Of all the unintended consequences of the housing bill that
passed the House on Wednesday, the most ironic and far-reaching may
be this: whatever security marginal homeowners have from
foreclosures, their homes will be far less safe from being taken by
bureaucrats through eminent domain.
The bill that emerged from the negotiations between House
Financial Services Committee Chairman Barney Frank and Treasury
Secretary Hank Paulson took the specific language protecting
property rights from the housing bill that most recently passed the
Senate and rendered those words almost meaningless.
Now, the billions of dollars in new grants the bill provides for
“the production, preservation and rehabilitation” of housing units
could stimulate a bonanza of state and local property confiscation
of the type green-lighted in the Supreme Court’s 5-4 decision
Kelo v. New London.
That 5-4 decision in 2005 allowed states and localities to use
eminent domain for the benefit of private parties, so long as the
land confiscation served a “public purpose.” The case generated
mass outrage, and rightly so.
As the Institute for Justice, which represented the homeowners
whose property was under threat in the case, has argued, the result
meant that no one’s home is safe. It would serve a “public purpose”
to destroy almost any residence and put a retail store in its place
to raise more tax revenue.
IN RESPONSE TO the decision, many states and towns have passed laws
protecting property owners by barring eminent domain solely for
economic development purposes. But many other municipalities have
simply ignored public opinion and used the ruling to condemn land
with even more abandon.
As property rights expert Don Corace puts it in his new book
Government Pirates, “Despite the widespread
fury from conservatives, libertarians and liberals, hundreds of
cities throughout the country cheered the ruling and continued
their assault.”
And for the many areas that still utilize this practice, the
federal government is often the source of funds for the projects
that result in the use of eminent domain. Efforts to bar federal
funds to be used on projects that make use of this type of eminent
domain have stalled in this and the last Congress.
To their credit, the drafters of the Housing and Economic
Recovery Act of 2008, which passed the Senate on July 11, at least
recognized this danger of throwing billions in construction grants
to state and local governments.
So they put in a clause stating, “No funds under this title may
be used in conjunction with property taken by eminent domain,
unless eminent domain is employed for a public use.”
The clause then adds that “public use shall not be construed to
include economic development that primarily benefits any private
entity.”
BUT THIS LANGUAGE has vanished from the House bill that passed
Wednesday, replaced with phrasing that would give governments
substantially more leeway to take land.
The nearly 700-page bill craftily replaces the
Senate’s prohibition on funds “used in conjunction with property
taken by eminent domain” with a looser ban on using the funds for a
“project that seeks to use the power of eminent domain.”
This new language in the House bill would give property-grabbing
bureaucrats an easy way around the supposed prohibition on using
eminent domain. All they would have to do is take property for any
reason that Kelo allows, then come up with another project
for the specific use of that property.
If land were grabbed for general economic development, as
Kelo permits, and then a new project were created for a
city to sell this land to developers, this would likely not be a
violation of the House bill. After all, the new project isn’t
“seeking” to use eminent domain, it is merely using land that had
already been confiscated.
It is typical for governments to change the “project” or purpose
of land use many times once it has been taken through eminent
domain. In fact, this was the case in Kelo.
Justice Sandra Day O’Connor noted in her eloquent dissent
describing the shifting justifications for the land grab in New
London, Connecticut: “Parcel 4A is slated, mysteriously, for ‘park
support.’ At oral argument, counsel for respondents conceded the
vagueness of this proposed use and offered that the parcel might
eventually be used for parking.”
The Senate language isn’t ironclad, but its broad ban on funds
being used “in conjunction with” eminent domain for economic
development would at least put some necessary burdens in using
these new funds to help confiscate land.
All in all, if this new language is what ultimately passes,
there will be virtually nothing stopping states and localities from
using the federal housing grants to help themselves to confiscate
housing.
HOW DID THESE property rights protections get removed? That’s
somewhat of a mystery.
Barney Frank may not be a friend of property rights, but then
neither is Treasury Secretary Paulson, who, according to press
accounts, convinced President Bush not to veto the bill. Just after
Bush nominated Paulson to head Treasury, Competitive Enterprise
Institute adjunct scholar Steve Milloy warned that Paulson “has demonstrated little respect
for private property rights.”
Milloy noted that as head of Goldman Sachs, Paulson spent
shareholders’ money to support environmental groups’ efforts to
stop forestry on a piece of land in Tierra Del Fuego, Chile. After
this pressure, the Chilean landowner was forced to sell the land to
— who else? — Goldman Sachs. For this reason and others, Milloy
urged the Senate to reject Paulson’s nomination, as did the
Competitive Enterprise Institute.
Because of the House changes, the Senate has to pass the bill
one more time before it goes to the President. This slighting of
property rights from the earlier Senate bill cannot be ignored.
Otherwise, the U.S. may repeat the tragedy of '50s and '60s
“urban renewal,” where the “federal bulldozer” of government
housing programs literally made people homeless.
If that happens, you ain’t seen a meltdown yet!
