REDUCING JUST COMPENSATION FOR
ANTICIPATED CONDEMNATIONS
Alan Romero*
Journal of Land Use &
Environmental Law, Spring 2006
21 J. Land
Use & Envtl. Law 153
I.
Introduction ............................................................... 153
II.
Determining Just Compensation
......................... 155
III.
Government Actions Reducing Market
Value to be Compensated
156
A. Planning ......................................................................
156
B. Publicity ......................................................................
158
C. Delay ............................................................................
158
D. Zoning .........................................................................
158
E. Building and Safety Regulations
............................ 159
F. Restricting Improvement and
Rehabilitation ....... 160
G. Government Improvements and Conduct Offsite ..
161
IV.
Constitutional Limits ............................................
162
A. Regulatory Takings by Denying
Economically
Viable Use ........................................................................
163
B. Illegitimate Purpose ..................................................
172
C. Figuring Just Compensation ..................................
188
V.
Conclusion .................................................................... 197
Governments,
and those they represent, generally prefer to spend as little as possible on
acquiring property interests. If they can get the desired property interest for
free, even better. Regulation of land often may satisfy the public’s need for
an interest in property without requiring any condemnation.
For example, if the government can prohibit coastal development by regulation
without paying compensation, it can save the expense of buying a negative
easement or fee simple title to the coastal land.[1]
But
sometimes the public interest requires an easement or fee simple title by
condemnation. In those cases, the government [*154] generally cannot hope
to acquire the necessary property interest for free. Of course, sometimes the
government can provide incentives that will induce some owners to voluntarily
grant the needed property interests to the public.[2]
But otherwise the government is going to have to pay.
Even
then, the government would generally like to save as much money as it can.
Sometimes political interests motivate the government to be more generous to
landowners. But
many cases evidence the government’s desire to reduce the just compensation
bill as much as possible.[3]
The
government often tries to save money by arguing that the “just compensation”
required by the Fifth Amendment does not require as much money as the landowner
asserts. Payment of fair market value for the interest condemned is generally
considered to be just compensation. So
the government may argue that fair market value is less than the landowner
believes.[4]
Another
way that the government might save money, though, is to actively reduce the fair
market value of properties it plans to condemn. If the government can plan what
lands it may want to acquire in the future, it can also plan ways to reduce the
costs of acquiring those lands.
This
article discusses various ways in which governments may reduce the cost of
condemning property interests by using their regulatory and police power to
reduce property’s market value in advance. It is not hard for the government
to do. But regulating to reduce just compensation may sometimes
unconstitutionally abuse the regulatory power. So besides describing and
illustrating ways that government may reduce just compensation by regulation and
other precondemnation activities, I discuss the constitutional boundaries to
such strategies. The government’s precondemnation activities may themselves
take property or deny [*155] substantive due process if they deprive the
owner of too much of the property’s value or if they do not further a
legitimate state interest – some interest other than saving money in eminent
domain proceedings. And even if precondemnation activities do
not take property or deny substantive due process, the Just Compensation Clause
sometimes will require the government to pay for the resulting market value
losses if the government does ultimately condemn the property.
The
Fifth Amendment prohibits governments from taking private property unless they
pay owners “just compensation.”[5]
To be just, compensation ordinarily must at least equal the fair market value of
the property taken by the government.[6]
But fair market value is not constant, of course. Property values as a whole may
fluctuate, but changes in a particular property or its neighborhood may also
cause changes in market value. Such changes in market value can contribute to
disagreements about what compensation the government must pay the owner of
condemned property. The
usual rule, however, is that the government must pay the market value at the
moment it actually exercises its eminent domain power, the moment it actually
takes the property from the owner.[7]
But
before that moment, the market may already have anticipated the condemnation by
the government. That anticipation sometimes may make the property worth less on
the market than it was worth before the market had reason to anticipate
condemnation. The government’s preparation for condemnation may also lead to
changes in permitted uses of the property or changes in the surrounding area
that reduce the market value of the subject property.
Ordinarily,
the property owner cannot complain. Changes in market value are one of the
risks, as well as one of the rewards, of property ownership. But if the
government has caused the loss in market value in preparing to condemn the land,
the property owner may object that the government simply took part of her
property in advance. Yet the law generally has been on the government’s [*156]
side: the government pays only the value on the day title changes from owner to
government.
Whether
purposeful or not, there are many ways the government can cause the market value
of future condemnation acquisitions to decline before actually beginning
condemnation proceedings. This section categorizes the types of government actions that reduce
the market value of properties that are ultimately condemned.
Merely
planning to condemn a particular property may reduce the property’s market
value, or at least slow the property’s appreciation in value.[8]
For example, property designated as the possible site of a hazardous waste
facility may have a reduced market value because it is no longer an attractive
or feasible site for homes or for farming.[9]
Therefore, when the time comes to actually condemn the property and use it for a
hazardous waste facility, the government pays only the depressed market value,
not the value it would have if the property were being used for say a mobile
home park, or even if the market were still anticipating such a use.
One
might reason that the mere possibility of condemnation should not depress the
market value because the property owner who starts farming or builds a mobile
home park will still be fully compensated for that value if the government does
eventually con- [*157] demn the property.[10]
But the government only pays for the property it condemns. It does not pay the
costs of relocating a business, lost goodwill, lost opportunity costs as time
passes without the development proceeding, and so on. A developer who wants to
build a mobile home park will undoubtedly sharply discount the value of a parcel
that the government plans to condemn, even though the developer may still be
willing to pay more than the value it would have if the government’s intended
use were the only possible use.[11]
In
Althaus v. United States,[12]
for example, the National Park Service frequently discussed in public meetings
its intention to acquire all private lands within Voyageurs National Park.[13]
The Park Service prepared land acquisition maps and otherwise planned to acquire
those private lands for as little as possible.[14]
As a result, there was virtually no market for buying those private lands, and
even the Park Service argued that speculators might only offer twenty-five to
fifty percent of their market value.[15]
Similarly,
plans to condemn may impair market value by impairing access to credit for
developing the property. In Mesa Ranch
Partnership v. United States,[16]
for example, certain property was included within a Department of Interior Land
Acquisition Plan for Point Reyes National Seashore. But since the government had
not yet initiated condemnation proceedings, the property owner tried to proceed
with developing a residential subdivision. Lenders would not finance the
development, however, because they anticipated the future condemnation, but
could not be sure that the property would be condemned and that the government
would pay sufficient compensation to pay off a development loan.[17]
Besides
formally planning to acquire certain property, government agencies and officials
may publicly discuss the possibility. [*158] Regardless of how definite
those plans may be, the result for the property owner may be the same: the
property’s value is depressed because the market anticipates the possible
condemnation.[18]
The
government may also save some condemnation expense by simply delaying regulatory
action on property that it anticipates condemning. Delay can save money in two
ways. First, if a building permit or zoning action would permit some development
on the property, delaying such actions prevents the property from becoming more
valuable as a result of the planned development.[19]
Second, delaying regulatory action may actually reduce the value of the
property. For example, in Citino v.
