- Email: [email protected]
Breaking up land oligopolies in the USA
HABITATfNTL.Vol.
11.No.
l.pp.S7-h1,1987.
OlY7-3975187 $3.00 + 0.00 @ 1987 Pcrgamcn Journals Ltd.
Printed in Great Britain.
Breaking
Up Land Oligopolies in the USA”
DAVID L. CALLIESJ-$ and LAURENCE 3. AURBACHSS t University of Hawaii, USA; and $ US National Ocearzic and Atmospheric Administration.
USA
The practices of the State of Hawaii and the Commonwealth of Puerto Rico providing for compulsory acquisition and distribution of land to break up oligopolies have been upheld by the Supreme Court of the USA. The procedures of these governments may be instructive to agencies in other areas of the wortd where concentration of land in the hands of a few owners interferes with a free market for land. The holdings of American courts provide guidance on the permissible scope for determinations of public purpose by legislatures and of judicial deference to such determinations. THE HAWAII
LAND REFORM
ACT OF 1967’
Enacted as part of a general reform package by a Democratic state legislature in the 196Os, Hawaii’s land reform law provides for the compulsory purchase of private Iand by a state agency (the Hawaii Housing Authority - HHA> for resale to those private homeowners who rent the land under their homes. The law transfers “fee simple” ownership from the large landowner landlord~l~ssor to the small homeowner tenant/lessee. Since the Fifth Amendment to the Federal Constitution requires not only “just compensation” but also a “public purpose” for such “takings”, the Land Refarm Act recites that the shift in land ownership from large estate to small householder is for a variety of public purposes, including the reduction of the price of residential land. History and specifics of the law are set out in the numerous brief? to the US Supreme Court, from which the Court distilled a history of sorts, roughly as follows. The Hawaiian Islands were originally settled by Polynesian immigrants from the Eastern Pacific. These settlers developed an economy around a feudal land tenure system in which one island high chief, the aEt’l’nui, controlled the land and assigned it for development to certain subchiefs. The subchiefs woufd then reassign the land to other Lower-ranking chiefs, who would administer the land and govern the farmers and other tenants working it. All land was held at the will of the ali’i nui and eventually had to be returned to his trust. There was no private ownership of land. *Updatedversion of a paper originally delivered at the Lincoln Institute Advanced Research Workshop Fublic-Privare Partnerships for Land Acquisirim and Development, La Nepoule, lO- 14 June 1984. #Address for correspondence: W.M.S. Richardson School of Law, 2515 Dole St., Honolulu. HI 96822, USA: Office of Ocean and Coastal Resource Management. NOAA, 3004, Cortland Place N.W., Washington DC 20008, USA. ’ Hawnii Rev. Sm. I Ch. 516. ‘E.G., Brief for Office of Hawaiian Affairs, 3-5; Brief for Hou Hawaiians and Maui Lna. Chief of the ffou Hawaiians, 32-34: Brief for the Appellants, pp. 3-4.
