I. Strengthening Property Rights Protection

America's Founding Fathers recognized the essential link between property rights and individual liberty when they drafted the Constitution of the United States and incorporated numerous measures intended to enshrine the protection of those rights. Michigan's constitution likewise provides for a considerable degree of property rights protection. However, court interpretations and various laws and regulations have undermined these all-important rights. The following recommendations will help to rectify the current deplorable situation and make Michigan a leader in citizens' rights to own and use their property.

1. Restrict governmental "takings" of private property.

Both the U.S. and Michigan constitutions call for "just compensation" when private property is taken by government for public use. But court interpretations of various laws and regulations have seriously undermined this principle. Property owners are usually awarded compensation by the courts only if the government prohibits all economically viable use of the entire parcel of property. Furthermore, the standard for what constitutes "public use" has been significantly weakened to allow the taking of private property for economic development.

The systematic violation of property rights must be halted by requiring fair compensation whenever the value of private property is diminished in whole or in part by governmental action. Takings must further be strictly limited to true public uses. In a study entitled "Reforming the Law of Takings in Michigan," the Mackinac Center for Public Policy proposed specific actions to achieve these objectives through executive order, statute, or constitutional amendment.

For further information, please see www.mackinac.org/11.

2. Require a property rights impact assessment for all major regulations.

An executive order issued by Gov. John Engler in 1995 requires new regulations to undergo cost-benefit analysis. This forces regulators to more carefully consider the rationality of proposed rules. The impact of regulation on private property should likewise be analyzed to ensure that government actions do not constitute an unwarranted taking of private property.

3. Limit state land holdings.

Some 20 percent of Michigan's total land area-or about 8.1 million acres-is now "owned" and managed by federal, state, and local governments, and the amount is growing. The continued acquisition of land strains government's abilities to properly maintain public property while also stifling the growth of Michigan's private recreation and natural resources industries. This year alone, for example, officials overseeing the Natural Resources Trust Fund have targeted land acquisitions and other projects totaling $37 million. This ongoing land grab artificially inflates property prices beyond the means of many private buyers, and few entrepreneurs can compete against state-subsidized recreation facilities.

To limit the growth of government land holdings, the Legislature should require that new land acquisitions by the Departments of Natural Resources, Management and Budget and Transportation be offset by the sale of other publicly held property. A policy of "no net loss of private property" would help to ensure that state government prioritizes its purchases and provides better stewardship of public lands.

4. Reform asset forfeiture laws.

In a single recent year in Michigan, law enforcement agents applied so-called asset forfeiture laws in nearly 10,000 cases to seize more than $14 million in private property, including homes, cars, and cash. In many instances, no charges were ever filed against the property owners, and no finding of guilt was ever determined in a court of law. In civil forfeiture cases, law enforcement officials need do little more than meet a low threshold of evidence indicating that the property in question was involved in a crime. The actual owner of the property may not even be aware of the alleged crime before the government seizes his property. Most police agencies profit from at least some of the forfeiture proceeds, raising conflict-of-interest concerns.

Congressman John Conyers notes that forfeiture law is intended to empower police to confiscate the property of major lawbreakers, but in actual fact it "mostly ensnares the modest homes, cars, and hard-earned cash of ordinary, law-abiding people." He has secured approval for some changes in federal forfeiture law, but more needs to be done.

Lawmakers must reform both state and federal forfeiture laws with three objectives in mind:

  • End the twin practices of allowing law enforcement agencies to profit from the sale of the assets they seize and paying informants to help build forfeiture cases;

  • Require government to prove that property is directly connected to illegal activity before it can be seized (and the amount of property seized must be proportionate to the crime committed by its owner);

  • Strengthen language in forfeiture statutes to ensure that property owners who have not participated in, or acquiesced to, a crime committed with their property are not punished by forfeiture.

Other important recommendations for reform of asset forfeiture laws are contained in the Mackinac Center for Public Policy study, Reforming Property Forfeiture Laws to Protect Citizens' Rights.

For further information, please see www.mackinac.org/792.

5. Reform eminent domain.

Starting in the 1950s, courts have given legislatures carte blanche to expand beyond any reasonable limits the scope of eminent domain property takings. Our Founding Fathers made provisions for condemning property for limited public use, which was understood to mean things like roads and bridges. But new laws have gradually expanded "public use" to mean "public purpose."

Sadly, Michigan has been a leader in this erosion of the right to own property, the 1981 Poletown Neighborhood Council v. City of Detroit case being a milestone. Such court decisions have opened the door for abuse, corruption, and the destruction of property rights. The potential for politically connected developers and self-serving politicians to abuse the process is almost unlimited. And politicians are getting bolder. Earlier this year the Michigan Legislature passed HB 4028, which explicitly authorizes municipalities to transfer to a developer property declared "blighted" under highly subjective definitions. In 1999, former Detroit Mayor Dennis Archer elicited howls of protest when he used eminent domain to benefit casino operators.

"Property owners are protected, because they receive fair market value," say defenders of eminent domain. But they are not protected, and here's why: Imagine an owner has held on to his Detroit property near the river for 30 years, hoping that some day its value would rise. Now this potential is being recognized by others, to the point where developers are weighing options. When one of these makes a low-ball offer, the owner wisely refuses to sell. But if a developer has a cozy relationship with city officials, he can use eminent domain laws to avoid the expense of voluntary market transactions. He gets the city to condemn the property on the basis of the "public interest" in a development, and to transfer it to himself. The owner is forced to sell for an amount based on past sales of comparable property, which ignores the turnaround value. This after he has hung on and paid high property taxes for 30 years.

The solution is to return the law to the traditional definition of "public use" in eminent domain cases, ending the unfair practice of taking property from one private citizen for the profit of another. Regardless of the purpose of the taking, business property owners should be compensated based on the value of the property's current location as well as local "good will" and other intangibles. Current law requires compensation for the real property value only.

For further information, please see www.mackinac.org/4046.

6. Revise historic preservation laws.

In 1970, the Michigan Legislature passed Public Act 169, a law that permits local governments to regulate changes to property in designated "historic districts." Some municipalities subsequently created historic district commissions with sweeping powers to restrict what types of changes property owners can make to their homes or businesses.

At a city council meeting in Midland, several historic district residents chronicled how costly, time-consuming, and intimidating it was to apply for a "Certificate of Appropriateness" from the historic district commission (HDC) for home improvements. The HDC is not obligated to advise or assist property owners, and makes no attempt to do so. The burden is on the owner to prove that any proposed improvement is historically accurate, even if no historic evidence exists. Decisions by the commission are often perceived as arbitrary, arrogant, petty, and even vindictive. People who were once amicable neighbors spy on one another, reporting presumed violations to the HDC. Similar experiences are occurring in other parts of Michigan as well. After Owosso created a historic district commission by ordinance, for example, citizens petitioned for a public vote on the issue. The ordinance was subsequently defeated by a 70-percent margin.

The best defense against erosion of historic value is to convince property owners that it is in their best interests to preserve the historic significance of their homes. This does not require the force of government.

The beautiful city of Marshall in south-central Michigan is proof that preservation is possible without government intervention. Marshall's famous historic district is the product of voluntary cooperation among property owners, many of whom rejected a recent attempt to impose a commission-based district under PA 169. It's time for the Legislature to revisit the 1970 law to make the preservation of historic private property a voluntary, educational project rather than a political, coercive one.

For further information, please see www.mackinac.org/4091 and www.mackinac.org/pubs/comments/3861.