In the Shadow of Kelo: Asking Hard Questions about Eminent Domain

In 2003, Columbia University, a private university in New York City, announced plans to build a new 17-acre campus in Manhattanville, West Harlem. This, it explained, was necessary to maintain its role as a leading educational and research hub. Moreover, the university emphasized the economic benefits that expansion would bring to the community. But, this proposed development encountered voluble resistance from Harlem residents, who feared soaring rents.
Five years later, New York State’s Empire State Development Corporation (ESDC) – a quasi-public body that finances and operates state development projects – approved Columbia University’s request to acquire the remaining plots of land through eminent domain. Just recently, New York State’s highest court overturned the previous ruling and upheld Columbia University’s campus expansion plan.
With politicians and libertarians now planning to take this case all the way up to the U.S Supreme Court, the stakes for both parties could not be higher. On the one hand, Columbia University claims not only that expansion through eminent domain is necessary for its future standing among elite universities, but stresses that the development of Manhattanville will create jobs and revitalize the area. On the other hand, libertarians are outraged at what they see as an egregious use of eminent domain to benefit large, powerful private entities at the expense of poor minorities. Moreover, they claim that courts have stretched their understanding of “public use” so much that virtually any property taking garnished with the promise of economic development is legitimate.  Most of this controversy is a product of the Supreme Court ruling on Kelo vs. City of New London in 2005, which held that transferring land from one private owner to another for economic development qualified as permissible “public use.”

Since the landmark ruling  libertarians like Charles Cohen and Ilya Somin have thus argued for a federal ban on these economic development takings (EDTs). In his paper, Somin stated that these EDTs are not only unnecessary, but counterproductive. Methods like secret purchases, he said, are more efficient and just than the blunt tool of forced government acquisition. This method involves double-blind acquisitions, where both the buyer and the potential seller of the property do not realize that a big developer is behind the purchase. As such, strategic holdouts by potential sellers are minimized. Daniel Kelly cites Harvard University as an example: in 1997, the private university used secret purchasers to purchase 52 acres of land for $88 million – a figure that would have been much higher had potential sellers known that Harvard was the buyer.
However, the verdict on secret purchases isn’t final. In a paper highlighting the limits of secret purchases, Marc Milahy argues that important city projects would not have happened without eminent domain. A survey of arguments purporting the efficacy of secret purchases reveals the lack of reliable empirical data; the understandable difficulty of obtaining this has meant that justifications for a ban have largely been based on anecdotes. Ultimately, more data are needed to determine if government compulsion is truly needed to bring about urban revitalization. Meanwhile, since the Kelo ruling, many state legislatures have considered changing their eminent domain laws to partially restrict EDTs. Meanwhile, the outcome of the struggle between property rights and the need for urban revitalization hangs in the balance.
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