Chapter 24: The Right to Property

Few rights have been more prominent throughout American history than property rights. The drive to settle North America was above all an attempt to exploit the economic potential of a new world, especially its vast tracts of land. Even individuals who came to escape political or religious persecution hoped for financial reward. But the ownership of property was not an end in itself. It was a right that protected liberty, which is why it appears in the Fifth Amendment as a restraint on governmental power: “No person shall be. . . deprived of life, liberty, or property without due process of law; nor shall private property be taken for public use, without just compensation.”

Colonists considered private ownership of property to be a birthright of Englishmen. They associated it with the time-honored guarantees of the Magna Carta (1215), which secured the rights of owners against seizure of their property without due process of law. As early as 1657, a Massachusetts court recognized as “a fundamental law” the principle that property could not be taken from another person or used “without his owne free consent.” John Locke, the seventeenth-century English political philosopher, powerfully reinforced this colonial attachment to property in his Second Treatise on Government. He argued that government was based on a compact between the people and their rulers. Rulers agreed to protect the natural rights of the people in exchange for the authority to govern. One of these natural rights was the ability to own and control property. That right was not absolute, however. Government could regulate the use of private property, especially to prevent it from being used in a way that threatened public health and safety. It could also seize property without the owner’s consent if the property was required for a legitimate public use. However, this power, known as eminent domain, required government to offer fair payment to the property owner.

The centrality of property rights to the American conception of liberty can scarcely be exaggerated: “The right of property,” Arthur Lee of Virginia wrote in An Appeal to the Justice and Interests of the People of Great Britain (1775), “is the guardian of every other right, and to deprive a people of this, is in fact to deprive them of their liberty.” For this reason, the framers of the Constitution provided numerous safeguards for property. They limited the ability of the federal government to tax land and granted Congress the authority to regulate interstate and foreign commerce, as well as to protect intellectual property, such as books and inventions. States were forbidden from enacting any law “impairing the obligations of contracts.” But the document did not provide a general right to property, just as it did not list other rights Americans considered essential. The Bill of Rights remedied this problem. The Fifth Amendment contained two important clauses designed to guarantee property rights: no property could be taken without due process of law, and owners must be compensated if property was taken under the government’s power of eminent domain. These rights provided a buffer protecting individuals from arbitrary government. Vice President John Adams in an essay, Discourses on Davila (1791), summed up the view of a new American creed: “Property must be secured or liberty cannot exist.”

As a man is said to have a right in his property, he may equally be said to have a property in his rights.

The strong connection between liberty and property caused early nineteenth century lawmakers to place a premium on the protection of property rights. Some judges went so far as to declare them natural rights—the term they used was “vested rights”—that existed before constitutions and therefore limited all governments. This view justified striking down any limitation a legislature might place on the enjoyment of private property. No one disagreed that government could regulate the use of property to protect the public health and safety, but judges looked skeptically at any law or action that interfered unduly with property rights.

By the 1830s, however, the disadvantage of treating property rights as sacred was apparent to many observers. The issue came to its head when legislators attempted to spur competition in transportation, especially in the building of roads and bridges. During the first decades of nationhood, state and federal governments sought to avoid taxes as much as possible in an effort to limit the power of government. One consequence of this policy was a decision to grant private investors the right to collect tolls (fees) for long periods of time, sometimes for as much as a century, if they would build roads and bridges for public use. As the population grew and demands for new transportation routes increased, legislators offered charters, or grants of authority, to companies who would provide additional roads and bridges. Some of these new routes and structures competed directly with the older toll roads and bridges. The owners of the long-established transportation companies protested that this new competition was destroying the value of their property in violation of their contract.

In 1837, the U.S. Supreme Court ruled on this claim in one of the most important property rights cases of the nineteenth century. Five decades earlier, in 1785, Massachusetts had authorized the Charles River Bridge Company to build a toll bridge over the Charles River between Boston and Charlestown. Before this charter expired, the legislature empowered the Warren Bridge Company to build a second bridge, with the provision that it could collect tolls only until its construction costs were paid. Then, it would become free. Because a toll bridge cannot compete successfully with a free bridge, the Charles River Bridge Company claimed that the state had violated the charter, a legal contract, and destroyed the value of its property. The Supreme Court ruled in Charles River Bridge v. Warren Bridge (1837) that, although the Constitution prohibited states from violating contracts, nothing in the Charles River Bridge charter stated that the grant was exclusive. Writing for the Court, Chief Justice Roger B. Taney emphasized that the language of contracts must be interpreted strictly, or precisely. States could regulate property in the public interest unless the language of a charter explicitly prohibited it. Otherwise, he explained, no one would invest in new transportation or new technologies until the old charters ran their course. Economic progress at times required that existing property rights had to be destroyed to make room for innovation and improvement. Such was the price of progress.

