by Matt Miller

April 17, 2018

True to its name, the Pleasant Ridge neighborhood of Charlestown, Indiana, sits at the top of a hill just west of the Ohio River. Like many older neighborhoods, it was built on one of the more desirable tracts of land in town. Also like many older neighborhoods, it is full of modest homes, most of which are in good repair, and a few of which are not.

People like living in Pleasant Ridge, where a low cost of living allows people from all walks of life to live their American Dream. Unfortunately for its residents, the neighborhood’s prime location has made it a target for a developer who would like to kick out the current residents, raze all the homes, and build a new neighborhood of upper-middle class houses.

In 2006, the Indiana legislature reformed its eminent domain laws to prevent this kind of thing from happening. Responding to the 2005 Supreme Court case of Kelo v. New London—which approved of redevelopment as a justifiable use of eminent domain—Indiana made it largely illegal for cities to take property from someone, using eminent domain, and give that property to someone else who promised to build something more expensive in its place.

For over a decade, these reforms have worked as intended by protecting the citizens of Indiana from Kelo-style eminent domain abuse. But, like all laws, they were not airtight. The city of Charlestown and its chosen developer believe they have found a way around what the legislature did, and they have already acquired over 150 homes in Pleasant Ridge in their effort to demolish the existing neighborhood.

Here’s how the scheme works: When a home is targeted for acquisition, the city sends its building inspector to the property. Would your house contain violations if a government bureaucrat went over it with a fine-toothed comb? Almost certainly. Mine would. Anyone’s would. Knowing this, the city’s inspector is inevitably able to find numerous violations at every property. These violations then turn into massive fines—sometimes adding up to thousands of dollars per day—that quickly accumulate, even if the homeowner attempts to immediately remediate the “problems.”

Confronted with massive fines for minor violations, homeowners are then given a Hobson’s choice by the city: Pay the fines (which nobody can afford to do), or sell your home to a developer—who happens to be offering only $10,000.

This “choice” is what makes what is happening in Pleasant Ridge worse than what happened in Kelo v. New London. When traditional eminent domain is used to take homes, the government must offer fair-market value. Your home might be being taken and given to a developer, but you are ultimately compensated for the loss (at least monetarily). By contrast, in Charlestown, you lose your home and are paid only $10,000.

This is flatly contrary to the Indiana legislature’s decision, in enacting post-Kelo reforms, to strengthen property rights and curb eminent domain abuse. If allowed to proceed, Charlestown’s scheme will become the model for cities wishing to circumvent eminent domain reforms in the future. Property owners will then be worse off than if cities were required to use eminent domain to take their homes. This cannot have been the intention of the Indiana legislature when it reformed the state’s laws in 2006. Charlestown’s attempt to exploit a perceived loophole in the law should not be allowed to stand.

Fortunately, the homeowners in Charlestown are being represented by the Institute for Justice—the same law firm that litigated Kelo over a decade ago. The homeowners secured an initial victory in the trial court, which the city is now appealing. The Goldwater Institute filed an amicus brief in the Indiana Court of Appeals supporting the homeowners. In it, the Institute urges the Court to affirm the trial court’s decision and stop Charlestown’s plan to destroy Pleasant Ridge. Oral argument on the appeal should take place this summer, with a decision to follow soon thereafter.

Matt Miller is a senior attorney at the Goldwater Institute.