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Wednesday, June 02, 2010

The Misguided Battle over Eminent Domain in New York

The New York Court of Appeals heard oral arguments yesterday in the eminent domain case involving the Urban Development Corporation's effort to take over "Manhattanville," a 17-acre area in West Harlem, on behalf of Columbia University. The judges yesterday were pretty ornery, peppering both sides with questions about the studies underlying the "blight" designation and the "public" character of Columbia University's educational activities. I stand by my earlier prediction that the Court of Appeals will reverse the appellate division's decision barring the condemnation. But the doctrinal battle between the appellate division and the Court of Appeals really is rooted in empty, incoherent blather that can never be a satisfying basis for a doctrine. "Blight" is an epithet in search of a definition, while "public use" is either merely a requirement of public benefit (in which case, it is judicially unmanageable) or a requirement of public title (in which case, it is a perverse encouragement of statist inefficiency).

The concepts of "public use" and "blight" ignore the real and fundamental dilemma raised by over-fragmented land -- viz.: (a) land markets tend to do a poor job of re-assembling over-fragmented parcels but (b) assemblers use eminent domain to hog all of the post-assembly surplus, to the justified resentment of the dispossessed owners. Absent some assembly mechanism beyond arms' length private bargaining, Manhattanville will be locked into drab industrial uses -- gas stations, storage facilities, auto repair, etc -- that, I strongly suspect, the owners themselves would quickly jettison if they could get a reasonable share of the "post-assembly" value. Getting rid of eminent domain will not vindicate these owners' private property rights: It will simply insure that they can remain trapped in a collective action problem that even the wiles of a Douglas Durst cannot untangle through interminable secret negotiations by beards and front-men.

The best answer to this dilemma is the creation of a mechanism by which the neighborhood's owners can collectively decide whether to sell their land. Such neighborhood self-governance would protect the owners' autonomy as well as their power to extract some share of the post-assembly value; It would also protect both society and the owners themselves from the owners' own strategic behavior in parcel-by-parcel bargaining. Michael Heller and I have proposed such a mechanism -- the land-assembly district -- that, whatever its faults, surely outperforms the twin evils of pure private property or pure eminent domain. Until such a device is created by a state legislature, however, we will be locked into the fruitless battle between advocates of private property who declare that eminent domain is unfair and advocates of eminent domain who assert that private holdouts make individual bargaining inefficient. The tragedy is that both sides of this fruitless argument are right. Any resolution to an argument framed in this barren way will either leave our cities unjustifiably drab or our urban landowners, justifiably furious.

Posted by Rick Hills on June 2, 2010 at 12:05 PM | Permalink


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For readers other than Rick I should maybe add that "Flurbereiniung" in Germany only works outside of city limits, and lots with houses on them are pretty much excempt, if I remember correctly ...

Posted by: Positroll | Jun 4, 2010 5:25:49 AM

Not sure how this model helps in cases like Columbia, where [so the argument goes] the proposed project is in the interest of the entire state / country. The conflict between the general interest and local NIMBYism won't be solved by your model, if I didn't browse too quickly ...

P.S. That's where Flurbereinigung is "stronger": since it's not voluntary, in Germany it occasionally was used by the planners of big construction projects (e.g. a highway or a high speed railroad) to fight back against NGOs who during the initial planning phase bought up small parcels of land to get standing to sue (and often resold subparcels of 1 square-meter to their members in order to complicate things) : You simply create a Flurbereinigungszone around the disputed area, with the local big farms contributing most of the land and therefore having most voting rights WRT administrating the combined area. Since they stand to make money from selling their lots to the state / developper, they won't put up a court fight and the procedural positions of the NGOs are limited to the participation rights they can claim under European law ...

Posted by: Positroll | Jun 4, 2010 5:19:58 AM

Yep, Positroll, the "Lex Adickes" concept of Land Readjustment but with a collective landowner veto is precisely what Michael and I have in mind. Neighborhood veto is critical, however, to insure that property owners' autonomy is preserved and that inefficient assemblies that do not pay the neighbors' reservation price are nixed. (Licht and Lehavi have a similar proposal to incorporate neighborhoods being condemned -- but they do not give the neighbors any veto, making their proposal far more similar to land readjustment).

Posted by: Rick Hills | Jun 3, 2010 9:17:15 AM

Sounds a little like the German concept of Flurbereinigung, though with a consent element added; cf. http://en.wikipedia.org/wiki/Flurbereinigung

Edit: O.k., FN 120 of your paper shows I was right. Duh ...

Posted by: Positroll | Jun 3, 2010 9:09:16 AM

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