Editor’s note: This is the fifth installment in a series examining the roots of America’s housing crisis. To read the earlier pieces, visit The roots of today’s housing crisis.
The Supreme Court’s 1954 decision in Berman v. Parker, which upheld the destruction of a working-class neighborhood for the benefit of redevelopment, paved the way for the destruction of working-class neighborhoods across America. But it took decades for the American public to catch on. Only after Kelo v. City of New London did Americans begin to understand the consequences of allowing any government to seize anyone’s property for virtually any so-called public purpose.
But that doesn’t explain why so many local governments were so anxious to jump on the redevelopment bandwagon and impose urban renewal on so many neighborhoods. The answer lies in the fact that poor communities don’t generate a lot of tax dollars — instead, they are often a burden on the public treasury.
When the typical college-educated urban planner sees a working-class neighborhood, the planner often sees “blight.” And finding blight is a legal justification for condemning property for redevelopment. But blight is as much a legal term as it is a value judgment in the eye of the beholder. Where some see peeling paint and run-down homes, others see homes and apartments that have served a neighborhood for generations. Where some see a neighborhood burdened by people of color, unfamiliar tongues, and strange cultural traditions, others see a vibrant community.
But mostly, where some see a neighborhood that doesn’t generate a lot of taxes, some redevelopers see the magic of the bottom line through what is known as “ tax-increment financing.” Through the redevelopment era that followed Berman, cities across the nation embraced the scheme.
This meant that government planners would designate run-down parts of a city as a redevelopment district, and give a redevelopment authority the power to condemn property for projects that served some public interest. Whatever yearly taxes had been collected up to that point served as a baseline, and that amount would continue to flow into city coffers. However, any increase in tax revenue that occurred after the creation of the redevelopment agency would flow to the agency, not the city.
So, if a redevelopment project tore down a slum that generated only a pittance in taxes and replaced it with a complex of fancy office buildings and hotels, the area would now generate huge tax revenues, with all the increase to be kept by the agency.
No rational agency would tear down beaten-down slum housing and replace it with affordable housing for the original residents. That wouldn’t be a money-maker. But a shopping mall could be a gold mine.
And thus, in city after city, urban neighborhoods were laid to waste to make way for more tax-advantaged development. Perhaps that would be a marginally acceptable perversion of “public use” if the second part of the Takings Clause had been given weight: “upon payment of just compensation.”
But what is “just compensation?” When Aurora Vargas was carried feet-first out of her home in Cesar Ravine to make way for what would become Dodger Stadium, her family home had been assessed at $17,500. But the judge overseeing the action arbitrarily lowered the payment to $10,050. Similarly, the value of the land under Vargas’s neighborhood was certainly worth far less than the value of that same land under Dodger Stadium. However, none of the increase in value was passed on to the original owners of the land. That was not “just.” But it was typical.
Condemning authorities are notorious for paying too little compensation for the properties they take, especially the properties of people who are poor and are poorly educated and lack the ability and sophistication to hire lawyers to fight for a fair price.
Instead, a family may receive a letter or notice tacked on a door from a redevelopment agency containing a lowball offer for their home. And a warning: if you don’t accept this offer immediately, you might receive less. It can be a shock.
What’s worse, family homes are more than soulless houses. The kitchen door, where parents may have measured their children’s growth in pencil, is gone. The living room, where a tree was decorated every holiday season: gone. The porch where the parents talked to their neighbors: gone. The yards and streets where their children played: gone. All gone for the sake of a redevelopment project that will pad the budget of a bureaucracy.
The people who were forced out of their homes had to go elsewhere. Sometimes, it would be a new poor neighborhood that would be targeted for another redevelopment project in a few years. With each redevelopment diaspora, the supply of affordable housing shrank. And because it is so difficult to build new housing, the limits on supply caused by the redevelopment mania that followed Berman live with us today.
James Burling is vice president of legal affairs at Pacific Legal Foundation, a nonprofit legal organization that defends Americans’ individual liberty and constitutional rights. He is the author of “Nowhere to Live: The Hidden Story of America’s Housing Crisis.”