Regulatory Takings

The United States Constitution and its amendments constitute, quite literally, the backbone of our society. However, in instances of unclear meaning or the potential of multiple interpretations, the Constitution becomes the basis for debate and struggle. The Constitution is twisted, turned, and manipulated in order to serve the purposes of various groups and individuals, no matter how well-meaning these efforts may be. Such is the case in the regulatory takings dispute.

The Fifth Amendment to the Constitution states that "nor shall private property be taken for public use, without just compensation." Known as the "takings clause", these words were designed to protect the public from a government intent to seize freely. However, there is a world of difference between a physical taking, wherein the government literally seizes or otherwise physically occupies a private property, and a regulatory taking, wherein the government limits use of private property through a regulation. In the first condition, the government is required to compensate an individual for a physical taking, under the principles of the Fifth Amendment, the concept of eminent domain, and relevant Supreme Court decisions. However, the second condition, that of a regulatory taking, is a much more complicated and oft-debated matter, which many preservationists feel that the Fifth Amendment was not designed to encompass. As is true in many divisive issues, the two sides interpret the same information in oddly different ways. Property rights advocates feel that the government is allowed too much power in regulating private property, and environmentalists feel that the government does not have enough power to preserve without fear of forced compensation.

In a physical taking, the government must demonstrate that a private property is needed for a legitimate public purpose, such as the building of a new road or school. The government is then permitted to seize the property, whether or not the property owner feels favorably about the issue. The property owner is, however, entitled to "just compensation," though a great deal of debate often encircles exactly what constitutes an appropriate amount. Not at issue, though, is the government's right to seize private property for public use in legitimate circumstances.

The government is endowed with what is known as "police power," the ability to regulate personal conduct and land use if acting in the interests of the health and welfare of a community. With such power comes the ability to regulate what people may and may not do with their private property. Zoning is one such area of regulation; it is what prohibits your neighbor from turning his residential property into a commercial go-kart track which runs until all hours of the morning. Environmental regulations, such as the protection of wetlands from development, or a required minimum of open space per property to reduce flood risk, are essential to the protection of both our environment and ourselves. Should our wetlands disappear, not only concerned environmentalists will suffer. Our entire ecosystem and our ability to pursue life as we know it will be diminished. In this way, environmental regulations protect us all, even if most people are unaware or unconcerned. Please see our extensive discussion of wetlands regulation here.

 

The Progressive Position

Environmentalists therefore feel that the government's legitimate right to regulate the use of private property in the public interest should prevent the government from being forced to compensate property owners for these regulations. Environmentalists fear that, should the government be required to compensate for regulation, fewer regulations would be passed, and the environment would be in dire jeopardy.

Also at issue for many is the very idea of compensation in the case of a regulatory taking. In a 2001 speech on "Property Rights and Public Values" at the National Building Museum, Donovan Rypkema, a Republican with a background in real estate and economic development, argued that governmental actions frequently result in the lowering of property values, and virtually no one expects to be compensated. For example, living in a poor school district negatively affects your property value, but most don't petition the government for compensation. Or, if the government wins a case of corporate monopoly, the stock for that company will certainly sink in value, as a direct effect of government action. Few reasonably minded people ask the government for their money back. In these examples, Rypkema says, "a public body was acting in what it saw as the public good and in each instance somebody's property was adversely affected and yet uncompensated. Land use controls are exactly the same."

Conversely, Rypkema argues, when a government regulation or change in zoning results in a property value increase for an owner, this owner is highly unlikely to offer to donate this money to the government. He says, "Let me ask you, when was the last time you heard an owner say, "Because of rezoning my land went from being worth $10,000 to being worth $100,000. But since it was the action of the Planning Commission and not some investment I made that increased the value, I'm writing a check to the city for $90,000"? No "property rights" advocate ever said that, nor should they have. Public decisions affect the value of real estate in both directions - it is one of the risks and potential rewards of ownership."

See the full text of the speech here.