Redevelopment Agency,[20]
the plaintiff’s land lost all market value during a nine-year period in which
the redevelopment agency never implemented a redevelopment plan for the
plaintiff’s property and surrounding property.[21]
On the
other hand, timely regulatory action may decrease, rather than increase, market
value. So sometimes the government may promptly take regulatory action on a
property it plans to condemn. The simplest strategy is simply downzoning property that the government
may desire to condemn. If the government wants to condemn land for an
airport, for example, downzoning prospective acquisitions from industrial land
to agricultural land would significantly reduce the property’s market value. Then,
when the time comes to exercise its eminent domain power, the government would
save a substantial amount of money by paying less just compensation to the
owners.[22]
In Grand Trunk Western Railroad [*159]
Co. v. City of Detroit,[23]
the city apparently zoned blighted property along a railway to permit only
multi-family residential buildings, knowing that it could not feasibly be used
for such purposes, but anticipating that at some point the city would condemn
the land for housing development.[24]
Rather
than downzoning the anticipated acquisition, the government may instead
establish buffer zones that can reduce the property’s market value, or at
least slow its increase in value. If neighboring property is zoned industrial
rather than agricultural, for example, the market value of residential property
will be less.
Finally,
the government may target future acquisitions directly with zoning changes. The
government could, for example, designate an airport zone that permits only lower
value uses. Then, when the day comes to actually acquire the land and build an
airport, the land will be worth less than if it had been developed industrially.
A special zone like this may even prevent the land from being developed
altogether. And the market value of land that may only be used for a
governmental use will surely be less than the value of land that could be used
for private development.
Other
regulatory actions can also depress or restrain market value. The government can
use building or safety regulations to prevent or obstruct private development on
land that the government plans or hopes to condemn.[25]
For example, the district court in Amen v. City of Dearborn[26]
found that the city had denied building permits, repair permits, and occupancy
permits in an effort to acquire certain properties for less.[27]
In Roth v. State High- [*160]
way Commission,[28]
the court found that the State Highway Commission had asked several times that
local governments not issue building permits for any property within an area
planned for a highway, and the city consequently refused to issue a building
permit to the plaintiff.[29]
Another
regulatory device to prevent future acquisitions from appreciating in value is
to limit or prohibit improvement and rehabilitation of specified properties. If
the government plans to condemn a blighted area, for example, preventing
rehabilitation in the meantime would ensure that the market value of the land
does not substantially increase. In fact, it almost ensures that the market
value will decrease, because the property will likely continue to deteriorate.
For
example, in In re Elmwood Park Project
Section 1, Group B,[30]
the city notified owners in an urban renewal area that it would be initiating
condemnation proceedings. But during the next ten years, the plaintiff alleged,
the city delayed the proceedings and deliberately caused the value of the
properties to decline by, among other things, refusing to issue building permits
to improve the properties.[31]
Then, twelve years after beginning the process, the city discontinued the
original proceedings and began new condemnation proceedings, using appraisals
based on the now blighted, vandalized, and depressed market values of the
properties.[32]
State
law may permit cities to freeze development of property for a specified period
of time while the city decides whether to acquire or condemn the land.[33]
Governments also have commonly restricted improvement of properties
while they make planning decisions about what regulatory restrictions are
appropriate for the properties.[34]
This sort of a moratorium on development, however, [*161] is not overtly
connected to a decision about whether to condemn properties, and therefore is
less likely to reduce the compensation to be paid when property is condemned. Still,
even this sort of a moratorium for regulatory decision-making will keep the
property undeveloped or unimproved, and if the government ultimately decides to
condemn some property subject to the moratorium rather than just regulate it,
the property will be worth less when condemned.
Even if
the government does not formally prohibit or restrain development, the
government may still try to prevent improvement and rehabilitation informally.
In one case, for example, the landowners alleged that the government told owners
that they would not receive compensation for improvements and discouraged them
in various ways from making improvements.[35]
If these informal means work, they too will reduce the compensation the
government will have to pay when it eventually condemns the property.
Finally,
the government may depress or restrain the market value of land by developing
government improvements nearby. Some improvements may increase the value of
nearby land, like roads, parks and infrastructure, but other improvements may
decrease the value of neighboring land. If the government intends to acquire
land in an area for some government development, acquiring some of the land and
beginning development thereon may reduce the cost of acquiring the rest of the
land.
[*162]
For example, in Merkur Steel Supply, Inc.
v. City of Detroit,[36]
the City of Detroit planned to acquire plaintiff’s land for an airport
expansion. For years, however, the city did not actually condemn the land, but
obstructed plaintiff’s efforts to expand its business on its land. Plaintiff
eventually sued in inverse condemnation, alleging among other things that the
city tried to reduce the cost of acquiring plaintiff’s land by condemning much
of the surrounding property in order to prevent plaintiff’s expansion.[37]
A
related but different claim, also suggested in Merkur
Steel, is that the government intentionally let neighboring properties
deteriorate.[38]
The result, of course, is that the subject property declines in value along with
the neighboring properties.[39]
Similarly, the government may not only allow neighboring properties to
deteriorate, it may even demolish them in the process of redevelopment. When a
building is surrounded by debris and vacant lots, it is much less valuable than
when surrounded by other valuable uses.[40]
The
government could acquire land for very little if it could use all of these
strategies freely. If there were no limits, the government could simply prohibit
use of a parcel for any purpose and make it useless, then condemn it and pay no
compensation at all. But of course there
are limits. This section discusses three constitutional limitations on reducing
just compensation for anticipated condemnations. First, the government’s
precondemnation conduct may itself amount to a taking by depriving the owner of
the use or value of her property. Second, the government may take property, or
deny substantive due process, if the regulation does not serve a purpose other
than reducing the compensation to be paid when the [*163] property is
eventually condemned. Finally,
even when the regulation does not take property or deny due process, if the
government does ultimately condemn the property, the Fifth Amendment may require
the government to pay the higher market value of the property before its
regulatory activities depressed the value.
