Hawaii Housing Authority v. Midkiff

467 U.S. 229

Case Year: 1984

Case Ruling: 8-0, Reversed and Remanded

Opinion Justice:  O?Connor

FACTS

The Hawaiian Islands were settled by Polynesians who developed an economic system based on principles of feudalism. Ownership and control of the land rested with the islands’ high chief, who distributed parcels to various lower-ranking chiefs. At the end of the chain, tenant farmers and their families lived on the land and worked it. Private ownership of real property was not permitted. Ultimate ownership of all lands rested with the royal family.

The monarchy was overthrown in 1893, and, after a brief period as a republic, the islands were annexed by the United States in 1898. When Hawaii became the fiftieth state in 1959, the land still remained in the hands of a few. In the mid-1960s the federal government owned 49 percent of the land in the Hawaiian Islands, and just seventy-two private landowners held another 47 percent. On Oahu, the most commercially developed island, twenty-two landowners controlled more than 72 percent of the private real estate. The Hawaiian legislature determined that this land concentration condition was detrimental to the state’s economy and general welfare. The legislative goal was to promote more widespread real estate ownership and create a competitive housing market.

The legislature first decided to compel landowners to sell large portions of their holdings to those individuals who leased the land from them. The landowners opposed this plan because it would result in exceedingly high capital gains that would increase their federal taxes. The legislature then revised its plans and enacted the Land Reform Act of 1967. This legislation allowed the state to condemn tracts of residential real estate. The Hawaii Housing Authority (HHA) would then seize the condemned property and help arrange the sale of individual parcels to the private parties who had been leasing the land. Compensation for land seized by the government enjoyed a more favorable tax status than did profits from outright sales, making the legislation more acceptable to the landowners.

Frank Midkiff and others owned a large tract of land that was condemned under the land reform program, but Midkiff, the HHA, and residents currently leasing lots could not agree on a fair price. Midkiff and his co-owners filed suit in federal district court to have the Land Reform Act declared unconstitutional as a violation of the takings clause. Among the arguments presented was the claim that redistributing land ownership was not an appropriate “public use” under the meaning of the Fifth Amendment. The district court rejected this argument, but the U.S. Court of Appeals for the Ninth Circuit reversed. The housing authority appealed to the Supreme Court.

 

JUSTICE O’CONNOR DELIVERED THE OPINION OF THE COURT.

The Fifth Amendment of the United States Constitution provides, in pertinent part, that “private property [shall not] be taken for public use, without just compensation.” These cases present the question whether the Public Use Clause of that Amendment, made applicable to the States through the Fourteenth Amendment, prohibits the State of Hawaii from taking, with just compensation, title in real property from lessors and transferring it to lessees in order to reduce the concentration of ownership of fees simple in the State. We conclude that it does not. . . .

The majority of the Court of Appeals . . . determined that the Act violates the “public use” requirement of the Fifth and Fourteenth Amendments. On this argument, however, we find ourselves in agreement with the dissenting judge in the Court of Appeals.

The starting point for our analysis of the Act’s constitutionality is the Court’s decision in Berman v. Parker (1954). InBerman, the Court held constitutional the District of Columbia Redevelopment Act of 1945. That Act provided both for the comprehensive use of the eminent domain power to redevelop slum areas and for the possible sale or lease of the condemned lands to private interests. In discussing whether the takings authorized by that Act were for a “public use,” the Court stated:

“We deal . . . with what traditionally has been known as the police power. An attempt to define its reach or trace its outer limits is fruitless, for each case must turn on its own facts. The definition is essentially the product of legislative determinations addressed to the purposes of government, purposes neither abstractly nor historically capable of complete definition. Subject to specific constitutional limitations, when the legislature has spoken, the public interest has been declared in terms well-nigh conclusive. In such cases the legislature, not the judiciary, is the main guardian of the public needs to be served by social legislation, whether it be Congress legislating concerning the District of Columbia . . . or the States legislating concerning local affairs. . . . This principle admits of no exception merely because the power of eminent domain is involved. . . .”

The Court explicitly recognized the breadth of the principle it was announcing, noting:

“Once the object is within the authority of Congress, the right to realize it through the exercise of eminent domain is clear. For the power of eminent domain is merely the means to the end. . . . Once the object is within the authority of Congress, the means by which it will be attained is also for Congress to determine. Here one of the means chosen is the use of private enterprise for redevelopment of the area. Appellants argue that this makes the project a taking from one businessman for the benefit of another businessman. But the means of executing the project are for Congress and Congress alone to determine, once the public purpose has been established.”

