Kelo, Directed Growth, and Municipal Industrial Policy

Abstract:     
This article explores trends towards increased local government land use regulation to spur economic development and towards partnering with private redevelopers. It notes that while Kelo v. City of New London has intensified these trends, the use of condemnation for retransfer for private redevelopment endorsed by Kelo is only one tool by which local government advances what the author terms municipal industrial policy. While Kelo expresses confidence in the ability of courts to distinguish between permissible economic development takings primarily for public benefit and impermissible takings primarily for private benefit, the author maintains that any such distinction is illusory.

The article also explores how public choice considerations augur in favor of unnecessary and inefficient condemnations. Finally, it suggests some alternatives that would better effectuate urban redevelopment while avoiding unfair and inefficient exercises of eminent domain. There include greater recognition of fractional property interests, and facilitating owner participation in post-condemnation redevelopment. Other salutary alternatives are localizing neighborhood redevelopment control, and making blight redevelopment open and transparent by replacing condemnation with abatement and foreclosure.

Keywords: abatement, blight, condemnation, economic development, eminent domain, foreclosure, Kelo, local government land use regulation, municipal industrial policy, private redevelopment, property, public choice, takings

JEL Classifications: D6, H71, K11, L32, O2

Working Paper Series