The right to own and use private property is among the most essential human rights and the essential basis for economic growth. That's why America's Founders guaranteed it in the Constitution. Yet in today's America, government tramples on this right in countless ways. Regulations forbid people to use their property as they wish, bureaucrats extort enormous fees from developers in exchange for building permits, and police departments snatch personal belongings on the suspicion that they were involved in crimes. In the case of Kelo v. New London, the Supreme Court even declared that government may seize homes and businesses and transfer the land to private developers to build stores, restaurants, or hotels. That decision was met with a firestorm of criticism across the nation. In this, the first book on property rights to be published since the Kelo decision, Timothy Sandefur surveys the landscape of private property in America's third century. Beginning with the role property rights play in human nature, Sandefur describes how America's Founders wrote a Constitution that would protect this right and details the gradual erosion that began with the Progressive Era's abandonment of the principles of individual liberty. Sandefur tells the gripping stories of people who have found their property threatened: Frank Bugryn and his Connecticut Christmas-tree farm; Susette Kelo and the little dream house she renovated; Wilhelmina Dery and the house she was born in, 80 years before bureaucrats decided to take it; Dorothy English and the land she wanted to leave to her children; and Kenneth Healing and his 17-year legal battle for permission to build a home. Thanks to the abuse of eminent domain and asset forfeiture laws, federal, state, and local governments have now come to see property rights as mere permissions, which can be revoked at any time in the name of the greater good. In this book, Sandefur explains what citizens can do to restore the Constitution's protections for this cornerstone of liberty.

CORNERSTONE OF LIBERTY

PROPERTY RIGHTS IN 21st CENTURY AMERICABy TIMOTHY SANDEFUR

CATO INSTITUTE

Copyright © 2006 Cato Institute
All right reserved.
ISBN: 978-1-930865-96-9

Contents

Acknowledgments..................................................................ix1. Introduction..................................................................12. Why Property Rights Are Important.............................................53. The Place of Property Rights in the American Constitution.....................514. The State of Property Rights Today............................................795. What Can Be Done?.............................................................117Notes............................................................................127Bibliography.....................................................................145Index............................................................................147

Chapter One

Introduction

What is it about our homes that makes them more than just wood and bricks? When Hurricane Katrina slammed into New Orleans and Mississippi in 2005, leaving thousands homeless, the nation saw firsthand just how much our property really means to us. In a commentary on National Public Radio's Morning Edition, New Orleans schoolteacher Anne Rochell Konigsmark described how it felt to lose her home. She appreciated the hospitality of the Atlanta relatives who took her in, she said, and Atlanta was very pretty. But it wasn't home, and she kept thinking about what she had left behind. "I imagine my house, which did not flood, sitting on our deserted street, hot and silent, rotten food in the fridge, toys and knickknacks gathering dust. I often dial my home phone number. The voice mail no longer picks up. It just rings and rings. I worry that someday, someone will answer."

Private property is an essential part of the human experience. Its importance to us is embodied in silly, sentimental poems like Edgar Guest's "Home" ("It takes a heap o' livin' in a house t' make it home") and in our most eloquent literary expressions, such as The Odyssey, in which the Greek warrior Odysseus braves all the wild dangers of legend to reach his "grand and gracious house." Not only are our homes important; business owners, too, find profound personal meaning in private property. They treasure the feeling of self-sufficiency and independence that comes from owning and operating their own shops or restaurants. As writer and businessman James Chan explains, entrepreneurs "are people who feel compelled to express our individuality through running our own businesses." Personal possessions, too, are obvious examples of the importance of private property in our lives; anyone who owns a wedding ring, or a photo album, or a piece of heirloom furniture knows the immense personal meaning that owned objects can embody-a personal meaning we call "sentimental value." People who have suffered a robbery or a burglary can attest to the terrible consequences of property crime; the shock and intense feelings of personal violation stay with victims long afterwards.

Property isn't important just for individuals; it's also an essential ingredient for economic growth and prosperity, for secure savings and intelligent investment, and for the sophisticated transactions that raise the standard of living for everybody in society. Property enables people to organize their resources and work together, to experiment with innovations, and to reap the rewards of their hard work. During the 20th century, many misguided political leaders tried to abolish private property, and the results were disasters in every conceivable way. Those societies lost everything, from social prosperity and peace to the very notion of personal privacy.

America's Founding Fathers well understood the centrality of property rights for any stable, successful, virtuous society. "That alone is a just government," wrote James Madison, "which impartially secures to every man, whatever is his own." But during the 20th century, political and legal thinkers came to reject the lessons the Founders taught us and to denigrate the importance of private property rights. Property, they argued, is really created by society or government rather than by individuals. Government should solve social problems, therefore, by taking property from people who have it and giving it to those who do not, or by giving the government the authority to control the use of property held by individual owners. As those ideas gained hold in the United States, property owners became increasingly burdened by laws that tell them what they may do with their property or impose exhausting bureaucratic requirements whenever they want to use their land. In many cases, government even takes their homes or belongings outright. As an attorney at the Pacific Legal Foundation-America's oldest public interest law foundation dedicated to protecting private property rights and other individual liberties-I've been in a unique position to observe some of the more disturbing ways in which government violates the fundamental rights of Americans to acquire, use, and trade property. Such interference curtails the essential freedoms that Americans ought to be able to take for granted, and often the consequences are terrible: injustice, economic stagnation, and the erosion of the fundamental basis of healthy democracy.

