PropertyProf Blog

Billion-Dollar Housing Sale and the Takings Clause

I want to thank Ben and Al for welcoming me to PropertyProf.  I’ve long been a fan, and hope to have an interesting post or two to add from time to time.  So, here goes…

The New York Times reported over the weekend on the latest development in a proposed $1.3 billion sale of Brooklyn’s Spring Creek Towers, better known as Starrett City.  Back in February, Clipper Equity submitted the winning bid to purchase Starrett City, the nation’s largest federally subsidized housing development, with nearly 6,000 units in 46 buildings housing roughly 14,000 people.  In March, HUD rejected the initial proposed structure for the sale, and the New York State Division of Housing and Community Renewal rejected a subsequent proposal.  According to the Times, however, the sale may still go through.

This transaction raises a number of important policy questions, but in particular is emerging as a poster child for the issue of housing preservation—how to keep units that house low- and moderate-income residents developed with public subsidies from moving to market-rate (and, in places like New York, high-end) housing.   As the Urban Prospect has noted, Starrett City was developed with a combination of federal subsidies under the Section 236 program as well as with rent subsidies under the Rental Assistance Program, a precursor to the current project-based Section 8 program.  Starrett City also received state subsidies under New York’s Mitchell-Lama program, and city real estate tax abatements. 

The great irony of the myriad attempts to block the sale is that Starrett City’s current owners appear to have the right to exit from the federal and state programs that helped build the development.  Legislation recently introduced in New York would extend rent stabilization to projects like Starrett City upon exit from the Mitchell-Lama program, but the owners have much flexibility, especially over the long run, to shift Starrett City away from its original purpose.  (Clipper Equity has signaled a commitment to affordable housing at Starrett City, but the question remains whether that commitment is binding.)

From a property law perspective, these tussles over whether Starrett City will be sold and the fate of its 14,000 tenants echo an earlier round in housing preservation policy that implicated the Takings Clause.  In Cienega Gardens v. United States, 331 F.3d 1319 (Fed. Cir. 2003), the Federal Circuit reviewed claims that two federal statutes – the Emergency Low Income Housing Preservation Act of 1987 and the Low-Income Housing Preservation and Resident Homeownership Act of 1990 – had abrogated exit rights that owners had under both the Section 236 program (used at Starrett City) and a similar federal program, Section 221(d)(3).  Both programs originally allowed owners to prepay their subsidized mortgages after twenty years and thus lift affordability requirements, but the 1987 and 1990 legislation required HUD approval to exercise that exit right.  The Federal Circuit held that this limitation on prepayment constituted a taking under the Fifth Amendment.  As a result, preservation strategies have shifted—as the legislation currently pending in Albany would do in part—towards creating incentives for owners and developers to remain voluntarily in the programs that created the housing in the first place.

The Starrett City controversy highlights one underlying fact in housing policy:  designing housing subsidies with built-in expiration dates seriously risks the significant public investment that has gone into the stock of affordable housing.

Nestor Davidson

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Whom Do You Trust?

Over at the Religion Clause blog, we learn about a controversy surrounding the new $1 coins:

WorldNet Daily reported yesterday that the new presidential dollar coins to be released next month will no longer have the motto "In God We Trust" on the face of the coin. Instead the motto will be moved to the thin edge of the new gold-colored dollars, as will the minting date and the motto "E Pluribus Unum". (Artist's rendering of the coin.) The U.S. Mint says the change will permit larger portraits of the presidents on the face of the coins. Some conservatives have found more sinister motives. Judicial Watch's blog, Corruption Chronicles, headlined its posting on this "US Mint Appeases Atheists".

Hmmm. This is an interesting marketing strategy by the U.S. Mint. They desperately want people to use these $1 coins, yet they stir up a culture war dispute guaranteed to lead to a boycott of the coins by groups opposed to this literal marginalization of God. When is Wal-Mart going to start minting legal tender?

