Just enough

Columbia Law Review

Volumn 113, Issue 8, 2013, Pages 109-122

  Anne Fennell, Lee ^a  

^a UNIVERSITY OF CHICAGO LAW SCHOOL   (United States)

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EID: 84883400060     PISSN: 00101958     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (62)

1. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
2. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
3. See, e.g., United States v. 564.54 Acres of Land, 441 U.S. 506, 511 (1979).
4. See, e.g., Yun-chien Chang, An Empirical Study of Court-Adjudicated Takings Compensation in New York City: 1990-2003, 8 J. Empirical Legal Stud. 384, 400 (2011) (comparing results of hedonic regression models with court-adjudicated compensation in New York City eminent domain cases and finding, "Overall, the claims, offers, and awards tend to be higher than the estimated fair market value. ").
5. Nicole Stelle Garnett, The Neglected Political Economy of Eminent Domain, 105 Mich. L. Rev. 101, 121-26 (2006) (detailing federal and state relocation assistance statutes that entitle condemnees to amounts significantly above fair market value)
6. Nicole Stelle Garnett, The Neglected Political Economy of Eminent Domain, 105 Mich. L. Rev. 101, 121-26 (2006) (detailing federal and state relocation assistance statutes that entitle condemnees to amounts significantly above fair market value)
7. See, e.g., Richard A. Posner, Economic Analysis of Law 74 (8th ed. 2011) ("[J]ust compensation in the legal sense is not full compensation in the economic sense. ").
8. The concerns associated with undercompensation in eminent domain sound in both fairness and efficiency. Fairness arguments center on the fear that condemnees will be forced to bear disproportionate burdens. Efficiency arguments focus on the fear that the government will take too much property (or the wrong property) if it is not required to fully compensate for what it takes. For an overview (and some counterarguments), see, e.g., Lee Anne Fennell, Taking Eminent Domain Apart, 2004 Mich. St. L. Rev. 957, 961-62 & nn.15-16 (2004) [hereinafter Fennell, Taking].
9. The concerns associated with undercompensation in eminent domain sound in both fairness and efficiency. Fairness arguments center on the fear that condemnees will be forced to bear disproportionate burdens. Efficiency arguments focus on the fear that the government will take too much property (or the wrong property) if it is not required to fully compensate for what it takes. For an overview (and some counterarguments), see, e.g., Lee Anne Fennell, Taking Eminent Domain Apart, 2004 Mich. St. L. Rev. 957, 961-62 & nn.15-16 (2004) [hereinafter Fennell, Taking].
10. James E. Krier & Christopher Serkin, Public Ruses, 2004 Mich. St. L. Rev. 859, 866 (2004) (noting "consumer surplus" that residents may have in their properties)
11. Thomas W. Merrill, The Economics of Public Use, 72 Cornell L. Rev. 61, 83 (1986) (observing owners may place "subjective premium[s]" on their properties above fair market value)
12. Katrina Miriam Wyman, The Measure of Just Compensation, 41 U.C. Davis L. Rev. 239, 260 (2007) (discussing how eminent domain deprives takees of opportunities to bargain for shares of surplus from economic development projects).
13. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
14. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
15. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
16. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
17. A reservation price is the smallest amount an owner would accept to sell an item, or the largest amount a buyer would pay to purchase it. See, e.g., Russell Korobkin, A Positive Theory of Legal Negotiation, 88 Geo. L.J. 1789, 1792 (2000). A seller's reservation price for a given property reflects the sum total of what the property is worth to her, and hence might be equated with her subjective valuation of the property, subject to two clarifications. First, her reservation price will tend to align with FMV even if she herself has no affection or use for the property, as long as she will have outside opportunities to sell at that price to other buyers. Second, as discussed in the text, only a subset of the things that she subjectively values about the property will fail to correlate with what the market as a whole values about the property.
