In a narrowly divided, 5-4 decision, the U.S. Supreme Court decided Thursday in favor of the City of New London, Connecticut, in Kelo v. City of New London. The question at hand was whether the City of New London could use eminent domain in pursuit of economic development. The court held that the city was within its rights to use eminent domain to promote economic development and that the city’s planned disposition of the property, an extensive plan that includes waterfront redevelopment, a pharmaceutical research facility, new residential areas, and additional office and commercial space, fell within the “public use” requirement of the Fifth Amendment.

Justice John Paul Stevens delivered the majority opinion, joined by Justices Anthony Kennedy, David H. Souter, Ruth Bader Ginsberg and Stephen G. Breyer. In the majority opinion, the court held that the city, which had decided that the area was sufficiently distressed to justify an economic development program that was then carefully formulated, was entitled to the deference of the court in that matter. The petitioners to the court argued that the court should establish a rule that economic development does not qualify as a public use, but Justice Stevens said in the majority opinion that “promoting economic development is a traditional and long accepted function of government."

Justice Sandra Day O’Connor delivered the dissenting opinion and was joined by Chief Justice William H. Rehnquist and Justices Antonin Scalia and Clarence Thomas.

The ruling by the court has widespread implications for the real estate industry. Cities and economic development organizations could now have much wider power to utilize eminent domain for private development that is planned specifically to revitalize areas — that are not necessarily blighted — in the interest of the greater good of the city. It remains to be seen how widely economic development groups and cities will employ the method, which is likely to be controversial on the local level when eminent domain is used, despite the court decision.