Rick Duncan

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Trial Court Opinion in Birds v. Wind Turbines

   In my recent post concerning the failure of the Center for Biological Diversity to maintain a public trust claim concerning the death of birds due to wind turbines, I promised to post the trial judge's opinion as soon as I obtained it.  Here it is.

Calvin Massey

Takings in Venezuela

Ben's link to Ilya Somin's post on Volokh reminded me that last Sunday's New York Times carried an article describing the proposed seizure of two posh private golf clubs in Caracas for conversion into housing for the poor.  The article also describes the seizure of apartment complexes and other buildings from their private owners to provide accommodations for the poor and lower-middle classes of Caracas.  "Just and opportune" compensation is afforded, says a government official.  Were this to occur in the US, there is no doubt that such seizures, accompanied by just compensation, would be for a public use.  The interesting twist is to note the effect on Caracas's housing market: "Landlords have flooded the market with aprtments for sale, fearful of the measures, some in effect and others under consideration, that would allow more expropriations and bolster the rights of tenants and squatters.  Rentals are so scarce that rents have skyrocketed to as much as $7,000 a month for a three- or four-bedroom apartment near the two golf courses." 

Calvin Massey

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Broken Trust: You Can Say That Again!

With the arrival of Carl Christensen of the University of Hawai'i as a fellow guest blogger, I thought mention should made of Broken Trust, the recently published book by the University of Hawai'i Press, by Carl's colleague Randall Roth and U.S. District Judge Samuel King.  As most T&E folks know, Roth, King, and several other people brought to light the astonishing scope of the breaches of fiduciary duty engaged in by the trustees of the Bishop Estate, the trust established by the will of Bernice P. Bishop, Princess Pauahi.  Though the trust was explicitly for the purpose of creating and maintaining the Kamehameha Schools, by the 1990s the trustees were operating the trust as a private investment fund.  That's what the IRS charged was the case when it sought to rescind the trust's charitable status, after the scandal broke into the open.  Now, in this book, Roth and KIng describe the development of the trust, the history of the Kamehameha Schools (which is also a history of the struggle of the indigenous Hawaiians following the arrival of European settlers), and the slide into corruption, greed, and colossal mismanagement that eventually resulted in removal of all five of the trustees.  One of the delicious ironies of the tale is the fact that the land redistribution program approved by the US Supreme Court in Midkiff resulted in the infusion of billions and billions of cash into the BIshop Estate, thus providing a ready temptation for the unscrupulous trustees.  Any property professors who dabble in trusts and the fiduciary duties of trustees in their property courses will want to read this.  The T&E people are no doubt already familiar with this sad tale.

Calvin Massey

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Psychological Defects?

The New York Times has an engaging article on home buyers who regret not asking whether anyone died in the house they purchased.  Ah, latent and patent defects.  This may be part of a post I'm planning as we get closer to Halloween....

Hat Tip: Carl Christensen.

The image of the St. James Hotel in Selma--which looks like it might be haunted! and is rumored to be (nice article from the Selma Times-Journal, one of our nation's oldest newspapers)--comes from our friends at the Library of Congress' Historic Buildings Survey, conducted during the 1930s.  Check out their website for some great photographs.  They're a source I often use when looking for public domain illustrations for propertyprof entries.

Alfred L. Brophy

Property and Russell Banks's Cloudsplitter

    I've been invited to guest blog for a while, an invitation which I am happy to accept.  I have been reading Cloudsplitter, Russell Banks's enormous and fascinating novel about John Brown and his sons.  Cloudsplitter has been in print for eight years but I'm sometimes slow to catch up.  Read (or re-read) it, as it offers remarkable insights into the nature of property (human slavery, of course, in this instance), the way some things lose their status as property, and the psychological process that produces extreme political violence, usually called terrorism. As to the latter point, Banks's fictional account of the process by which John Brown and his sons turned to radical violence in their moral quest to end slavery in America resonates particularly strongly in this era of global terrorism rooted in religious conviction. As to property, Cloudsplitter raises, at least to a property prof, questions about how things lose their status as property.  As we all know, property is not about the relations of people to things, but about the relations between people with respect to things.  How does (should) society restructure these relationships to "de-propertize" (if that's a word) such relationships?  We use ordinary legal processes to (mostly) increase the range of legal entitlement to intellectual property, and we rely on custom to create socially (if not legally) recognized entitlements to such things as a parking place from which one has cleared the snow, or a seat at a meeting.  These processes work in reverse, in theory, but how often do we actually eliminate property?  Extending the public trust doctrine to provide waterfront access is an example, but such extensions are limited by the takings clause.  Did Lincoln's Emancipation Proclamation constitute a taking?  Odious thought, of course.  We start out Property by asking students to figure out where property rights come from in the first instance.  Cloudsplitter caused me to wonder whether we ought to spend a little time also in the beginning asking students to figure out when and how property rights ought to disappear.   