If
regulation goes too far, it will be treated as a taking of private property
requiring just compensation, even though the government may not have intended to
take the property.[41]
The compensation-reducing strategies discussed in Part II may sometimes go too
far.
Government
land-use regulation that deprives the owner of economically viable use of her
land is a taking of private property requiring just compensation.[42]
In rare cases, the government may make a property useless for any purpose other
than its own planned use. But even if the property is not useless, the restraint
on use and the resulting loss of value may be so extreme that the government has
effectively taken the owner’s property. The court will consider “[t]he
economic impact of the regulation on the claimant and … the extent to which
the regulation has interfered with distinct investment-backed expectations” in
deciding whether the regulation is constitutionally equivalent to a taking.[43]
In this section, I consider possibilities that the precondemnation activities
discussed in Part II will amount to a taking in this way by reducing the
property’s value so much that it is equivalent to taking the property away
from the owner.
Ordinarily,
planning and publicity will not themselves impair the market value so severely
that they effectively take the property from the owner. Planning a condemnation,
or even passing legislation authorizing a condemnation, obviously does not
actually [*164] take the property from the owner, nor does it make the
property useless. Plans may change, of course, and the property may never
actually be condemned by the government.[44]
If courts grant just compensation for merely planned takings, inverse
condemnation suits can subvert the legislative power to decide if and when to
condemn.[45]
In the meantime, the owner is still legally free to use or transfer her property
as she wishes until the government actually condemns it. “[I]n the absence of
an interference with an owner’s legal right to dispose of his land, even a
substantial reduction in the attractiveness of the property to potential
purchasers does not entitle the owner to compensation under the Fifth
Amendment.”[46]
Many cases have held that planning a condemnation therefore does not take the
property until the condemnation actually occurs.[47]
But
sometimes planning or publicity may actually deny an owner all economically
viable use of her land, or nearly so.[48]
For example, if the property’s present use is not economically viable,
planning and publicizing condemnation for the property may make it practically
impossible to rehabilitate the land or sell it to another who would develop it
in an economically useful way.[49]
A [*165] number of cases have held that urban blight declarations can
destroy substantially all the value of property in the blighted area. If the
property is not ultimately condemned, some courts have correctly held that the
government has nonetheless taken the owner’s property.[50]
When the
government delays giving permission for property use or development, the delay
may be a taking of this sort if, during the period of delay, the property cannot
be used productively. Obviously, if the property is already developed and
valuable, even a very long delay in permitting some more valuable use will not
deprive the owner of all or nearly all value – just the extra increment of
value that the owner sought, however substantial that may be. But
if the property is undeveloped or otherwise useless in its present condition and
the owner is unable to use or sell her property while the government delays
decisions about permits, zoning or condemnation, the owner has been deprived of
all value of her property during that period of delay.[51]
In Ehrlander
v. State Department of Transportation & Public Facilities,[52]
for example, the developer, Ehrlander, bought undeveloped land for residential
development. Ehrlander sought subdivision plat approval, but the city denied
approval for part of his property because the Department of Transportation (DOT)
intended to acquire an unspecified part of the property for a highway.[53]
Ehrlander alleged that DOT unreasonably delayed the condemnation of his land for
three years, thus taking his property because he could not subdivide his
property as long as the city was waiting for DOT to decide what land it was
going to condemn for [*166] the highway.[54]
The Alaska Supreme Court held that Ehrlander had properly alleged a taking,
because he was “deprived of the most important incidents of ownership, the
rights to use and alienate property.”[55]
The owner was deprived of the right to use the property because it was
unimproved and he could not improve it while the planned condemnation prevented
subdivision approval. Additionally, his ability to market the property was
allegedly “substantially impaired” by the planned, but uncertain,
condemnation.[56]
But even
if the owner is deprived of all value during a period of delay, the delay may
not last forever. The government may eventually issue the permit or otherwise
allow the property to be used again. The delay itself will only be a taking if,
in light of all the circumstances, the burden on the owner is unfair and should
be borne by the public.[57]
As the Supreme Court put it in Penn Central Transportation Co. v. City of New York,[58]
these are “essentially ad hoc, factual inquiries.”[59]
Of course, “the duration of the restriction is one of the important factors
that a court must consider in the appraisal of a regulatory takings claim.”[60]
But in Tahoe-Sierra Preservation Council,
Inc. v. Tahoe Regional Planning Agency, the Court said that “with respect
to that factor as with respect to other factors, the ‘temptation to adopt what
amount to per se rules in either direction must be resisted.’“[61]
Other considerations include the “landowners’ investment-backed
expectations, the actual impact of the regulation on any individual, the
importance [*167] of the public interest served by the regulation, [and]
the reasons for imposing the temporary restriction.”[62]
So if
the government’s delay has a major economic impact on the owner’s
investment-backed expectations, as in Ehrlander,
and the government does not have a good reason for the delay, it is likely to be
a taking. But if the government does have a good reason for the delay, it is
less likely to be a taking. In fact, while Tahoe-Sierra
Preservation Council resists categorical rules, most other courts that have
considered the issue have suggested that normal and reasonable delays can never
be takings.[63]
The Supreme Court in First English
Evangelical Lutheran Church v. County of Los Angeles[64]
stressed that it was not holding that the government must pay compensation for
“normal delays in obtaining building permits, changes in zoning ordinances,
variances, and the like which are not before us.”[65]
Many cases have held that normal delays do not take property, even if the
property is useless during the period of delay.[66]
In Agins v. City of Tiburon,[67]
for example, a pending condemnation limited the owners’ ability to sell their
