Hooked On Takings
According to this report in the New York Times, the use of eminent domain to advance private development is the dirty little secret of commercial real estate.
Bank of America agreed to join the developer Douglas Durst in 2003 in building a 54-story tower in the heart of Midtown Manhattan, giving a psychological and economic lift to a city that was still reeling from the destruction of the World Trade Center.
Mr. Durst said he would not have been able to negotiate with Bank of America or other prospective tenants had the state not authorized him to use eminent domain, a redevelopment tool that is coming under fire in the wake of a United States Supreme Court ruling last June in a Connecticut case.
Now under construction at 42nd Street and the Avenue of Americas, the Bank of America Tower at One Bryant Park, as the project is known, was decades in the making as the Durst family assembled the site. Ultimately, only two buildings remained, but their owners kept raising the price, Mr. Durst said.
Eventually, the state told Mr. Durst that if he found an anchor tenant the buildings could be condemned even though the site was not in a blighted neighborhood. That threat alone was enough to break the impasse. “Once we had that ability, we were able to quickly come to a resolution on the two properties and meet Bank of America’s schedule,” Mr. Durst said.
Let’s be clear about what happened hear. While not as well-known or flamboyant as Donald Trump, the Durst family is one of the largest commercial real estate developers in New York City, if not the nation. When they ran into two building owners who realized that the laws of supply and demand gave them an advantage, thus refusing to sell at a rock-bottom price, they called on their cronies at Gracie Mansion and in Albany to forcibly take their property from them. Now, I’m sure that the owners of those buildings are quite different from the Kelo’s and other citizens of New London who were the subject of last year’s Supreme Court decision, but theft is theft and that’s exactly what this is.
What is more interesting, though, is the extent to which the use of eminent domain has become common place in the commercial real estate development business. With the backlash that has come from Kelo, however, the article goes on to point out the delicate situation that developers and government officials find themselves in:
Using eminent domain for private projects has long been a divisive issue, but never more so since the Supreme Court upheld the right of officials in New London, Conn., to condemn homes and businesses to increase the tax base of one of the state’s poorest cities.
That decision, coupled with reports of abuses in places like the predominantly African-American community of Riviera Beach, Fla., where plans called for replacing thousands of homes with upscale condos, has prompted a onslaught of legislation, both federal and state.
In other words, when Kelo was handed down, ordinary Americans began to realize what was happening and what could happen to their property. They responded by pressuring their elected representatives to do something about it:
In November, the House of Representatives approved a bill by F. James Sensenbrenner Jr., Republican of Wisconsin, that would penalize government agencies for using condemnation powers for private projects by denying them economic development funds for two years. Legislation has been introduced in 27 states, and more is coming, said Larry Morandi, the director of the environment, energy and transportation program of the National Conference of State Legislatures
That hasn’t stopped them from trying to justify what they’ve done, of course:
But around the country, developers and city officials say weakening or destroying the power to condemn property will seriously undermine efforts to rehabilitate decaying cities and might even hinder the rebuilding of New Orleans. Without eminent domain, the Inner Harbor, which played an essential role in Baltimore’s success in building its tourist industry, could not have been redeveloped, said Ralph S. Tyler, the city solicitor.
The fact that you stole someone’s property to do it doesn’t matter does it ? Apparently not.
One business group that has opposed restrictions on eminent domain is the Partnership for New York City, whose members include most of the city’s top developers. Kathryn S. Wylde, the president and chief executive of the group, said her members opposed any efforts to alter condemnation procedures through federal or state legislation. “When you add restrictions on development, you are never quite sure what the results are going to be,” she said. “We want to avoid political reaction to an issue that adds more problems and obstacles to economic growth.”
Hmmm, and when you create a legal environment where people’s property can be taken away from them on the whim of a government official who happens to be in the pocket of a big developer what kind of result will that create Ms. Wylde ?
If one thing is clear from this article it is that these commercial developers have become dependent upon the government to get them the land they need to build their projects, and politicans have become dependent on campaign contributions from the developers. The end result is a world where your property isn’t really yours anymore.
Cross-Posted at Below The Beltway