Each year, the Edmondson Community Organization (ECO)—a nonprofit in Baltimore dedicated to revitalizing the city's Midtown-Edmondson area—reviews an obscure list of properties released by the government. The task is to see how many are situated within the organization's neighborhood boundaries. The fewer, the better.

The owners of the properties that do appear have fallen behind on their property taxes and, as a result, are poised to lose their real estate in an annual tax sale conducted by the government. After poring over the list, the ECO knocks on those doors to deliver the queasy news and alert the occupants to what is about to happen.

The issue is one ECO knows intimately. A few years back, the organization accrued a $2,543 property tax debt on its community center. So in 2018, the city sold that lien for $5,115 to a California-based investor, who then foreclosed on and sold the ECO's building for $139,500. In return, the ECO got a check for the difference between its debt and the lien purchase price: $2,572.

In other words, all told, the organization paid six figures to compensate for the $2,543 it owed the government, in what a new federal lawsuit alleges is a pervasive practice in Baltimore that illegally deprives people of their equity in violation of the Fifth Amendment's Taking Clause as the city attempts to satisfy modest tax debts.

Every spring, Baltimore bureaucrats conduct a mass auction online to sell off liens like the ECO's. Sometimes the unlucky debtors have fallen just hundreds of dollars behind on their taxes.

For that, they may lose their property and the vast majority of equity tied up in it. Following an investor's purchase, an owner has a certain period to satisfy the amount of the lien, along with interest and fees, to keep their property. That's a tall order when considering these parties were struggling to pay the original debt, much less the new total, which has since ballooned. In the case that debtors are unsuccessful, the investor has effectively purchased the property for the amount they paid for the lien.

In the ECO's case, that meant an investor bought their building for about 2,600 percent less than what it ultimately sold for. The ECO, in turn, was left with a fraction of what their property was worth.

That Baltimore's process robs property owners of huge chunks of equity is not just a regrettable side effect, the ECO's lawsuit alleges; it's baked into the nature of the city's approach. "The City understands there that there is a finite pot of investor capital available to purchase all the liens," reads the complaint. "This creates a perverse incentive for the City to minimize the winning bids"—a.k.a. to depress prices—"to spread that finite pot across the highest number of liens." 

Some of the moving parts of Baltimore's approach do seem to imply that the government is not merely unconcerned with owners retaining some of their equity but that they are actively seeking to keep bids low. The more glaring examples included in the ECO's suit show that the city charges a high-bid premium that punishes investors making offers above a certain threshold and opts to fulfill the law's advertising requirement in part by listing properties in The Daily Record, a business and legal newspaper that is not targeted at the general community. (The ECO says this violates state law, which stipulates that such a sale must be advertised twice in general-circulation newspapers.)

"There's a limited amount of investor money out there," says Maryland Legal Aid's chief legal and advocacy director Somil Trivedi, who is representing the ECO, "and the city has structured a system to spread that money across as many liens as possible instead of getting as much equity back for their citizens."

The ECO is not alone, according to the suit, but is one of many victims. You don't have to travel far to find others. "In the same tax sale in which a bidder purchased a lien on ECO's building, 68 properties in Midtown-Edmondson were also subject to the tax sale," states its complaint. "The winning bids on those properties totaled only 22% of the assessed value of the properties—a dramatic loss of generational wealth for the owner of each Midtown-Edmondson property that was lost in the sale."

Home equity theft, as it's sometimes called, was once an obscure issue limited to discussion in magazines like this one. But last year it took the national stage when the Supreme Court ruled unanimously in Tyler v. Hennepin County that a local government had violated the Constitution when it seized an elderly woman's condo over a modest tax debt, sold it, and kept the profit. Geraldine Tyler, the plaintiff in that suit, had fallen $2,300 behind on her taxes, which ultimately reached $15,000 after Hennepin County tacked on penalties, interest, and fees. The government then sold the condo for $40,000 and kept the additional $25,000.

While the ECO's situation isn't entirely analogous to Tyler's—the organization was paid something—Baltimore's scheme could still very well be unconstitutional, says Christina M. Martin, a senior attorney at Pacific Legal Foundation who represented Tyler before the Supreme Court. "If the procedure that you're using to sell the property is designed in a totally unreasonable manner, then obviously people are going to still get robbed of more than what they owe," she tells me. "There's a longstanding history of courts overturning sales that have a shocking result like [the ECO's]."

Tyler, in theory, should have put an end to stories like these. But the lawsuit out of Baltimore comes as some other jurisdictions have devised creative ways to comply with the law on its face but not really in practice. After Michigan's Supreme Court ruled the practice unconstitutional, for example, the state passed a convoluted debt collection statute that requires owners to complete a Herculean legal obstacle course to reclaim their equity. It is a difficult course to win.

