You wrote you would condemn the homeowners property instead of his, based on your impression that the homeowners were bad people. I have a different impression, but neither of our impressions matter. Condemnation under Eminent Domain is done -- sparingly, for reasons of practicality -- for the greatest public good, and it is certain that the number of people who would benefit from the condemnation of the lake exceeds one person -- the lake owner.
Furthermore, condemnation of the homeowners many plots of land would be impractical because the cost of acquiring many dozens of $300,000+ homes and the property on which they sit. It is much cheaper and more practical to condemn the lake.
It also simply makes more sense on a variety of levels.