Bryan Bowers and his business partner Mike Licata planned to build medical office space across from a new hospital in downtown Utica, New York.
The Oneida County Industrial Development Agency nixed that plan by agreeing to take the property so a competing business next door could use it for a parking lot — a land grab that a state appeals court approved last February.
The US Supreme Court invited such abuses with its 2005 ruling in Kelo v. City of New London, which blessed the use of eminent domain to promote economic development by transferring property from one private owner to another.
Bowers’ case offers the justices another chance to revisit that widely criticized decision, which endangered property rights by letting government officials reassign them to politically favored businesses.
The Institute for Justice, which represents Bowers, is asking the Supreme Court to clarify the limits of that license.
Alternatively, it says, the court should overturn Kelo, which was “wrong the day it was decided.”
The Fifth Amendment imposes two restrictions on government takings of private property: They must be accompanied by “just compensation,” and they must be for “public use.”
But in New York, the state appeals court noted, “what qualifies as a public purpose or public use is broadly defined as encompassing virtually any project that may confer upon the public a benefit, utility, or advantage.”
In this case, the court said, “the acquisition of the property will serve the public use of mitigating parking and traffic congestion.”
That sort of reasoning, Bowers argues, is suspect even under Kelo.
Writing for the majority in Kelo, Justice John Paul Stevens emphasized that the condemnation of homes in the Fort Trumbull neighborhood of New London, Conn., was based on “a ‘carefully considered’ development plan” that supposedly would “create in excess of 1,000 jobs,” “increase tax and other revenues,” and “revitalize an economically distressed city” (none of which actually happened).
In Bowers’ case, by contrast, OCIDA was not implementing a “development plan”; it was simply imposing its judgment that a parking lot was a better use for his property than the office building he planned to open.
Stevens said New London would not be “allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit.”
But he noted that the city adopted its plan without knowing exactly which new owners would benefit from it.
“It is, of course, difficult to accuse the government of having taken A‘s property to benefit the private interests of B when the identity of B was unknown,” Stevens wrote.
In Bowers’ case, by contrast, it is easy to accuse the government of doing precisely that, since the main beneficiary of its seizure, Central New York Cardiology, is a private business that stood to profit by restricting the supply of medical office space.
“Taking our property wasn’t for the public,” Bowers says. “It was to benefit our competitors.”
Dissenting in Kelo, Justice Sandra Day O’Connor warned that “all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded — i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public — in the process.”
That hazard could have been avoided, Justice Clarence Thomas said in a separate dissent, if the court had hewed to “the most natural reading” of “public use” — that “it allows the government to take property only if the government owns, or the public has the legal right to use, the property, as opposed to taking it for any public purpose or necessity whatsoever.”
In addition to Thomas, three other current members of the court — Neil Gorsuch, Samuel Alito, and Brett Kavanaugh — have indicated they favor curtailing Kelo or overturning it altogether.
Given the nakedly protectionist nature of the Utica land grab, Bowers’ case seems like a good opportunity to do so.
Jacob Sullum is a senior editor at Reason magazine.
Global property catastrophe reinsurance rates will fall 5% to 15% on Jan. 1 for books of businesses which have not suffered losses, reinsurance broker Guy Carpenter said on Monday, as the market becomes more competitive after years of rate rises.
Reinsurers insure the insurers, and have raised prices and excluded some business in recent years following increased losses from wars and natural catastrophes. However, reinsurers have become more willing to take on risk after enjoying strong profits, Guy Carpenter, a unit of Marsh McLennan said.
"Renewal outcomes at year-end reflect reinsurers' positive property experience over the last two years," Dean Klisura, president and CEO of Guy Carpenter, said in a statement.
However, insurance portfolios which have faced catastrophe losses in the United States, Europe and Canada will see unchanged rates, or rises of up to 30%, Guy Carpenter added.
After World War II, a major priority for U.S. policymakers was to push home ownership for as broad a swath of the population as possible. In many ways, the agenda was a success. Happy families living in fine homes all over the United States, one income from a stable job, and two cars became the mark of prosperity, and a point of advertising for the American experiment the world over.
Every TV show featured exactly this.
Two decades into the 21st century, that dream is broken, as most people cannot even think about home ownership even with two incomes. The latest trends show skyrocketing prices and, unlike 2008, this seems less like a bubble than pure inflation with little hope of falling prices. Existing owners, of course, do not want price declines in any case.