 

There is, of course, a role for courts to play in reviewing a legislature’s judgment of what constitutes a public use, even when the eminent domain power is equated with the police power. But the Court in Berman made clear that it is “an extremely narrow” one. The Court in Berman cited with approval the Court’s decision in Old Dominion Co. v. United States(1925), which held that deference to the legislature’s “public use” determination is required “until it is shown to involve an impossibility.” The Berman Court also cited to United States ex rel. TVA v. Welch (1946), which emphasized that “[a]ny departure from this judicial restraint would result in courts deciding on what is and is not a governmental function and in their invalidating legislation on the basis of their view on that question at the moment of decision, a practice which has proved impracticable in other fields.” In short, the Court has made clear that it will not substitute its judgment for a legislature’s judgment as to what constitutes a public use “unless the use be palpably without reasonable foundation.”

To be sure, the Court’s cases have repeatedly stated that “one person’s property may not be taken for the benefit of another private person without a justifying public purpose, even though compensation be paid.” Thus, in Missouri Pacific R. Co. v. Nebraska (1896), where the “order in question was not, and was not claimed to be, . . . a taking of private property for a public use under the right of eminent domain,” the Court invalidated a compensated taking of property for lack of a justifying public purpose. But where the exercise of the eminent domain power is rationally related to a conceivable public purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause.

On this basis, we have no trouble concluding that the Hawaii Act is constitutional. The people of Hawaii have attempted, much as the settlers of the original 13 Colonies did, to reduce the perceived social and economic evils of a land oligopoly traceable to their monarchs. The land oligopoly has, according to the Hawaii Legislature, created artificial deterrents to the normal functioning of the State’s residential land market and forced thousands of individual homeowners to lease, rather than buy, the land underneath their homes. Regulating oligopoly and the evils associated with it is a classic exercise of a State’s police powers. We cannot disapprove of Hawaii’s exercise of this power.

Nor can we condemn as irrational the Act’s approach to correcting the land oligopoly problem. The Act presumes that when a sufficiently large number of persons declare that they are willing but unable to buy lots at fair prices the land market is malfunctioning. When such a malfunction is signaled, the Act authorizes HHA to condemn lots in the relevant tract. The Act limits the number of lots any one tenant can purchase and authorizes HHA to use public funds to ensure that the market dilution goals will be achieved. This is a comprehensive and rational approach to identifying and correcting market failure.

Of course, this Act, like any other, may not be successful in achieving its intended goals. But “whether in fact the provision will accomplish its objectives is not the question: the [constitutional requirement] is satisfied if . . . the . . . [state] Legislature rationally could have believed that the [Act] would promote its objective.” When the legislature’s purpose is legitimate and its means are not irrational, our cases make clear that empirical debates over the wisdom of takings—no less than debates over the wisdom of other kinds of socioeconomic legislation—are not to be carried out in the federal courts. Redistribution of fees simple to correct deficiencies in the market determined by the state legislature to be attributable to land oligopoly is a rational exercise of the eminent domain power. Therefore, the Hawaii statute must pass the scrutiny of the Public Use Clause. . . .

The mere fact that property taken outright by eminent domain is transferred in the first instance to private beneficiaries does not condemn that taking as having only a private purpose. The Court long ago rejected any literal requirement that condemned property be put into use for the general public. “It is not essential that the entire community, nor even any considerable portion, . . . directly enjoy or participate in any improvement in order [for it] to constitute a public use.” As the unique way titles were held in Hawaii skewed the land market, exercise of the power of eminent domain was justified. The Act advances its purposes without the State’s taking actual possession of the land. In such cases, government does not itself have to use property to legitimate the taking, it is only the taking’s purpose, and not its mechanics, that must pass scrutiny under the Public Use Clause. . . .

The State of Hawaii has never denied that the Constitution forbids even a compensated taking of property when executed for no reason other than to confer a private benefit on a particular private party. A purely private taking could not withstand the scrutiny of the public use requirement; it would serve no legitimate purpose of government and would thus be void. But no purely private taking is involved in these cases. The Hawaii Legislature enacted its Land Reform Act not to benefit a particular class of identifiable individuals but to attack certain perceived evils of concentrated property ownership in Hawaii—a legitimate public purpose. Use of the condemnation power to achieve this purpose is not irrational. Since we assume for purposes of these appeals that the weighty demand of just compensation has been met, the requirements of the Fifth and Fourteenth Amendments have been satisfied. Accordingly, we reverse the judgment of the Court of Appeals, and remand these cases for further proceedings in conformity with this opinion.

It is so ordered.