Undoing Property Rights Reforms – HBs 364 & 365

House Bills 364 & 365 – Undoing the Prohibition on Economic Development Takings

It has been almost six years since the U.S. Supreme Court issued its infamous Kelo v New London case, allowing governments to take property for economic development purposes instead of for only public uses.

Texas responded to Kelo almost immediately by prohibiting takings for economic development purposes in 2005. And in 2009, the citizens of Texas added to this protection by adopting a related constitutional amendment. Yet now, even as the Legislature is moving ahead with more property rights protections in other legislation, HB 364 and HB 365 would unnecessarily undo some of these private property protections.

HB 364 (on the General State Calendar Friday, April 8) would exempt a municipality with a population of more than 1.9 million (Houston) from the constitutional and statutory bans on takings for economic development purpose if a property is occupied by a condominium where “all lawful occupation of or construction activity for the condominium has ceased, or reasonably appears to have ceased, for more than 365 consecutive days.”

HB 364 proposes to fix a problem in Houston where there may be several abandoned condominium developments. In one instance, the city exercised its police powers to demolish a condominium that was viewed as a threat to public safety. The land is now a vacant lot, and some in Houston would like to see the property developed to further remove the challenge of having a large vacant lot in an area where higher levels of crime are sometimes present. However, since the property was occupied by a condominium, there are multiple owners involved-some who might not be able to be located, and it could take significant time and expense for a new buyer to obtain clear title.

The solution to this issue being offered in HB 364 is to allow the city of Houston to clear the title through condemnation and then resale it to a developer. It is important to note that a city does not need this legislation to tear down abandoned condominium units-this can be done through the city’s police power if there is an issue of public safety. The primary purpose of HB 364 would be to condemn the land on which a condominium is built.

HB 364 is a very blunt instrument for unifying title for the purpose of eliminating a vacant lot-especially since there are other ways this issue can be dealt with. For instance, the only real problem with clearing title to such a property would be if there are owners who cannot be located. But in that instance, there will almost certainly be delinquent taxes on the property. Houston could sell the portion of the property with the delinquent taxes/missing owners through a tax sale and immediately solve the title issues. At that point, all of the owners of the property would be known, and the sale of the property could proceed normally. In addition to this, Houston could condemn the property using its existing eminent domain authority and turn it into a park or other public use so that the property would no longer remain vacant.

HB 364 is a matter of convenience rather than necessity. While it is appropriate at times for the Legislature to address specific problems with specific solutions, this solution is at best too broad. At the very least, it should be time limited by requiring the exemption to expire on December 31, 2012.

There is no similar need for HB 365 (on the General State Calendar Monday, April 11). It grants the same exemption to Houston to condemn for economic development purposes, except that it is for when a property is occupied by multi-family dwellings, i.e., apartments or related structures. Yet there is not the same problem with apartments with multiple missing owners as there might be with a condominium. HB 365 would undo the private property protections given Texans back in 2005 without justification.

In addition to the problem with giving Houston eminent domain authority for these reasons, eliminating property rights protections every time a tough problem comes along starts Texas down a slippery slope. There is nothing to prevent condemnors from seeking other exemptions in the future.

Property rights are at the center of all of our freedoms as Americans. We shouldn’t erode property rights protections unless there compelling reasons to do so. Given that there are already solutions in place that can be used to address the challenge these bills attempt to address, this is not the time to exempt a local government from the prohibition on takings for economic development purposes.