"It is the government's choice in the first place to collect property taxes, to decide what regime they want to use to enforce the collection of those property taxes, and so it can't then complain that the regime that it chose to engage in for an amount of money that it chooses to collect is then too difficult to do constitutionally," says Trivedi. "There are lots of jurisdictions around the country that do it differently. Some don't even have tax sales. Some have much longer periods of negotiation and payment plans….Municipalities around the country have figured out ways to collect taxes without doing it unconstitutionally."

The post Baltimore's Tax Sales Are Robbing People of Their Equity appeared first on Reason.com.

An Indiana court recently touched off a firestorm of media attention and online debate by ruling that burritos and tacos are sandwiches. The decision exemplifies a longstanding issue in legal interpretation: how to figure out the "ordinary meaning" of words in a statute or regulation. It also highlights the absurdity of zoning rules restricting the development and use of property.

The case arose because developer Martin Quintana wanted to use a property he owned in Fort Wayne, Indiana for commercial purposes. In order to be able to do that, he had to get the Fort Wayne Plan Commission (a local government agency) to "upzone" the area from allowing single-family residential housing only, to allowing some types of commercial uses. The Commission was only wlling to do that in exchange for Quintana signing a "Written Commitment" (required at the behest of a local NIMBY group) under which only certain types of restaurants would be allowed in the area.  The restrictions imposed by the Commitment became new zoning rules for these tracts. Specifically, the Commitment bars "restaurants, including fast food-style restaurants," except for the following:

A sandwich bar-style restaurant whose primary business is to sell "made-to-order" or "subway-style" sandwiches (which by way of example includes, but is not limited to, "Subway" or "Jimmy John's", but expressly excludes traditional fast food restaurants such as "McDonalds", "Arbys" and "Wendys"), provided that any such restaurant shall not have outdoor seating or drive—through service….

One of the businesses Quintana recruited as a tenant for the new development is a Famous Taco establishment—a Mexican restaurant that (as the name implies) serves tacos and burritos. The Plan Commission contended the Famous Taco should be barred because these food options are not "sandwiches." Indiana Superior Court Judge Craig Bobay rejected that argument, concluding that burritos and tacos are, in fact sandwiches:

The proposed Famous Taco restaurant falls within the scope of the general use approved in the original Written Commitment. The proposed Famous Taco restaurant would serve made-to-—order tacos, burritos, and other Mexican-style food, and would not have outdoor seating, drive-through service, or serve alcohol. The Court agrees with Quintana that tacos and burritos are Mexican—-style sandwiches, and the original Written Commitment does not restrict potential restaurants to only American cuisine-style sandwiches. The original Written Commitment would also permit a restaurant that serves made-to-order Greek gyros, Indian naan wraps, or Vietnamese banh mi if these restaurants complied with the other enumerated conditions.

In Indiana, as in most jurisdictions, courts are generally required to interpret laws  (or, in this case, an agreement that has the force of law, by virtue of being embodied in a zoning restriction) in accordance with their "ordinary meaning." The Supreme Court of Indiana recently reiterated that rule in its February decision in Spells v. State.

Do tacos and burritos fall within the ordinary meaning of "sandwich"? It's hard to say. I think most Americans would not usually refer to these items as sandwiches. On the other hand, it's not hard to see why a taco or a burrito would fall under what most ordinary people would understand to be the general concept of a sandwich: meat and/or vegetables encased in bread or some other similar wrap. Thus, it may be that Judge Bobay was right to conclude that tacos and burritos are "Mexican-style sandwiches," even if few people would actually refer to them in that way. It all depends on whether ordinary meaning depends on usage or on people's intuitive theoretical understanding of the concept in question.

This ruling diverges from a controversial 2006 Massachusetts state court decision, which held that tacos, burritos, and quesadillas do not fall within the ordinary meaning of "sandwich," because that term normally refers to a food item encased in two pieces of bread, while these Mexican foods usually only feature one. Judge Bobay does not cite the Massachusetts precedent, which—in fairness—isn't binding in Indiana. He also doesn't consider the issue of whether a sandwich must have two pieces of bread, as opposed to just one.

To my mind, food encased in a single continuous piece of bread (or tortilla roll) still counts as a "sandwich." The top and bottom of a hamburger bun or hot dog roll are sometimes connected to each other. But that doesn't mean hamburgers and hot dogs can't qualify as sandwiches. My wife (who is both a lawyer and much more knowledgeable about food than I am) points out there are "open-face sandwiches" that use only one piece of bread.

