The Use of Eminent Domain

The proposed use of eminent domain laws to effect change during the housing crisis is something which we’ve often tweeted about, as the very notion was initially and immediately seen as incredibly novel and potentially laden with explosive fallout.   San Bernardino County in southern California’s Inland Empire was at the center of this potential controversy in 2012 with similar use being explored in counties across the rest of the country.

In January, San Bernardino County “abandoned its plan to use eminent domain to seize troubled mortgages and write down debt for homeowners,” according to a Los Angeles Times article.  A lack of public support was cited, but the reality is likely an overwhelming abundance of fear and potential legal backlash.   The same article said, “Ever since the idea was floated in San Bernardino last year, advocates of the mortgage and investment industries have called the plan an overreach that would nullify valid contracts and hurt the local housing market.  The result would be protracted litigation, a surge in mortgage rates and a tightened market for borrowers with less-than-perfect credit.” These same fears were echoed in a Mortgage Banker’s Association testimony before the House of Representatives’ Financial Services Subcommittee which we covered a few weeks ago.

The truth of the matter may hit closer to the moral heart, however.  In a recent Housingwire article on the subject, Kerri Ann Panchuk highlighted the purposes that the San Bernardino proposal had, but draws a sort of converse parallel in Colorado.  She writes, “Another eminent domain-related bill is getting slammed in Colorado because it would allow oil pipeline companies to have eminent domain and condemnation rights in certain scenarios where they need to expand their operations. “ She attributed the law’s failure to the fear held by lawmakers about toying with property rights, specifically for private business.  She asserts that a sort of double standard exists wherein intervening with property ownership rights is a violation of the original contract and the very nature of ownership (in Colorado), but that in places like San Bernardino and elsewhere, there is far less objection to knocking out investors’ interests under the noble and efficient guise of “dealing with the housing blight.”

She insists that “what proponents of eminent domain forget to ask themselves is whether they would back the same view under a different type of scenario,” which reminds us all that laws exist with impartiality to scenario or circumstance, and that the application of a law must occur across the board and not just in more acceptable and isolated incidents.

Do you think that there’s a double standard that exists with this legislative gray area? What about elsewhere?  Leave us a comment below.  We’d love to check it out.

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