Applying Penn Central - The Search for Equity in an Unfair World
by Elaine L. Spencer
June 9, 2011
The American economy and indeed American notions of what freedom means are heavily built upon the concept of private property. Private property as it has been known in the United States is unique in much of the world – it is unlike the feudal background of European property laws, certainly unlike the state control of property in Communist countries, even countries like China that are in transition to something approximating a free market, and unlike property laws in much of South America where the property rights of indigenous people often overlap and are diametrically opposed to the property rights of corporate interests in the same piece of real estate. And so the Fifth Amendment’s injunction that private property shall not be taken for public use without the payment of just compensation has been viewed in American civics courses for generations as a bulwark of American law.
On the other hand, as the country became more populated, more industrialized, and as we have come to understand the importance of things like wetlands, tidelands and channel migration zones to the public welfare as a whole, the scope of the police power and government’s regulatory authority necessarily increased. Government regulations that would have been considered unthinkable in the Nineteenth Century became accepted as essential in the Twentieth Century.1 The courts, and particularly the United States Supreme Court, was extremely cautious about potentially overstepping its bounds in protecting private property and thereby inappropriately chilling the efforts of local governments to respond to changing conditions.
The result was that for most of the last half of the Twentieth Century the task for a property owner’s lawyer attempting to determine whether their client had a viable regulatory taking claim was to read cases where the property owner lost and tried to decide whether anything about their client’s case made it more likely that they would win. The United States Supreme Court spent years avoiding reaching the merits of regulatory takings cases based on ripeness and jurisdiction arguments. See, e.g., Williamson County Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S. Ct. 3108, 87 L. Ed. 2d 126 (1985)(holding that a developer’s taking claim was not ripe because it had not obtained a final administrative decision as to what would be permitted on its property and because it had not sought compensation for any taking under state law); MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, 106 S. Ct. 2561, 91 L. Ed. 2d 285, reh’g denied, 478 U.S. 1035 (1986)(holding that just because a “relatively intensive” use of land is turned down does not mean that a takings case is ripe if a less intense development might be approved and would still allow economically viable use of land). And when the Supreme Court actually addressed a regulatory taking claim, it more often than not decided that the property owner before it had not suffered a taking requiring compensation – even though in dicta it indicated that a regulatory taking under similar circumstances might be possible.
A. Penn Central outlines the bounds of the conversation on regulatory taking.
One such case was Penn Cent. Transp. Company v. City of New York, 438 U.S. 104 (1978). There the Court held that New York City’s landmarks preservation law did not create a compensable taking of Penn Central’s rights in Grand Central Station by prohibiting the construction of a 50-story building cantilevered above the terminal.
The Court in Penn Central can be credited with at least “fessing up” to the difficulty it was having in figuring out how to distinguish a regulation that was within the police power of the government to prohibit uses of property that are harmful to the public health, safety and welfare or require uses that are conducive to the health safety and welfare, and those regulations that require compensation.
The question of what constitutes a “taking” for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty. While this Court has recognized that the “Fifth Amendment’s guarantee . . . [is] designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole, this Court, quite simply, has been unable to develop any “set formula” for determining when “justice and fairness” require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons. Indeed, we have frequently observed that whether a particular restriction will be rendered invalid by the government’s failure to pay for any losses proximately caused by it depends largely “upon the particular circumstances [in that] case.”
438 U.S. at 123-124 (authorities omitted). The Court went on to describe what has been called “the Penn Central test.” In the ordinary parlance of a “test,” it is not a “test” at all, but at most a discussion of things that a court should evaluate in considering a regulatory taking claim. How the Court should think about those factors depends on the particular case.
In engaging in these essentially ad hoc, factual inquiries, the Court’s decisions have identified several factors that have particular significance. The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. See Goldblatt v. Hempstead, supra, 369 U.S. at 594, 82 S.Ct., at 990. So, too is the character of the governmental action. A “taking” may more readily be found when the interference with property can be characterized as a physical invasion by government. See, e.g., United States v. Causby, 328 U.S. 256, 66 S. Ct. 1062, 90 L.Ed. 1206 (1946), than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.