Perhaps these kinds of issues reveal the limits of "ordinary meaning" interpretive rules. Ordinary people (at least those who aren't lawyers) usually just don't think about these kinds of conundrums. Thus, when an issue like whether burritos qualify as sandwiches comes up, there may not be any unequivocal "ordinary meaning" answer to the question at hand.

Whichever way you come down on the definition of "sandwich," this case also highlights the absurdity of zoning restrictions on development. Barring some kind of significant danger to public health or safety (of which there is no evidence here), Quintana should not have had to get special permission to use his property for commercial purposes in the first place. It makes even less sense to allow restaurants that serve "'made-to-order' or 'subway-style' sandwiches," but not those that serve other kinds of food. This distinction appears to be based on little more than the esthetic preferences of the Covington Creek Association, the NIMBY group that pressured the Plan Commission into imposing this restriction on the development.

Such NIMBYism causes real harm to both property owners (who are deprived of the right to use their own land as they see fit) and consumers who wish to patronize their services. I don't especially like tacos and burritos, myself. But many people do, which is why there is a substantial demand for restaurants like Famous Taco.

In a forthcoming Texas Law Review article, Josh Braver and I argue that exclusionary zoning rules restricting housing construction violate the Takings Clause of the Fifth Amendment. Restrictions on commercial development are a more complicated case. But under the originalist theories discussed in Part II of the Article, such restrictions also violate the right to use property protected by the Takings Clause, unless they protect against a serious threat to public health or safety, and thereby fall within the "police power" exception (see Section II.C). Things may be different under the living constitution approaches covered in Part III of the article.

The post Indiana Court Rules Burritos and Tacos Qualify as Sandwiches appeared first on Reason.com.

A federal court yesterday heard arguments in an appeal concerning an area of law that, while niche, has seen a streak of similarly situated plaintiffs pile up in recent years. At stake: When a SWAT team destroys an innocent person's property, should the owner be strapped with the bill?

There is what I would consider a commonsense answer to that question. But in a reminder that common sense does not always guide law and policy, that is not the answer reached by several courts across the U.S., where such victims are sometimes told that "police powers" provide an exception to the Constitution's promise to give just compensation when the government usurps property for public use.

It remains to be seen where the U.S. Court of Appeals for the 6th Circuit will fall as it evaluates the complaint from Mollie and Michael Slaybaugh, who are reportedly on the hook for over $70,000 after a SWAT team destroyed much of their home in Smyrna, Tennessee.

In January 2022, Mollie Slaybaugh stepped outside her house and was greeted by a police officer with his gun drawn. She was informed that her adult son, James Jackson Conn—who did not live with her but had recently arrived to visit—was wanted for questioning concerning the murder of a police officer, which she says was news to her. Although she offered to speak to Conn and bring him out of her house, law enforcement declined to permit that, or to let her re-enter at all, so she went to stay at her daughter's house nearby.

The next day, police broke down the door and launched dozens of tear gas grenades into the Slaybaughs' home, laying waste to nearly everything in the house. Their insurance declined to assist them, as their policy—like many policies—does not cover damage caused by the government. Yet both Smyrna and Rutherford County said they were immune from helping as well.

But despite Mollie Slaybaugh's offer to coax Conn out sans tear gas, her complaint does not dispute that it was in the best interest of the community for law enforcement to do as they did that day. It merely contests the government's claim that innocent property owners should have to bear the financial burden by themselves when police destroy their homes in pursuit of a suspect.

"Law enforcement is a public good. Through our taxes, we pay for the training, equipment, and salaries of police officers. We pay to incarcerate criminals. We pay for a court system and public defenders," reads her complaint. "When the police destroy private property in the course of enforcing the criminal laws, that is simply another cost of law enforcement. Forcing random, innocent individuals to shoulder that cost alone would be as fair as conducting a lottery to determine who has to pay the police chief's salary each year."

That hypothetical is absurd. And yet the spirit of it is at the heart of several court decisions on the matter. That includes the U.S. District Court for the Middle District of Tennessee, which ruled last year that the Slaybaughs were not entitled to a payout because, in the court's view, the Takings Clause of the Fifth Amendment does not apply when the state seizes and destroys someone's property in the exercise of "police powers."

The Slaybaughs are unfortunately not alone. The notion that "police powers" immunize the government from liability is what doomed Leo Lech's lawsuit, which he filed after a SWAT team did so much damage to his home—in pursuit of a suspect that broke in and had no relation to the family—that it had to be demolished. In 2020, the Supreme Court declined to hear the case.

