It is true that victims of eminent domain get compensated by the government. But Trump’s claim that they get “a fortune” and can then “go buy a house now that’s five times bigger, in a better location” is, in the vast majority of cases, simply false. If it were true, people would be happy to have their homes condemned. It also isn’t true that victims of takings can usually just “move two blocks away into a much nicer house.” Since World War II, urban renewal takings and other condemnations for private development have forcibly displaced hundreds of thousands of people, most of whom were left far worse off than they were before.
In reality, owners of condemned property often don’t even get the “fair market value” that the government is required to pay them by law. And fair market value compensation (essentially, the price the property would bring if sold on the open market), itself often systematically undercompensates property owners, because it fails to account for the “subjective value” that many owners attach to their land. Homeowners, renters, and small business people often value their land above its market price because they benefit from the social ties, business connections, and other intangible advantages of living in a particular area. If they really did value the property at only its market price or less, they would likely have sold it long before Trump or some other developer lobbied the government to condemn it. For this reason, numerous economists and legal scholars across the political spectrum have argued that compensation for takings should be increased above market value. Some states have adopted this reform, but most so far have not.
Trump is also wrong to suggest that the use of eminent domain for private projects typically results in “massive development that’s going to employ thousands of people.” In reality, these projects are often pushed through on the basis of grossly inflated estimates of the economic benefits, which then fail to materialize. In the notorious condemnation project upheld by the Supreme Court in the famous case of Kelo v. City of New London (2005), the only “development” on the condemned property so far consists of improvised shelters for the feral cats who have settled on the land. Trump himself is no stranger to inflated estimates of the benefits of takings. In 1994, he lobbied the city of Bridgeport, Connecticut to condemn five small businesses so he could build an office and entertainment complex that he absurdly claimed would turn Bridgeport into a “national tourist destination.” In the long run, one of the best ways to promote economic development is to respect property rights, a lesson cities such as Detroit have learned the hard way.
Trump stakes out more reasonable ground in claiming that the use of eminent domain for private development is necessary to prevent “holdouts” from blocking valuable projects by demanding exorbitant sales prices for their land. This is indeed the standard rationale for economic development takings advanced by policy experts who defend the practice. The holdout argument is not completely without merit. But it is not nearly as compelling as it might seem.
In the real world, there is no reason to believe that the use of eminent domain will be driven by genuine holdout problems, as opposed to the relative political power of the two sides to the dispute. The empirical record of such takings strongly suggests that the latter is more common. Moreover, modern building techniques often allow developers to build around a few resisting property owners.
Even in the rare cases where a genuine holdout problem might block a genuinely valuable project, developers often have good strategies for avoiding the problem without resorting to eminent domain. The most effective and commonly used approach is secret assembly, which has many important advantages over eminent domain.
To put it in Trump’s own preferred terminology, his defense of economic development takings largely consists of lightweight loser arguments (the holdout point excepted). It is ironic that, on this issue, he has shown less respect for private property rights than even self-described socialist presidential candidate Bernie Sanders.