The Hawaii Land Reform Act, providing for condemnation of residential tracts and resale to lessees, is constitutional.
The United States Court of Appeals for the Ninth Circuit held the Land Reform Act of 1967 (Act), Haw. Rev. Stat. § 516, unconstitutional in a suit brought by appellee landholders against appellant Hawaii Housing Authority (HHA). The act permitted the HHA to condemn residential tracts and transfer ownership of the condemned fees simple to existing lessees. The HHA had enacted the Act after the Hawaiian legislature discovered that only a small number of landholders owned the state's land. 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. The HHA held a public hearing concerning the acquisition of the landowner's property and made the statutory finding that the acquisition of the property effectuated a public purpose under the Act. The HHA then ordered the landowners to submit to compulsory arbitration, to which the landowners responded with the lawsuit.
Does the Public Use Clause of the Fifth Amendment, made applicable to the States through the Fourteenth Amendment, prohibit 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?
The Court found the Act constitutional by limiting the number of lots any one tenant could purchase and authorized the use public funds to ensure that the market dilution goals were achieved. The Court held that the HHA enacted the Act not to benefit a particular class of individuals but to attack certain perceived evils of concentrated property ownership in Hawaii, which was a legitimate public purpose, and that condemnation was not an irrational power to achieve that purpose. The Court reversed the judgment of the appeals court and remanded for further proceedings in conformity with the Court's opinion.