Similar claims are continuing to accumulate. The city of Los Angeles refused to compensate Carlos Pena after a SWAT team destroyed his North Hollywood print shop in pursuit of a suspect who barricaded himself inside, and the government in McKinney, Texas, turned away Vicki Baker after police ruined her home and much of its contents while, again, trying to catch a fugitive. After a legal odyssey of sorts, Baker was able to secure a judgment from a federal jury—though that was ultimately overturned by the U.S. Court of Appeals for the 5th Circuit, which ruled there was a "necessity" exception to the Takings Clause. Most recently, the local government in South Bend, Indiana, rejected Amy Hadley's pleas for help after police mutilated her home in search of a suspect she'd never met and who'd never been to her home. An officer's botched investigation led law enforcement to her house, and she has been forced to pay the price of that blunder. Accountability should not just be for the little people.

"The plain text of the Just Compensation Clause contains no exemptions for the police power, for public necessity, or for damage done by law enforcement. And the government bears the burden of establishing that any such exception is grounded in our nation's history and tradition," Jeffrey Redfern, an attorney with the Institute for Justice representing the Slaybaughs, told the 6th Circuit yesterday. "But the government hasn't even tried to meet that burden. Instead it asks this court to blindly follow decisions from other jurisdictions—decisions whose reasoning the government isn't really defending."

In some sense, the government is throwing what it can at the wall to see what sticks. And a fair amount of nonadhesive material is successfully latching on—an exception to the laws of nature that few entities other than the government could reasonably hope to enjoy.

The post A SWAT Team Blew Up This Innocent Couple's Home and Left Them With the Bill. Was That Constitutional? appeared first on Reason.com.

In addition to finally passing long-delayed and much-needed military assistance to Ukraine, the House of Representatives today also enacted the REPO Act.  That law gives the president the authority to confiscate $6 billion in Russian government assets currently frozen in the United States, and transfer them to Ukraine, in order to assist that country in resisting Russia's brutal war of aggression.

The Senate will almost certainly pass the REPO Act, as well, and President Biden seems certain to sign it and act on it. While $6 billion isn't all that much relative to the costs of the war, hopefully this US action will incentivize our European allies to confiscate the nearly $300 billion in Russian state assets currently frozen under their jurisdiction.

I have long advocated this idea, which is overdue. In a November post, I outlined the case for it, and addressed a number of objections, including claims that confiscation would violate the Takings Clause of the Fifth Amendment, sovereign immunity arguments, arguments that confiscation is unfair to the people of Russia, and fears that it would set a bad precedent deterring foreign investment in the US.

Here's an excerpt:

There is a staggering $300 billion in frozen Russian state assets located in Western nations backing Ukraine…. To put this figure in perspective, it's worth noting that the total amount of US aid to Ukraine from February 2022 through July 31, 2023 was about $77 billion. The European Union, individual European states, and Canada, gave approximately $165 billion during the same period…. The $300 billion in frozen assets is equal to some two years of total Western assistance to Ukraine at the current pace of spending!…

[I]n the US the private property of foreigners is protected against confiscation by the Takings Clause of the Fifth Amendment, which requires the government to pay "just compensation" if it takes "private property." Most European nations have similar constitutional protections for private property rights, as does the European Convention on Human Rights.

But the Fifth Amendment and its European analogues do not offer the same kind of blanket protection to the property of foreign governments. This distinction undermines claims by some critics that uncompensated seizure of Russian state assets would violate the Takings Clause and similar constitutional guarantees in Europe. It also mitigates concerns that confiscating Russian government assets would create a dangerous slippery slope. Private property rights of foreigners would remain protected by constitutional guarantees….

Oona Hathaway argues that confiscating Russian state assets would violate sovereign immunity. I think the Tribe report offers compelling responses to this argument (pp 60-64).

In addition, I am not convinced that sovereign immunity is actually a just principle that we have a duty to obey. It is in fact a perversion of justice, enabling rulers to escape accountability for violating human rights and other injustices they perpetrate. It was a mistake to read it into the US Constitution. It is equally a mistake to allow it to be a principle of international law. Some laws are so deeply unjust that we have no duty to obey them. The law of sovereign immunity is one such case.

At the very least, sovereign immunity should not be permitted to shield authoritarian states like Putin's regime from having their assets confiscated in order to combat their wars of aggression, mass murder of civilians, and other large-scale human rights violations. Such rulers no more deserve sovereign immunity than Mafia bosses….

The post House Passes REPO Act Giving President Authority to Confiscate Russian Government Assets in the US and Transfer them to Ukraine appeared first on Reason.com.

