Introduction
Updated as of January 2020.
Eminent domain refers to the government’s power to take land from property owners who are unwilling to sell it voluntarily.
The Takings Clause of the Fifth Amendment to the U.S. Constitution (“Nor shall private property be taken for public use without just compensation”) was traditionally thought to restrict the use of eminent domain to cases in which the government needed the land for roads, military bases, other public facilities, or for use by a “common carrier,” a private entity such as a railroad or utility that is obliged to serve the public.
That’s why the 2005 U.S. Supreme Court ruling in Kelo v. City of New London shocked the country. The court upheld the use of eminent domain to take working-class citizens’ homes and give the land to a private corporation for “high-end” commercial development.
The issue in Kelo was whether New London’s use of eminent domain to transfer property from one private party to another for the sake of economic development violated the Takings Clause. The court held that, while the Takings Clause might forbid a transfer from one private party to another “for the purpose of conferring a benefit on a particular private party,” it does not prohibit such a transfer when it serves a “public purpose” like promoting economic development.
It also held that the question of whether a specific taking serves a public purpose is not one the federal courts should attempt to answer. Instead, state and local governments should be allowed to determine for themselves “what public needs justify the use of the takings power.” At the end of the opinion, the court added, “We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power.”
Many states responded to that invitation by taking steps to protect their citizens from eminent domain abuse. The states in the southeastern region did particularly well in that regard. Almost all of them adopted highly effective measures to prevent eminent domain abuse, and the measures adopted by Florida and Virginia are generally regarded as the best in the country.
In both Florida and Virginia, the reform process began with legislatively enacted statutory changes designed to prevent eminent domain abuse. Significantly, however, in both states, the voters later approved constitutional amendments that supplemented statutory protections with specific, constitutional restrictions on takings in which property is transferred from one private party to another for the sake of economic development.
Unfortunately, despite the persistent efforts of several members of the North Carolina House of Representatives, the General Assembly still has not taken steps to protect North Carolinians from the kind of eminent domain abuse the U.S. Supreme Court authorized in Kelo. It has not added suitable restrictions on the use of eminent domain to the North Carolina General Statutes, and it has not given voters an opportunity to add such restrictions to the North Carolina Constitution.
Our failure to adequately protect the property rights of our citizens is one of the primary reasons why, when it comes to regulatory freedom, North Carolina languishes in the bottom third of states, both nationally and regionally.
Key Facts
- The U.S. Supreme Court decision in Kelo v. City of New London brought two serious but previously little-known problems to the attention of the American public: First, in the name of economic development, state and local governments across the country were using eminent domain to transfer property from ordinary citizens to politically connected developers and industrialists. And second, the federal courts would do nothing to prevent such transfers.
- Most states responded to Kelo by changing their own statutes and constitutions in ways designed to protect their citizens from eminent domain abuse. Unfortunately, North Carolina is one of the few states that hasn’t taken such steps.
- In 2019, the North Carolina House of Representatives passed an eminent domain reform bill for the seventh consecutive session. The North Carolina Senate has refused to consider any of them.
Recommendations
The North Carolina General Statutes and the North Carolina Constitution should be amended to provide protections against eminent domain abuse. These protective provisions should:
- State that private property may be taken only for public use and with just compensation.
- Stipulate that a court must decide the question of whether a taking complies with the public-use requirement without deference to any legislative or administrative determination.
- Define “public use” in a way that forbids transfers from one private party to another for the sake of economic development and permits such transfers only when the property is needed by a common carrier or public utility to carry out its public mission or, in cases of blight, when the physical condition of the property poses an imminent threat to health or safety.
- Define “just compensation” in a way that ensures property owners are reimbursed for all losses and costs, including loss of access, loss of business good will, relocation costs, and reasonable attorneys’ fees.