 

The Property Rights Advocate Position

On the other side of the debate are property rights advocates. Please see our full discussion of the philosophical basis of the property rights debate here. Property rights supporters argue that property owners should be entitled to pursue the "highest and best use" of their land, and if prohibited to do so by excessive government regulation, the owner should be entitled to compensation. In his 1995 testimony before Congress, Roger Pilon, Director of the Cato Institute's Center for Constitutional Studies, denounced the regulation of private property without compensation, no matter how compelling the public interest may be. He said, "We do not have rights to views, for example, even lovely ones, unless we own the conditions that give rise to those views. So too with greenspaces, or historic sites, or habitat for endangered species, and much else. None of which is to say that those goods are not good or valuable. They may very well be. But as with anything else that may be of value, we must obtain those goods legitimately. We cannot just take them." However, Mr. Pilon fails to acknowledge that paying property owners for every limitation of use for environmental purposes would eventually end all preservation programs due to financial restraints. If the government had to compensate a property owner each time the owner wished to build on a wetland and couldn't, the government would soon be unable to afford to regulate wetlands, at devastating environmental consequence. While Mr. Pilon hopes that the "compensation requirement" he proposes will "discipline the public's appetite" for regulation, he does not explore exactly what will happen should environmental regulation cease to be a viable option for preservation. One can hardly envision America without its wetlands, floodplains, forests, and wide variety of animal species, but perhaps one should try in order to realize the gravity of what Mr. Pilon proposes.

See the full text of Roger Pilon's testimony here.

One must also consider the special interests at play in the regulatory takings debate. Industries such as homebuilders, whose lives would be a good deal easier without land use regulations, frame the issue as a property rights struggle when in fact they are just concerned with their personal economic profit. In contrast, environmentalists are concerned with the public good that comes from sensible land use policies and a preservationist-minded government.

 

Property Rights as an Emotional Issue

Clearly, environmentalists and property rights advocates have differing priorities. This is not to say that environmentalists do not believe in a fundamental basis of property rights, or that property rights supporters cannot see the long term benefit of environmental preservation. Instead, the two groups simply approach the issue very differently. Raymond Coletta, Professor of Law at the University of the Pacific, explains that Americans tend to view property in a very distinctive way, on a private, cultural, and emotional basis. He writes that because of our collective history of imperialism and westward expansion, "We have developed an individual braggadocio toward real property, focusing on the “my-ness” of land and its economic meaning to individual status. We exploit rather than conserve this valued resource. Private land ownership has gained an idiosyncratic American personality reflecting notions of economic power, individual self-meaning, and personal self-worth. Not surprisingly, where regulation leads to lessening land values, we feel unjustly compromised as well as personally devalued." Therefore, "given our biological and cultural heritage, Americans begin the takings debate with an overwhelming prejudice in favor of private property rights. We perceive limitations on land use as a threat and are psychologically wired to presume any such limitation as a taking of a natural right."

Mr. Coletta's writings help to illuminate why some Americans may not support uncompensated government regulation in the name of environmental protection or public welfare. Emotional reactions and feelings of the need to protect private property rights will triumph rather than reason. Appeals to fear and emotion, as exhibited by property rights zealots, will be more persuasive than a governmental urging for citizens to consider long-term environmental or community benefits. Mr. Coletta writes that "This is not a rational debate where the better of two sides will triumph; weighed policy arguments are not necessarily the most convincing."

See Raymond Coletta's full essay here.

 

Framing the Debate

The government has a legitimate right to regulate the use of private property in the public interest. This principle is not at debate in the regulatory takings discourse, though there is certainly disagreement as to the extent of this power. Also not at debate is the government's right to regulate, without compensation, against "harmful or noxious" uses of property, also known as the "nuisance exception." That is, the government can forbid a property owner to develop a chemical lab on premises, which would pose a significant public health risk, without fear of a court ordering the government to pay the property owner compensation for lost revenue.

Instead, the primary issue at hand with regulatory takings is if a property owner is entitled to compensation should the property lose value as a result of the governmental regulation for a previously acceptable use. That is, if a property is classified as a wetland, and the owner may not build a home upon this land due to wetland regulation, is the owner entitled to compensation from the government for this financial loss?

This is a question that legislatures and the courts have been trying to answer for the better part of a century. In short, the most recent Supreme Court cases have found that a government regulation is considered a taking (which is therefore compensable under the Fifth Amendment), if and only if the property loses its full value as a result of the regulation. For example, say a regulation prohibits a store owner from building a larger store due to legitimate flooding concerns. This owner is still able to conduct business from the smaller store; therefore, the property is not rendered entirely valueless by the regulation. However, if a different regulation prohibited all building on the site, and the site was not reasonably suited for any other use, the property may be considered valueless, and the property owner would be eligible for compensation, as a taking would have occurred in this scenario.

