Cities are in love with small coffee shops, artisan burger shops, and boutique clothing stores. The only thing they like more is taking people’s property and converting it to those types of businesses. This is, of course, a bit of hyperbole, though many would make that statement with much more sincerity. The controversy over government seizing private property for the benefit of the public has flared up recently as Georgia cities have rallied around Georgia House Bill 434, which would allow local governments to condemn blighted properties and sell them to private developers.
The US Constitution allows the government to condemn private property with just compensation to the owner for public use. Traditionally this has meant that the government can take private property, but it can only use the property for things like parks or roads and cannot sell or give the property to a private entity. In the 2005 case Kelo v. City of New London, the US Supreme Court handed down a landmark ruling allowing governments to use their power of eminent domain to condemn private property and sell it to private entities.The Court reasoned that as long as the purpose of such an action was to facilitate economic growth then the government was condemning the property for public use, which would satisfy Constitutional requirements.
Some states, including Georgia, took issue with this decision and immediately afterward passed laws making it more difficult to condemn private property for resale.
In a 2006 referendum, 83 percent of Georgia voters approved of a Constitutional amendment to restrict the manner in which local governments could condemn private property. It’s difficult to read too much into this statistic, of course, since referendum language is notoriously deceptive and indecipherable. In many cases, people have no idea what they are voting for or against.
However, we can probably agree that most people don’t want the government to be able to condemn private property for a wide range of reasons. On the other hand, people probably don’t want to live next to blighted, run-down property either. Real or perceived, the association between blight and crime can have a negative impact on property values and inhibit positive development.
These contradicting ideals create friction between the idea that the government shouldn’t be able to take property and sell it to private developers and the notion that something needs to be done about blighted, run-down property. As it stands now, local governments can condemn blighted property, but they can only sell it to a private entity after 20 years have elapsed from the time of the condemnation. They must use it for a public purpose, which thanks to our laws that were passed in response to the 2005 Kelo case and 2006 referendum, generally means that it must be used as a publicly-owned facility or converted to a road or other purely public use.
Private entities could, of course, just come in and buy the blighted properties and convert them to artisan burger shops. This, however, can be difficult when owners are difficult to locate or when owners do not want to sell their property. In a purely free-market system, the highest and best use of land doesn’t always prevail when one party simply doesn’t want to participate.
So the only options are that blighted properties remain or the government condemns them and uses them for a park or public facility; the latter option would ultimately be a direct cost for taxpayers and would generate no tax revenue from the property, though it may lead to higher tax revenue from surrounding properties.
House Bill 434 would allow the government to act as an intermediary by condemning blighted properties and selling them to private entities. The bill requires the government to prove to a court that the properties are blighted and would also require the condemned property to be used as its existing land use for a period of 5 years. This seemingly means that a condemned house could not be used as anything other than a house for a period of 5 years. If this is the case then it substantially limits the ability of a private entity to take full advantage of market demands.
The definition of “blight” is critical in assessing the fairness of such a proposal. O.C.G.A § 22-1-1(1) states that blight means any urbanized or developed property that:
“[i]s conducive to ill health, transmission of disease, infant mortality, or crime in the immediate proximity of the property”; and a combination of two or more of the following factors:
building code violations lasting more than a year; repeated illegal crime on the property that the owner knew of or should have known of; destruction due to natural disaster; the building being uninhabitable, unsafe, or abandoned; or hazardous contamination to the point that it becomes a federal superfund site.
While most would agree that the above factors are undesirable, it’s easy to see how the government could attempt to take advantage of some of the more discretionary factors listed above to condemn a property. Ultimately a court would have to agree with the government that the property meets the blight requirements laid out in Georgia law.
If we generally recognize that blighted property is bad for a neighborhood because of crime, property value, or other public health reasons then why should the government not play a role in making the property more productive and less hazardous? If the market fails to produce a desirable outcome then there should be an avenue for the government to facilitate a net-positive transaction.
The government shouldn’t have an all-encompassing power to condemn whatever property it desires for the sole benefit of private companies. However, in circumstances where owners continuously allow their properties to become hazardous to the surrounding community then the government needs a mechanism for bringing the land into a safer and more productive state. That could mean converting the property to a public park, public library, or selling the property to a developer to make it a coffee shop.
We’ve extended the power of eminent domain to take private property for railroads, electric lines, and gas lines; uses that benefit the public, but also directly benefit private businesses. Allowing the government to remedy blight by extending its use of eminent domain in a similar manner through a process that includes extensive judicial oversight could be a great asset in revitalizing harmful and substandard property.
Update May 9, 2017: Governor Deal signed HB 434 into law