18. Thus, the fact that an owner might subjectively feel aesthetic delight when observing her own granite countertops does not keep this element of value from being reflected in FMV as long as enough would-be buyers feel a similar sense of delight when exposed to granite countertops. By contrast, the happy feeling an owner gets when observing his buckling do-it-yourself countertops covered in an unpopular color of linoleum is unlikely to be (positively) correlated with anyone else's feelings toward those countertops.
19. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
20. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
21. See, e.g., Robert C. Ellickson, Alternatives to Zoning: Covenants, Nuisance Rules, and Fines as Land Use Controls, 40 U. Chi. L. Rev. 681, 736 (1973) (observing "long-occupied singlefamily homes in stable residential areas tend to attract increasing subjective valuations as the tenure of ownership increases"). Causation likely goes in both directions, with deepening attachments tending to lengthen the stay, even as longer stays lead (on average) to deeper attachments.
22. Downward shifts in subjective valuation need not be associated with negative life events. For example, a commuting location that is ideal for a job in downtown Cleveland will be a very poor commuting location for a new job in Chicago. Likewise, a trendy but edgy neighborhood may lose some of its appeal after one has children. The fact that fluctuations in subjective valuation can go in both directions explains why owners tend to place a high value on holding the "possessory option" to stay or leave at a time of their own choosing. See, e.g., Lee Anne Fennell, Possession Puzzles, in 11-1 Powell on Real Property WFL10-1, WFL10-4 to WFL10-8 (Michael Allan Wolf ed., 2010).
23. Census data on reasons for moves indicate that nearly half of all moves in the United States occur for either job-related reasons or family-related reasons. U.S. Census Bureau, Table 25: Reason for Move, by Sex, Age, Race and Hispanic Origin, Relationship to Householder, Educational Attainment, Marital Status, Nativity, Tenure, Poverty Status, and Type of Move (Collapsed Categories): 2011 to 2012 (2012), http://www.census.gov/hhes/migration/files/cps/cps 2012/tab25-1.xls (on file with the Columbia Law Review). Most of the balance are due to "housing-related reasons." Both push and pull factors are likely to feature in each of these categories.
24. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
25. The example in the text implicitly assumes that the demand for owner-occupied housing is not completely price-inelastic, and that a would-be buyer could walk away (perhaps to double up with family, perhaps to rent, perhaps to obtain housing in a different housing market) rather than meet the reservation price of a high valuer.
26. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
27. Of course, if we add another buyer or two to the story, our erstwhile nonseller becomes a seller.
28. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
29. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
30. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
31. See William A. Fischel, Political Structure and Exclusionary Zoning: Are Small Suburbs the Big Problem?, in Fiscal Decentralization and Land Policies 111, 114 (Gregory K. Ingram & Yu-Hung Hong eds., 2008) (using measure of housing supply elasticity to measure regulatory restrictiveness).
32. See generally Edward L. Glaeser et al., Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices, 48 J.L. & Econ. 331 (2005) (empirically investigating gap between construction costs and condominium prices in Manhattan).
33. See, e.g., Margaret Jane Radin, Residential Rent Control, 15 Phil. & Pub. Affairs 350, 372 (1986) ("Common companions of rent control are condominium-conversion control and demolition control. ").
34. See Richard K. Green, Stephen Malpezzi & Stephen K. Mayo, Metropolitan-Specific Estimates of the Price Elasticity of Supply of Housing, and Their Sources, 95 Am. Econ. Rev. 334, 334 (2005).
35. For work on a similar phenomenon, see generally Stephen Day Cauley & Andrey D. Pavlov, Rational Delays: The Case of Real Estate, 24 J. Real Est. Fin. & Econ. 143 (2002) (examining rationality of holding onto real estate in down markets for option value associated with potential market recovery).
36. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
37. Nicole Stelle Garnett, The Neglected Political Economy of Eminent Domain, 105 Mich. L. Rev. 101, 121-26 (2006) (detailing federal and state relocation assistance statutes that entitle condemnees to amounts significantly above fair market value)
38. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
39. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
40. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
41. Here too, the lost chance to bargain may leave some owners better off. For example, an owner might have miscalculated the amount of surplus available from a project and insisted on so much that she caused the project to fail, even though the FMV payout would have met her reservation price.
42. It is an empirical question how disruptive displacement from the home is, and thus how significant is an owner's right to continued possession. See Stephanie M. Stern, Residential Protectionism and the Legal Mythology of Home, 107 Mich. L. Rev. 1093, 1109-19 (2009) (critiquing assumption that displacement visits serious harms on those who are displaced).
43. Henry E. Smith, Property and Property Rules, 79 N.Y.U. L. Rev. 1719, 1728, 1754-55 (2004).
44. Larissa Katz, Spite and Extortion: A Jurisdictional Principle of Abuse of Property Right, 122 Yale L.J. 1444, 1480-82 (2013) (discussing extent of, and limits on, delegation to owners).
45. Downward shifts in subjective valuation need not be associated with negative life events. For example, a commuting location that is ideal for a job in downtown Cleveland will be a very poor commuting location for a new job in Chicago. Likewise, a trendy but edgy neighborhood may lose some of its appeal after one has children. The fact that fluctuations in subjective valuation can go in both directions explains why owners tend to place a high value on holding the "possessory option" to stay or leave at a time of their own choosing. See, e.g., Lee Anne Fennell, Possession Puzzles, in 11-1 Powell on Real Property WFL10-1, WFL10-4 to WFL10-8 (Michael Allan Wolf ed., 2010).
46. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
47. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
48. Richard A. Epstein, Takings: Private Property and the Power of Eminent Domain 195-215 (1985).
49. Richard A. Epstein, Takings: Private Property and the Power of Eminent Domain 195-215 (1985).
50. See, e.g., Gregory S. Alexander, The Social-Obligation Norm in American Property Law, 94 Cornell L. Rev. (Special Issue) 745, 775-79 (2009) (examining obligations of ownership in context of eminent domain).
51. Lynn E. Blais, Takings, Statutes, and the Common Law: Considering Inherent Limitations on Title, 70 S. Cal. L. Rev. 1, 42 (1996) (contrasting ex ante vision of reciprocity of advantage with Epstein's view).
52. See, e.g., Gregory S. Alexander, The Social-Obligation Norm in American Property Law, 94 Cornell L. Rev. (Special Issue) 745, 775-79 (2009) (examining obligations of ownership in context of eminent domain).
53. Larissa Katz, Spite and Extortion: A Jurisdictional Principle of Abuse of Property Right, 122 Yale L.J. 1444, 1480-82 (2013) (discussing extent of, and limits on, delegation to owners).
54. Of course, owners are only able to sell at a time of their own choosing if they can find willing buyers. In some cases, the government's role as a potential buyer could expand rather than contract the choice set available to owners-as where the exercise of eminent domain happens to coincide with the owner's own preferred time of sale.
55. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
56. Rachel D. Godsil & David V. Simunovich, Protecting Status: The Mortgage Crisis, Eminent Domain, and the Ethic of Homeownership, 77 Fordham L. Rev. 949, 978 (2008) ("[T]he application of the [percentage premium plan] exacerbates the wealth disparity at taxpayer expense. ").
57. Jeffrey Evans Stake, Just (and Efficient?) Compensation for Governmental Expropriations, in Law, Mind, and Brain 299, 314 (Michael Freeman & Oliver Goodenough eds., 2009) (observing "a simple multiplier for duration of possession might be unfair" because it would treat differently losses of poor and rich owners).
58. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
59. Jeffrey Evans Stake, Just (and Efficient?) Compensation for Governmental Expropriations, in Law, Mind, and Brain 299, 314 (Michael Freeman & Oliver Goodenough eds., 2009) (observing "a simple multiplier for duration of possession might be unfair" because it would treat differently losses of poor and rich owners).
60. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
61. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).
62. See Brian Angelo Lee, Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593, 613 n.71 (2013) (suggesting sentimental value is likely to be greater, on average, for residential owners than for business owners).