58
David L. Caflies and Laurence J. Aurbacla
Beginning in the early 18OOs, Hawaiian leaders and American settlers repeatedly attempted to divide the lands of the kingdom among the crown, the chiefs, and the common people. These efforts proved largely unsuccessful, however, and the land remained in the hands of a few. In the mid-1960s after extensive hearings, the Hawaii Legislature found that, while the state and federal governments owned almost 49% of the state’s land, another 47% was in the hands of only 72 private landowners. The legislature further found that 18 landholders, with tracts of 21,000 acres or more, owned more than 40% of this land and that, on Oahu, the most urbanized of the islands, 22 landowners owned 72.5% of the fee simple titles.’ The legislature concluded that concentrated land ownership was responsible for skewing the state’s residential fee simple market, inflating land prices, and injuring the public tranquility and welfare. To redress these problems, the legislature decided to compel the large landowners to break up their estates. The legislature considered requiring large landowners to sell lands which they were leasing to homeowners. However, the landowners strongly resisted this scheme, pointing out the significant federal tax liabilities they would incur. Indeed, the landowners claimed that the federal tax laws were the primary reason they previously had chosen to lease and not sell their lands. Therefore, to accommodate the needs of both lessors and lessees, the Hawaii Legislature enacted the Lund Reform Act of 1967, which created a mechanism for condemning residential tracts and for transferring ownership of the condemned fees simple to existing lessees. By condemning the land in question, the Hawaii Legislature intended to make the land sales invoIuntary, thereby making the federal tax consequences less severe while still facilitating the redistribution of fees simple. Under the Act’s condemnation scheme, tenants living on single-family residential lots within developmental tracts at least 15 acres in size are entitled to ask the HHA to condemn the property on which they live.4 When eligible tenants, or tenants on half the lots in the tract, whichever is less, file appropriate applications, the Act authorises HHA to hold a public hearing to determine whether acquisition by the state of all or part of the tract will “effectuate the public purposes” of the Act.” (An eligible tenant is defined as one who, among other things, owns a house on the lot, has a bona fideintent to live on the lot or be a resident of the state, shows proof of ability to pay for a fee interest in it, and does not own residential land elsewhere nearby.h) If HHA finds that these public purposes will be served, it is authorised to designate some or all of the lots in the tract for acquisition. It then acquires, at prices set either by condemnation trial or by negotiation between lessors and lessees.7 In either case, compensation must equaf the fair market value of the owner’s leased fee interest.s After compensation has been set, HHA may sell the land titles to tenants who have applied for fee simple ownership. HHA is authorised to lend these tenants up to 90% of the purchase price, and it may condition final transfer on a right of first refusal for the first 10 years following sale.” If WHA does not sell the lot to the tenant residing there, it may lease the lot or sell it to someone else, provided that public notice has been given. ‘() However, HI-IA may not sell to any one purchaser, or lease to any one tenant, more than one lot, and it may not operate ‘For a more fulsome analysis of these landholding patterns. see Bosselman and CaIIies, The Quiet ~e~~~~rjff~z in Land Use C’ontmi, Ch. 1 (US Government Printing Office, 1972): Catlies, ~eg~~~urj~g Parad&; Land Use Confrul fn Huwuii, Ch. 1. Ch. 5 (University of Hawar Press. 1984). ‘H.R.S. i .516-l(2), 516ljll). 516-22 (1977). ‘H.R.S. $516-22 (1977). ‘H.R.S. $51633(3), 516-X(4), 516X3(7) (1979). ‘H.R.S. B 516-56 (Supp. 1983). ‘H.R.S. 5 516.l(14). “H.R.S. $ 516-30, 516-34, and 516-35 (1977). “‘H.R.S. ii 516-28 (1977).
Breaking
Up Land Oligopolies
59
in the USA
for profit.‘i In practice, funds to satisfy the condemnation awards have been supplied entirely by lessees. While the Act authorises HHA to issue bonds and appropriate funds for acquisition, no bonds have been issued and HHA has not supplied any funds for condemned lots. Prior to the US Supreme Court’s decision upholding the Land Reform Act,” several groups of homeowners had petitioned the HHA to condemn leasehold property under the Lund Reform Act. In the late 1970s and early 198Os, many of these condemnation actions were settled before the cases came to trial. In one of the more famous of these, hundreds of homeowners in the wealthy Kahala area agreed to pay the Bishop Estate between US$5 and $7/sq. ft for lots ranging approximately from lO,OOO-14,000. This represented a figure considerably more than the appraisal figures presented to the court by the homeowners (between $2 and $3/sq. ft) and less than the figures of the landowners (closer to $9/sq. ft). The first tracts of leasehold property to go to judgment following the decision of the US Supreme Court in a more middle-class single family area established land value at between $3 and $4 sq. ft in 1984, for lots between 8,000 and 9,000 sy. ft. This is less than the roughly $5 claimed by the landowners, and more than the roughly $2 claimed by the homeowners. So far, relatively few lots have been condemned and transferred to homeowners under the Land Reform Act since the Supreme Court decision, and virtually no low-cost housing has been so transferred. There is not yet a noticeable impact on the cost of housing generally in Hawaii, nor is the difference between comparable leasehold and fee simple housing in the same neighbourhood anywhere near the price recently paid by homeowners for their lots. Trials in court to establish value for compulsory purchase purposes have been scheduled by courts in Hawaii well into 1986, at considerable cost to the parties. Meanwhile, the State Supreme Court has not yet ruled under a further challenge to the Land Reform Act alleging it is unconstitutional under that constitution’s public purpose clause, which the landowner-lessors allege should be more strictly interpreted by the state courts. Meanwhile, attempts to amend the Land Reform Act in the 1985 session of the Hawaii Legislature both by lessees who would like the law extended to multifamily dwellings (apartments, duplexes and so forth) and the lessors (who would like either to abolish the bill or tighten qualification requirements for homeowner-lessee status under the Act) have so far failed.