Id. at 124.
B. Palazzolo holds that Penn Central has meaning, but doesn’t elucidate that meaning.
While subsequent cases almost immediately started referring to that as the “three-part” Penn Central test (dividing “economic impact of the regulation” and “extent to which the regulation has interfered with distinct investment-backed expectations” into two parts of the “test”), it was not until Palazzolo v. Rhode Island, 533 U.S. 606, 121 S. Ct. 2448, 150 L. Ed. 2d 592, on remand, 785 A.2d 561 (2001), 23 years later, that the Supreme Court demonstrated that in fact, a regulatory taking might be found based on an ad hoc evaluation of the Penn Central factors, even where the regulation did not take all economically viable use of the property and did not include a physical invasion of the property.2
Palazzolo involved a regulation preventing the filling of salt marsh tidelands. Palazzolo had acquired his property in 1959, at a time when many similarly situated beach properties in his community had been filled or were being filled. Palazzolo had owned the property in various forms over time – first with other investors, in a corporate form, and later, after he bought out the other investors and the corporation was dissolved, as a private individual. He had made various attempts to develop the property as a private beach club over time, which the Court described as “sporadic.” Each of his proposals ran into objections, and each resulted in a scaling back from the previous proposal. Eventually though it was clear that he was not going to be able to fill the wetlands and thus he wasn’t going to be able to build the beach club, and because the property was overwhelmingly wetland, he claimed it had no economically viable use. The Rhode Island Supreme Court found that Palazzolo’s case was not ripe, that because he took individual ownership of the property after the wetland regulation was already in place he did not have “reasonable investment-backed expectations” that were affected by the regulation, and that because there was one small corner of the property that was upland, upon which a single house could be built, he was not deprived of all economically viable use of the land.
The U.S. Supreme Court reversed the Rhode Island Court. It found his case ripe – there was no remaining question as to whether he could fill the wetland. It also found that the fact that when he obtained sole ownership of the property the wetland regulation was already in place did not bar Palazzolo’s claim.
The State may not put so potent a Hobbesian stick into the Lockean bundle. The right to improve property, of course, is subject to the reasonable exercise of state authority, including the enforcement of valid zoning and land-use restrictions. . . . The Takings Clause, however, in certain circumstances allows a landowner to assert that a particular exercise of the State's regulatory power is so unreasonable or onerous as to compel compensation. Just as a prospective enactment, such as a new zoning ordinance, can limit the value of land without effecting a taking because it can be understood as reasonable by all concerned, other enactments are unreasonable and do not become less so through passage of time or title. Were we to accept the State's rule, the postenactment transfer of title would absolve the State of its obligation to defend any action restricting land use, no matter how extreme or unreasonable. A State would be allowed, in effect, to put an expiration date on the Takings Clause. This ought not to be the rule. Future generations, too, have a right to challenge unreasonable limitations on the use and value of land.
Nor does the justification of notice take into account the effect on owners at the time of enactment, who are prejudiced as well. Should an owner attempt to challenge a new regulation, but not survive the process of ripening his or her claim (which, as this case demonstrates, will often take years), under the proposed rule the right to compensation may not be asserted by an heir or successor, and so may not be asserted at all. The State's rule would work a critical alteration to the nature of property, as the newly regulated landowner is stripped of the ability to transfer the interest which was possessed prior to the regulation. The State may not by this means secure a windfall for itself.
533 U.S. at 627. The Supreme Court agreed with the Rhode Island Supreme Court, however, that the fact that the property retained $200,000 in value as the site for a single home meant that the regulation did not cause a Lucas taking. As a result, the Supreme Court reversed and remanded the case for a determination of whether there was a regulatory taking under Penn Central.
The upshot is that the Court necessarily concluded that Penn Central could provide a basis for a regulatory taking, even where the property has continuing economic value. That squarely presents, however, the question left completely undiscussed by Penn Central, which is how in an “essentially ad hoc factual inquiry” a court should evaluate those “factors” Penn Central set forth. The Supreme Court’s decision in Palazzolo does not answer that question, but left it to the lower court on remand.
