New Lessons in Expropriation by Other Means
New Lessons in Expropriation by Other Means
Published in February, 2017
Charlestown can’t seize the properties, so it’s citing them to force them to sell.
Institute for JusticeMembers of a small, low-income community in Indiana are discovering that state-level protections that make it hard for cities to seize their property may not be enough. When city leaders decide to get into bed with private developers, there are all sorts of ways for cronyism to threaten the property rights of owners.
When we imagine how a city or town seizes private property from citizens in order to hand it over to developers for special projects, we often think about eminent domain. Governments can force citizens to sell them their property (often for much less than it's worth on the market). While eminent domain was supposed to be used solely for public works projects (roads, schools, et cetera), the infamous Kelo v. City of New London Supreme Court decision set a legal precedent allowing governments to use it to hand over property to private developers for big projects.
Some states that objected to that decision passed new laws to restrict how eminent domain may be used within their borders. Indiana was one of them.
So property rights-minded citizens might be surprised to hear that the mayor and city officials of Charlestown, Indiana, a rural community with a population of less than 8,000, are trying to arrange to hand over hundreds of homes to a private developer. He's not using eminent domain to do so. Instead, the city stands accused of deliberately finding excuses to burden the community's residents with thousands of dollars of fines that will be waived if they sell their properties to the private developer.
The property-rights-defending lawyers of the Institute for Justice (you may recall their efforts to stop abuse of civil asset forfeiture) are stepping in to represent several property owners in this community and are seeking an injunction to stop the city from trying to use code violation citations to essentially force property transfers.
Within Charlestown is a low-income neighborhood named Pleasant Ridge, full of working-class folks and retirees. According to the Institute for Justice, Mayor Bob Hall decided in 2014 that he wanted to get rid of the houses there and replace it with a more upscale planned community with fancier homes and retail options. But he needed to get rid of the houses (and the people within them) first. Starting in 2016, residents and property owners of Pleasant Ridge discovered Charlestown had a nasty tool to try to get rid of them. City officials started looking for any excuse to cite property owners for code violations. When you're looking at low-income neighborhoods full of working people and retirees, there are likely to be plenty. The Institute for Justice described how it played out:
Beginning in the summer of 2016, the city unleashed a torrent of code enforcement targeted specifically at the Pleasant Ridge neighborhood. City officials began performing exterior inspections of properties in Pleasant Ridge and mailing citations to the owners. So far, this campaign has primarily targeted landlords who own multiple rental properties, rather than smaller landlords and owner-occupied houses.
The citations state that the owner accrues penalties of $50 per violation, per day. Multiple citations are issued per property, which means that a single property will begin accumulating hundreds of dollars in fines each day. The fines can be for things as minor as a torn screen, weeds taller than eight inches or chipped paint. In many cases, the fines begin the day the citation was issued, not the day the owner received it. So owners can easily be on the hook for thousands of dollars in fines before they even receive notice, and the fines continue to accrue until the owner is able to repair the property.
The city knows that many of the residents cannot afford to pay these exorbitant fines, leaving them only two options: Sell their home to Neace Ventures or raze it to the ground to have the fines waived. The scheme would be bad enough if Neace were offering fair market value for the homes, but it is not. The inspections regime has been a windfall for Neace. Not only has it compelled more than 140 homeowners to sell—it has also forced them to sell at a considerable loss. Most of the homes have a tax assessed value of between $25,000 and $35,000, and they would be worth much more if the city had not caused the market to collapse by announcing in 2014 that it was going to destroy every home.
One grotesque little detail from the Institute for Justice is that that the city probably would have to pay the citizens more for the property if it did use eminent domain. But this nasty little system lets the private developer get the property on the cheap.
One of the plaintiffs the Institute for Justice is representing, a neighborhood association that owned a duplex in the neighborhood, had racked up almost $9,000 in fines due to citations for a bunch of minor violations. The fines bankrupted the association and resulted in them selling the property. (CORRECTION: The fines have not bankrupted the association yet, but they will if they are not thrown out by the courts.)
The city attorney for Charlestown told The Courier-Journal that the city is acting completely within the law with their fines. But the Institute for Justice claims that Charlestown is violating state law for the exorbitant amount of the fines and violating its own code by immediately fining property owners rather than waiting for after providing a written order for repairs and determining that they've refused to cooperate. That's because the city doesn't actually want them to cooperate. They want the residents to sell their homes and get out. The mayor said as much in a Facebook post last fall trying to discourage property owners from repairing their homes.