The late nineteenth century brought a dramatically different view of this issue. It was an age of industrial monopoly, and the Supreme Court interpreted the due process clause of the Fourteenth Amendment to sharply curtail the authority of states to regulate or control the use of property. In what came to be known as economic due process, the Court decided that legislatures could not pass unreasonable restrictions on property, such as regulating the prices a utility company or railroad could charge. Judges, not elected representatives, would determine what was reasonable. The justices also ruled that courts, not legislatures, would determine fair compensation for any property taken for public use under the state’s power of eminent domain. The result was unprecedented protection of property rights—and a decrease in the ability of government to challenge monopolies or regulate businesses for the public good.

The Great Depression of the 1930s changed this approach to the rights of property. With as many as one-third of Americans out of work, the Supreme Court could not resist for long the demand that government had a duty to protect people from economic disaster. The New Deal was President Franklin Roosevelt’s plan to stimulate the economy and provide economic support, such as jobs and welfare, to Americans hurt by the depression. It required much greater government involvement in the economy than was traditional. In the early 1930s, the Supreme Court ruled that these programs were unconstitutional; the justices struck down governmental efforts to control prices and set wages, for example, as violations of property rights, especially freedom of contract. By 1938, however, public support for the New Deal—and the retirement of some justices—persuaded the Court to change its stance. Instead of blocking federal laws to reform the economy, the justices adopted a position that Congress could act freely in economic matters under its authority to regulate interstate commerce if it believed good reasons existed to do so. Under this broad standard, property rights virtually disappeared from the Court’s agenda. Once considered a right essential to liberty, property rights were now secondary to the desire to promote economic security and restrain too-powerful corporations. A wide array of laws and agencies sharply curtailed the unfettered private use of property in the name of a greater public good. The legal compass had swung almost 180 degrees from the Court’s position in the late nineteenth and early twentieth centuries. It was a constitutional revolution of the first order.

In the 1980s and 1990s, the Supreme Court began to trim what had become vast congressional power to control the economy and the use of property. It especially gave more discretion to states to adopt their own standards in this area. It was not long, however, before the rights of property and the power of government came into conflict. The most volatile issues centered on the state’s use of eminent domain to condemn property and turn it to private uses that claimed to have a public benefit. A case from Connecticut brought the conflict into stark focus—and resulted in a Supreme Court and a nation equally divided over where to draw the line between the power of government and the rights of property owners.

Susette Kelo, a registered nurse in New London, Connecticut, dreamed of owning an older house near water, so her 1997 purchase of a modest Victorian cottage on the Thames River, near its junction with Long Island Sound, seemed ideal.

In no other country in the world is the love of property keener or more alert than in the United States, and nowhere else does the majority display less inclination toward doctrines which in any way threaten the way property is owned.

The ninety-year-old house was in reasonably good condition, and it had a small front yard for her flowers and a place to watch the ever-changing river from her front window. It was in the neighborhood known as Fort Trumbull, an area of older homes and families who had lived there for decades. Down the street from her was a house built in 1895, and a nearby family had been in the neighborhood for generations, dating to the time when William McKinley was President. A number of houses had been owned by the same families for several generations. Susette Kelo’s next-door neighbor, for example, lived in the house once owned by his grandmother, who had started a garden the family still maintained. As Kelo and her husband restored their pink house, she realized how special her neighborhood was and how much potential it had for revitalization that would preserve its historic character.

Yesterday the active area . . . was concerned with ‘property.’ Today it is ‘civil liberties.’ Tomorrow it may be ‘property’ again.

Soon after she moved in, however, Kelo’s world started to unravel. New London, Connecticut, once a prosperous city, had recently fallen on hard times. The federal government closed its 1,500-employee Naval Undersea Warfare Center in 1996, and by 1998, the city’s unemployment rate was the highest in the state. It also was hemorrhaging population; New London’s 24,000 residents was its lowest total since the 1920s. Then salvation arrived, or so it seemed, when a giant pharmaceutical company, Pfizer, began construction of a $300 million research facility on the outskirts of Fort Trumbull. Believing Pfizer’s commitment offered an opportunity for a wider economic revival, New London asked its economic development corporation, a private nonprofit organization, to create a plan to revitalize the surrounding area, including the Fort Trumbull neighborhood.

The resulting plan was impressive: it envisioned a resort and conference center, a new state park, an upscale housing development, an office park, and high-end shopping centers. Enthusiastic city and state leaders approved the plan and set out to acquire land in Fort Trumbull. The development corporation offered to purchase the 115 houses in the neighborhood, and all but fifteen residents agreed to sell. For the holdouts, the issue was both personal and a matter of principle: “This is the second time someone from my family may have to move because the government wants to take their home for another private party,” one resident said. “If that can happen to us twice, it can happen to anyone, anywhere, not just here in Connecticut. Basically, it’s homeowner beware.”

