Redevelopment Wrecks: Introduction

June 2006

The argument is always the same: Tax-hungry bureaucrats and land-hungry developers claim that the use of eminent domain is necessary for economic development. They promise everything from high-rise condominiums to trendy shopping malls, all in the name of more taxes and jobs. There is a strong incentive for cities and developers to over-hype the benefits of individual private development projects involving eminent domain in order to garner political and public support. But it turns out that many of these projects are failures.

This report details 20 prominent examples of those failures. The examples chronicled here are of two kinds. The first kind occurs when, after cities and developers condemn homes and businesses to make way for private development projects, the promised projects never materialize. Usually, this happens after bulldozers have transformed condemned neighborhoods into vacant lots. Obviously, these failures do not produce any tax revenues or jobs. In fact, they destroy existing revenues and jobs, along with the homes and businesses they eliminate. Also, public expenditures on the project are wasted. At best, cities hope to scramble to find replacement projects. At worst, they have created nothing more than a scar on the nation’s landscape.

The second kind of failure involves projects that, although completed, simply do not live up to the grandiose promises and projections that were used to justify the abuse of eminent domain. For example, they produce fewer jobs and less tax revenue than expected—sometimes less than before the project was built. Quite often, the public’s financial costs—in the form of new debt, subsidies, other spending and foregone revenues—go through the roof. Also, areas that were supposed to be revitalized either remain the same or get worse.

Failures occur for a range of reasons: financing fell through, developers backed out, tenants were not secured, market conditions changed, or incompetence prevailed. These reasons show why economic development is best done through the marketplace rather than by government force. Simply put, governments do not make very good real estate speculators.

During the past 50 years, cities have increasingly used eminent domain to seize land for the declared purpose of “economic development.” This report does not include the many historic horror stories of the urban renewal movement in which governments literally flattened entire neighborhoods and failed to achieve the hopes of replacing them with newer, and supposedly “nicer,” residential and commercial buildings. Indeed, this report is not meant to be an exhaustive list; instead it is a brief compilation of failures, put together using news reports, and publicly available documents. It is best thought of as the tip of a very large iceberg—one upon which many more cities have run aground.

The strong possibility of failure should give those concerned with revitalizing struggling areas good reason to be skeptical of developers and bureaucrats promising to solve a city’s problems through the use of eminent domain to achieve their grand central plans. This list also demonstrates that simply having a plan—the only requirement the government must meet to condemn private property for private use under the Supreme Court’s decision in Kelo v. City of New London—should not be enough justification for the government to take people’s homes and businesses for economic development. Governments and developers always have plans, but oftentimes, they not only fail to meet the promises they make, they lose revenue and jobs in the process.

There are better ways to achieve economic growth—all without giving home and small business owners the boot.