C. Recent federal cases are ad hoc and fact-specific, but shed light on some parts of the Penn Central test.
1. Florida Rock Industries V – after 15 years, the fifth decision is a judgment for the property owner.
Regulatory taking cases are not for the faint of heart. Through most of the time when the United States Supreme Court was developing its current regulatory taking jurisprudence, a company called Florida Rock Industries was litigating the issues in the Federal Court of Claims. Florida Rock Industries bought 1,560 acres of largely wetland in 1972 for the purpose of mining limestone from beneath the wetland. That purpose, if at least as disruptive as most mining, was entirely legal in 1972. The 1974 amendments to the Clean Water Act prohibited the dredging or filling of wetlands without a Section 404 permit, however, and because Florida Rock’s proposed activities did not meet the standards for the issuance of a 404 permit, it had been foreclosed from using the vast majority of its property based on its investment-backed expectations. The case has resulted in five major federal decisions between 1985 and 1999. (Florida Rock Indust. Inc. v. United States, 8 Cl.Ct. 160 (1985)(Florida Rock I), rev’d and remanded, Florida Rock Indus., Inc. v. United States, 791 F.2d 893 (Fed. Cir. 1986), cert denied, 479 U.S. 1053 (1987)(Florida Rock II), on remand, Florida Rock Indus., Inc. v. United States, 21 Cl.Ct. 161 (1990)(Florida Rock III); Florida Rock Indus. Inc. v. United States, 18 F.3d 1560(Fed. Cir. 1994), cert denied, 513 U.S. 1109(1995)(Florida Rock IV), and Florida Rock Indus., Inc. v. United States, 45 Fed. Cl. 21 (1999)(Florida Rock V). The Court’s discussion in Florida Rock V finally addressed the Penn Central test, and found a taking requiring compensation.
The Federal Circuit’s decision in Florida Rock IV had found that there was a “speculative market for property comparable to Florida Rock’s land,” 45 Fed.Cl. at 31, and therefore Florida Rock V started with the proposition that economically viable use of the land remained after the Clean Water Act amendments.3 There was no categorical taking of Florida Rock’s land. Nonetheless, Florida Rock V found a 73% diminution in value from the regulation.
The court found a 73% reduction in value to be a substantial diminution in value, but then had to deal with cases that have said that “mere diminution in value” is not enough to constitute a taking. Courts have found no taking where a regulation included mere diminution in value than the court found Florida Rock would suffer. See, e.g., Euclid, 272 U.S. 365 (1926)(no taking despite 75% diminution; Hadacheck v. Sebastian, 239 U.S. 394, (1915)(no taking despite 87 1/2% diminution). Those cases have led some governmental bodies to posit that if they can leave a landowner with some minor value, their regulation could not be a taking. The Florida Rock V court explained that “mere diminution” is not a quantitative evaluation – it means that “diminution alone,” in the absence of other factors, does not constitute a taking.
The police power may necessarily limit or reduce the value of some property owners’ property. But all citizens and all property owners also benefit from the police power.
The economic impact of certain land use controls, when shared by other members of the community, has been held to be non-compensable. “When there is reciprocity of advantage, paradigmatically in a zoning case . . . then the claim that the Government has taken private property has little force: the claimant has in a sense been compensated by the public program ‘adjusting the benefits and burdens of economic life to promote the common good.” “Mere diminution’ occurs when the property owner has received the benefits of a challenged regulation, such that an ‘average reciprocity of advantage’ results from it. . . .
A ‘partial taking occurs when a regulation singles out a few property owners to bear burdens, while benefits are spread widely across the community,’
45 Fed. Cl. at 36-37 (authorities omitted). Although that discussion necessarily brushes over into the second test – the “character of the governmental action” – what it suggests is that as with any 3-factor test, the weight to be given to different factors will vary depending on the facts of the case, but diminution in value alone is not sufficient to constitute a taking.
