had stood empty for years, quietly falling into ruin. “There’s so much abandoned property that drives property values down,” Fretty said.

These properties have now been redeveloped as part of projects like the city’s Cuyler-Brownsville Neighborhood Revitalization Project, Fretty said.

If officials could not use eminent domain to claim abandoned properties, they could probably still eventually seize some boarded up properties for unpaid property taxes, though the process might be much more complicated, depending on how protective local laws are of property rights.

However, some owners of empty, decayed property still pay their property taxes. Speculators will often hold the empty shells for years if they think that the land might someday be worth something.

The alternative to using eminent domain in situations like this is “to play this game where everyone wants to be the last one to sell, who makes or breaks the deals,” Kildee said.

Kildee is hoping that if state legislatures pass laws restricting eminent domain, that these lawmakers steer away from moratoriums and chooses subtler tools instead. “It really comes down to having clear legislative language and an efficient judicial review,” Kildee said.