property, but they were free to sell or develop when the proceeding ended. The
Court stated that “[m]ere fluctuations in value during the process of
governmental decisionmaking, absent extraordinary delay, are ‘incidents of
ownership. They cannot be considered as a ‘taking’ in the constitutional
sense.’”[68]
The
emphasis on ad hoc determinations in Tahoe-Sierra
Preservation Council seems to leave open at least a hypothetical possibility
that consideration of all the circumstances might find a temporary regulatory
taking based on other factors, even though the delay was normal. And some courts
have suggested that even normal delays may take property. The Alaska Supreme
Court, for [*168] one, reversed summary judgment for a condemning
authority even though the plaintiff had not alleged that the authority’s delay
was extraordinary.[69]
If the property is useless for a substantial period, and the government is
depriving the owner of that value, it might seem that the public as a whole
should bear the burden of lost property value resulting from public
deliberations about condemnation and the like.[70]
But that argument seems obviously to go too far, because it would require the
government to pay compensation for delay incident to even normal permitting
processes. As the Court observed in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning
Agency:
[T]he extreme categorical rule that any deprivation of all
economic use, no matter how brief, constitutes a compensable taking surely
cannot be sustained. Petitioners’ broad submission would apply to numerous
“normal delays in obtaining building permits, changes in zoning ordinances,
variances, and the like,” as well as to orders temporarily prohibiting access
to crime scenes, businesses that violate health codes, fire-damaged buildings,
or other areas that we cannot now foresee.[71]
The
Court reasoned that a “rule that required compensation for every delay in the
use of property would render routine government processes prohibitively
expensive or encourage hasty decisionmaking.”[72]
Besides
this practical fear that the government would have to abandon or pay
compensation for “numerous practices that have long been considered
permissible exercises of the police power,”[73]
there is a good theoretical reason to conclude that normal delays [*169]
do not take property. While even normal delays may very well deny the owner use
of her property for a time, all properties are equally subject to such delays
and enjoy the benefits of other properties being subject to such decision-making
processes as well. This “average reciprocity of advantage”[74]
means that the owner does not unfairly bear a burden to benefit the public in
its efforts to regulate land uses because all other owners are likewise subject
to the same burden, which benefits the owner in return.[75]
When
delays are extraordinary, however, the owner is subjected to a burden to which
others are not subject. Furthermore, that burden cannot even be justified by the
importance of the government’s activity because it is not important for the
government to delay extraordinarily, beyond what the normal and reasonable
process requires. Depriving the owner of
all economically viable use because of extraordinary delay therefore should
generally be considered a taking, although some such cases might still not be
takings because the temporary burden on the owner is so small in relation to the
value of the property as a whole over time.[76]
Delay
may also constitute a taking when the property has some value to begin with, but
during the period of delay it becomes useless. In such a case, the taking is not
just temporary. The government has not just deprived the owner of the use of
valuable property for a time, but has instead made the property worthless by its
conduct. In Citino v. Redevelopment Agency,[77]
for example, the redevelopment agency designated plaintiff’s apartment
building for condemnation and redevelopment, but agreed that plaintiff could
redevelop the property himself on certain conditions. Plaintiff improved the
property under the threat of fines from the Agency. But even though the Agency
acquired the neighboring properties, for nine years the Agency did not follow
through with its redevelopment plan and allowed the area to deteriorate so [*170]
much that plaintiff’s building was practically useless.[78]
The court therefore held “that the defendant’s actions in failing to
implement its redevelopment plan for the area in a reasonable amount of time,
although not formally abandoning the plan, and in permitting the overall
deterioration of the property within the area, amounts to a taking of the
plaintiff’s property without just compensation.”[79]
If the
delay is a taking under the circumstances, the government must pay just
compensation for the taking period even if the government later permits
development. In First English, the
county’s ordinance allegedly denied the property owner all use of its property
for several years. The Supreme Court held that invalidating the ordinance in
such a case, and thereby allowing the owner to use its property again, was “a
constitutionally insufficient remedy” and that the county must pay just
compensation for the period during which it deprived the owner of all use of its
land.[80]
The Court reasoned that “temporary use and occupation” takes property from
an owner just as permanent occupation does.[81]
If
the government downzones, denies building permits, or otherwise restrains the
use and development of the land to keep it more affordable for eventual
condemnation, this inverse condemnation theory will generally find the
government’s regulatory action to be a taking only if the property cannot
practically be used for any permitted purpose.[82]
The land-use regulation may be unconstitutional because of the government’s
illegitimate purpose, but that’s a different theory discussed in the next
section.[83]
As far as this theory goes, the regulatory act will generally be a taking only
if the property is undeveloped, or maybe if somehow its currently [*171]
permitted use has become completely unfeasible.[84]
Even then, if the zoning action, development moratorium, or other regulatory
action is only temporary while the government considers condemnation or
appropriate land uses or whatever, and the period of deliberation is normal or
reasonable, the regulatory act still will not be considered a taking under this
theory.[85]
This
kind of precondemnation activity will never be a taking solely because of its
effect on an owner’s property. If the government condemns other land in the
area, or allows the surrounding area to deteriorate, or otherwise uses or
affects neighboring land in a way that depresses the market value of property to
be condemned, the government has not even restrained the owner’s use and
enjoyment of her property, let alone taken it from her. Government conduct
offsite can certainly affect a property’s value, but mere injury to market
value does not amount to a taking.[86]
Neighbors, public or private, can always affect a property’s value by what
they do with their own property. That is one of the risks of property ownership.