Already, the taxes and costs of insurance have grown equal to the mortgage payment itself, which means that in terms of overall expenditure, the sticker price might be only a quarter of what you will spend over 30 years, according to The Wall Street Journal.
Many people look at this situation and wonder what the point is. There are ways to use whatever liquid assets you have to earn money rather than spend it this way.
In the past few months, I’ve heard many suggestions for fixing this problem. None of them is promising.
Some make matters worse.
First, people suggest more Federal Reserve interventions. Keep in mind, however, that the Fed can control only one rate—that which is charged to member banks. That rate will influence others down the line within the yield curve structure. The influence is not always predictable. In fact, it can sometimes result in a steeper curve, presenting a bitter problem: lower short-term rates combined with higher rates. This result reflects expectations of the future.
This is precisely what is happening right now. The Fed keeps lowering the federal funds rate even as mortgage rates increase.
(Data: Federal Reserve Economic Data (FRED), St. Louis Fed; Chart: Jeffrey A. Tucker)
The other problem is that lower rates feed inflation and thus threaten to increase housing prices, insurance costs, and therefore also property taxes. Therefore, Fed intervention will not fix any existing problem and contributes to making the situation worse rather than better.
Second, people are suggesting restrictions on institutions buying with cash offers. This is designed to address what intuitively strikes everyone as unfair and unjust. You are negotiating on a house, lining up your borrowing, selling assets for a down payment, and out of nowhere some cash buyer comes along and snatches it away.
No question that this is happening, with the largest financial firms buying the asset that they believe to be the most lucrative on the market right now, which is housing. But how in the world would one restrict such purchases? Owners want to sell to the best buyer regardless. It seems strange to intervene in property rights in ways that would make that impossible.
It’s also not clear how that would affect home prices. Whether a home is purchased with cash or borrowed money does not affect housing prices overall. Such interventions would likely create unanticipated problems. For example, it would certainly reduce the number of rental units available and thus make the housing problem worse, not better.
Third, people are suggesting that the federal government make special mortgage rates available for borrowers of a certain sort, perhaps families with children or teachers or some other class. I’ve heard numbers such as 3 percent being thrown around. This is not a good idea. It would end up subsidizing the most risky borrowers and recreate the very conditions that led to the housing crisis of 2008. It would also increase demand for housing and apply upward rather than downward pressure on prices.
The same can be said of the idea of granting tax write-offs or outright subsidies for down payments. That would worsen the deficit and only drive up prices to the point of the subsidy itself.
Fourth, we hear talk of dramatically increasing the supply of housing in underdeveloped areas. Trump administration teams have floated the idea of freedom cities, for example, with huge development subsidies. Again, this amounts to yet another public expenditure that adds to the fiscal problem and does not address the real problem, which is that people want housing close to their places of work. It achieves nothing to build huge developments in places without enterprise infrastructure, as China has learned over several decades of boondoggles.
Fifth, people suggest public housing and outright price control, both truly terrible options. In the 1930s, there was a great deal of optimism about the idea of government-provided housing for everyone, but those dreams died by the 1970s. Government can neither build nor manage housing, and even existing units reveal the problem. Every major city has a blighted area filled with public housing that everyone despises. No one wants more of that in their area.
If none of these solutions is right, what can be done?
We need to fix the problem of inflation above all else, because that is what is driving insurance costs so high. Insurance is a pricing of risk, and the rising prices in every area of repair, including labor costs, has made it unaffordable in many locations. In fact, this is a major reason why cash purchases are so popular: You don’t have to pay for broad insurance coverage. Fixing inflation will require restraint on money printing. Nothing else gets to the heart of the problem.
Property taxes should be reduced or abolished, but that is a matter for states and localities, not the federal government. And many cities and states are faced with impossible fiscal cages: Lowering property taxes means less revenue for schooling and crime control, the result of which is to drive residents out rather than attract them. There is no easy solution to this, though state-level vouchers for private forms of schooling are promising. But there again, we have a solution that is several stages removed from the problem we are trying to address.
Regulations on development at the federal level have become a terrible cost that has inhibited building and expansion of the housing stock. These days, it is nearly impossible even for an individual to build without fitting the new home to green-energy-compliant standards, for example. All of this needs to go. If it were my choice, I would completely defund the Department of Housing and Urban Development. It has been a very long menace and serves no other function than to feed tax dollars to large developers—a classic example of a captured agency.