The Florida Rock V case also clarified a point that is implicit but not explicit in Lucas. In Florida Rock V the government proved that there was a market for the land consisting of speculators who were prepared to buy it for a quarter of its unregulated value, intending to hold the land for some indefinite period until the Clean Water Act regulations were removed, and it could be used to mine limestone. There was also an argument that “Florida Rock could also use its land for the observation of wildlife or maybe even for hunting.” That, however, was not a use that would prevent a taking. “However, these are not commercially valuable uses.” 45 Fed. Cl. at 37.
Turning to Florida Rock’s “reasonable investment-backed expectations,” the court rejected the argument that state and local regulations would have precluded the mining, and therefore federal regulations did not impair Florida Rock’s investment-backed expectations. “The mere presence of such regulatory programs does not affect our analysis.” But it did not have to deal with the situation where a landowner buys land knowing that regulations in place would restrict its use. Florida Rock bought its land in 1972, at a time when its proposed mining was entirely legal. The court did note that unlike the regulation in Penn Central, which did not interfere with the use the owner had made of the property for decades – a train station – the regulation here directly prohibited the primary purpose for which the company had purchased the property. These were “distinct investment-backed expectations,” squarely rendered impossible by the regulation.
Turning finally to the “character of the governmental action,” the court focused on two things. 1) The regulation was not to address a health or safety risk. It was to protect the environment. 2) It not only provided widespread public benefit, at considerable cost to Florida Rock, it was not even applied equally to all owners of similarly situated properties. The government had apparently drawn a line, to the east of which it would allow similar operations to occur, and to the west of which it would protect the wetlands. Florida Rock was on the west side of the line. But the very fact that the activity was permitted elsewhere suggested that the government action did not fall into the category of nuisances or other activities that may have been prohibited under the common law.
The government made a permissible policy choice that this land should benefit the public’s supply of wetlands. This court cannot review or scrutinize or second guess this policy choice. Plaintiff does not ask the court to do this anymore than in a condemnation proceeding a court could review or second guess a need for a road or a school. The court must, however, decide whether this action has taken the plaintiff’s property as effectively as if it had been condemned.
45 Fed.Cl. at 40.
Having reviewed each part of the 3-part Penn Central test, the court found that all three put together constituted a regulatory taking. The court only had before it 98 acres of the total property, for which an actual permit had been denied.4 The court awarded $752,444 in damages for the taking of the right to mine the 98 acres, plus interest from October 2, 1980, when the permit was denied, plus attorneys fees, and encouraged the parties to settle the claims as to the remaining 1462 acres, which the court now presumed would suffer a comparable fate.
2. Guggenheim v. City of Goleta – the Ninth Circuit finds a facial taking under Penn Central, then changes its mind.
Guggenheim v. City of Goleta, 582 F.3d 996 (2008) was a facial challenge to a mobile home park rent-control ordinance. Under the ordinance, the owner of a mobile home park was prohibited from raising rental rates to mobile home owners more than a fixed percentage of the CPI, with a rigid additional formula for recovering the cost of improvements to the park. The City of Goleta was facing skyrocketing increases in housing prices, and the regulation was intended to protect low-income housing. But because a mobile home owner could sell their unit to someone else with the rent-controlled rent in place, the effect was that the mobile home would sell for more than if the new owner would be subject to rent increases from the mobile home park owner. As a result of the ordinance, a mobile home that might sell for $12,000 based on its intrinsic value, instead sold for over $100,000, with the difference being the capitalized value of the rent increases that the ordinance protected the new owner from. The result of the ordinance was a one-time wealth transfer from the mobile home park owner to the owners of the mobile home when the ordinance went into effect.