However,
if the government’s offsite conduct causes actual damage to the property,
rather than merely making it worth less because of how it changes the
surrounding area, the government may have to pay just compensation. “A
property owner may be required to bear without compensation incidental damages
which are suffered alike by the public in general, but he is entitled to
compensation for special and peculiar damage inflicted upon him.”[87]
[*172] This may be especially true under state constitutions that require
compensation for property “taken or damaged.”[88]
So if the government builds an airport runway and the runway causes a nuisance
on property not yet condemned, the government may have to pay just compensation
for the lost market value of the uncondemned property.[89]
But if the property is simply worth less because the government’s conduct has
made the area less desirable for development, changed traffic patterns, and so
on, then the government does not have to pay just compensation.[90]
Government
regulation may also deny the owner substantive due process of law if the
regulation does not further a legitimate public purpose. In Village
of Euclid v. Ambler Realty Co.,[91]
the Supreme Court held that a zoning ordinance does not violate the Due Process
Clause unless it is “clearly arbitrary and unreasonable, having no substantial
relation to the public health, safety, morals, or general welfare.”[92]
Then, in Nectow v. City of Cambridge,[93]
the Supreme Court held that the application of a zoning law to a particular
property did violate the Due Process Clause because it did not “bear a
substantial relation to the public health, safety, morals, or general
welfare.”[94]
For twenty-five years, the Supreme Court also maintained that “[t]he
application of a general zoning law to particular property” may similarly be a
taking if it “does not substantially advance legitimate state interests.”[95]
But [*173] the Court recently decided in Lingle
v. Chevron[96]
that the purpose served by a regulation does not affect whether the regulation
is a taking.[97]
Still, the Court reaffirmed that a regulation may violate the Due Process Clause
if it does not serve a legitimate governmental purpose.[98]
Despite
the Lingle decision that failure to
substantially advance a legitimate state interest does not make a regulation a
taking, the regulation’s purpose may still result in a taking in one way that Lingle
acknowledges. That is, it may be a taking not because it doesn’t serve a
legitimate purpose, but because the purpose it serves is unfairly or uniquely
accomplished at the expense of the individual property owner. The Court in Lingle
emphasized again that the Takings Clause does not prevent any conduct by the
government, but simply requires the government to pay compensation when it would
otherwise “forc[e] some people alone to bear public burdens which, in all
fairness and justice, should be borne by the public as a whole.”[99]
The Court explained that the “substantially advances” test “cannot tell us
when justice might require that the burden be spread among taxpayers through the
payment of compensation.”[100]
The test ensures that the regulation is doing something legitimate and useful,
but:
[t]he owner of a property subject to a regulation that
effectively serves a legitimate state interest may be just as singled out and
just as burdened as the owner of a property subject to an ineffective
regulation. It would make little sense to say that the second owner has suffered
a taking while the first has [*174] not. Likewise, an ineffective
regulation may not significantly burden property rights at all, and it may
distribute any burden broadly and evenly among property owners. The notion that
such a regulation nevertheless “takes” private property for public use
merely by virtue of its ineffectiveness or foolishness is untenable.[101]
The
Court thus seems to have indicated that a regulation may be a taking not because
of the magnitude of the burden on the owner, but because of “how any
regulatory burden is distributed among property owners.”[102]
Even if inequality alone cannot create a taking, the distribution of the burden
is certainly relevant to the takings determination, at least.
A
regulation, then, might be a taking because its purpose is by its nature
achieved at the expense of individual property owners rather than being fairly
distributed among property owners.[103]
The typical regulatory purposes are naturally accomplished without unfairly
unequal burdens on property owners. Zoning regulations are naturally reciprocal,
in that all landowners are generally subject to such regulations and all,
including the subject property owner, enjoy the benefit of the general
regulatory approach.[104]
And some regulations that burden smaller groups of landowners are still
constitutional without compensation because of their [*175] general
public benefit. In some early takings cases, the Supreme Court held that even if
regulation burdened only one or a few landowners, the government need not pay
compensation when the regulation was prohibiting “harmful or noxious uses.”[105]
Such regulation is not unfair, despite its unequal burden, because it simply
mitigates or prevents harms or burdens caused by the property owners themselves.
But in Penn Central, the Supreme Court
said that those earlier cases are “better understood as resting not on any
supposed ‘noxious’ quality of the prohibited uses but rather on the ground
that the restrictions were reasonably related to the implementation of a policy
. . . expected to produce a widespread public benefit and applicable to all
similarly situated property.”[106]
And in Lucas v. South Carolina Coastal
Council,[107]
the Court said that this principle “was … the progenitor of our more
contemporary statements that ‘land-use regulation does not effect a taking if
it ‘substantially advance[s] legitimate state interests.’”[108]
While the Court has now rejected the broader-sounding “substantially
advances” test for takings, Lingle
reaffirms this narrower understanding of the test – that a regulation may be a
taking if it burdens a single landowner or a small group of landowners, but does
not apply to all similarly situated property, or does not produce a widespread
public benefit. That is, it may be a taking if the regulatory burden is unfairly
distributed.
So if a
regulation furthers a purpose that naturally requires unfairly unequal burdens,
then the regulation could be a taking for that reason. Some courts have found takings, for
example, when “land use restrictions . . . are clearly imposed to support or
subsidize some distinct Government function or enterprise (such as the provision
of public parks, schools, playgrounds, roads, airports, or flood control
projects, etc.), where the burdens imposed are based largely on the accident of
ownership of land at a particular location.”[109]
In such cases:
[T]here
is no approximation of equal sharing of cost or of sharing according to capacity
to pay as there is where a public benefit is obtained by subsidy or expenditure
of public funds. The accident of ownership [*176] of a particular
location determines the persons in the community bearing the cost of increasing
the general welfare.[110]
While
the benefit of the government improvement may be widespread, the regulatory
burden is not “applicable to all similarly situated property,”[111]
but only those properties that happen to be in the location selected for the
government’s project.
Similarly,
if the government restrains property development only because it anticipates
condemning the property and wants to save money, the government imposes a unique
burden on the property owner simply because of the accident that the owner has
property the government wants. Property
owners generally are not subject to such restraints. Even similar types of
property are not subject to such restraints - only those properties that the
government has happened to select for acquisition. So if the only reason for a precondemnation development restraint is to
save money when the property is ultimately condemned, the restraint is by its
nature unequal and takes property because, in fairness, the public as a whole
should bear the burden of land acquisition for public projects.
