The property rights revolt against the Supreme Court's controversial "Kelo" eminent domain ruling rolled on last week to Michigan. The legislature overwhelmingly approved a proposed amendment to the state constitution last Tuesday that would effectively negate the high court's decision within Michigan's borders. The amendment would prohibit local government eminent domain seizures of property from private owners solely for the purpose of transferring it to other private owners for "economic development" purposes or to increase local tax revenues.

In Kelo v. City of New London, decided last June 23, the Supreme Court ruled that local governments can consider private redevelopments of seized real estate to be a form of "public purpose" sanctioned under the Fifth Amendment of the U.S. Constitution. The case involved a group of homeowners and rental property owners in downtown New London, Conn.,who refused to sell their properties for redevelopment as office buildings, condos and a hotel.

The court's 5-4 decision shocked property owners nationwide who recognized, in the words of dissenting Justice Sandra Day O'Connor, that under the majority's decision "the specter of (eminent domain) condemnation hangs over all property. Nothing is to prevent the state from replacing any Motel 6 with a Ritz Carlton, any home with a shopping mall, any farm with a factory."

The Fifth Amendment prohibits eminent domain seizures of private property "for public use" without just compensation. Though for more than a century "public use" was interpreted narrowly to mean public ownership and use -- municipal buildings, schools and roadways -- the Supreme Court in recent years has relaxed that standard to encompass broader "public benefit" purposes such as clearing blighted, privately-owned neighborhoods for private redevelopments that produced jobs and stimulated local economies. It was that broad purpose that the city of New London invoked to justify its condemnation of Susette Kelo's house and 14 other privately-owned properties.

The Michigan constitutional amendment which passed both houses is scheduled to go on the ballot next year for final approval by the voting public. Steven Anderson, coordinator of the property rights group, the Castle Coalition, said, "We are confident that the citizens of Michigan will overwhelmingly approve this amendment."

Michigan becomes the fifth state in six months to react to the Kelo decision with statutory or constitutional reforms. Alabama, Delaware, Ohio and Texas all have passed legislation to limit eminent domain seizures of private property for private economic development purposes. Another 38 states have proposals pending in the legislature that would similarly limit local governments' eminent domain powers.

Congress has also jumped into the controversy. The House passed a bill last month that would strip all economic development-related funds from any municipality or state that uses eminent domain to seize and transfer real property from one set of private owners to another. The bipartisan Private Property Rights Protection Act of 2005 is currently awaiting Senate action.

Published: December 19, 2005

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.