In a split decision the Ninth Circuit initially reversed the trial court and found a facial taking. It was clearly impressed by two factors in particular – first the extent to which the ordinance took significant value from the park owners and transferred the value to the mobile home owners at the time the ordinance was adopted. “It has long been accepted that the sovereign may not take the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation.” 582 F.3d at 1021 (quoting Kelo v. City of New London, 545 U.S. 469, 477 (2005)) Second, the ordinance put a burden on a very limited number of property owners – the people who own mobile home parks – to address a broad societal problem of the lack of low income housing. The court found it was a classic case where government was “forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.5” 582 F.3d at 1028.
There were two unique issues that the court had to address in Goleta, however. The first was, in a facial challenge, what evidence can a court actually consider? Both parties had offered economic expert testimony about the impact of the ordinance on the owners. But was that proper? In an “as applied” challenge to an ordinance the court can clearly consider all sorts of evidence about how the ordinance impacts the property. But does a “facial” challenge mean you can only look at the face of the ordinance and that a court cannot receive evidence about its impact. The Court’s resolution was to hold that the court can receive evidence that shows that the “mere enactment” of the ordinance constitutes a taking.
The proper inquiry in a facial challenge is not whether the property owners can demonstrate that property has been taken without providing evidence beyond the text of the regulation; the inquiry is whether the ‘mere enactment’ of the regulation constitutes a taking. Thus, in a takings claim we must look not only at what the statute says, but also at what its mere enactment does. At a minimum, we must look to the general economic principles that allow us to interpret the statute’s effect, so that we may understand the regulation’s general scope and dominant features. In addition, there must be a way to understand the economic impact on the complaining property owner. A property owner who is not permitted at least to present evidence that proves that he has actually suffered the kind of economic harm of which he complains would be precluded from even proving his own standing to bring the claim- the property owner must be permitted to adduce evidence that he has suffered the injury for which he seeks redress.
582 F.3d at 1017.
The second issue was how the court should analyze the “distinct investment-backed expectations” of the plaintiffs, who purchased their property at a time when it was in the county, before Goleta was incorporated, and who bought when the county had a similar ordinance in place. The court struggled with the fact that on one level, the park owners got what they expected to get. On the other hand, Palazzolo had held that the fact that Palazzolo did not acquire sole interest in the property until the regulations he challenged were in place did not bar his claim. The three-judge panel held that Palazzolo meant that the owners who took ownership after a rent control ordinance was in place could bring the suit that their predecessors could have brought.
On rehearing, 638 F.3d 1111, cert. denied, 2011 WL 884881 (U.S. May 16, 2011), an en banc panel vacated the three-judge panel’s decision and affirmed the trial court’s grant of summary judgment for the City. The en banc panel, with a 3-judge dissent, found that the property owners, who purchased the property while it was subject to rent control, could have no “distinct investment-backed expectation” that the rent control ordinance would be repealed.
A landlord buys land burdened by lease-holds in order to acquire a stream of rents and the possibility of increased rents or resale value in the future. The stream already suffered a reduced flow when the Guggenheims bought it, so what they paid would reflect the flow that the law allowed. The Guggenheims might conceivably have paid a slight speculative premium over the value that the legal stream of rent income would yield, on the theory that rent control might someday end, either because of a change of mind by the municipality or court action. But that premium could be no more than a speculative possibility, not an “expectation.” Speculative possibilities of windfalls do not amount to “distinct investment-backed expectations,” unless they are shown to be probable enough materially to affect the price
Id. at 1120-21. The Court went on to note that the people who really did have investment-backed expectations were the mobile home owners who had paid a premium for their mobile home after the rent control ordinance had been adopted. Ending rent control would create a windfall for Guggenheim at their expense.
It is fair to assume that this will be an area of continuing development of the law of regulatory taking. Although the en banc panel’s reasoning is hard to argue with, the three-judge panel also made strong arguments in the opposite direction. And, the en banc panel left the law where the regulatory taking claim depends on when a property owner bought their property, implying that the ordinance might take property from one owner, requiring compensation, but not from another owner.
3. Rose Acre Farms, Inc. v. United States – protection of public health and safety doesn’t result in a taking.
The most recent Federal Circuit case coming out of the Court of Claims is Rose Acre Farms, Inc. v. United States, 559 F.3d 1260, cert. denied, 130 S.Ct. 1501 (2010) (Fed. Cir. 2009). There the Federal Circuit reversed a takings judgment, and held that no taking had occurred.