It took the Supreme Court seventy years to arrive at this distinction between partial and total takings. It first heard a regulatory takings case in 1922, in Pennsylvania Coal v. Mahon, and the "valueless" test was developed in 1992 in Lucas v. South Carolina Coastal Commission, later refined in 2002's Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency. It is most useful to study the evolution of the Supreme Court's interpretation of regulatory takings doctrine through each case individually. Links are provided to each case for the full decision and further information.

 

Critical Supreme Court Decisions

The courts play an incredibly important role in regulatory takings issues, for in many ways, they are beyond the reach of citizens. Citizens are unable to change the holdings of the court, or fire the justices who hand down the rulings, while in contrast citizens can vote out legislators or lobby actively against proposed legislation. The courts are also inherently conservative institutions, generally shying away from shocking rulings and basing their decisions on precedent. Court decisions can make pursuing environmental protection quite difficult for preservation-minded legislators and local officials who fear of lawsuit or forced compensation. To best understand the complicated development of law and opinions relating to regulatory takings, it is quite useful to study several key Supreme Court cases.

Pennsylvania Coal Co. v. Mahon (1922)

Pennsylvania Coal, the first major Supreme Court case on regulatory takings, helped to frame the modern debate on the divisive subject. The legislation in question was the Kohler Act, a Pennsylvania state law which prohibited coal mining in developed areas in order to prevent houses over the mines from sinking. When the Pennsylvania Coal Co. sought to mine the surface beneath the Mahons' home, the family sought an injunction to stop the mining under the auspices of the Kohler Act. However, the deed to the property from 1878 granted the coal company the right to mine the property with no assumption of liability from any damages incurred. The Court of Common Pleas denied the injunction requested by the Mohans' on the basis that the Kohler Act, applied in this situation, would be unconstitutional. However, the Pennsylvania State Supreme Court found the Act to be an appropriate use of "police power" and granted the Mohans' the injunction.

The primary issue, when the case reached the Supreme Court, was then if the police power of the government, as represented in the Kohler Act in an attempt to protect property owners, was powerful enough to supersede the property rights of the Pennsylvania Coal Co., which had pre-existing rights by deed to the coal beneath the Mohans' land. The Court found in favor of the Pennsylvania Coal Co., noting that the police power of the state did not extend to protecting individuals from property damage as in this case. In writing for the Court, Justice Oliver Wendell Holmes wrote that "It is our opinion that the act cannot be sustained as an exercise of the police power, so far as it affects the mining of coal under streets or cities in places where the right to mine such coal has been reserved." Furthermore, the Act cannot be justified as being in the public interest, for "usually in ordinary private affairs the public interest does not warrant much of this kind of interference. A source of damage to such a house is not a public nuisance even if similar damage is inflicted on others in different places. The damage is not common or public… We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change." In conclusion, Holmes writes, "The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." Here, Justice Holmes establishes for the first time that a taking is not just limited to physical governmental occupation or seizure of property; he writes that excessive regulation can, in select cases, also considered a taking.

In writing his dissent, Justice Brandeis expressed concern over the principle of expected compensation for governmental regulation. He writes, "Every restriction upon the use of property imposed in the exercise of the police power deprives the owner of some right theretofore enjoyed, and is, in that sense, an abridgment by the state of rights in property without making compensation. But restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking. The restriction here in question is merely the prohibition of a noxious use. The property so restricted remains in the possession of its owner. The state does not appropriate it or make any use of it. The state merely prevents the owner from making a use which interferes with paramount rights of the public. Whenever the use prohibited ceases to be noxious-as it may because of further change in local or social conditions-the restriction will have to be removed and the owner will again be free to enjoy his property as heretofore."

Please see Pennsylvania Coal Co. v. Mohan for the entire decision.

 

Nollan v. California Coastal Commission (1987)

The California Coastal Commission granted a permit to the Nollan family that allowed them to replace a beachfront bungalow with a larger house on the condition that they would then be required to allow a public easement across their beach. The California Coastal Commission argued that there was a legitimate public interest in having continuous beachfront, which would be accomplished if the public easement was granted through the Nollan's property. The Supreme Court ruled that if the commission outright took the easement and did not compensate the Nollan's, such an action would constitute a violation of the Takings Clause. However, the commission instead made a permit contingent upon this easement. The Supreme Court ruled that "conditioning appellants' rebuilding permit on their granting such an easement would be lawful land-use regulation if it substantially furthered governmental purposes that would justify denial of the permit." Therefore, there must be an "essential nexus" between a "legitimate state interest" and the conditions required by the local authority.