Calvin Massey

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over at my blog...

Joel Kotkin has a weird rant at Newsweek, and I respond to it on my blog.

Kotkin baffles me; he agrees with New Urbanists that suburbia could use a bit of change, but he goes out of his way to attack anyone (other than himself) is the tiny bit critical of the sprawl status quo. 

I also have a post on Brookings' new study on the decline of middle-income neighborhoods.  The press has reported (correctly) that cities have more rich neighborhoods and more poor neighborhoods than they did 30 years ago.  But I found another story hidden in the middle of the study: despite all the ranting in the popular press about gentrification, most cities have a lot more poor neighborhoods than they did in 1970.

Michael Lewyn

Property Songs

Thanks to Ann Althouse's pointer, I've been enjoying the National Review's "Fifty Greatest Conservative Rock Songs."  Classifying some of them as conservative seem like fitting a round peg into a square hole to me--a point Althouse makes well.  "Small Town" by John Cougar Mellencamp?  "Who'll Stop the Rain" by CCR?  "Sweet Home Alabama" probably belongs on the list, although I am told there is some revisionist thinking on it, as this wikipedia entry illustrates.  Be that as it may, I love lists that rank things--like rankings of law reviews.

Property profs may be particularly interested in song 39 on the list, "Property Line," by The Marshall Tucker Band (on the Long Hard Ride album).

Couple of lines here:

    Well my idea of a good time
    Is walkin’ my property line
    And knowin’ the mud on my boots is mine.

I've already inquired about the property implications of the Beatles' Strawberry Fields Forever.  Other songs that may warrant further discussion (though perhaps not on the National Review's list), are Signs and Alabama's "Song of the South."

Alfred Brophy

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Alito Coverage

For those interested, Joe Hodnicki at the Law Librarian Blog has a roundup of coverage of Alito issues on the Law Profs Blog network.

Ben Barros

Using Superprecedent to Save the Commerce Clause

Warning:  this post contains very little property-related content, though it does touch on the FHA.

The idea of superprecedent has generated a lot of commentary recently, and is likely to be a major topic in the Alito confirmation hearings.  The basic idea seems to be that the Supreme Court should be even more reticent than usual about overturning a precedent if that precedent has been repeatedly affirmed and has become a settled part of the public understanding of a particular Constitutional issue.  Although the issue is often discussed in the abstract, the focus of the debate has been on whether Roe v. Wade has achieved superprecedent status.

I have to say at the outset that I have some doubts about the entire idea of superprecedent -- the Justices take their oath to uphold the Constitution, and if they truly believe that a precedent is contrary to the Constitution, then they should vote to overturn that precedent, super or not.  But I want to suggest a possible strategic use of the concept of superprecedent by those who (like me) believe that the Constitution actually means what it says when it created a federal system in which the federal government has limited and enumerated powers.

