The Four Types of Regulatory Takings

The best way to understand how the NAI approach helps to prevent takings challenges is to look specifically at what the courts have decided may constitute a regulatory taking. In 2005, the U.S. Supreme Court ruled on a precedent-setting case (Lingle v. Chevron), which clearly established regulatory taking guidelines. In their unanimous decision, the Court determined that there are four ways for a regulation to be a taking. Each way is briefly discussed below, with a non-technical explanation of how they are relevant to an NAI approach. (For a more detailed legal explanation of these cases, see the latest edition of No Adverse Impact Floodplain Management and the Courts, published  by the Association of State Floodplain Managers.)

  1. A physical  intrusion. Governments may not, without compensation, place anything on private property against the wishes of the owner. The case discussed (Loretto v. Teleprompter Manhattan) involved a New York City requirement that building owners allow the cable company to install a small cable box and cables on all residential buildings. Because the NAI approach doesn’t generally promote  structural solutions, this type of regulatory taking is unlikely to apply. However, if a community’s NAI plan involves the placement of structures (culverts, for example)  on private property, this ruling makes it clear that the community may be required to obtain the permission of the landowner or pay compensation.
  2. A total or near-total regulatory taking. If a regulation restricts property rights to such a degree that it eliminates all or essentially all economically viable uses of a piece of property, this may constitute a taking. The case reviewed (Lucas v. South Carolina Coastal Council) was filed by a landowner who was prohibited from building a home on a barrier beach. In their opinion, the Court clearly states that regulations aimed at preventing nuisance don’t constitute takings. It warns, though, that governing bodies arguing that specific regulations are designed to prevent nuisances will need to demonstrate how they are addressing similarly situated nuisances (i.e., regulations may not be applied arbitrarily). The NAI approach can help your community to consistently articulate how potentially harmful projects are nuisances. When designing land use regulations, your community should always try to ensure that the owner retains at least some economically beneficial uses. This is both fair and helps establish the legal reasonableness of your regulations. Note that land uses that harm others are not legal or beneficial, and that beneficial uses don’t necessarily include building residences or other structures, especially in hazardous areas. Where new regulations, even hazard-based regulations, could sharply decrease the market price of property, consider allowing the transfer of development rights to areas where your community would like growth to occur.
  3. A significant, but not near-total regulatory taking. Courts hearing takings arguments should consider three factors that have “particular significance” – a) the magnitude of the economic impact, b) how severely the regulation affects “investment- backed expectations,” and c) the character of the government in action. The central case discussed (Penn Central v. City of New York) concerned a denied expansion of Grand Central Station in New York City. The historic preservation regulation reviewed in this case seeks to protect neighborhood character-not to prevent physical harm. These are two very different things in the eyes of the law. The U.S. legal system sometimes requires governments to compensate landowners when property rights are compromised for community improvement, but less frequently when they prevent potential harm. There is no property right to use or develop land in a way that harms others, even if that use maximizes the particular site’s economic potential. There is no constitutional or legal right to a good return on investments. Unfortunately, some people invest in land with erroneous ideas about what they are legally allowed do with it, and when forbidden to do as they wish, may argue that regulations have devalued their property. The courts have made it clear that while regulations designed to prevent harm may reduce the market value of a piece of property, they do not decrease its true value, and hence NAI-based regulations cannot trigger this aspect  of a taking test. A 2005 Massachusetts Supreme Judicial Court decision upheld a coastal town’s regulation prohibiting new residences in its coastal floodplain because the town successfully established that this regulation was designed to prevent harm and did not render the land valueless.
  4. Insufficient relationship between the requirement and the articulated government interest. If a community conditions a permit, the requirements it exacts from the landowner must be related to the goals of the regulation and must be “roughly proportional”  to the predicted  impacts of the proposed development. In the two cases, Nollan v. the California Coastal Commission and Dolan v. City of Tigard, landowners were required to provide a public right of way as a permit condition, even though the proposed developments did not reduce public access. The NAI approach avoids this type of taking by tightly binding regulations to the specific goal of preventing harm.

With these and other decisions, the courts have made it clear that governments may regulate land without compensation if they do so with the intent of preventing harm. Fairly applied No Adverse Impact regulations make the “takings issue”  a non-issue.

From the property rights perspective, it’s worth noting that the Cato Institute, which advocates for limited government, individual liberty, and free markets, agrees that preventing landowners from causing harm to others does not constitute a taking:

“Owners may not use their property in ways that will injure their neighbors. Here the Court has gotten it right when it has carved out the so-called nuisance exception to the Constitution’s compensation requirement. Thus, even in those cases in which regulation removes all value from the property, the owner will not receive compensation if the regulation prohibits an injurious use.”

—Roger Pilon, Senior Fellow and Director, Cato Institute (to the U.S. House of Representatives, 2/10/95)

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