In this case, the Supreme Court ruled that this connection did not exist; "the condition does not serve public purposes related to the permit requirement." The Court noted that the commission is free to exercise its powers of eminent domain and pay for the easement, but that the Nollan family cannot be expected to grant the easement as a condition of permit approval. The four dissenting justices, Justices Brennan, Marshall, Blackmun, and Stevens, argued that the larger home planned by the Nollan's encroaches upon the public's beach access, and that permit approval contingent on granting the easement is therefore a reasonable condition.

Please see Nollan v. California Coastal Commission for the entire decision.

Dolan v. City of Tigard (1994)

The Nollan decision left dangerously open the question of the degree to which an "essential nexus" must exist in order for there to be a compelling governmental regulatory interest. This issue was addressed in Dolan. The Court did not address this issue in Nollan because, in the view of the majority, the conditions set forth did not even come close to being reasonable. In Dolan, the Court resolved that "the degree of the exactions demanded by the city's permit conditions [must] bear the required relationship to the projected impact of petitioner's proposed development."

Florence Dolan applied to the city of Tigard to expand her store and pave her parking lot, which was approved by the city with two conditions. First, she was required to establish a public greenway on her property to help alleviate the additional flooding that would be caused by the increase in impervious surface on her property. Second, she was required to allow for a pedestrian and bicyclist sidewalk in order to decrease congestion in the city's business center. She appealed the conditions, but they were upheld by the Land Use Board of Appeals, the State Court of Appeals, and the State Supreme Court.

The Supreme Court ruled that both conditions set forth by Tigard were "legitimate public purposes," and that the appropriate "nexus" exists both between the greenway requirement and reduced floodplain, and between the pedestrian pathway and decreased traffic congestion. However, the issue at hand in Dolan was instead if the conditions imposed were of a sufficient connection to the public interests identified. Here, the Court established the standard of "rough proportionality," to be evaluated with the previously established standard of the "essential nexus." The Court held that "No precise mathematical calculation is required, but the city must make some sort of individualized determination that the required dedication is related both in nature and extent to the proposed development's impact. This is essentially the "reasonable relationship" test adopted by the majority of the state courts."

In Florence Dolan's case, the Court found that the conditions stipulated for the permit were not of "rough proportionality" to the public benefit. For the first condition of the public greenway, the Court decided that the 15 percent of open space that Dolan was already required to have would nearly alleviate the increased flooding risk. Furthermore, the Court found that the city did not demonstrate why a public greenway, in which Dolan would surrender some rights to her property, was necessary rather than a private greenway. For the second condition of the pedestrian pathway, the Court held that the city did not demonstrate that the additional number of cars entering and exiting Dolan's new facility would be eased by creating a pedestrian and bike pathway. If the city could quantitatively demonstrate that the increase in car traffic to Dolan's store would be roughly offset by use of the pedestrian pathway, the Court ruled that such a condition would then be reasonable. Therefore, because the city did not demonstrate this quantitative relationship, the opinions of the lower courts were reversed and the Supreme Court found for Florence Dolan.

By establishing the test of "rough proportionality" as a companion to the "essential nexus" principle, the Court further limited the ability of local governments to pursue their vision for and responsibility to their towns and cities. The Dolan ruling limits the ability of local governments to force developers to fund infrastructure improvements which have been necessitated by this new development, unless the government can conclusively prove the "rough proportionality" of the development impact and the proposed infrastructure improvements. This has a devastating impact on the local taxpayer, who now has to foot the bill for more schools, water, roads, and increased congestion rather than the developer who is profiting at the expense of local infrastructure. Furthermore, local governments are stripped of their power to decide what is best for their community, and those decisions seem destined to be made by national lawmakers or courts.

Please see Dolan v. City of Tigard for the entire decision.

Yee v. City of Escondido (1992)

What exactly constitutes a taking? The Supreme Court sought to decisively define this when the justices delivered their judgment in this case. Here, owners of a mobile home park challenged a city ordinance and California law which stipulated several restrictions upon mobile home park landowners. The California Mobilehome Residency Law allows the landowner to terminate his tenants' leases only when the tenant cannot pay rent, or if the owner decides to alter the use of his property. The law does not allow the landowner to invoke a transfer fee when a mobile home changes ownership, or to be otherwise involved in the sale. In the city of Escondido, rent control laws in place keep land rent at 1986 levels, with a prohibition on rent increases. In this case, the landowners sued, saying that these restrictions are limiting their rights as property owners and lease givers, and as such, constitute a taking under the Fifth Amendment. The Superior Court, and Court of Appeal both rejected this allegation, and the Supreme Court, in a unanimous verdict, ultimately agreed with the lower courts.

