The Taking of Land Part 1

The Supreme Court has ruled that land use regulation is constitutional so long as it “substantially advance[s] legitimate governmental interests” to protect public safety, health, and welfare.  Regulations must follow constitutional due process and equal protection.  Government has a role in setting and enforcing reasonable and common sense laws for the communities in which we live, but no law should trample unfairly an individual’s rights.  There is a balance between respecting individual property owners’ rights and upholding a community’s public needs.  This is the U.S. Constitution at work at the local level through your town’s planning and zoning commission.

The first U.S. Supreme Court case on land use regulations (Village of Euclid v. Ambler Realty, Co., 1926) was about whether limiting the use of property is a kin to the taking of property.  Governmental taking of land is a serious affair.  The Founders of the Constitution knew this well, having witnessed the unjust taking of property by the British government and by the Continental Congress in wartime.

Article V of the Constitution says, in pertinent part “nor shall private property be taken for public use, without just compensation”.  Few words.  Big statement.  Lasting impact.  The Constitution does not say taking of private property by government is prohibited.  It says when private property is taken, government must provide the property owner with just compensation.  This begets the ongoing debates about under what circumstances can government take private property, how to determine just compensation, and when a restriction on the use of property is the same as a physical taking of property.

We all recognize eminent domain as government physically taking private land for a public purpose, such as for constructing highways or building schools.  This is straightforward.  The property is taken.  Just compensation is required.  However, to complicate things, the Supreme Court expanded the circumstances of eminent domain by allowing a municipality to take private residential property and give it to a private developer, for a purpose determined to more benefit the public (Kelo v. City of New London, 2005).  This is controversial.  It allows government to determine that one person’s private property has less community value than is another’s future use of the same property, even if an individual’s property is priceless to them for non-monetary reasons or is the only asset they have.

Eminent domain involves a physical taking of land.  More varied and nuanced is when government regulates private property such that its use by the owner is restricted in part, now or in the future, but the property is not physically taken.  Your town’s land use regulations put limits on what can be done with land and property.  Examples are building height and scope; road and neighboring property setbacks; house distances from wells and septic systems; pollution control; business hours; lighting; number of people living in a house or being at an event; and road placement dimensions.  These are common types of zoning regulations, which limit to some degree, and to differing degrees, the use of private property.  Each one of these regulations serves a community by promoting public health, welfare, and safety. This type of government action can cause a regulatory taking of property.

For the first part of this article series, let me focus on regulatory takings because they are a prime reason a property owner objects to or sues in court over a municipal agency’s decision regarding land use.

Not everything is black and white when it comes to the realities of land use and land use regulations.  This is why the U.S. Supreme Court itself has struggled over the years to define a one-size-fits-all ruling.  Rather, the Supreme Court has chosen to look at the individual aspects of each case, using what it considers to be a set of pertinent factors regarding how it views the Constitution’s Taking Clause.  Even so, the Supreme Court’s opinions have changed over time, reflecting the difficulties in weighing one factor of a case in relation to another when it comes to determining government’s regulatory property restrictions even if the property is not physically taken.

The Supreme Court has used evaluation criteria to determine when a regulatory taking becomes the same as a physical taking of property: 1.) the economic effects on the owner, 2.) the extent of interference with reasonable investment-backed expectations regarding the property, and 3.) the nature of government’s action.

The “economic impact” criterion looks at the actual fair market value of the land before and after a regulation’s effects take place.  Determining a specific future value can be challenging to pin down, even if it is readily acknowledged that the future value will be diminished from the current value.  But, how much of a financial diminishment is needed before a possible property taking has occurred?  10%? 50%? 100%?  In the 1926 Euclid case, the decrease in value of the land affected by the land use regulation was 75%.  The Supreme Court has set a higher threshold of diminishment: 90%.