THE PUERTO
RICO LAND ADMINISTRATION
ACT
In a purpose clause similar to Hawaii’s Land Reform Act, the legislature Puerto Rico stated:‘” “(a) That the Commonwealth of Puerto Rico is one of the most densely populated areas in the world: that urban lands, or lands adapted to urban development, are monopolised and kept unused by their owners, which creates an artificial shortage of land and raises its price at a rate higher than the raise in price of other properties and staple commodities; that the speedy raise in the price of land makes it impossible for persons of moderate or low resources to purchase iand in appropriate areas, and forces such persons to build their homes outside of close-to-town areas and far from their places of work and other activities; that the raise in the price of land makes for undesirable urban expansions, which, in turn, creates serious financial problems to the Commonwealth and municipal governments, as the costs of “H.R.S. 5 516-28 and 516-32 (1977). 12Hawaiian Housing Authority v. Midkiff, 13Act No. 13 of 16 May 1962.
104 S.Ct. 2321, 1984.
of
David L. Callies and Laurence .i. Aurbach
60
providing public services such as roads, water, sewers, public parks, public health, fire prevention and fire fighting, police vigilance, and others such as are necessary for the protection of life and property, so essential for the development of a community, increase several times; that the raise in the price of land increases the overhead cost of industrial and commercial enterprises and, therefore, sets their products at a disadvantage in competition locally as well as abroad; that the relatively speedy raise in the price of land increases differences in income, inasmuch as unused land in Puerto Rico, both urban and rural, is controlled, to a large extent, by a small number of persons; . . .” “(c) that the raise in the price of land also affects or prevents the implementing of the master plans and is a cause of worry for the public conglomerate and constitutes a serious problem, to control which available public funds may be put to maximum use, by authorising the acquisition of private property whenever necessary; (d) that it is in the public interest to avoid, as soon as possible, the excessive and disproportionate increase in the market price of land.” The purpose
clause frankly
states that traditional
remedies
have so far failed:
“(b) that this ever-increasing price of land cannot be controlled, nor the problems thereby created be solved, by any of the tools available to the Commonwealth and municipal governments; that the levy of taxes and the regulations of physical planning are insufficient; that the regulation on subdivision and zoning operates prospectively for undeveloped and underdeveloped areas and cannot prevent the undesirable, but legal, use of the land; and that the regulation on land sub-division is insufficient to control either the expansion of city limits or the disconnected and inadequate expansion of the cities . . .,‘I4
In Cu~~o~~ea~~~ of Puerto Rico v. ROSSO,~~the Supreme Court of Puerto Rico upheld Puerto Rican land banking activities, pursuant to the statute, as necessary to arrest urban sprawl and its related economic and social ills. In Puerto Rico v. Eastern Sugar Associates the Supreme Court of Puerto Rico upheld a legislative act authorising condemnation of large private farms to be reconveyed to squatters and slum dwellers who lived on the property. The Court deferred to the legislature’s determination that the shortage of land, the monopolistic ownership of land by a few corporations, and the economic hardships on the majority of the Puerto Rican population justified the redistribution of land. The court merely required “some public benefit” to result from such a transfer to meet the public purpose test, specifically rejecting the argument that the redistribution was unconstitutional because the purpose for taking the land was “to sell it to others to use personally instead of for use by the general public”. “[Aflthough we cannot substitute our estimate of the extent of the evils aimed at for that of the Insular Legislature, we are required to make some inquiry into facts with reference to which the Legislature acted.” “ . . . It seems to us that the reasonableness of the Insular Legislature’s belief in the existence of the evils it attempted to cure is amply attested by social and economic conditions in Puerto Rico generally, and on the Island of Vieques in particular, so well known that we, at least as a court having appellate powers over the Supreme Court of Puerto Rico and hence a sort of insular court, may notice them judicially.” “ibid. “95 P.R.R.
