The recent ruling by the Supreme Court of the United States regarding private property and a governments right to confiscate it under the principal of "Eminent Domain" has many real estate owners and investors fearing for the future of private property ownership in America. In case you are not very familiar with what has happened as a result of this court ruling, let me quickly cover the high points.

In New London, Connecticut, the local city government was approached by a large private corporation, who wanted a certain piece of waterfront land upon which to build a new commercial facility. Since New London is economically depressed and needs more jobs and more tax revenue for the city, it was decided by the local government that this new project would be of "public benefit", and therefore it should proceed. Only one problem, a number of private houses were already located on this waterfront land. All but 6 homeowners agreed to the terms of a buyout that would take their houses and demolish them to make way for the new construction.

The remaining 6 owners have fought a long, expensive legal battle just for the right to stay in their homes.

The years-long court battle finally ended with the supreme court ruling in June of 2005. It was decided by the high court that governments have the authority to confiscate private property, including businesses, for any "public purpose", even if the "public purpose" is actually a private, for profit project. Through this ruling the court has broadened the definition of "public benefit" to include any project that can increase tax revenues. This has caused an outcry in the real estate community, over the definition of "Eminent Domain" and it's original intent and purpose.

But what is "Eminent Domain"? and How is it supposed to be used? Here is how my 10 year old real estate agents licensing manual defines "Eminent Domain" (also known as "Police Power"):

"The right of government to take ownership of privately held real estate regardless of the owners wishes. Land for schools, freeways, streets, parks, urban renewal, public housing, and other social and public purposes is obtained this way. Quasi-public organizations, such as utility companies or railroads are also permitted to obtain land needed for power lines, pipes and tracks..."

Note the reference in the above paragraph to urban renewal and public housing. Prior to the 1950's, even this purpose was not considered to be a "public benefit". Up until a 1950's supreme court ruling that allowed governments to take land from so called "slum lords" in the inner cites for urban renewal projects, only roads, parks, freeways, and other truly public uses were considered eligible for the confiscation of private property under the concept of Eminent Domain.

Now, we have another court making making the police powers of the state even broader. But is there really an issue here? Are we all going to lose our house or commercial property because of this ruling?

I think the real problem here is the slow erosion of our private property rights. Like water running through the grand canyon or wind sweeping across monument valley, everything appears to be normal and unchanging. But as with the erosion caused by rain and wind, over a period of years our property rights are slowly being eaten away, and replaced by a new mindset that says the government knows best what to do with all property located within its jurisdiction.

I don't expect anything sudden or dramatic to happen, but make no mistake about it, the erosion of your right to own property will continue. My biggest concern is that in another generation people will begin to lose the concept of private property ownership, and develop a mindset that the government knows best how to control everything.

Communist countries already live under the principal that the state knows best. In the old USSR, under socialism, people were assigned a place to live and a job to work. It was "efficient use of the states resources". Certainly communist China would agree that taking property for the good of all is efficient and makes planning and growth issues easier to deal with. After all, in China, the state has determined that it is in the "publics best interest" to allow each family only one or two children. If you exceed that number, well, it's in the public interest to exterminate those additional babies. So today in China, your children can be confiscated too. But not to worry, it is all in the publics best interest.

There is no power more dangerous to the concept of individual rights and private property ownership than a government in need of money. Add to that the growing belief that people should give up individual rights for the good of society as a whole. Heck, I can see how the city of Atlanta could find it useful and in the public interest to confiscate all the private property in the city and redistribute it so that all the homeless people can have a place to live. We can end homelessness right now if all of us investors who own inner city properties will just give them up so that they can be used to help those who are down on their luck. That would help us all right?

This probably won't happen next week, but give it 10 or 20 years. Once this kind of thinking takes hold and more local governments get into dire financial need, individual property owners will become the "bad guys" who are impeding progress and hindering the public good. Today it is the 6 homeowners in New London, Connecticut, tomorrow it might just be you or your children. Then, it will make "perfect sense" to eliminate private property ownership "for the public good".

Donna Robinson

Donna Robinson is a real estate investor, author and consultant in Atlanta, GA. Her experience in Real Estate includes starting as a licensed sales agent in 1996, then growing into a full time investor buying and selling houses both retail and wholesale. As a wholesaler, Donna has participated in well over two million dollars worth of SFR rehab and wholesale projects, owned or controlled rental properties, and commercial real estate, while risking none of her own cash or credit.

She is also an expert in RE market analysis, as well as creative financing strategies. She teaches on buying and financing strategies, how they work and how they affect the outcome of a deal. Over the past 10 years, she has analyzed more than 1000 real estate deals.

Her honest presentation of the real estate investing business, including both benefits and risks is respected for it's candid, truthful approach. She is considered to be a reputable, reliable source for the facts behind the sometimes difficult and challenging aspects of real estate investing. She is also the founder and "Dean" of Real Estate Investor University, a new web based "school" where investors can study basic and advanced real estate investing concepts. REIU will officially open in April of 2006.