Penn
Central also says that one factor to
consider in deciding whether a regulation is a taking is “the character of the
governmental action.”[112]
The Federal Circuit has recently held that the government’s bad faith is a
relevant part of the character of the government’s action. In Cooley
v. United States,[113]
the court considered a takings claim based on the Army Corps of Engineers’
denial of a wetlands fill permit under the Clean Water Act. In discussing the
issues on remand, the court said:
Accordingly, those agencies receive appropriate deference in
acquiring technical information. However, in the instant case the agency admits
its requests for additional information were not necessary for issuing a permit.
The trial court previously discounted the credibility of the Corps’ argument
that the permit denial letter requested additional information in an altruistic
effort to issue a permit. In conducting a Penn
Central analysis, the trial court may weigh [*177] whether the
Corps’ conduct evinces elements of bad faith. A combination of extraordinary
delay and intimated bad faith, under the third prong of the Penn Central analysis, influence the character of the governmental
action.[114]
So in
this way, too, the purpose of the government’s precondemnation activity is
relevant to deciding whether that activity amounts to a taking of property
requiring just compensation.
Finally,
regardless of how the Supreme Court construes the federal Takings Clause, state
takings clauses may still be construed to require just compensation when
government regulation restrains property use without a legitimate reason. In Johnson v. City of Minneapolis,[115]
for example, the Minnesota Supreme Court recently declined to decide a federal
takings claim under the Penn Central
test and instead found a taking under the state constitution.
The court said that, under the Minnesota constitution, “an abuse of the power
of eminent domain may be tantamount to a regulatory control, constituting a de
facto taking ‘when that abuse is specifically directed against a particular
parcel.’”[116]
The city had misled the property owners into thinking that their properties
would certainly be acquired for redevelopment and had acted in bad faith in
causing the redevelopment deal to fail.[117]
The court held that the city had thus taken some of the value of the properties
that were designated for acquisition but never condemned.[118]
The court ended with the caution that its decision does not mean “property
owners are entitled to compensation for any diminishment in value or loss of
income caused by the prospect that their property will be condemned at some
future date,” but Johnson
certainly indicates the possibility that state constitutions will grant just
compensation when the government restrains development of specific properties in
bad faith and thereby impairs the properties’ value.[119]
Precondemnation
activity that serves no purpose other than saving money on condemnation is also
a deprivation of substantive due process.
The Supreme Court “[has] not elaborated on the standards for determining what
constitutes a ‘legitimate state interest,’” but has said in the takings
context that the term includes a “broad range of governmental purposes.”[120]
Ordinarily, of course, land-use regulations further state interests in planning
communities, protecting health and safety, and harmonizing land uses, although
they could certainly further other legitimate purposes as well. But
if the government’s precondemnation activity does not further a legitimate
purpose, then it does not matter how much of the owner’s property is taken.
The government’s action is invalid under the Due Process Clause.
Whatever
the range of “legitimate” state interests, the Supreme Court has identified
one illegitimate interest: obtaining a property interest without paying
compensation. In Nollan
v. California Coastal Commission, the Court held that conditioning a
building permit on the surrender of a lateral easement across the beach was
unconstitutional. The Court explained:
Similarly here, the lack of nexus between the condition and the
original purpose of the building restriction converts that purpose to something
other than what it was. The purpose then becomes, quite simply, the obtaining of
an easement to serve some valid governmental purpose, but without payment of
compensation. Whatever may be the outer limits of “legitimate state
interests” in the takings and land-use context, this is not one of them. In
short, unless the permit condition serves the same governmental purpose as the
development ban, the building restriction is not a valid regulation of land use
but “an out-and-out plan of extortion.”[121]
As the
Court noted, the government has a legitimate interest in obtaining property,
like easements. The government likewise has a legitimate interest in saving
money in acquiring property for public uses. But it is not legitimate to
circumvent the Just Compensation Clause and try to obtain that property for free
by [*179] using the regulatory power as leverage to extort the property
from the owner. Similarly,
it is not legitimate to try to obtain property for less by using the regulatory
power to depress market values, rather than to further good-faith planning
goals.[122]
In the exactions situation, the government seeks to obtain a property interest
for free, whereas in the precondemnation regulation situation, the government
merely seeks to pay less for an interest it may eventually condemn. But that is
a difference only of degree. In both cases, the government is not
regulating to reduce public burdens or injuries resulting from a land use, to
harmonize conflicting land uses, or to further any other such legitimate
purpose. The government is regulating simply to save money in acquiring land.[123]
There is
another, more significant difference between exactions and precondemnation
regulation, however. When the government demands that the property owner convey
some property interest in exchange for permission to develop her property, the
government’s own conduct objectively reveals the illegitimate reason for the
property regulation. The government conditionally denies permission to develop
the property, but tells the owner it will grant permission if the owner conveys
the property interest. So the government will permit development if the owner
conveys the interest, but will restrain development if the owner does not convey
the interest. At that point, the only reason why the regulation [*180] is
still restraining development is that the owner hasn’t given the government
some of her property. That is not a legitimate reason to restrain development.[124]
The
objective reasons for precondemnation regulation, on the other hand, are less
clear. Even if the regulation or other precondemnation activity does depress the
property’s value, thus reducing just compensation to be paid, the
precondemnation activity may also have furthered other purposes that are
legitimate. If the government could have rationally thought that its
precondemnation activity would further some legitimate purpose – some purpose
other than reducing the amount to be paid in just compensation later – then
the government has not denied the property owner substantive due process.[125]
So courts should be deferential and only find a substantive due process
violation when there is clearly no possible purpose for precondemnation activity
other than saving condemnation expenses in the future.[126]
This is
true even if the government regulators did not actually intend to further any
purpose other than saving money on later condemnations. As long as the
precondemnation activity could have been thought to further some legitimate
purpose, it should not matter that the regulators were primarily or even
entirely motivated by the desire to save money on condemnation.[127]
As the California Supreme Court observed in Landgate,
Inc. v. California Coastal Commission:[128]
The Court of Appeal erred in its attempt to divine … the
“true,” illegitimate, motive for the Commission’s [*181] decision
to deny Landgate’s development permit. The proper inquiry is not into the
subjective motive of the government agency, but whether there is, objectively,
sufficient connection between the land use regulation in question and a
legitimate governmental purpose so that the former may be said to substantially
advance the latter. This type of objective inquiry is consistent with the
principle that courts do not delve into the individual purposes of
decisionmakers in a quasi- adjudicative proceeding, but rather look to the
findings made by the government agency and determine whether these are based on
substantial evidence. Thus, we must determine not whether a sinister purpose
lurked behind the Commission’s decision, but rather whether the development
restrictions imposed on the subject property substantially advanced some
legitimate state purposes so as to justify the denial of the development permit.[129]
However,
some courts have relied upon evidence of actual illicit intent in deciding
substantive due process challenges to land use regulation.[130]
For example, in Blanche Road Corp. v.