488, appeal dismissed, 393 US 14 (1970)
Breaking
Up Land Oligopolies
61
in the USA
“
. . . [Elnough h as been said to indicate both that the Puerto Rican Legislature’s belief in the existence of a serious economic and social problem was not of a serious economic and social problem was not arbitrary, and that the program to provide not only homesteads and proportional private farms for agrega&s and subsistence farms for more skilled farmers, on the Island of Puerto Rico proper, but, in addition to the foregoing, to provide for the renewal of sugar cane grinding and the development of the liquor industry on the Island of Vieques, embodied means reasonably calculated to deal with these problems.”
US SUPREME COURT REVIEW
In upholding the Hawaii legislation, the Supreme Court of the USA provided broad guidance on when it would uphold a determination by legislatures to support acquisition of land. “[T]he Court has made it clear that it will not substitute its judgment for a legislature’s judgment as to what constitutes a pubhc use unless the use be palpably without rea~o~abfe foundation. . . . fW]here the exercise of the eminent domain power is rationally related to a coF~&e~vublepublic purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause.“i6
Specifically with respect to breaking up land oligopolies, exchange during the argument before the Court is instructive:
the following
“The Court: What’s wrong with spreading the ownership of residential property as a public purpose? “Bishop Estate: I don’t have any quarrel with that as a public purpose, but “The Court: Well, why isn’t this case over, then?“” For all practical purposes, the case was over. In the terms of the Court, it is inconceivable that a public purpose which has been conceived by a legislature could be inconceivable under this case. Hence the United States courts will refrain from substituting their judgment for that of legislatures in determinations of public purpose to support the public acquisition of land.
‘~~awa~~an booing Authority Y. ~jdki~, 104 S.Ct. 2321 at 2329 (1984). (Emphasis added.) “From the Official Transcript, Proceedings Before the US Supreme Court in HHA v. ~idkiff, 1984, at 39.
March 26,
11.No.
l.pp.S7-h1,1987.
OlY7-3975187 $3.00 + 0.00 @ 1987 Pcrgamcn Journals Ltd.
Printed in Great Britain.
Breaking
Up Land Oligopolies in the USA”
DAVID L. CALLIESJ-$ and LAURENCE 3. AURBACHSS t University of Hawaii, USA; and $ US National Ocearzic and Atmospheric Administration.
USA
The practices of the State of Hawaii and the Commonwealth of Puerto Rico providing for compulsory acquisition and distribution of land to break up oligopolies have been upheld by the Supreme Court of the USA. The procedures of these governments may be instructive to agencies in other areas of the wortd where concentration of land in the hands of a few owners interferes with a free market for land. The holdings of American courts provide guidance on the permissible scope for determinations of public purpose by legislatures and of judicial deference to such determinations. THE HAWAII
LAND REFORM
ACT OF 1967’
Enacted as part of a general reform package by a Democratic state legislature in the 196Os, Hawaii’s land reform law provides for the compulsory purchase of private Iand by a state agency (the Hawaii Housing Authority - HHA> for resale to those private homeowners who rent the land under their homes. The law transfers “fee simple” ownership from the large landowner landlord~l~ssor to the small homeowner tenant/lessee. Since the Fifth Amendment to the Federal Constitution requires not only “just compensation” but also a “public purpose” for such “takings”, the Land Refarm Act recites that the shift in land ownership from large estate to small householder is for a variety of public purposes, including the reduction of the price of residential land. History and specifics of the law are set out in the numerous brief? to the US Supreme Court, from which the Court distilled a history of sorts, roughly as follows. The Hawaiian Islands were originally settled by Polynesian immigrants from the Eastern Pacific. These settlers developed an economy around a feudal land tenure system in which one island high chief, the aEt’l’nui, controlled the land and assigned it for development to certain subchiefs. The subchiefs woufd then reassign the land to other Lower-ranking chiefs, who would administer the land and govern the farmers and other tenants working it. All land was held at the will of the ali’i nui and eventually had to be returned to his trust. There was no private ownership of land. *Updatedversion of a paper originally delivered at the Lincoln Institute Advanced Research Workshop Fublic-Privare Partnerships for Land Acquisirim and Development, La Nepoule, lO- 14 June 1984. #Address for correspondence: W.M.S. Richardson School of Law, 2515 Dole St., Honolulu. HI 96822, USA: Office of Ocean and Coastal Resource Management. NOAA, 3004, Cortland Place N.W., Washington DC 20008, USA. ’ Hawnii Rev. Sm. I Ch. 516. ‘E.G., Brief for Office of Hawaiian Affairs, 3-5; Brief for Hou Hawaiians and Maui Lna. Chief of the ffou Hawaiians, 32-34: Brief for the Appellants, pp. 3-4.
