Although the cost is high for these areas there is little new construction.

.: Quote from @Cameron Moore: Another example: the average roof in DFW is replaced every 6 years and the average cost is $40k.

What do you mean "at cost?"

Since you estimate a resale value of $200-215K and renovation costs of $60-70K (although you said that's on the higher end), your margin is tight, especially considering closing costs, realtor fees, and unexpected expenses.

It’ll cover all your rehab costs.

The justification for eminent domain would be the cost of defending the current set up, health costs and environmental cleanup costs. 

Asking price, cost of rehab (plus time to complete), ARV, and rent once rehab is complete.Asking price $50k.

The reason people hesitate to pursue ground-up construction here is because it's costly, unless you're building a two-family home where you can live in one unit and rent out the other.

There are many reasons but near the top of the list is their cost versus the value add. 

The long-term moves are to get a concession to buy down the rate for good (not a 2-1 or 3-1 buy down), it's a smaller number (i.e. .25% or .5% decrease on the rate), and getting their full closing costs covered is money out of their pocket today they'll be saving that could be huge to give the buyer more money for repairs and/or furniture along with just life expenses.