Private property rights bundle (a) the right to use a good, (b) the right to decide the terms of another’s use of it (e.g., rent, lease, borrow), and (c) the right to exchange or sell it.
Property rights protect against other private parties and against government uses or takings. E.g., William Pitt the Elder stated strongly: “The poorest man may in his cottage bid defiance to all the forces of the crown. It may be frail, its roof may shake, the wind may blow through it, the storm may enter, the rain may enter, but the King of England cannot enter. All of his forces dare not cross the threshold of the ruined cottage.”
Yet a traditional exception has been Eminent Domain, which is a government’s taking of private property. In the United States, for example, the Constitution’s Fifth Amendment says: “nor shall private property be taken for public use without just compensation.”
One immediate question then is: What is public use? Early Americans answered that essential government functions, such as building military installations, roads and bridges, and (later) schools could justify compelling private owners to sell property to the government.
Over time, though, the meaning of public use changed to public benefit. Benefit to the public is broader than public use, and arguments for eminent domain no longer presupposed that a government would be the user. Instead, property could be transferred to anyone making a case for using it in a way that would better benefit the public.
What counts as benefitting the public? One argued answer is financial: some uses of property generate more property taxes, and increasing tax revenues for the government in turn benefits the public. Another answer is safety: some properties are in disrepair, posing physical dangers or attracting criminals. Another is aesthetic: some properties are uglier and could be torn down and rebuilt by developers with attractive designs.
Landmark cases include Berman v. Parker (1954), in which the U.S. Supreme Court held that blight justified a forced transfer of property from one private party to another. Poletown Council v. Detroit (1981) upheld Detroit and Hamtramck’s clearing a neighborhood so that General Motors could build a factory. Hawaii Housing Authority v. Midkiff (1984) held that higher tax revenues, job creation, and destroying oligopolies justified eminent domain.
The Supreme Court’s 5-4 decision in Kelo et al. v. the City of New London (2005) generated great controversy. New London transferred the development of land granted for use by the Pfizer Corporation to a private development agency, which used eminent domain to seize land, including Susette Kelo’s home.
Kelo caused an outcry, and in response many US states and localities changed their statutes, restricting eminent domain’s use in various ways and increasing compensation.
The major criticisms of eminent domain are that it (a) uses force to compel property transfers, rather than voluntary agreement; (b) undermines property rights, which are key to an individual’s control over his or her life; (c) is based on bad Constitutional interpretations that distort the original meaning of public use; (d) enables the politically connected to take from the politically less connected; (e) undermines the democratic process by increasing bribery and conflicts of interest.