The Court ruled that this scenario does not represent a taking, because "The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land." In delivering the opinion of the Court, Justice Sandra Day O'Connor classified claims of government takings into two distinct classes. In the first distinction, the government physically seizes the property, perhaps even taking the deed, and in such cases, the owner is generally due compensation. In the second distinction, the government restricts use of the property through regulation. Determining compensation in these cases is a much more difficult issue, and O'Connor writes that compensation is "required only if considerations such as the purpose of the regulation or the extent to which it deprives the owner of the economic use of the property suggest that the regulation has unfairly singled out the property owner to bear a burden that should be borne by the public as a whole." While there is a clear rule of compensation for the first distinction of takings cases, the second distinction is a much more murky issue.

The Court stopped short of ruling on whether the California law, coupled with the city's rent control ordinance, represented a regulatory taking on technical grounds that the issue was not properly raised when the involved parties petitioned the Court. The Court, however, made clear that the governmental restrictions upon the landowners did not at all represent a physical taking.

Please see Yee v. City of Escondido for the entire decision.

The Court's decision (or indecision) in this case illustrates how complicated the courts have found the regulatory issue and related compensation. However, just three months after the Yee ruling was handed down, the Court delivered a much more decisive approach to determining when to compensate landowners for a regulatory taking.

Lucas v. South Carolina Coastal Council (1992)

In a decision which apparently pleased no one on either side of the property rights debate, the Court established what is now the most decisive test in regulatory takings case law. While the ruling in Yee emphasized the complicated process necessary to properly determine whether a government regulation deserves compensation, Lucas simplified the issue enormously, and some feel, inappropriately. In this landmark case, Justice Scalia, in writing for a six-person majority, established that a government regulation would result in a taking only if the property had been rendered "valueless" as an effect of said regulation.

In 1986, developer David Lucas paid nearly one million dollars for two beachfront lots in South Carolina. Two years later, the South Carolina legislature passed the Beachfront Management Act, an environmental effort to protect the delicate landscape of South Carolina's coasts. However, this legislation prevented Lucas from building the two homes he had planned on his property. Lucas argued that the legislation represented a taking because he was no longer legally permitted to build on his property (which had been purchased before the passage of this legislation). Lucas did not argue that the legislation was not a legitimate use of the state's police power; instead, he argued that the legislation had rendered his property "valueless" and as such, was due proper compensation under the Fifth Amendment's takings clause. The trial court agreed with Lucas' assessment, and ordered the state to pay Lucas over one million dollars in damages. However, the South Carolina Supreme Court reversed the decision, noting the valid and laudable purpose behind the environmental legislation. The court ruled that when legislation is designed "to prevent serious public harm," the owner of the affected property is not entitled to compensation.

The South Carolina Supreme Court also ruled that the government should not be subject to takings claims as a result of this particular piece of legislation, for its aim was to prevent "harmful and noxious uses" of property. Historically, this phrase has been used to advance government objectives of limiting inappropriate uses of property without being required to compensate owners for this limitation. However, the Supreme Court disagreed with the South Carolina Supreme Court in regards to its classification of the legislation as preventing "harmful and noxious uses," noting that virtually all human activity causes some damage to the environment and natural landscape. More importantly, the Supreme Court ruled that the "harmful and noxious use" principle cannot always be used to justify the government not compensating the property owner in situations of "total takings," where the property is rendered valueless. Otherwise, the Court ruled, the government would rarely be forced to compensate.

The Court was quick to clarify this principle, however, and illustrated several examples in which a total taking based on noxious use or nuisance principles would not require compensation. For example, if a lakebed owner is denied a permit to develop landfills which would have the effect of flooding the neighbors' land, his property may be deprived of all economically beneficial uses. However, if this harmful use was not previously allowed under state property and nuisance laws, the property owner is not due compensation for this regulation.

The Supreme Court reversed the decision of the South Carolina Supreme Court, finding that, since the legislation had deprived Lucas of all value from his property, the situation constituted a taking and he was therefore due full compensation. This was one of the most decisive rulings the Court had ever made on regulatory takings, and the development of this simple test of partial versus total takings infuriated a wide variety of issue and advocacy groups. Many, in reaction to the ruling, felt that the complicated issue of regulatory takings did not warrant such a simple test, which does not easily allow for exceptional circumstances. While Lucas made life a lot easier for lower court judges who now have a simple test to rely upon when ruling on regulatory takings cases, many feel that these issues are not appropriately analyzed by such a test.

