Minimizing The Effects Of The Kelo Decision

Continuing attempts by American Planning Association leadership and its chapters to minimize the adverse impacts of the Supreme Court's decision in the Kelo case, and to provide a coordinated approach to damage control seem to be failing, as reported in the variety of state legislative actions described in the March issue of Planning by Paul Shigley. Those who wrote and presented APA's amicus curae to the Court did not seem to realize the potential volatility of the takings issue, nor did they foresee the opportunities that would be created for the ever-present property rights crowd. Instead of providing guidance and knowledge based on our nationwide professional experience they misled the Court in not citing the hazards involved in this case.

The APA seems also to be having difficulties in its subsequent damage control efforts to minimize the catastrophic effect on nationwide legitimate urban development and redevelopment programs. Most devastating is the compounding of the damage by creating new opportunities to the opposition for proposing and passing far-reaching "regulatory takings" legislation. This legislation would emasculate the long-standing legitimate power of zoning as an effective planning and development control.

There are numerous provisions that could be added to state urban redevelopment statutes to preserve the rights of property owners subject to eminent domain. For example, states could limit any taking by eminent domain until at least 50% of all properties and the total project area have been acquired by negotiation.

An interesting professional approach to the basic aspects of the takings issue is provided by the Lincoln Institute of Land Policy in an article by Amnon Lehavi and Amir N. Licht in the January issue of Land Lines titled "Squaring the Eminent Domain Circle - A New Approach to Land Assembly Problems". They point out that "post-Kelo reality may not necessarily be heading in one direction". The article suggests a unique approach to the takings issue by pointing out that the government and private project developers "enjoy the entire increment in the assembled land value (a windfall gain!) since compensation to the previous landowners is based on the pre-project fair-market value".

To correct this inequity the Lincoln Institute researchers propose "a novel solution which would turn the (prior) landowners into pro rata shareholder in a development corporation that would acquire unified ownership of the land and the development project." To accomplish this, the authors propose that "a public authority exercising its eminent domain powers [create] a special purpose development corporation for that project. Land owners whose land was condemned would have the choice of two forms of compensation: 1. compensation based on fair value; or 2. shares in the development corporation in proportion to the landowner's contribution."

The authors of the Land Lines article cite recent developments in British planning law as one source of their proposal. They point out that "in contrast to the United States (although some American skeptics would argue otherwise, the English Crown holds all landed property development rights and in theory, private land owners have no development rights in their property until these are explicitly granted by a governmental agency. This gives local governments in England substantial latitude both in deciding whether to grant planning permission, and in negotiating with the developer over its planning obligations."

This is of particular interest to me as I recall that when I was student at the London School of Economics in 1951 I became familiar with the provisions of the 1947 Planning Act under which the future development rights to all private property in Britain were purchased by the government with a global fund of 300 million pounds. Unfortunately, due to the difficulty in apportioning this fund to the millions of claimants and the later opposition of Conservative MP Maggie Thatcher, this Act was rescinded. Now the government claims that it always owned these future development rights! Wow! What an impact that would have on the US property-rights crowd who now claim payment for any potential future value taken from them by zoning enactments. Some chutzpah!

Note: This piece is an expanded version of a letter that was published in the April 2007 issue of Planning.

Richard May, FAICP, has worked with the U.N. and the World Bank, managed two of his own firms, and served as president of the New York APA chapter and as chair of the International Division.