Takings clause

Description: Provision in the Fifth Amendment that prohibits the taking of private property for public use unless the owner is appropriately compensated.

Significance: The takings clause is one of the most important and vigorously contested constitutional provisions, at the center of numerous cases before the Supreme Court. The clause pits fundamental capitalist principles of private ownership against the doctrines of state sovereignty and the public good.

The U.S. Constitution contains a number of provisions that seek to protect private ownership of property and property rights more generally. Chief among these is the takings clause of the Fifth Amendment. The clause provides that “private property [shall not] be taken for public use without just compensation.” In including this provision, the Framers paid respect to a long-standing, basic individual right with roots in seventeenth century English legal tradition.

The takings clause seeks simultaneously to protect the property rights of individuals crucial to the United States’ capitalist economic system and its cultural value of individualism and to ensure that the state is able to acquire private property when necessary in order to promote the public good. In other words, it is not a person’s property that is inviolable; rather, a person is entitled to the value of that property in the event that the state has a compelling need to acquire (“take”) it. Such state takings of property (usually land) follow the principle of eminent domain essentially, that the government retains the ultimate right to secure private property for the good of the state because the existence of the state is a precondition of property itself. However, while the principles of eminent domain and just compensation work together neatly under the concept of the takings clause, the business of defining what specific instances warrant the exercise of eminent domain and what level of compensation is just, is fraught with controversy. The Supreme Court has issued a number of landmark decisions on these questions over the years.

Condemnation

Governments exercise eminent domain that is, they take private property through a process of “condemnation” in order to advance projects deemed to be in the interest of the public or the government. For example, state and local governments exercise eminent domain over private property that stands in the way of a planned road expansion, a proposed state building, a public works project such as a dam, or any of a number of other projects. Such condemnation of property typically is construed as a taking and thus requires payment of fair market value to the property owner. Eminent domain can be exercised by all levels of government, as well as some quasi-governmental entities such as public utilities.

Disputes may arise over what constitutes the fair market value for a property that is taken by the government through condemnation, but the principle of eminent domain is well established and seldom open to a constitutional challenge. As long as just compensation is provided, the threshold for a valid exercise of eminent domain is relatively low.

Sometimes a government may seize property without providing just compensation. For example, a number of laws at the state and federal level provide for the forfeiture of a person’s assets under certain circumstances, including conviction for specified crimes. For example, federal laws permit the forfeiture of certain property, including boats and homes, that were purchased with illicit drug proceeds. Such laws have been challenged as unconstitutional, but generally it is the Eighth Amendment (which prohibits “excessive fines”) that is invoked. Because seizures of this type are considered penalties, they do not require compensation.

There are several other circumstances under which the government can seize property without granting compensation. In certain cases, a government may destroy private property in order to preserve public health and safety. For example, the Court has long upheld the right of the state to demolish structures posing a fire hazard as in Bowditch v. Boston (1880), to destroy diseased trees that threaten the health of other trees as in Miller v. Schoene (1928), or otherwise to abate nuisances, all without compensation. In these cases, property is not seized for public use; rather, the state is performing a remediation action where a property owner has failed to meet requirements specified in laws and ordinances.

The takings issue becomes much more complicated when a government seeks not outright condemnation of property but rather to restrict its use. Regulating the use of property is a fundamental and indispensable facet of a government’s police powers. Land use restrictions of various kinds have long been a recognized prerogative of government.

For example, federal, state, and local governments impose habitability standards for housing, hotels, mobile homes, and other structures. Local governments typically zone different sections of land under their jurisdiction for different uses, such as housing, retail businesses, or parks in order to impose order and promote compatible uses. Some such zoning ordinances restrict liquor stores or adult bookstores from areas near churches or schools. Zoning may also be used to restrict residential construction from floodplains and other hazardous areas. Local ordinances may limit noise from a factory or amphitheater in order to preserve quiet for nearby neighborhoods. Land developers may be required to provide open space for habitat conservation or public recreation. Easements may be required to facilitate public access to natural resources such as shorelines or parks. In these and myriad other ways, government exercises a long-accepted right to restrict the use of property.

Regulatory Takings

Governmentally imposed restrictions on the use of property, such as zoning restrictions, can be construed as “regulatory takings” when new restrictions are imposed on a piece of property after a person has purchased it. Presumably restrictions that exist on a property at the time of its purchase are reflected in the purchase price, and thus no governmental compensation is necessary.