All of these solutions can help, but there is no magic answer to restoring the 1950s-era dream of universal housing ownership. It’s not even clear that it makes much sense anymore, as most young people prefer the flexibility of renting. They can find better uses for liquid funds than tying them up in property that carries huge liabilities in taxes, interest, and insurance.
Meanwhile, focusing reform efforts on regulatory costs, inflation, and schooling options could end up doing more to repair the housing problem than any direct interventions in the market as it currently functions.
Few would argue that New York City is mired in a housing crisis — as defined by high prices and low vacancies. There’s good evidence for that conclusion. The most recent federal New York City Housing and Vacancy Survey reported a vacancy rate of just 1.4%, “a stark contrast to the 4.54 rate in 2021”. Over the same period, median monthly rent rose from $1,500 to $,1641 — and that includes everything from luxury high-rises to public housing.
These sorts of figures drive an ongoing search for solutions to the problem — including, most recently, Mayor Adams’ Dec. 12 announcement of a new city Charter Revision Commission to consider, as he put it, how to “deliver as much affordable housing to working-class New Yorkers and their families.”
A thorough examination of New York’s housing policy — both at the city and state level — could include a growing body of economic research regarding rent regulation, which affects the 960,000 “rent-stabilized” apartments whose price is set not by the market but by mayoral appointees. Rent stabilization may provide a good deal for those lucky to benefit from it. But as economists from across the political spectrum increasingly concur, it ultimately harms the city’s housing market for many.
Research into the impact of rent control has a long history. Back in 1997, the Harvard economists Edward Glaeser and Erzo Luttner described the “misallocation of housing” that rent controls creates. That was their term for a mismatch between what renters might need and what they choose because the price is cheap — such as folks who might only need a small apartment, but live in a big one because they can afford it.
More recently, in 2018, the liberal Brookings Institution cited the same problem: “Once a tenant has secured a rent-controlled apartment, he may not choose to move in the future and give up his rent control, even if his housing needs change.” This “misallocation,” Brookings continued, is not without major consequence, most notably “empty-nest households living in family-sized apartments and young families crammed into small studios.”
Last year’s Census analysis of New York housing data suggests that’s exactly what is happening here — as young people crammed into subdivided studios with multiple roommates know well. The difference between rent-regulated and market-rate housing in the Big Apple is stark: Only 94,000 (24%) rent-stabilized tenants had moved (either in or out) in the past year, compared to 221,000 (57%) of market-rate tenants. Rent-stabilized tenants are more likely to stay put — forming a kind of housing blockade for newcomers or households with kids who need more bedrooms. As per the Census, the long-term rent-stabilized tenants were not necessarily low-income: 30% reported incomes above $100,000 a year—in keeping with notorious stories of the actress Mia Farrow and Congressman Charles Rangel enjoying rent-stabilized units. (Farrow inherited hers through her family, as the law permits.)
Decades ago Harvard economistsEdward Glaeser spoke about the “misallocation” of housing created by rent regulations.AFP via Getty Images
Rent controls, notes the Journal of Housing Economics, lead to a redistribution of income — which can include tenants who become better off at the expense of landlords. As Kenny Burgos, the former Bronx Assemblyman who now heads the New York Apartment Association (NYAA) — which represents the owners of some 400,000 regulated units — notes, the current system “inhibits the natural flow and movement of a normal housing market.”
There can be ill-effects on housing quality too, economists are finding, in ways that harm rent-stabilized tenants themselves. In February, 2024, ceonomists at the St. Louis Federal Reserve Bank looked at the physical effects of rent controls. They concluded that “while rent-control policies do restrict rents at more affordable rates, they can also lead to a reduction of rental stock and maintenance, thereby exacerbating affordable housing shortages.” Similarly, new research in the Journal of Housing Economics from March 2024 concluded that “even tenants in the controlled dwellings can suffer from rent control, as maintenance of such dwellings can be reduced, leading to a decreased housing quality.”
Actor Mia Farrow is one of the many high-profile New Yorkers who famously live in a rent-regulated home.Christopher Peterson / SplashNews.com
Once again, the most recent findings from New York reveal these very same market conditions. Its review of “reported housing problems” found that there are more tenant complaints about rodents, leaks, cracks and heating in rent-stabilized units than in the non-regulated. The numbers are striking: 376,000 reports of rodents in regulated units (39% of all), compared to 240,000 in market-rate units (22% of all).