58
David L. Caflies and Laurence J. Aurbacla
Beginning in the early 18OOs, Hawaiian leaders and American settlers repeatedly attempted to divide the lands of the kingdom among the crown, the chiefs, and the common people. These efforts proved largely unsuccessful, however, and the land remained in the hands of a few. In the mid-1960s after extensive hearings, the Hawaii Legislature found that, while the state and federal governments owned almost 49% of the state’s land, another 47% was in the hands of only 72 private landowners. The legislature further found that 18 landholders, with tracts of 21,000 acres or more, owned more than 40% of this land and that, on Oahu, the most urbanized of the islands, 22 landowners owned 72.5% of the fee simple titles.’ The legislature concluded that concentrated land ownership was responsible for skewing the state’s residential fee simple market, inflating land prices, and injuring the public tranquility and welfare. To redress these problems, the legislature decided to compel the large landowners to break up their estates. The legislature considered requiring large landowners to sell lands which they were leasing to homeowners. However, the landowners strongly resisted this scheme, pointing out the significant federal tax liabilities they would incur. Indeed, the landowners claimed that the federal tax laws were the primary reason they previously had chosen to lease and not sell their lands. Therefore, to accommodate the needs of both lessors and lessees, the Hawaii Legislature enacted the Lund Reform Act of 1967, which created a mechanism for condemning residential tracts and for transferring ownership of the condemned fees simple to existing lessees. By condemning the land in question, the Hawaii Legislature intended to make the land sales invoIuntary, thereby making the federal tax consequences less severe while still facilitating the redistribution of fees simple. Under the Act’s condemnation scheme, tenants living on single-family residential lots within developmental tracts at least 15 acres in size are entitled to ask the HHA to condemn the property on which they live.4 When eligible tenants, or tenants on half the lots in the tract, whichever is less, file appropriate applications, the Act authorises HHA to hold a public hearing to determine whether acquisition by the state of all or part of the tract will “effectuate the public purposes” of the Act.” (An eligible tenant is defined as one who, among other things, owns a house on the lot, has a bona fideintent to live on the lot or be a resident of the state, shows proof of ability to pay for a fee interest in it, and does not own residential land elsewhere nearby.h) If HHA finds that these public purposes will be served, it is authorised to designate some or all of the lots in the tract for acquisition. It then acquires, at prices set either by condemnation trial or by negotiation between lessors and lessees.7 In either case, compensation must equaf the fair market value of the owner’s leased fee interest.s After compensation has been set, HHA may sell the land titles to tenants who have applied for fee simple ownership. HHA is authorised to lend these tenants up to 90% of the purchase price, and it may condition final transfer on a right of first refusal for the first 10 years following sale.” If WHA does not sell the lot to the tenant residing there, it may lease the lot or sell it to someone else, provided that public notice has been given. ‘() However, HI-IA may not sell to any one purchaser, or lease to any one tenant, more than one lot, and it may not operate ‘For a more fulsome analysis of these landholding patterns. see Bosselman and CaIIies, The Quiet ~e~~~~rjff~z in Land Use C’ontmi, Ch. 1 (US Government Printing Office, 1972): Catlies, ~eg~~~urj~g Parad&; Land Use Confrul fn Huwuii, Ch. 1. Ch. 5 (University of Hawar Press. 1984). ‘H.R.S. i .516-l(2), 516ljll). 516-22 (1977). ‘H.R.S. $516-22 (1977). ‘H.R.S. $51633(3), 516-X(4), 516X3(7) (1979). ‘H.R.S. B 516-56 (Supp. 1983). ‘H.R.S. 5 516.l(14). “H.R.S. $ 516-30, 516-34, and 516-35 (1977). “‘H.R.S. ii 516-28 (1977).