In 2005 the U.S. Supreme Court decided the case of Kelo v. New London, holding that government may use eminent domain to condemn private homes and transfer the land to developers who want to demolish and replace the homes with privately owned shopping malls, hotels, or convention centers. The decision sparked a national outcry, and political leaders began looking for ways to solve the problem. But the abuse of eminent domain is only one aspect of a property rights crisis in America today. Addressing that crisis requires understanding the origin and meaning of property rights, as well as the role of those rights in the U.S. Constitution. In what follows, I will give a brief account of why property rights matter-to human beings generally and to Americans in particular. I will then look at the state of property rights in our nation today. Finally, I will discuss some ways to better protect this most important of all human rights. Throughout, I provide some startling examples of government's abuse of property rights, drawn mostly from cases in which the Pacific Legal Foundation has worked to defend property owners. Because this essay is intended only as a brief introduction to recent controversies over the security of private property, I have skipped over many important and complicated aspects of property rights. Those who wish to pursue these issues further will find some reading suggestions in the bibliography.

Chapter Two

Why Property Rights Are Important

Frank Bugryn and his three elderly siblings owned two houses and a Christmas tree farm in Bristol, Connecticut. The family had lived on the 32-acre homestead for more than 60 years when city officials decided that their land would produce more tax revenue if it were owned by the Yarde Metals Corporation instead. Because the property was next to a state highway, the company hoped to construct a large sign and entranceway to attract more business. But the Bugryns refused to sell, so the city used its eminent domain power to condemn their property.

In May 1998 Frank and his family asked a state court to stop the city from condemning their land. The Fifth Amendment to the U.S. Constitution, after all, declares that government may take private property only for a "public use" and only if it pays the owner "just compensation." The Bugryns argued that the taking was, not for a "public use," but for the private use of Yarde Metals. And they didn't want to leave. "I don't want to go anywhere," Frank told the court. "My parents built the family house in 1939, and I built my own house on the property 42 years ago. I'm almost 78. Where am I going to go now?" But Mayor Frank Nicastro testified that the industrial park was "in the best interest of the future growth of the city," because it would "build up the tax base."

The court refused to intervene, holding that the condemnations of the Bugryns' homes "do not ... constitute serious or material injuries." The Bugryns appealed, and while their case was pending, the community rallied against them; even the nearby newspaper, the Hartford Courant, editorialized repeatedly in favor of the city. Finally, the Connecticut Appellate Court decided to allow the condemnation, and the city continued its plans-even though by this time the lawsuit had taken so long that Yarde Metals had given up and moved out of town. The state supreme court declined to take the case, and the Bugryns were ordered to move out.

In 2004, when the family still refused to leave their homes, the city initiated proceedings to evict them. Once again, the Courant attacked them in an editorial, calling their resistance a "public farce" and a "melodrama" and denouncing the family for "stall[ing] and draw[ing] upon the public's sympathy." Meanwhile, 76-year-old Michael Dudko, husband of one of the Bugryn sisters and a Polish immigrant who at the age of 15 had been taken from his home by the Nazis and forced into farm labor, suffered a relapse of cancer and died. After a nearby radio station ran a story about the Bugryns' plight, an anonymous, irate telephone call forced the police to post a guard in the mayor's office. Relations within the Bugryn family became strained; when one sister failed to leave her house in time, her nephew took the city's side, telling reporters that "people are pointing the finger at the mayor and the council and city officials, but all they're really doing in taking the property is using an eminent domain system that was given to them by the legislature." The reverberating effects of eminent domain not only disrupted the family and community; they also bred a sense of disillusionment best expressed by Frank Bugryn himself, who told a reporter, "I'm a veteran of World War II, I fought for our freedom, democracy. But it seems 60 years later it doesn't work." Finally, the family was forced to leave their land.

Frank's grandson, Michael Dudko, describes how he felt about the whole experience. "It has become an act of stealing," he writes. "Citizens' private property rights are totally disregarded. You're cheated on the value of what they take. There is dishonesty on the part of elected officials of why they are doing what they are doing. Those freedoms we all talk about on the Fourth of July don't mean much if our government can make a buck off its citizens by nullifying their validity."