The idea that regulatory (nonphysical) takings require compensation has evolved slowly and remains controversial. Until the early 1900’s most courts rejected the argument, made by some property owners, that postpurchase regulatory takings warranted compensation under the Fifth Amendment. For example, in Euclid v. Ambler Realty Co. (1926), the Court rejected a property owner’s argument that he deserved compensation for a local zoning ordinance that banned industrial development on his land. The Court held that the restriction was a valid exercise of police powers exercised by the government for legitimate reasons. Euclid thus upheld the constitutionality of zoning ordinances. At about this time, the Court began to recognize the possibility that zoning and other land use regulations, if restrictive enough, could indeed amount to takings deserving of just compensation. For example, in Nectow v. City of Cambridge (1928), the Court considered another ordinance prohibiting industrial development. In this case, the ordinance would permit only residential development on land under contract to be sold for industrial use. The Court found that the ordinance amounted to a taking because it allowed for “no practical use” of the particular parcel.

Many naturally sought guidance on identifying the point at which an otherwise legitimate government exercise of police powers becomes a taking under the Fifth Amendment. The issue was addressed, albeit incompletely, in the Court’s opinion in Pennsylvania Coal Co. v. Mahon(1922). In that case, the first to address nonphysical takings, the Court found that “Government hardly could go on” if every governmental regulation that diminished the value of property had to be accompanied by compensation. Rather, “some values are enjoyed under an implied limitation and must yield to the police power.” At the same time, however, “the implied limitation must have its limits or the contract and due process clauses are gone.” In this case, the Court held that restrictions that prevented coal mining on a particular piece of property made that property virtually worthless, and therefore the owner deserved compensation. Justice Louis B. Brandeis issued a dissenting opinion, however, highlighting some difficult and controversial aspects to the Court’s attempt at balancing public and private interests. Brandeis’s dissent presaged many of the debates that would come into full bloom a half-century later.

For many decades after the 1920’s the Court largely avoided takings cases, leaving them to be resolved by state and federal courts. Allowing for some variation among states and regions, legal development during much of the century generally took a fairly conservative approach to the takings clause, emphasizing the need for compelling, often extraordinary state interests in order to effect a taking without compensation. In the 1980’s and 1990’s, however, the Court heard and decided a number of landmark cases that generally had the effect of strengthening the government’s ability to pursue regulatory takings, particularly with the goal of advancing environmental protection.

Balancing

In the 1980’s the Court identified two major criteria for determining whether a taking had occurred. This approach, which the Court set forth in Agins v. City of Tiburon (1980), called for considering whether the restriction still permitted an economically viable use of the property and whether the regulation advanced a legitimate state interest. This approach is typically referred to as “balancing of public benefit against private loss.” In the Agins decision, the Court determined that a local zoning ordinance that restricted but did not prohibit residential development did not constitute a taking.

It is important to note that denying a property owner the “highest and best” use of his or her property is not adequate grounds for a takings claim. Certainly a regulation eliminating all viable economic use would be considered a taking. This was illustrated in Whitney Benefits v. United States (1989), which held that federal legislation that deprived a mining company of all economic use of its property amounted to a taking without just compensation. Similarly, in Lucas v. South Carolina Coastal Council (1992), the Court found that the denial of a beachfront building permit effectively prohibited all economic use of the land and thus amounted to a taking deserving of compensation. (Lucas allowed an exception for nuisance abatement.) Aside from such extreme cases as Whitney and Lucas, however, it is somewhat difficult to establish whether a regulatory action or zoning ordinance permits “economically viable use.” One case that did so is Goldblatt v. Hempstead (1962), wherein the Court found that an ordinance that effectively prohibited the operation of a gravel pit did nevertheless allow for other, economically viable uses for the property. A similar conclusion was arrived at in Agins.

In another landmark case from the 1980’s, the Court ruled in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (1987) that even a temporary taking requires just compensation. In this case, a church sought to rebuild some structures on its property that were destroyed in a flood. The county, however, had adopted an interim ordinance preventing construction (including reconstruction) of buildings on the floodplain where the church’s buildings had been located. The Court found that a taking, such as that created by the county ordinance, requires just compensation even when the taking is temporary. This decision closed a potential loophole of long-lived, though putatively temporary, land use restrictions.