Rose Acre Farms is a major producer of fresh eggs, with 112,000 laying hens in three farms, producing several million eggs annually. It suffered injury when for a period of about two and a half years some of its flocks were subject to regulations that allowed their eggs to be sold only to the pasteurized market as a result of salmonella being found in the flocks. Rose Acre claimed its eggs and its hens were “taken.”
The Federal Circuit’s decision is significant for two reasons. First, its discussion of the measure of the “economic impact of the regulation” will affect property owners who want to claim lost profits as a result of the government’s action. The court rejected lost profits as a measure of impact.
Second, having addressed at length the economic impact and reversed the Court of Claims decision that the impact was significant, the Court went on to address what was probably the larger problem with Rose Acres’ claim. That is that while we have seen a huge increase in the scope of government regulation during the Twentieth Century that has spawned the whole concept of regulatory taking, government regulation to protect the health of food being sold goes back to at least the Twelfth Century. See, 559 F.3d at 1279. The “character of the governmental action” factor was simply overwhelming under the facts of Rose Acre to any of the other factors.
D. Practice Thoughts, in Somewhat Random Order.
Regulatory taking law remains the area of law concerning protection of constitutional rights where the courts are the most tone deaf to actually protecting constitutional rights. Very few property owners can undertake decades of litigation to vindicate their rights, with multiple trips not just through the administrative process but up and down from trial court to appellate court and back. Most landowners suffering a regulatory taking will have no protection because they cannot afford the cost of vindicating their rights. That phenomenon fuels the property rights movements and leads to arguably much more serious outcomes than if government would figure out how to pay people when it takes their property.
Understand that “precedent” is only modestly helpful in regulatory taking cases. The single most universal thing the Court said in Penn Central is that whether or not a regulation requires compensation because of a taking “depends largely upon the particular circumstances of that case.” 438 U.S. at 124. So the differences of the case in front of you from the cases previously decided will be more important than the similarities. The challenge is to properly figure out how to generalize from the prior ad hoc decision to the one you have to address.
The problem, of course, is that the intersection between the proper, uncompensated scope of the police power or other government regulation and the Fifth Amendment’s requirement of just compensation for the taking of property is not subject to a bright line test. There are no Miranda warnings that can be spelled out.
In the end, the three part test of Penn Central is perhaps less instructive than what the Court said before laying out those three factors. The issue is “fairness and justice.” What sorts of burdens should be borne by the public as a whole and what sorts of burdens is it appropriate to assume each property owner should bear because they also receive a “reciprocity of advantage” from the regulations? What did the property owner have a right to expect, not just when they bought the property, but over the period that they have owned it?
Regulatory taking law needs to recognize the different characteristics of property owners. There remain in the world long-term property owners, who husband their property over decades or even generations. Their investment-backed expectations may (or may not) evolve over time, but the expectations tend to be very long-term. On the other hand, there are developers whose entire business model is premised on holding any piece of real estate for the shortest possible time. Government attorneys tend to want to paint both property owners with the same brush, the result of which is to favor developers with short-term interests. Regulatory taking law should not be allowed to develop to the prejudice of land owners who hold their property over long periods. It would be helpful if an “important” court would say that. It is tragic to see an 84 year-old man assailed as being a “developer” who was “too stupid” to have developed his property when everyone else did – as happened in the last regulatory taking case I had. There also – at least in the state of Florida – may be investors who are willing to buy land that they know to be highly regulated, on the speculative hope that the regulation will someday be repealed. Those owners should not be able to come in later and complain – but exactly how to reconcile their situation with the Palazzolo situation will be a subject of future litigation.
