WASHINGTON — Property rights in the United States are at a constitutional crossroads.

Increasingly, in towns and cities across the nation, local governments are seizing and demolishing private homes to assemble large tracts of land needed for economic-development projects.

Homeowners say their constitutional right to own private property is being violated. Local officials counter that their actions are permitted by the Constitution and necessary to ensure the long-term prosperity of their communities.

Today, the Supreme Court takes up a potential landmark case that asks the justices to strike the proper balance between the right to own private property and the government's power to seize that same property for a broader public good. How a majority of justices strike that balance will define the scope of property rights in America, perhaps for generations, analysts say.

"Cities have been going along with almost no guidance from the Supreme Court for almost half a century," said Dana Berliner, a lawyer with the Institute for Justice in Washington. "Whatever the justices say is going to have a large impact."

The case, Kelo v. New London, involves an effort by homeowners in New London, Conn., to prevent the city from using its power of eminent domain to demolish their houses to make way for a 90-acre economic-development project.

The city wants to redevelop the neighborhood, which looks out to the waters of Long Island Sound, with a waterfront hotel, an office park and town houses. It says the project is necessary to generate much-needed tax revenues and new jobs.

Residents say it amounts to a land grab, with the city taking their property and giving it to a private developer for $1 a year in the hope that commercial development will yield more taxes than private homes have.

The Constitution's Fifth Amendment mandates that private property may be taken by the government if fair compensation is paid to the owner. But there is a second requirement: The property may be taken only if it is for "public use."

The issue the Supreme Court must decide is whether a privately owned development project amounts to a "public use."

The most common and accepted public use of private property occurs when the government takes land for government facilities such as a highway, public school or military base. Public use also includes the taking of property for privately owned businesses such as railroads, power companies and other firms that need contiguous land to offer regulated services to the public. Public-use takings also have occurred to eliminate urban blight.

But the New London case illustrates the most controversial application of the public-use rationale.

"If the taking of our property were for a bridge, a road or a firehouse, I would be prepared to sell without a fight," said Susette Kelo, a New London homeowner. "This is for private profit, not public use."

Lawyers for the city of New London say it is up to elected representatives to decide land-use and economic-development issues. Judges must show deference to the sometimes tough economic decisions made by legislative and municipal officials, they say.

State supreme courts are divided on the issue. Eight state supreme courts, including Washington's, have ruled that private economic development does not amount to a public use and have barred condemnations in such cases. Six state high courts have ruled that private economic-development projects are a public use.

In March 2004, the Connecticut Supreme Court ruled that the New London project was a public use because it promises to bring higher tax revenues and jobs to the economically depressed city. The state high court offered an expansive reading of the term: Public use can mean "public usefulness, utility or advantage, or what is productive of general benefit."

"It is a more sympathetic story to talk about the homeowner who gets their home taken, but people don't as often talk about the people who get jobs because of the development project that goes forward, or the better schools or city services that are created because of the increased tax revenues," said Daniel Krisch, a member of New London's legal team.

Critics of the decision say the Connecticut high court confused "public use" with "public benefit." They say that if the ruling is upheld by the U.S. Supreme Court, any property in the country could be seized and turned over to a private company that promises to produce higher tax revenues from that property.

A house facing a busy intersection could be turned over to an oil company seeking to open a gas station, they say. A middle-income neighborhood could be demolished to make way for a Wal-Mart or Costco.

"The Supreme Court is really faced with a choice here," said Berliner, who is a member of the legal team representing the New London homeowners. "If they affirm the Connecticut Supreme Court, they will fundamentally change the meaning of property ownership for everyone in the United States."

Material from the Los Angeles Times is included in this report.