Bensalem Township,[131]
the Third Circuit held that evidence of intentional delaying of permits to
prevent a subdivision development would establish a substantive due process
violation.[132]
Considering such evidence makes more sense if a court is trying to decide if an
executive official was acting so arbitrarily, or with such bad faith, that it
“shocks the conscience,” a substantive due process standard adopted by the
Supreme Court in reviewing executive actions like police conduct in pursuing a
motorcyclist.[133]
The Third Circuit has held that this standard should apply to executive action [*182]
concerning regulation of land as much as it applies to other executive action.[134]
But
I don’t need to get into the debate about whether land-use regulatory actions
are legislative or executive, a debate which may have little practical
significance in resolving substantive due process cases anyway.[135]
The substantive due process theory of Nollan
is clearly based on an objective fact about the purposes served by the
government regulation, not an assessment of how egregiously the regulators
acted.[136]
Still, evidence of actual intent may not be entirely irrelevant to this
particular inquiry. This substantive due process theory requires a court to
examine the relationship between the means chosen by the government and the ends
served thereby. Courts generally should defer to government decisionmakers, as
long as there is any apparently rational purpose for their action. But if the
evidence shows that the government was actually motivated by illegitimate
purposes, a court does not have the same reason to defer to the government’s
judgment. There is not as much of a reason to assume the government was acting
in good faith to achieve some legitimate purpose when the court can see what the
government actually intended to achieve. The actual illegitimate motive itself
may not thus make the action a due process violation, but it may justify the
court in more closely scrutinizing whether the action did objectively advance
some legitimate purpose despite the actual illegitimate purpose.[137]
Some
courts have held that if property owners are not entitled to receive development
permission, the Due Process Clause does not protect them at all because denying
permission does not deprive them of any property right.[138]
This “entitlement” requirement [*183] comes from the Supreme
Court’s decision in Board of Regents v.
Roth,[139]
which involved neither land-use regulation nor substantive due process.[140]
I have previously argued that this reasoning is inconsistent with the Supreme
Court’s original approval of zoning in Euclid
v. Ambler Realty Co.[141]
The ordinance in Euclid did not
entitle the owners to develop their property, but the Court did not say that
they therefore had no due process rights in developing their property. Instead,
the Court reasoned that the public benefits of zoning outweighed the
individual’s right to use her property as she pleased.[142]
Even while applying its “entitlement” precedents, the Second Circuit
acknowledged that:
It is not readily apparent why land regulation cases that
involve applications to local regulators have applied the … entitlement test
to inquire whether an entitlement exists in what has been applied for …
instead of simply recognizing the owner’s indisputable property interest in
the land he owns and asking whether local government has exceeded the limits of
substantive due process in regulating the plaintiff’s use of his property by
denying the application arbitrarily and capriciously.[143]
Regardless
of whether an owner has a “right” to a certain sort of development approval,
the owner clearly owns her property. She has the right to use her property any
way she chooses within the boundaries of the common law, such as nuisance law.
Any further restraint of her property use by the government takes away some of
her property rights, and must be consistent with the limitations of the Due
Process Clause as well as the Takings Clause.[144]
In
summary, government’s precondemnation activities may take property, and deny
the owner substantive due process, if they deprive the owner of some part of her
property rights with no objective purpose other than obtaining the property for
less, because such property restraints are not fairly and equally distributed
and do not further a legitimate public purpose. The rest of this section
discusses the circumstances in which particular compensation- [*184]
reducing practices may take property or deny substantive due process in this
way.
The
government certainly has good reasons to plan its acquisitions well in advance.
Advance planning promotes deliberate consideration of government projects.
Planning future acquisitions is also necessary so that the government can plan
funding for those acquisitions, which often requires years of preparation. And
planning future acquisitions helps prevent the economic waste that would result
from incompatible development on or near the planned government development.
Planning future condemnations therefore will consistently serve a legitimate
state interest.
Publicizing
government plans also generally has a legitimate purpose. The public has an
interest in such plans and should have an opportunity to discuss, comment, and
object.[145]
“[T]o allow recovery under all circumstances for decreases in the market value
caused by precondemnation announcements might deter public agencies from
announcing sufficiently in advance their intention to condemn.”[146]
[*185]
Statutes may even require such an opportunity for the public to comment.[147]
But
sometimes the government publicizes before it plans. That is, sometimes the
government may indicate to the public that it may condemn certain land in the
future, even though the government has not actually gone through the applicable
planning process to arrive at that conclusion. In such cases, the government
cannot justify publicity on the same grounds.
Statutes and due process would not require the publicity. Still, the government
might reason that public awareness and input, even before the planning process,
will help ensure planning that is sensitive to public concerns and reduce the
severity of potential citizen reaction. Sometimes, though, a plaintiff might
establish a substantive due process violation if the only purpose of early
publicity, without any procedural need to publicize, is to prevent land from
being developed in the meantime in a way that would increase the ultimate cost
to the condemning authority.
As
discussed above, extraordinary delay may be a taking when it deprives the owner
of all use and enjoyment of her property for a time.[148]
But even if it deprives the owner of some, but not all use, or deprives the
owner of all use for a period not long enough to amount to a taking, it should
still be a substantive due process violation if it does not serve a legitimate
state interest. Delay that results from good faith deliberation always serves a
legitimate state interest, even if the government is doing a poor job of
deliberating. But
in some cases it seems the government’s only reason for delay is not to
deliberate further, but to stall while it considers condemning the property. If
so, the government’s reason is not legitimate.[149]
Sure, the government wants time to consider a condemnation decision. But it is
not a legitimate reason to prevent development that otherwise is consistent with
land use regulations and policies. The only reason for the delay is that the
government does not want the owner to develop the property, or receive building [*186]
or zoning permissions for the property, in a way that increases the cost of
condemning the property. Saving money in this way is not a legitimate public
purpose.
