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One of the most important real estate cases of modern history, Kelo v.City of New London tested the limits of the government's right to condemn private property for public use, and concluded with the United States Supreme Court granting wide latitude to local government.

The issue involved a desire by the city of New London, Connecticut, to condemn 90 acres of private property and offer it to a developer as part of a larger urban revitalization plan. Historically, eminent domain has been used to build roads, schools, and public buildings. In the Kelo case, the overall development plans called for a resort hotel and conference center, retail space, residences, and a new state park.

The case finally ended up in the United States Supreme Court. On June 23, 2005, Justice Stephens wrote the majority opinion, finding in favor of the city of New London. Justice Stephens said that local governments should be given wide latitude in local condemnation cases. “The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue.” Under the particular facts of the Kelo case, the condemnation was for a permissible public purpose and not a private purpose.

There have been two types of backlash to the Kelo decision.

Many local governments immediately passed laws prohibiting the use of eminent domain for private development. The Supreme Court decision left open the likelihood that such laws would be constitutional and, in fact, practically invited states to pass new laws.

Small towns across America began plans to condemn undeveloped property owned by Wal- Mart within their borders. City leaders and citizens claimed it would be for the public good, because a Wal-Mart store where planned would be a blight on the community, much the same as the 90 acres in New London was considered a blight. (At this writing, it is too early in the judicial process to see where this will go.)

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Before Kelo, "public use" was understood to mean for road building and similar unambiguously public purposes or, in recent decades, for renewal of blighted urban wastelands.
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