A loss of a land’s value is not in and of itself a reason to declare a regulatory taking.  There must be a concurrent loss of using the land for another economically viable use.  If a parcel of land is restricted so that condominiums cannot be built, but could still be used to build single-family homes, then the property may have less value, but it still retains some value.  The parcel of land has to have some potential use before a regulation affects it.  If a parcel of land is not permitted for commercial buildings, yet it never could be developed for anything at all due to other reasons (it has so much unbuildable acreage, such as wetlands, that the remaining acreage is too small to build upon), then it never had development economic value.

The “reasonable investment-backed expectation” criterion looks at the future use and value of property.  This is important because land is bought to use not just in the present, but also in the future.  This type of property value can be determined in different ways.  Land can retain or increase in significant value merely by holding onto it.  A homeowner uses the land’s value to get a home equity loan.  Land may appreciate in value if it can be used for other purposes.  A farmer uses land as collateral to obtain loans to keep annual agriculture operations going.  Land may become more valuable because of its location.  A developer buys land with a scenic view to build homes or land near a main road to construct offices.  All of these land uses have different degrees of future value. 

Investment-backed expectations do not mean that a property owner can be compensated for a loss of land value if the property was bought when a regulation was already in existence.  The property owner knew ahead of time of the land use regulations, and should have factored such into a decision to buy the land.  Likewise, the need to obtain required zoning, building, health, and fire safety permits does not affect adversely the property’s value if the need for permits was already present before the owner bought the land.  What this all means is that when a land use is already regulated before the owner decides to change a property’s use, then as long as the regulations are constitutional, no adverse investment-backed expectation has occurred because the expectation should have taken the regulations into account. 

This is different from when a property owner has land and intends to use it for a different purpose based upon the regulations in existence at the time of purchase or ownership, and the regulations subsequently change in a manner that limits or prohibits the intended future use.  This could be an unfair situation to the landowner when the rules are changed after the fact.  It is why when regulations are changed or created, existing, legally conforming uses are usually grandfathered so as to allow them to continue as is, unless the use changes.  Sometimes, regulation changes can serve an over-riding public protection purpose, such as prohibiting buildings too close to drinking water supplies or limiting the number of people who can live safely in one residence.

Another regulatory situation is when a land use agency denies a landowner’s application for a particular land use based upon existing regulations.  The denial may cause a loss of value of the land for the owner.  If the land use does not meet the regulations’ stated requirements, then the application is denied.  However, if the land use is permitted by the regulations, and if the application meets the requirements of the regulations, then the application must be approved.

The “nature of the government action” criterion gets to the fundamental purpose of the regulation itself.  Government must show a necessary reason for a regulation, such as serving a defined public purpose and goal.  Furthermore, it must show it has acted within its statutory authority.  These provisions protect individual landowners from government because government cannot act without limits and accountability – the Constitution speaks to this concept.

Land use regulation and decision making is not easy.  Some actions may benefit a land use applicant and others in a community, such as building a grocery store that sells food and provides jobs.  Some actions may benefit an applicant but not others, such as developing land with a scenic view to build office buildings.  Some actions may not benefit an applicant but helps others, such as prohibiting large industrial operations being built next to houses in order to prevent noise and pollution harm.  Just like the Supreme Court, your town’s planning and zoning commission looks at the individual characteristics of each land use application, looks at the land use in the context of the neighboring areas and the entirety of your town’s land, and uses a set of defined criteria to make the best decision possible, balancing complimentary and competing factors.    

Using your land as you see fit is important.  There are rules that govern land use in order to protect the common good of your community, which should be focusedBookmark: #_GoBack in scope so as to meet reasonable and common sense public goals.  Justice Oliver Wendell Homes, Jr., said, “the general rule, while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking”.

In Part 2 of my article series, I will explore with you two other aspects of the Takings Clause: temporary takings and categorical takings.

Dr. Jeffrey A. Gordon is Chairman of Woodstock’s Planning and Zoning Commission.  This article does not reflect any official statement of the Commission.  Check out www.JeffreyGordon.com.

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