Breaking
Up Land Oligopolies
59
in the USA
for profit.‘i In practice, funds to satisfy the condemnation awards have been supplied entirely by lessees. While the Act authorises HHA to issue bonds and appropriate funds for acquisition, no bonds have been issued and HHA has not supplied any funds for condemned lots. Prior to the US Supreme Court’s decision upholding the Land Reform Act,” several groups of homeowners had petitioned the HHA to condemn leasehold property under the Lund Reform Act. In the late 1970s and early 198Os, many of these condemnation actions were settled before the cases came to trial. In one of the more famous of these, hundreds of homeowners in the wealthy Kahala area agreed to pay the Bishop Estate between US$5 and $7/sq. ft for lots ranging approximately from lO,OOO-14,000. This represented a figure considerably more than the appraisal figures presented to the court by the homeowners (between $2 and $3/sq. ft) and less than the figures of the landowners (closer to $9/sq. ft). The first tracts of leasehold property to go to judgment following the decision of the US Supreme Court in a more middle-class single family area established land value at between $3 and $4 sq. ft in 1984, for lots between 8,000 and 9,000 sy. ft. This is less than the roughly $5 claimed by the landowners, and more than the roughly $2 claimed by the homeowners. So far, relatively few lots have been condemned and transferred to homeowners under the Land Reform Act since the Supreme Court decision, and virtually no low-cost housing has been so transferred. There is not yet a noticeable impact on the cost of housing generally in Hawaii, nor is the difference between comparable leasehold and fee simple housing in the same neighbourhood anywhere near the price recently paid by homeowners for their lots. Trials in court to establish value for compulsory purchase purposes have been scheduled by courts in Hawaii well into 1986, at considerable cost to the parties. Meanwhile, the State Supreme Court has not yet ruled under a further challenge to the Land Reform Act alleging it is unconstitutional under that constitution’s public purpose clause, which the landowner-lessors allege should be more strictly interpreted by the state courts. Meanwhile, attempts to amend the Land Reform Act in the 1985 session of the Hawaii Legislature both by lessees who would like the law extended to multifamily dwellings (apartments, duplexes and so forth) and the lessors (who would like either to abolish the bill or tighten qualification requirements for homeowner-lessee status under the Act) have so far failed.
THE PUERTO
RICO LAND ADMINISTRATION
ACT
In a purpose clause similar to Hawaii’s Land Reform Act, the legislature Puerto Rico stated:‘” “(a) That the Commonwealth of Puerto Rico is one of the most densely populated areas in the world: that urban lands, or lands adapted to urban development, are monopolised and kept unused by their owners, which creates an artificial shortage of land and raises its price at a rate higher than the raise in price of other properties and staple commodities; that the speedy raise in the price of land makes it impossible for persons of moderate or low resources to purchase iand in appropriate areas, and forces such persons to build their homes outside of close-to-town areas and far from their places of work and other activities; that the raise in the price of land makes for undesirable urban expansions, which, in turn, creates serious financial problems to the Commonwealth and municipal governments, as the costs of “H.R.S. 5 516-28 and 516-32 (1977). 12Hawaiian Housing Authority v. Midkiff, 13Act No. 13 of 16 May 1962.
