For almost 60 years, urban redevelopment and eminent domain have been intertwined, both in public policy and in the public’s mind. Since at least the passage of the Housing Act of 1949 – and in some states even before that – eminent domain has been used to assemble large blocks of urban land out of small, cut-up parcels. Maybe urban development specialists can’t imagine life without it.
Now all that is changing. The backlash against last summer’s U.S. Supreme Court decision in Kelo v. City of New London – which upheld the use of eminent domain for economic development purposes (see CP&DR August 2005, July 2005) – has rippled throughout the nation and deeply into California. There are any number of bills in Sacramento that would restrict or place a moratorium on local governments’ use of eminent domain. Two initiatives are in the signature-gathering stage. And state Sen. Tom McClintock (R-Thousand Oaks) is trying to ride the anti-eminent domain wave into the lieutenant governor’s office, just as he used anti-car tax sentiment in his 2003 gubernatorial campaign.
Not surprisingly, most of the effort on the public side is focused on trying to turn back this tide or at least contain restrictions on eminent domain. But the truth of the matter is that, in California, eminent domain has been on the wane as an economic development tool for at least a decade, and further restrictions appear inevitable no matter what local government and redevelopment advocates do.
So the real question is not, how does expansive use of eminent domain get protected? It won’t. The reason question is, how do you pursue an urban development strategy without eminent domain?
There are two answers. One is the “needle in a haystack” idea – use a microscope to find the best hidden opportunities in the private market. The second is the “big kahuna” idea – find the biggest landowner you can, usually a public agency or a large institution, and bring them to the table.
Let’s begin with the needle in a haystack. One of the main reasons for the use of eminent domain in urban redevelopment was land ownership patterns. The same conditions exist today that existed 60 years ago. Infill locations are cut up into small parcels. The parcels are expensive. And many landowners are simply uninterested in playing the infill game.
Hence the needle in the haystack strategy. This is what most of the major GIS-based infill analysis experts are working on – finding the parcels that are big enough, well situated enough, and that have enough potential under existing zoning to accommodate a lot of new development. Cities want to identify these sites in order to focus their infill development policies in the right locations. Developers want to find the needles in the haystack to get a leg up on the competition.
Full disclosure: This is the essence of what the infill analysis method developed by CP&DR’s sister company, Solimar Research Group (Solimar.org.), seeks to do. It is also the idea behind other GIS-based infill policy tools that have emerged, mostly with Caltrans funding. These include the California infill parcel locator (infill.gisc.berkeley.edu), developed by John Landis of UC Berkeley, and the L.A. Lots program (lots.ucla.edu), developed by Neal Richman and his colleagues at the UCLA Neighborhood Knowledge Research Center.
Simply finding the parcels isn’t the end of the story. Whether you’re a city or a developer, if you don’t have eminent domain available, you then have to persuade the current landowners to play ball voluntarily. And this isn’t easy.
Like their greenfield counterparts – who were historically farmers – urban landowners are not always economically rational business owners and they are not always in the marketplace at the time cities or developers want them to be. Farmers usually want the right to farm until they decide to retire, at which time they want the right to sell out to a developer at a high price.
The same is true for urban landowners. They want the right to sell at a high price, but only on their timetable. And often as not, their timetable is driven by personal concerns such as retirement, estate planning, or the educational needs of children and grandchildren. On top of that, many urban landowners – especially along commercial strips – have owned their property for decades. This means they have no debt and pre-Proposition 13 taxes. Even a half-empty, rundown strip is providing them with a healthy cash-flow, and it can be hard to persuade them that partnering in an infill development project is a better business model than cashing their tenants’ checks.
But that doesn’t mean that looking for the needle in a haystack is pointless. It only means you have to be realistic and understand that the landowner’s internal clock is as important as any other factor. For developers, this means understanding the landowner’s personal circumstance and financial needs.
For public agencies, it’s a little trickier. The main goal of the needle in the haystack search is to identify the parcels that should be ripe for infill, and then change land use policies (density, parking, processing time, whatever) so that when the right time comes for the landowner, infill is an attractive alternative. Another goal might be to pre-screen parcels so that infill developers don’t have to look so hard to find the needle. The city gives them the microscope.
Then there’s the “big kahuna” approach – which is likely to be the basis for most large-scale urban development in the post-eminent domain world. Amid all the needles in haystacks in the urban environment, there are a few landowners in a completely different situation. They own large parcels, and often (though not always) they are focused on public policy goals rather than strictly on the bottom line. This class of landowners includes government agencies of all kinds and semi-public institutions such as universities and hospitals.
Sometimes, these institutions and agencies have similar motivations to other urban landowners. They have no debt on their land and therefore little motivation to use it efficiently; they don’t see themselves as being in the development business. Increasingly, however, they see both the financial rewards of infill development and the benefit of improving their neighborhood around them. And in places that are both congested and expensive, they are also often motivated to provide housing for their employees.
We have seen this motivation at work for some time in downtown Los Angeles, where the county government owns some of the most desirable real estate in the United States. Attempts to exploit it for profit go back two decades, when the county planned skyscrapers on what is now the site of the Walt Disney Concert Hall. Now there is a renewed effort for something more sophisticated and urbane, given the hot downtown condo market.
Sometimes large private landowners simply realize it is time to cash in – as is happening with the owners of California’s pre-eminent horse racing tracks. In these situations, cities can play the redevelopment game by using the leverage they have over the approval process to get an urban place rather than just a development project. Bay Meadows in San Mateo is undertaking a major and commendable “placemaking” effort – and it’s not in a redevelopment area. We will surely see a similar large-scale effort at Hollywood Park in Inglewood and perhaps at Santa Anita in Arcadia as well.
Of course, even under the best of circumstances, a lot of needles will stay lodged in the haystack. And some large urban landowners – even institutional and public landowners – will take the easy money of big boxes and self-storage over the harder job of making great urban places. But the larger point is that urban redevelopment will continue to occur in California – with or without eminent domain – because political and economic forces are demanding that it happen.