Many property rights groups were infuriated that the Court so decisively ruled that partial takings do not necessitate compensation. A paper published for The Cato Institute, a Libertarian think tank, argued that the distinction between partial and total takings is "arbitrary and inconsistent with the purposes of the Takings Clause." For example, a property owner losing 50 percent of the value of his property may lose much more financially than another property owner losing 100 percent of the value of a less expensive property. These advocates argued that prior Supreme Court cases had allowed for compensation in partial takings cases, and therefore Lucas went against established precedent (see Jacobs v. United States, 1933, and Griggs v. Allegheny County, 1962). Roger Pilon, Director of the Center for Constitutional Studies for Cato, argued that "the Court has gone about its business backwards. Rather than ask whether there has been a taking and then ask what the value of that taking is, the Court asks what the value of the loss is to determine whether there has been a taking." See Roger Pilon's congressional testimony here.

However, the reasoning displayed by the Court and property rights groups such as the Cato Institute struck panic in the heart of environmentalists. The Georgetown Environmental Law and Policy Institute called the principle established in Lucas a "virtually automatic rule" which may prevent future environmental progress. Environmentalists fear that governmental bodies may be less likely to regulate properties for environmental and protectionist purposes in fear of forced compensation, which would then have devastating environmental effects. More compensation would result in less regulation, the exact goal of conservatives! Also, courts may be too quick to judge a taking as rendering a property entirely "valueless," when in fact the regulation represents only a partial taking, in order to neatly stick to the test established in Lucas and deliver a quick and easy verdict. Also, courts may be sympathetic to the claims of property owners who have lost significant property value, and can classify their loss as a "total taking" in order to guarantee compensation when it may not in fact be deserved. Raymond Coletta, in his essay on the biological and cultural basis of regulatory takings, suggested that this may have indeed been the case in Lucas. (See Raymond Coletta's essay here.) In fact, many groups have argued that the situation involving the Lucas property was only a partial taking, as there were other uses for which Lucas could have utilized his property without building the homes he had planned.

Please see Lucas v. South Carolina Coastal Council for the entire decision.

Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency (2002)

In what the Georgetown Environment Law and Policy Institute heralded as "the first clear win for environmentalists in a Supreme Court regulatory takings case in fifteen years," the Court ruled in April 2002 that a building moratorium does not represent a taking under the principles established in Lucas.

Previous major victories for environmentalists and local governments included Penn Central v. New York City (1978), which held that local governments could restrict use for historic preservation or landmark purposes in the legitimate public interest without fear of compensation. Also, in Agins v. Tiburon (1980), the Court held that zoning requirements for development as part of a comprehensive open space program did not limit the developer significantly enough to justify a takings claim. That is, if a locality limits building on a parcel to a certain number of homes of a certain variety, the Court held that it is within their power to do so.

In Tahoe, the Tahoe Regional Planning Agency (TRPA) had issued a 32-month building moratorium on the Lake Tahoe basin area while formulating a comprehensive land use plan for the region. Affected real estate owners argued that the moratorium constituted a taking under Lucas because their land had been rendered (though temporarily) valueless. The District Court found that TRPA had temporarily made this land economically inviable, and as such, held that the moratorium represented a taking which required compensation. The decision was reversed by the Ninth Circuit of the U.S. Court of Appeals, which held that Lucas applied to only the narrow and rare instance of when a governmental regulation removed all value from a given property permanently. The Supreme Court agreed and affirmed this ruling.

In First English Evengelical Lutheran Church v. County of Los Angeles (1987), the Court had held that if a temporary taking had occurred, the property owner was due compensation for the period of time in which he was subject to the regulation. However, the Court made the important distinction that in First English, the Court addressed the issue of how to measure the amount of compensation once a regulatory taking is established, but did not engage in a discussion of whether a temporary regulation is indeed a taking. Therefore, the Supreme Court, found that First English did not apply in this case.