Finally, the city tired of negotiating. It assigned its power of eminent domain to the economic development corporation, which moved quickly to condemn the fifteen remaining properties. No one claimed the area was blighted or neglected, typical reasons for the use of eminent domain; the city wanted the land solely because it was in the redevelopment area. Kelo and the other homeowners sued the city, claiming that its use of eminent domain violated the Fifth and Fourteenth Amendments. The planned development, they argued, benefited private interests. In fact, while the case was pending, the redevelopment corporation offered a private company a ninety-nine-year lease on the property for an annual rent of one dollar a year. Where was the public purpose the amendments required?

Kelo v. City of New London was the first major eminent domain case to make it to the Supreme Court since the 1980s. The stakes were high because New London was not alone in its willingness to exercise eminent domain on behalf of private developers. It was an innovative use of government’s power; eminent domain traditionally had allowed government to seize land for clearly public purposes, such as building a highway or a water treatment plant or ridding an area of blight. But many governments, eager to spur economic growth, were now pursuing similar strategies. If the justices sided with Susette Kelo and her fellow plaintiffs, their decision might threaten the economic revitalization of many distressed areas. But if they supported the city, would they not be requiring a few unfortunate property owners to sacrifice their rights for the benefit of wealthy private investors?

In 2005, the justices upheld the city’s right to use eminent domain to support its economic development strategy, but the decision revealed a deeply divided court. Five justices agreed that government could not take property from one private party and transfer it to another private entity, even if it paid just compensation, but New London had used the seized property for a public purpose, they concluded. The new jobs and increased tax revenue promised by the developers met the constitutional requirements of public use; the primary benefit of the development would be to the community at large, they found, even though the private investors in the project might profit from it as well. The concept of public welfare is broad and inclusive, the majority ruled, and it was not the Court’s job to interfere with the judgment of public officials as to how best to serve public needs.

The four dissenting justices condemned the majority’s conclusion. The majority’s standard, Justice Sandra Day O’Connor warned, removed any meaningful distinction between public and private and effectively “delete[s] the words ‘public use’ from . . . the Fifth Amendment.” It put all private property at risk: “Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded.” She dismissed the need to defer to elected officials. If they were the sole judge of what constituted public use, then the Fifth Amendment’s restriction would be merely “hortatory fluff.” The framers intended the amendment to protect individuals against arbitrary actions of government. Without this protection, “nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.” The result of the Court’s decision would be to make government a reverse Robin Hood—taking from the poor to give to the rich. “The Founders,” O’Connor concluded, “could not have intended such a perverse result.”

Susette Kelo and her neighbors lost their battle, but perhaps not the war. Public outrage over the decision forced a moratorium on eviction notices while the Connecticut legislature and governor considered a remedy. “The abuse of eminent domain has become a national plague,” wrote the Boston Globe in an editorial that reflected national sentiment. Within weeks, state legislatures across the country received pressure to strengthen laws protecting homeowners. By April 2006, twelve states had prohibited the use of eminent domain for private development, and similar proposals were being considered by twenty-seven other states. Only five states that took up the measure failed to pass a restriction. Clearly, Kelo v. New London had provoked a response in favor of stronger protections for property rights, a response that resulted from the involvement of citizens in democratic government.

This result, no doubt, would have pleased the founders, who universally accepted both the right to property and citizen participation in government as fundamental to liberty. But it left unanswered a wide array of questions related to the potential conflict between the right of individuals to enjoy their property and the public desire that government promote economic growth and protect jobs. This latter concern stems from one of the most devastating economic episodes in American history, the Great Depression. More recently, threats to financial security have come from the loss of jobs to lower-cost labor markets and the rise of Asia as an economic powerhouse. We want government to have enough power to act in the public’s economic interests yet not enough power to threaten private property rights. Where is the balance point between individual property rights and economic security?

In this desire, we are not as far from the framers of the Constitution as we might imagine. We live in a remarkably different economic world in many ways, yet the fundamental issues are similar. We believe, as did the founding generation, that widespread property ownership encourages economic self-sufficiency and political independence. We affirm, as they did, that protection of private property is a hallmark of a good society. Yet we are also aware of the need to promote the general welfare, the pledge contained in the preamble to the Constitution, and we worry that unbridled economic power or unrestrained competition threatens our liberty as much as concentrated governmental power. The revolutionary generation was most concerned about the restraint of power in any form, although they saw it most gravely threatened by government. We, too, worry about how best to limit power, but we have come to view government as an effective counterbalance to corporate power.

Constitutional protection for the rights of property, we have learned, is necessary for both a healthy democracy and a healthy economy. The ability to buy, sell, and protect property not only constitutes the legal foundation of our free market economy, but it also helps to secure the financial investments required for economic growth. The recognition of property rights also promotes individual liberty by increasing our economic independence, thus helping us resist interference in our lives from overbearing government or too powerful corporations. With economic independence and security, we are freer to participate fully in a democratic society. We may no longer treat property rights as the guardian of every other right, but we continue to value the economic freedom that enables us to fulfill our duty as citizens more effectively, including our obligation to protect liberty.