Most taking cases need to be settled, because the government has lawyers on the payroll and property owners usually don’t. That means that the task for a plaintiff’s lawyer is to 1) only take good cases, and 2) focus on the equities early, often and vigorously. At the same time, government lawyers who view regulatory taking plaintiffs as being in the same category as mass-murders – to be beaten at all costs or at the very least kept in litigation until they die – need to recognize that they fuel the extremes of the property rights movement. Regulatory taking cases are like other cases; good lawyers should settle them before the whole purpose of bringing the case has become moot.
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1 The Court in Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 386-87 (1926), which first sustained a local zoning ordinance, put it this way:
Building zone laws are of modern origin. They began in this country about 25 years ago. Until recent years, urban life was comparatively simple; but, with the great increase and concentration of population, problems have developed, and constantly are developing, which require, and will continue to require, additional restrictions in respect of the use and occupation of private lands in urban communities. Regulations, the wisdom, necessity, and validity of which, as applied to existing conditions, are so apparent that they are now uniformly sustained, a century ago, or even half a century ago, probably would have been rejected as arbitrary and oppressive. Such regulations are sustained, under the complex conditions of our day, for reasons analogous to those which justify traffic regulations, which, before the advent of automobiles and rapid transit street railways, would have been condemned as fatally arbitrary and unreasonable. And in this there is no inconsistency, for, while the meaning of constitutional guaranties never varies, the scope of their application must expand or contract to meet the new and different conditions which are constantly coming within the field of their operation. In a changing world it is impossible that it should be otherwise.
2 In the interim the Court had formulated “rules” for at least two simpler kinds of takings.
In Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419(1982) the Court held that where an ordinance forced a building owner to submit to the “actual physical invasion” of their property in the form of allowing cable TV companies to attach wires to the exterior of the building without compensation, that was a regulatory taking. The fact that the injury to the property was de minimis, and indeed may have increased the market value of the building, because without it tenants could not get cable TV, was deemed irrelevant.
In Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 112 S. Ct. 2886, 120 L. Ed.2d 798 (1992) the Court held that where a regulation deprives a property of all economically viable use, it is a taking. Significantly, Lucas did not hold that the property must have no “value.” The property at issue was a residential lot on the South Carolina coast. All other lots in the subdivision, including lots similarly situated, had been built upon, but the Coastal Council adopted a rule that would prohibit construction of a house on the Lucas lot. Nonetheless, the dissent argued vigorously that the lot had a market – someone would buy it to picnic or camp on it, and the neighbors might well be willing to buy it to expand their own properties. Both points were probably true, but the fact that the majority held a taking had occurred necessarily rejects the notion that the fact that a parcel of land has some sort of “salvage value” – as most land will have – prevents a regulatory taking. The Lucas Court found one circumstance under which a regulation depriving property of all economically viable use is not a taking. That is if “background principles” of common law would have precluded the use of the property anyway. Thus a nuisance or certain interference with navigation on navigable waters would never have been allowed under the common law, so a regulation spelling out the fact that it cannot be done is not a taking.
3 That speculative market is apparently based on the assumption that eventually the Clean Water Act will be amended to permit the dredging and filling of wetlands, and there are people willing to pay quite a lot of money now for property that they will have to hold until the Clean Water Act is amended or repealed. But then there were also people who apparently were paying to get their affairs in order prior to the Rapture that was predicted for last month. It is unfortunate that the Federal Circuit allowed such a speculative market to be treated as a “viable economic use” of the property – particularly because once the government is forced to pay for an easement precluding any dredging of the land, the speculators are likely to vanish, leaving the property owner only partly compensated.
4 One of the earlier remands in the Florida Rock saga was based on the fact that until Florida Rock had applied for a permit and been denied, the court did not know what might be allowed. Following that, Florida Rock applied for a permit, and as expected, the permit was denied.
5 Interestingly the court found the benefits of the ordinance applied not just to people in need of low-income housing, but also to another group: “those who would like to support affordable housing initiatives without paying for it themselves, for example, owners and developers of other forms of housing such as apartments that might otherwise be forced to provide subsidized housing, and taxpayers who want to subsidize affordable housing without actually increasing their own tax liability to pay for it. 582 F.3d at 1021.
