Banking and Finance

In June the Supreme Court ruled that private developers could exercise "eminent domain" over private property if a local municipality backed the project. The ruling was received with a great uproar as citizens felt their property rights were being taken away by the Federal government. Surprisingly one of the most high profile opponents was the National Association of Home Builders, which stated that it does not endorse the use of eminent domain to promote economic development. Now banking and lending company, BB&T Corp, has stated that they will not lend money to developers who plan to use land seized by the practice. Unfortunately the socially responsible actions of a single bank are unlikely to spark a revolution.

According to the article, eminent domain has been used for years by governments to seize land for public use. In the past it was used to build airports, roads and schools. However, some see this latest development as a corruption of basic principals of property rights. Still, 38 states have enacted laws that would prohibit the use of eminent domain for private projects. Further, private projects are barred from federal funding for two years if they use seized property.

While it's nice to see a lending institution step up and make a stand, I seriously doubt it will stop private developers from seizing land. The simple fact is that undeveloped land is growing scarce in urban areas. It could be difficult for a developer to convince 20-30 home owners to pack up and sell their land so they can put in a brand new mega mall. Chances are at least one of them will either hold out for more money or flat refuse the offer. At this point the developer is stuck, and without invoking eminent domain, the project will likely be scraped.

The point is, there is too much money to be made from major construction projects. Municipalities get the increased tax revenue and developers profit from the building and selling of brand new complexes. With city budgets stretched, it's quite easy for a developer to make a town an offer they can't refuse. In the meantime the developer makes a healthy profit, while the original property owners get a token payment for their land.