Eminent domain-government's power to force a person to sell his home, his business, or other property to the government at a price it deems "just compensation"-is one of the most extreme forms of government coercion, and today among the most common. Used for centuries for constructing railroads, canals, and post offices, eminent domain is now a multi-billion-dollar industry. Governments throughout America routinely seize property to transfer it to private companies to "create jobs" and increase the tax base of a community. In 1999 the city of Merriam, Kansas, condemned a Toyota dealership to sell its land to the BMW dealership next door. That same year a Washington court upheld the city of Bremerton's condemnation of 22 homes to resell the land to private developers. Mesa, Arizona, condemned a profitable brake shop to replace it with a more profitable hardware store. In one especially egregious case, billionaire Donald Trump convinced the government of Atlantic City to condemn the home of an elderly widow so that he could build a limousine parking lot. Although a state court later blocked that condemnation, stories like this are startlingly common, and property owners in such cases rarely manage to keep their land. As attorney Jennifer Kruckeberg writes, "Corporations, using cities as their personal real estate agents, are proposing the following assignment: 'Find me your most prominent location, get rid of what is on it, help me pay for it, and maybe you will be lucky enough to have me move to your city.' Such is the state of the current eminent domain power."

In the 2005 case of Kelo v. New London, the U.S. Supreme Court held that the Constitution does not forbid such condemnations, even though the Fifth Amendment requires that takings be for a "public use." Because "promoting economic development is a traditional and long accepted function of government," five justices held that the government is benefiting the public when it transfers property to private businesses for private development. "Public use," the Court declared, means the same thing as "public benefit," and it's up to the legislature or the city council to decide what distribution of property will benefit the public. The decision caused a national outcry, including a formal resolution by the U.S. House of Representatives expressing its "grave disapproval." Many state legislatures began reexamining their eminent domain practices.

But eminent domain is only one of the many ways government deprives us of our property rights. The Fifth Amendment requires government to pay owners "just compensation" when their land is taken from them, yet through a growing array of laws and regulations, government today deprives countless owners of the value of their land-prohibiting them from using it, or selling it, or building on it-without actually forcing them to hand over the deed to the property. Of course, if government could evade the just compensation requirement by using this technical loophole-taking away the use of the land but not the land itself-the owners would be left with an empty title and property rights would be all but meaningless. In fact, as early as the 1870s, the Supreme Court held that government could not be allowed take away the use of land "without making any compensation" on the grounds that "in the narrowest sense of that word, it is not taken for the public use." Although in some cases the Court requires government to compensate people for these "regulatory takings," in more recent years, it has allowed government to impose more and more such restrictions.

Lake Tahoe, a beautiful resort community straddling the California- Nevada border, is governed by a special agency called the Tahoe Regional Planning Agency. In 1981 the TRPA instituted a "temporary moratorium" on all construction in the Lake Tahoe area to give itself time to study the increasing amount of algae that was polluting the lake's once-clear water. The agency's report, produced in 1984, recommended banning almost all construction in the Tahoe area, but a federal court held that those recommendations would still allow too much development, and it blocked the report's implementation. It wasn't until 1987 that the TRPA produced a new report, recommending that every piece of land in the area be subject to individual assessment for permission to build. But over all that time, the moratorium on construction continued.

Some 700 landowners filed suit against the agency, arguing that it had effectively taken away their property by prohibiting them from using it. What followed was almost two decades of complicated litigation; in 2000 the Ninth Circuit Court of Appeals found that, although the "temporary" moratorium had barred construction for more than a decade, the government did not need to pay just compensation because it had not "taken" the land. Two years later, the U.S. Supreme Court agreed. Justice Stevens, who would also write the Kelo decision, held that the ban on construction was only temporary, and thus the landowners (some 300 of whom had actually died by the time the Supreme Court took their case) still might be able to use their property-someday. And in any case, Stevens continued, government takes away so much property from so many people that it can't possibly afford to pay for it. Seriously enforcing the just compensation requirement "would transform government regulation into a luxury few governments could afford ... [and] render routine government processes prohibitively expensive...." Since government doesn't have the money, it can ignore the Constitution's compensation requirement.

More startling than those stories is the fact that many of today's intellectual leaders-political scientists, lawyers, politicians, and historians-view property rights as unimportant, or as pass. Testifying before the U.S. Senate on the subject of eminent domain months after the Kelo case was decided, Thomas Merrill, a law professor who specializes in law and economics at Columbia University, expressed astonishment at the public outcry. He found it "remarkable," he said, "indeed quite stunning," that there was such an "overwhelming reaction" against the Kelo decision. It "really sobered me quite a bit," he told the senators.

I've given a great deal of thought to what it is about the decision that has caused this.... And I think there are many explanations, but I think the nub of the problem is that the American people believe that property rights are invested with moral significance. It's not just a measure of value. It's something that people think has an important moral and constitutional dimension.

(Continues...)

Excerpted from CORNERSTONE OF LIBERTYby TIMOTHY SANDEFUR Copyright © 2006 by Cato Institute. Excerpted by permission.
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