An Empirical Study of Compensation Paid in Eminent Domain Settlements: New York City, 1990–2002

Abstract

No large-scale empirical study on condemnation compensation has been done in the past thirty years. Yet several state legislatures, in response to the Kelo case, have changed laws to increase condemnation compensation, despite the lack of empirical grounds. To fill in the empirical gap, I use hedonic regression models and about 80,000 sales to estimate the fair market value (FMV) of condemned properties whose owners reached compensation settlements with the condemnor, New York City, between 1990 and 2002. More than 50% of these condemnees were compensated with less than FMV; about 40% received more than FMV; and less than 10% got FMV. Owners of residential properties and non-residential properties alike often received extreme compensations that are less than 50%, or more than 150%, of FMV. Condemnor's political interests and condemnees' ignorance of estimated FMV are the most likely explanations. Compensation level does not correlate with any factor with available data.

Dealing with private property for public purposes : an interdisciplinary study of land transactions from a micro-scale perspective

“…This corresponds with prior research (Chang, 2010) in New York and Nevada which found that compensation values that are settled in court differ significantly from the values that he calculated using the Fair Market Value. However, instead of concluding that there is an inherent ambiguity in the compensation value and that his model is not accurate enough to calculate the Fair Market Value, Chang assumes that his calculated Fair Market Value is accurate and concludes that the landowner, expropriator, and court use values that differ significantly from the 'real' Fair Market Value.…”

“…The principles are based on the assumption that there is one objective value, while in reality value is something that people construct and that may differ from person to person. The studies of Chang (2010; and Clauretie et al (2004) indicate that the ambiguity in CP compensation may not be present in the Netherlands alone, but rather more widely.…”

“…Government appraisers estimated the compensation of low-value properties as being lower than the actual market price, while they estimated the value of high value properties as being higher than the market price. The studies of Chang (2010) and Clauretie et al (2004) show that there may be ambiguity in estimating CP compensation. This brings up the question as to whether the Dutch set of compensation guidelines enables the unambiguous establishment of CP compensation.…”

“…Different legislations as well as different interpretations of these legislations have led to varying standards of compensation such as the Fair Market Value or the market value in combination with compensation for other financial damage (Carland and Carland, 2006;Sluysmans, 2011). In several articles, researchers argue that just compensation should be higher than the Fair Market Value 2 (Knetsch and Borcherding, 1979;Fennel, 2004;Chang, 2010). In these articles, the question is posed as to whether emotional or attachment value should and indeed can be taken into account in CP compensation.…”

Does the Endowment Effect Influence Outcomes in Takings Cases? An Exploratory Look at Some Important Cases and Suggestions for Additional Research

“…Ultimately, electoral politics and the vicissitudes of electoral democracy will determine whether planners-as agents of elected officials-used their judgment appropriately (Brooks 2002, Chapter 12) and got it right (Campbell and Marshall 2002 (Chang 2010). This suggests some recognition of the endowment effect, but whether this goes far enough is still an empirical question.…”