Had the Supreme Court found otherwise in this case, the results for planners and local officials would have been nothing short of disastrous. If the Court ruled that a moratorium constituted a taking, virtually all other elements and natural delays of the planning process would have fallen into the deadly category of "temporary takings." Delays relating to acquiring building permits, approving plans, and other such reasonable matters, may have fallen into this classification at the great expense of local governments, who would then have felt rushed to approve projects in order to escape a temporary takings claim. The Court understood this potential effect, and held that the cautious nature of the building process must be preserved for the good of our communities. While the Court suggested that a nearly three-year moratorium was perhaps excessive, they cautioned that it was dangerous to fashion a general rule of takings upon it, and urged the courts to use discretion in such cases so as to not establish a such a precedent.

Also of great importance in Tahoe, the Court reaffirmed its "parcel as a whole" rule, which requires courts to evaluate a takings case in regards to the property owner's entire property, rather than merely the parcel directly affected by a regulation. This rule applies in several dimensions: first, the spatial, the physical amount of property affected; second, the functional, the intensity of the regulation; and third, the temporal, which is addressed here in Tahoe. While already established, the Court's affirmation of this tri-pronged rule after an apparent reconsideration of it, is a large victory for environmentalists. The Court also reaffirmed the important distinction between physical takings and regulatory takings, and the very different standards used to evaluate each.

Some have argued that Tahoe may make the principles established in Lucas meaningless. While in Lucas the Court found that a property must be rendered valueless for a taking to have occurred, the Court did not quantify their interpretation of "valueless." But here in Tahoe, the Court held that a given property must be deprived of 100 percent of its value to justify compensation; even a 95 percent decrease in value was insufficient to garner the benefits of Lucas. Because most properties, even if deprived of almost all of their value, do not lose 100 percent of their value, some have argued that this principle established in Tahoe seriously weakens the effects of Lucas.

Please see Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency for the entire decision.

 

Lower Court Cases

Takings are one of the hottest issues being addressed in the courts today, and the vast volume of decisions handed down on the issue on a monthly basis demonstrates how complex, minute factors can complicate what would otherwise be a simple takings case. Please visit the Georgetown Environmental Law and Policy Institute for a comprehensive listing and analysis of state and federal rulings from the past several years.

Takings and Congress

In the past decade, several important pieces of takings legislation, which would have had devastating effects for environmentalists, have been proposed, developed, but then ultimately, have failed.

In the 104th Congress, as part of the GOP's "Contract with America," Congress considered legislation which would have redefined a taking as virtually any regulatory restriction (besides nuisance restrictions) which resulted in any degree of lost property value, an idea which is clearly not in line with Supreme Court reasoning on the matter. The measure passed in the House, but was never fully considered by the Senate, and the bill died.

However, property rights advocates and those in the pockets of special interests in the House were unrelenting. The next year, the House voted in support of another takings bill, this time supported heartily by the National Association of Home Builders. In this frightening legislation, developers would not have to go through the entire local review process with a building complaint before taking the locality to court. It also allowed such groups to sue local governments directly in federal court, without having to go through the state court channels. Developers supported this measure because the higher the level of the court, the less likely the court is to sympathize with the position of the local government. This legislation, once again, clearly contradicts the findings of the Supreme Court. In Williamson County Regional Planning Commission v. Hamilton Bank of Johnson County (1985), the Court ruled that a takings claim is not "ripe" for higher courts until the local review board has issued a final decision; also, all state judicial channels must be exhausted before appealing the case to federal court. Luckily for environmentalists and local governments across the country, the legislation failed in the Senate.

However, this failure did not keep the regulatory takings issue from resurfacing. In 2000, the House passed the Private Property Rights Implementation Act, also known as the Homebuilders Bill. Once again, the legislation tried to redefine when a takings claim is "ripe" by allowing builders to sue local governments earlier and in higher courts than previously allowed. Though passed by the House, once again, the bill died in the Senate when they failed to address the issue before the close of Congress that year.

The Georgetown Environmental Law and Policy Institute (GELPI) notes that support for these measures, which have passed each year in the House, have nonetheless been subject to declining support. The 1995 takings compensation bill discussed above passed with a large margin of 129 votes. The first bill to attempt to redefine the ripeness doctrine passed with 70 votes, while the almost identical legislation of the Homebuilders Bill passed with a margin of only 44 votes. GELPI notes that, "Apparently, the more members of Congress learned about takings legislation, the less they liked it."