The repair needs of older, rent-regulated buildings can even lead to owners simply abandoning them, as Maggie Brunn, president of Brooklyn’s A&E Real Estate, has said. “When an apartment has been lived in for 20 or 30 years, those limits [on rent increases] don’t even come close to the actual costs of rewiring, plumbing and the basic improvements you’d need to rent an apartment that a family would be proud to call home. That means more and more of those desperately needed low-rent apartments are sitting vacant.” That problem has been exacerbated by 2019 New York state legislation which sharply limits rent increases even for rising costs such major capital repairs.
“The system,” says Burgos, “is not working either for owners or tenants.” But how could this deeply established system — existing, in one form or other, for more than 50 years — actually be adjusted?
Buenos Aires’ housing stock became more affordable as a result.jkraft5 – stock.adobe.com
The experience of another major world city, Buenos Aires, Argentina, suggests doing so might not bring on the chaos and price-gouging tenant advocates would suggest. Late last year, libertarian-leaning Argentine President Javier Milei simply “scrapped” rent controls, as reported in The Wall Street Journal.The effect, it reported, is that “the Argentine capital is undergoing a rental-market boom. Landlords are rushing to put their properties back on the market, with Buenos Aires rental supplies increasing by over 170%. While rents are still up in nominal terms, many renters are securing better (or at least fairer) deals, with a 40% decline in the real price of rental properties when adjusted for inflation.”
Simply scrapping rent control like in Buenos Aires would be far more difficult in regulation-laden New York, of course. But, as Burgos notes, even permitting the de-regulation of vacant units could lead to significant improvement — without affecting current tenants. What he calls “vacancy control” stands in the way of the rent increases owners need to invest simply to comply with building codes and lead abatement laws — rather than leaving units vacant. The city’s Charter Commission could help by reducing property taxes or water rates for regulated units.
Luxury apartments such as these are generally exempt from rent regulations, which furthers the city’s housing imbalance.Getty Images
But even a rapid deregulation might not be that consequential in much of the city. Census survey reports that the typical market-rate rent ($2,000) is not fantastically higher than the typical regulated rent ($1,500). In The Bronx, the typical rent for all units — including non-rent stabilized — is just $1,200. Market rents, in other words, can be close to regulated rents in lower-cost neighborhoods. Combined with a wave of vacant units coming back on the market and new investments, New York might follow (or at least tiptoe) in the footsteps of Buenos Aires.
Such a move would not only benefit renters, it would save the city the expenses associated with an agency most metropolises don’t possess, the Rent Stabilization Guidelines Board, whose staff sets rent increase recommendations and monitors compliance. What’s more, property owners — including mom-and-pop landlords who own just a few buildings — would no longer have to incur the red tape headaches of registering their buildings every year — and either mailing or hand-delivering the required forms and fees, to be paid, for each unit, both to the state ($13) and the city ($20). Failing to do so means a $500 fine — per apartment.
Efforts to roll back rent regulations were placed before the Supreme Court recently.AFP via Getty Images
There have been attempts, led by the owners’ lobby, the Rent Stabilization Association (now part of the New York Housing Association), to upend the price control regime through the courts — without success. Most recently, the US Supreme Court declined a challenge based, in part, on the argument that rent regulation was effectively a legal “taking of an owner’s property, without compensation.”
The fact that property owners sought to overturn rent regulation through the courts makes clear how difficult it is to change the system legislatively. But city and state officials should take notice of the changing leadership in Washington. In the first Trump Administration, a White House Executive Council singled out rent control for criticism, writing that it can lead to “restricted supply [which] ends up hurting some of the lower-income renters they are intended to help.”
Trump may take a less favorable view of rent rent regulations.KEN BLEVINS/WILMINGTON STAR-NEWS / USA TODAY NETWORK via Imagn Images
New York City’s budget relies on Washington for $100 billion in revenue, including from the Department of Housing and Urban Development — which could attach strings to that aid, including revisions to rent regulation or calling for it to end. Once back in office, Donald Trump — as he often does — could prove a wild card and deregulate New York City’s housing market.
Howard Husock is a senior fellow in domestic policy at the American Enterprise Institute.