If the
government zones a property in order to assure compatibility with neighboring
uses, to promote orderly development, or for other normal planning purposes, the
zoning itself is not a substantive due process violation regardless of whether
the zoning depresses market value, although it may still be a taking if it makes
the property useless, of course.
But
if the government downzones a particular area because it anticipates condemning
the land, the downzoning should be treated as a substantive due process
violation because the government’s purpose is not legitimate. The government
legitimately desires to reduce the costs of land acquisition, but it cannot
legitimately restrain land use just to save itself money.[150]
Some
courts have recognized this possible unconstitutional abuse of the zoning power.
For example, in State ex rel. Tingley v.
Gurda,[151]
the Wisconsin Supreme Court found that:
[T]he city planning commission contemplates some time in the
future a boulevard along Mud creek, and, with that in view, a zoning regulation
has been promulgated destroying the value of the property which will later have
to be taken for that purpose, so that the city may be able to carry out the
boulevarding project with less expense to itself.[152]
The
court held that the city had exceeded the authority of the zoning law when it
used the zoning power to zone “a block in the heart of an industrial section
to residential purposes only” in order to reduce the cost of later
condemnation.[153]
On the
other hand, the government may have a legitimate reason to directly prevent
development of property that it is considering condemning. The government does
not want the owner to develop the property wastefully. Even if the government
fully compensates the owner for the increased market value, the owner’s
investment was still economically wasteful. The government ends up undoing
valuable improvements that it does not need, and having to pay for the
privilege. It may seem that the government is simply saving itself some money,
but it is doing more than that. It is preventing waste. So a moratorium on
development while condemnation is being considered should not be considered a
taking for failure to advance a legitimate state interest.
But if
the regulatory restraint is not preventing waste, then it seems to clearly be a
taking. For example, in the unlikely case that a moratorium prevented
rehabilitation of an improvement that the government would keep and use after
condemnation, the moratorium would not prevent waste in the same way as when the
improvements would not long be useful. The government’s only other purpose is
to keep the value of the property down, which is an illegitimate purpose.
The
biggest problem for the landowner claiming a substantive due process violation
based on this kind of precondemnation activity is that the government has not
interfered with any recognized property right. A property owner may have an
expectation, but not a property right, to a good or compatible neighborhood
around her. If the government has not taken away any of the owner’s property
rights at all, it doesn’t matter what purposes the government has advanced.[154]
The property owner has no due process claim.
One way
the government may try to reduce the market value of properties it plans to
condemn is by acquiring other properties in the area first.[155]
Although reducing compensation may be one purpose, government condemnation and
development nearby will also surely serve a legitimate interest in advancing
whatever [*188] project the government has in mind. But even if in an
unusual case the evidence showed that the government really had no need of
certain property condemned nearby and had no plans to make use of it, and also
showed that the effect was to depress the market value of necessary properties,
the owner of later-acquired property could not claim that the earlier
condemnations denied her substantive due process, because she had no property
interest in what happened on the neighboring land. As for those whose land was
taken, they would have no reason to claim a taking or due process violation
because the government in fact formally took their land and paid them just
compensation for it.
In some
cases the government allegedly neglected, demolished, or otherwise affected
neighboring properties in order to reduce the value of property in the area
before acquiring it.[156]
Doing so might further a legitimate state interest in using public resources
wisely by not maintaining or rehabilitating properties that the government
intends to demolish anyway. And again, the affected property owner cannot really
claim that the government has taken her property by allowing the area to
deteriorate. However substantial the impact on her use and enjoyment of the
property, the government has not taken away any recognized property right,
regardless of the interests advanced by its actions.
Most of
the time the government’s precondemnation activities will not themselves
amount to a taking. If the government were to stop there and never condemn the
property, it would need to pay no compensation to the owner at all, even though
the owner may have suffered some actual lossduring that anticipated condemnation
period. That is simply one of many risks that come with ownership: the
government and private owners alike may make decisions that affect the use and
value of any particular [*189] property, and the value of the property
will rise and fall because of those decisions, and in anticipation of those
decisions.[157]
But
when the government does ultimately take the property in formal condemnation
proceedings, there is a second constitutional question: how much must the
government pay for the condemned property? What compensation is “just”? The
usual rule is that the government must pay the market value at the moment it
actually takes title from the owner.[158]
But a property’s real market value might have been significantly higher if the
government had not already started depressing the value by its regulatory or
other precondemnation activities.
In
general, the government should compensate owners for their full loss. “The
owner is to be put in the same position monetarily as he would have occupied if
his property had not been taken.”[159]
Taking property is not an instantaneous action. After making the decision to
condemn, planning, funding, negotiating, and litigating a taking can take a long
time. If the property declines in value because of that process, or because of
other precondemnation activities, the owner has suffered a loss solely because
of the taking, and the government should make her whole.[160]
Of
course, we cannot determine actual market values very precisely to begin with.[161]
And then isolating different causes of [*190] market value declines is
even harder. So
sometimes it may be too speculative to determine how much the property would be
worth were it not for the government’s precondemnation activities.[162]
But the owner should be able to offer such proof and should be able to recover
such value if she can sufficiently prove it.[163]
Proof of just compensation is even harder when there are multiple causes of market decline, or when market values generally increase, but the pending condemnation slows the increase in market value of the subject property. When the precondemnation activities themselves constitute a taking, as discussed above, the government must pay the entire market value at that earlier time. There is no need to isolate different effects on market value in such a case. But when the precondemnation activities themselves are not a taking, and the question is simply what compensation is required upon eventual condemnation, the government usually should not have to pay the owner for declines in value due to market changes generally, only those declines specifically due to the government’s precondemnation activities.[164] Somehow the evidence must establish how much loss was due to the precondemnation activities and not other