104 S.Ct. 2321, 1984.
of
David L. Callies and Laurence .i. Aurbach
60
providing public services such as roads, water, sewers, public parks, public health, fire prevention and fire fighting, police vigilance, and others such as are necessary for the protection of life and property, so essential for the development of a community, increase several times; that the raise in the price of land increases the overhead cost of industrial and commercial enterprises and, therefore, sets their products at a disadvantage in competition locally as well as abroad; that the relatively speedy raise in the price of land increases differences in income, inasmuch as unused land in Puerto Rico, both urban and rural, is controlled, to a large extent, by a small number of persons; . . .” “(c) that the raise in the price of land also affects or prevents the implementing of the master plans and is a cause of worry for the public conglomerate and constitutes a serious problem, to control which available public funds may be put to maximum use, by authorising the acquisition of private property whenever necessary; (d) that it is in the public interest to avoid, as soon as possible, the excessive and disproportionate increase in the market price of land.” The purpose
clause frankly
states that traditional
remedies
have so far failed:
“(b) that this ever-increasing price of land cannot be controlled, nor the problems thereby created be solved, by any of the tools available to the Commonwealth and municipal governments; that the levy of taxes and the regulations of physical planning are insufficient; that the regulation on subdivision and zoning operates prospectively for undeveloped and underdeveloped areas and cannot prevent the undesirable, but legal, use of the land; and that the regulation on land sub-division is insufficient to control either the expansion of city limits or the disconnected and inadequate expansion of the cities . . .,‘I4
In Cu~~o~~ea~~~ of Puerto Rico v. ROSSO,~~the Supreme Court of Puerto Rico upheld Puerto Rican land banking activities, pursuant to the statute, as necessary to arrest urban sprawl and its related economic and social ills. In Puerto Rico v. Eastern Sugar Associates the Supreme Court of Puerto Rico upheld a legislative act authorising condemnation of large private farms to be reconveyed to squatters and slum dwellers who lived on the property. The Court deferred to the legislature’s determination that the shortage of land, the monopolistic ownership of land by a few corporations, and the economic hardships on the majority of the Puerto Rican population justified the redistribution of land. The court merely required “some public benefit” to result from such a transfer to meet the public purpose test, specifically rejecting the argument that the redistribution was unconstitutional because the purpose for taking the land was “to sell it to others to use personally instead of for use by the general public”. “[Aflthough we cannot substitute our estimate of the extent of the evils aimed at for that of the Insular Legislature, we are required to make some inquiry into facts with reference to which the Legislature acted.” “ . . . It seems to us that the reasonableness of the Insular Legislature’s belief in the existence of the evils it attempted to cure is amply attested by social and economic conditions in Puerto Rico generally, and on the Island of Vieques in particular, so well known that we, at least as a court having appellate powers over the Supreme Court of Puerto Rico and hence a sort of insular court, may notice them judicially.” “ibid. “95 P.R.R.
488, appeal dismissed, 393 US 14 (1970)
Breaking
Up Land Oligopolies
61
in the USA
“
. . . [Elnough h as been said to indicate both that the Puerto Rican Legislature’s belief in the existence of a serious economic and social problem was not of a serious economic and social problem was not arbitrary, and that the program to provide not only homesteads and proportional private farms for agrega&s and subsistence farms for more skilled farmers, on the Island of Puerto Rico proper, but, in addition to the foregoing, to provide for the renewal of sugar cane grinding and the development of the liquor industry on the Island of Vieques, embodied means reasonably calculated to deal with these problems.”
US SUPREME COURT REVIEW
In upholding the Hawaii legislation, the Supreme Court of the USA provided broad guidance on when it would uphold a determination by legislatures to support acquisition of land. “[T]he Court has made it clear that it will not substitute its judgment for a legislature’s judgment as to what constitutes a pubhc use unless the use be palpably without rea~o~abfe foundation. . . . fW]here the exercise of the eminent domain power is rationally related to a coF~&e~vublepublic purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause.“i6
Specifically with respect to breaking up land oligopolies, exchange during the argument before the Court is instructive:
the following
“The Court: What’s wrong with spreading the ownership of residential property as a public purpose? “Bishop Estate: I don’t have any quarrel with that as a public purpose, but “The Court: Well, why isn’t this case over, then?“” For all practical purposes, the case was over. In the terms of the Court, it is inconceivable that a public purpose which has been conceived by a legislature could be inconceivable under this case. Hence the United States courts will refrain from substituting their judgment for that of legislatures in determinations of public purpose to support the public acquisition of land.
‘~~awa~~an booing Authority Y. ~jdki~, 104 S.Ct. 2321 at 2329 (1984). (Emphasis added.) “From the Official Transcript, Proceedings Before the US Supreme Court in HHA v. ~idkiff, 1984, at 39.
March 26,