The modern Supreme Court has interpreted the power of the federal government to regulate interstate commerce so broadly that it has essentially written the Commerce Clause, and with it the idea of limited federal power, out of the Constitution.  The idea of interstate commerce at the margins can be fuzzy, but at its core it really isn't a hard idea to understand.  It also isn't hard for ordinary people to figure out whether a particular law passed by Congress constitutes a regulation of interstate commerce.  Every year, I go over the text of the Fair Housing Act with my Property students and ask them whether Congress was regulating interstate commerce when it passed the FHA.  Usually about 15% of the students raise their hands.  I then ask those students if they had an undergraduate course in Constitutional Law; invariably they all did.  To the other students, who have not yet had their minds polluted with the Court's Commerce Clause jurisprudence, the nature of the FHA is abundantly clear:  it is a law prohibiting discrimination in local housing markets, not a regulation of interstate commerce.

The unfortunate result of reading the Commerce Clause to mean what it says is the conclusion that the FHA is unconstitutional.  And so, of course, would be every other Civil Rights law passed by Congress that has had its constitutionality grounded by the Supreme Court in cases relying on the Commerce Clause.  (Some Civil Rights laws have their constitutionality grounded in the Civil War Amendments, and so do not rely on the Commerce Clause for their constitutionality).  These laws, quite plainly, were Civil Rights Laws, not regulations of interstate commerce.  (I should note that this view is not based on a "strict constructionist" reading the Commerce Clause.  I'm not sure that anyone on the planet is actually a strict constructionist as caricatured by many commentators, but in any event you reach the same result if you either rely on the plain language of the text or look to the very clear normative idea behind the Commerce Clause, i.e., that the federal government has limited powers).

I'm personally a fan of the FHA and the Civil Rights laws, and this result makes me uncomfortable.  It also makes it impossible to have an intelligent discussion about the scope of the Commerce Clause.  Advocates for reading the Commerce Clause to have actual meaning constantly have to deal with the "but that interpretation will lead to the invalidation of the Civil Rights laws" argument.  On the more-federal-power-is-better side of the debate, the desire to protect the Civil Rights laws forces scholars to engage in herculean feats of analytic gymnastics to explain why their view does not drain the Constitutional text of any meaning whatsoever.

Here's where the idea of superprecedent might come in to save the day.  Why don't advocates for a meaningful reading of the Commerce Clause say, "okay, the cases upholding the Civil Rights laws (including the FHA) are superprecedent.  Can we have an honest debate about the limited scope of federal power now?"  Indeed, the cases upholding the Civil Rights laws seem to be a very settled and uncontroversial part of the Constitutional landscape (at least as far as public reliance goes), and therefore would seem to have a stronger claim to superprecedent status than Roe v. Wade.  (I think, by the way, that because public reliance is an important part of the idea of superprecedent, the scope of superprecedent status has to be somewhat fact specific.  So no arguing for giving superprecedent status to the vacuous Wickard v. Filburn unless you're talking about regulating the sale of wheat).

Beyond promoting honesty in the Commerce Clause debate, giving these cases superprecedent status would force liberal commentators (most of the time I count myself in this category) to confront the differences between substantive due process issues and commerce clause issues.  Personally, I am not willing to accept the proposition that either the federal or state governments could enact a law that, say, limited parents to having only one child.  I'm also not willing to accept the proposition that the federal or state governments can prohibit a grandchild from living with his grandmother, which is why Moore v. East Cleavland is my favorite substantive due process case.  (I hope that Judge Alito is asked about these fact patterns during his confirmation hearings.  If he can't find the rights reflected in these positions in the due process clause, as conservative commentators like to say, maybe he could try looking at the Ninth Amendment or the Privileges and Immunities Clause).  I recognize that these results require a normative interpretation of ambiguous constitutional text that as a practical matter may devolve into Constitutional law that is shaped by the policy preferences of the Justices of the Supreme Court.  Accepting this type of judging in the context of the ambiguous Due Process Clause or the Ninth Amendment, however, does not mean that judges should be able to impose their policy preferences in the face of Constitutional text that, like the Commerce Clause, is far more clear in both its plain and purposive meanings.  Combining superprecedent status for the Civil Rights laws with recognition that some of the Constitution's text isn't so indeterminate as to be devoid of meaning might, among other things, reduce the number of liberal commentators that seem to lose all sense of reason when confronted with a judicial nominee who actually tries to take the text of the Constitution seriously.

Ben Barros

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