Congressional efforts to ease ripeness requirements were likely influenced by a 1998 Congressional Budget Office (CBO) report in which the office delineated how property owners could benefit from changes in how and when their cases were brought to court. Noting the high cost of litigation, length of the judicial process, and the low chance of success, CBO concluded that property owners were at a disadvantage. Therefore, CBO highlighted several plans (such as those included in the legislation discussed above), which would make this process easier, cheaper, and potentially more successful for the property owner; unfortunately, these advances would be at the sake of local government and the sanctity of the planning process. Such plans included relaxing requirements for when a case was ripe to bring to state and federal courts, which would enable a potential bypass of local review boards. Also included were plans to "encourage" property owners and localities to use alternative dispute resolution techniques, such as binding arbitration, to resolve a takings issue, therefore eliminating the need for a court hearing. However, such measures would serve to make local governments much more hesitant to regulate properties in fear of being overturned by binding arbitration or in a federal court in which the case does not really belong. Therefore, environmentalists feel that changing the ripeness standards that currently protect, to some degree, local governments in the legal process, should be vehemently upheld. The Supreme Court continues to reconsider this issue, as it persistently resurfaces in takings cases.

See the entire CBO report here.

There have been a variety of other attempts in Congress to expand the scope of compensable regulatory takings issues, including eliminations of state coastal programs to preserve delicate landscapes, and the removal of local authority to determine land use relating to religious organizations. To date, these measures have failed. Any of these bills, if passed, would have devastating effects on our environment, our ability to protect our communities against harmful private interests, and the role and importance of local government. It is ironic that conservative lawmakers, in trying to advance personal agendas of increased developers' rights and an expanded compensable regulatory takings doctrine, are also abandoning the American principle of state and local rights. By concentrating decision-making at the federal level, these lawmakers are not allowing for local discretion and jurisdiction, at great detriment to the structure of our country. It is absolutely essential that environmentalists and those concerned with local government fiercely oppose any measures to decrease our rights in the realm of regulatory takings. The American Planning Association agrees: "APA generally opposes takings legislation that expands the takings doctrines established by the Supreme Court to the detriment of the ability of local, state and federal governments to protect their citizens. The collective political forces that have joined in support of "takings" legislation have grossly distorted both the frequency and intensity of the occurrence of hardship caused by government regulations." (See the APA website here.)

 

Links

See our other sections on these related issues:

Property Rights

Eminent Domain

Wetlands Regulation

 

Full Texts of Important Supreme Court Cases

Pennsylvania Coal Co. v. Mahon

Yee v. City of Escondido (1992)

Nollan v. California Coastal Commission (1987)

Dolan v. City of Tigard (1984)

Lucas v. South Carolina Coastal Council (1992)

Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency (1992)

Agins v. Tiburon (1980)

Penn Central v. New York City (1978)

First English Evangelical Lutheran Church v. County of Los Angeles (1987)

Williamson Planning Commission v. Hamilton Bank (1985)

Palazzolo v. Rhode Island (2001)

City of Monterey v. Del Monte Dunes at Monterey (1999)

Keystone Bituminous Coal Association v. DeBenedictis (1987)

 

Internet Links

Georgetown Environmental Law and Policy Institute - An absolutely essential site for anyone concerned with the environmental ramifications of the regulatory takings issue. Extensive analysis of takings in court and in Congress.

"The Measuring Stick of Regulatory Takings: A Biological and Cultural Analysis" - Written by Raymond Coletta, Professor of Law at the University of the Pacific. A wonderful analysis of the emotional and cultural basis of the rhetoric surrounding property rights and regulatory takings, as well as a good legal introduction to the issues.

American Planning Association - Visit the APA's website for more information regarding the organization's position on the takings issue, as well as some information regarding takings in the courts and Congress.

Congressional Budget Office Report: "Regulatory Takings and Proposals for Change" - This December 1998 report provides a good introduction to some issues surrounding the regulatory takings debate, and an examination of several proposed congressional measures.

"Regulatory Takings: Implementation of Executive Order on Government Actions Affecting Private Property Use"
This 2003 GAO (General Accounting Office) report provides very useful quantitative data on the levels and frequencies of government compensation for regulatory takings, as well as information about the implementation of President Reagan's Executive Order on the subject.

"Regulatory Takings After Lucas" - Written by Henry Butler, Professor of Law and Economics at the University of Kansas, and published in the Cato Institute's "Regulation" publication. A good example of property rights point of view as applied in a variety of instances

Cato Congressional Testimony - Delivered in 1995 by Roger Pilon, Director of the Center for Constitutional Studies of the Cato Institute before the Subcommittee on Constitution, Committee on Judiciary.