The Supreme Court is currently considering two cases in which social media firms challenge the constitutionality of Texas and Florida laws requiring them to host content the platforms would prefer to exclude. The issue before the Court is whether these laws violate the Free Speech Clause of the First Amendment. But, in a recent Reason article, Ethan Blevins of the Pacific Legal Foundation—one of the nation's leading public interest law firms litigating takings cases—argues they also violate the Takings Clause of the Fifth Amendment:

While pundits and lawyers cross swords over free speech on social media, a quieter yet critically important principle is being ignored: property rights. In addition to violating the First Amendment, the rush to force social media platforms to host content violates the Fifth Amendment as well—in particular, the Takings Clause.

The Takings Clause says that government shall not take private property "for public use, without just compensation." While many are familiar with the clause's importance when the government wants to seize land through eminent domain, courts have also applied this right as a limit on the ability to overregulate property. For example, if a beach town requires the owners of oceanfront properties to let the public walk across their yards to get to the beach, this would require compensation, because the regulation effectively takes the property owner's right to exclude, a cornerstone of ownership.

Likewise, the Takings Clause shields social media platforms from regulations requiring they host content or users they want to exclude. These platforms have as much right to eject unwelcome digital interlopers as homeowners do to stop the government from using their yard as a public right of way—unless they are given just compensation. If states intend to force social media apps to host users and content against their wishes, they will have to pay for it….

Both state and federal laws already treat online platforms as property. All states criminalize unauthorized access to computer systems, often expressly framing these crimes as trespass….

Laws that mandate online platforms to accept certain content or users effectively invade private property. And the courts have established that when the government grants third parties access to private property without the owner's consent, that requires compensation. The federal government had to pay a private marina owner in Hawaii before it could be compelled to allow public boating access. Similarly, the Supreme Court ruled just a few years ago that California had to compensate employers after it forced them to let union representatives access their property.

I very much agree, and previously made a similar argument here:

The Takings Clause bars government from taking "private property" without paying "just compensation." In its 2021 ruling in Cedar Point Nursery v. Hassid, the Supreme Court ruled (correctly, in my view) that even a temporary government-mandated "physical occupation" or invasion of private property counts as a per se taking….

The Florida and Texas social media laws are also blatant attacks on the right to exclude. No one doubts that the Twitter site and its various features are Twitter's private property. And the whole point of the Florida and Texas laws is to force Twitter and other social media firms to grant access to users and content the firms would prefer to exclude, particularly various right-wing users. Just as the plaintiffs in Cedar Point wanted to bar union organizers from their land, so Twitter wishes to bar some content it finds abhorrent (or that might offend or annoy other users)….

To be sure, there are obvious differences between virtual property, such as a website, and more conventional physical property, like that involved in the Cedar Point case. But the Taking Clause nonetheless applies to both. If Texas decided to seize the Twitter site, bar current users, and instead fill it with content praising the state government's policies, that would pretty obviously be a taking, much like if California decided to seize the Cedar Point tree nursery's land.  In the same way, requiring Twitter to host unwanted content qualifies as an occupation of its property, no less than requiring a landowner to give access to unwanted entrants…

One could argue that forcing a website owner to host unwanted users isn't really a "physical occupation," because the property is virtual in nature. But websites, including the big social media firms, use physical server space. Other things equal, a site with more user-generated content requires more such space than one with less. Even aside from the connection to physical infrastructure, it seems to me that occupation of virtual "real estate" is analogous to occupation of land. Both are valuable forms of private property from which the owner generally has a right to exclude.

The post Laws Requiring Social Media Firms to Host Content they Prefer to Exclude Violate the Takings Clause appeared first on Reason.com.

UPDATE: This event has been postponed till September, for scheduling reasons. I will post the new date and time when it is set.

Note: I am reposting this in order to include the registration link.

On April 23, the Schar School of Policy and Government at George Mason University will hold an event on "Solving the Nation's Housing Shortage." I will be speaking along with economist Bryan Caplan (George Mason University), author of Build, Baby, Build: The Science and Ethics of Housing, and Jerry Howard, former Director of the National Association of Home Builders. Bryan will discuss his book,  which addresses the causes of the housing crisis, and potential solutions. I will speak about how exclusionary zoning—the most significant cause of our housing shortage—violates the Takings Clause of the Fifth Amendment, and how judicial review can help address the problem. These issues are covered in greater detail in my forthcoming Texas Law Review article on exclusionary zoning (coauthored with Josh Braver).

The event is free and open to the public. Here is the time and address:

12-1 PM, Schar School of Policy and Government, George Mason University, Van Metre Hall, Rm. 111, 3351 Fairfax Dr., Arlington, VA

You can register at this link.

The post Upcoming Event on "Solving the Nation's Housing Shortage" [update] appeared first on Reason.com.