Open Space and Environment

The increasing concern with environmental issues in the latter part of the twentieth century was accompanied by greater governmental regulation of private property to provide open space and public access to natural resources. Although the Court has generally supported such goals as legitimate public purposes, it has also had occasion to identify circumstances in which takings have resulted, thus requiring just compensation. For example, in Kaiser Aetna v. United States (1980), the Court held that requiring a landowner to provide public access to a private pond amounted to a taking deserving of just compensation. The Court pushed this decision further in Nollan v. California Coastal Commission (1987), holding that a state agency’s demand for a coastal easement on private property amounted to a regulatory taking that required just compensation. In the case of Nollan, it was a public resource (the coastline of the Pacific Ocean), rather than a private pond, for which public access was required.

It would seem that the Court accepted a broad range of resource-related goals as legitimate grounds for the exercise of eminent domain. At the same time, the Court seemed to be viewing open space requirements and demands for easements as bona fide takings requiring just compensation. A distinction was generally drawn for open space requirements imposed on land developers whose proposed development would itself generate a need for such open space. For example, a housing development on agricultural land would increase the population of the area, thus arguably creating a need to preserve and create access to some open space, such as parks or greenbelts. Requirements for such environmental impact-mitigating measures might therefore not warrant compensation. However, in Dolan v. City of Tigard (1994), the Court struck down a city’s requirement that a hardware store owner dedicate a portion of property for a trail in order to be permitted to expand the store. The Court held that the city had not satisfactorily established that the requirement was needed to offset any anticipated increase in traffic from the expansion. Dolan thus underscored the need to link mitigating measures to the actual impacts of a proposed project.

Later Decisions

In the late 1990’s the Court seemed to continue its support for environmentally based regulatory takings, while maintaining or even expanding the requirement that such takings, when significant, require just compensation. The state has a right to insist on property restrictions that protect the environment, the Court seemed to say, but the state must be willing to pay when these restrictions significantly restrict use.

A major case from this period was Suitum v. Tahoe Regional Planning Agency (1997). In this case, a property owner sought to build a home on an undeveloped lot she had purchased fifteen years earlier. The lot, in Nevada near Lake Tahoe, fell under the jurisdiction of the Tahoe Regional Planning Agency (TRPA). The agency, charged with protecting environmental quality in the Lake Tahoe Basin, prohibited the development as likely to cause unacceptable environmental damage. TRPA essentially denied all economic use and offered as compensation “transferable development rights.” Such rights could not be used to build on Suitum’s lot but could be sold to a different landowner in the Tahoe basin where such development would not be prohibited. By purchasing those rights, the property owner could build a larger structure than otherwise allowed.

Suitum had been told by a lower court that her case was not “ripe” that she had not accepted and tried to sell the transferrable development rights. However, the Supreme Court held that Suitum’s case was indeed ripe and must be decided by the District Court of Nevada.

Transferable development rights are one of a number of the sometimes innovative, sometimes complicated, and frequently controversial approaches that were developed by various governmental bodies in order to regulate land use without running afoul of the Fifth Amendment. Other approaches involve development fees, open space dedications, habitat conservation plans, and statutory compensation programs.

Bibliography

One of the most focused recent works on the Supreme Court’s treatment of takings is provided in George Skouras’s Takings Law and the Supreme Court: Judicial Oversight of the Regulatory State’s Acquisition, Use, and Control of Private Property (New York: P. Lang, 1998). For theoretical overviews of the broader subject of property rights, see Polly J. Price’s Property Rights: Rights and Liberties Under the Law (Santa Barbara, Calif.: ABC-Clio, 2003) and Tom Bethell’s The Noblest Triumph: Property and Prosperity Through the Ages (New York: St. Martin’s Press, 1998). Among general works on legal issues associated with property rights (including treatments of takings), see Jan Laitos’s Law of Property Rights Protection: Limitations on Governmental Powers (Gaithersburg, Md.: Aspen Law and Business, 1998). On the subject of environmentally motivated takings, see Robert Meltz et al., The Takings Issue: Constitutional Limits on Land Use Control and Environmental Regulation (Washington, D.C.: Island Press, 1998), and Robert Innes et al., “Takings, Compensation, and Endangered Species Protection on Private Lands,” Journal of Economic Perspectives (Summer, 1998): 35-52. A somewhat critical assessment of regulatory takings is provided by Gideon Kanner in “Just Compensation Is by No Means Always Just,” The National Law Journal (March 24, 1997): A23. The Congressional Budget Office has put out a very understandable overview of regulatory takings, describing the current system for handling regulatory takings claims and evaluating various proposals for changing that system. See Regulatory Takings and Proposals for Change (Washington, D.C.: Congressional Budget Office, 1999).