Budgetary Impact of Limiting Regulatory Authority

Under the U.S. Constitution, people are entitled to compensation when a government takes their property. This is known as a taking. A taking is most commonly the result of a government using its eminent domain authority. Eminent domain allows a government to take private property for public use. In contrast, a regulatory taking arises when government regulation is so extreme and burdensome that it reduces property value, even though the government did not intend that result.

Some states have adopted inappropriately broad definitions of what counts as a taking. Sometimes the amount of compensation due the property owners is excessive. These laws can effectively shut down the government’s ability to adopt planning, zoning, and regulatory activities, interfering with efforts to protect public health, public safety, and quality of life. Enormous sums can be involved, and states may not be able to afford or may choose not to pay the compensation.

The U.S. Supreme Court has established three explicit situations that amount to a regulatory taking. Not all state rules have followed them. The first situation is when a landowner has been denied “all economically viable use” of the land (Lucas v. South Carolina Coastal Council, 1992). The second situation is when the regulation forced the landowner to allow someone else to enter onto the property (Loretto v. Teleprompter Manhattan, 1982). The third is when the regulation imposes unreasonable burdens or costs on the landowner (Dolan v. City of Tigard, 1994). An unreasonable cost is one that does not bear a reasonable relationship to the impacts of the project on the community.

Two categories of state laws have emerged that go far beyond Court precedent. They are known as red tape and compensation. Red tape laws require the state attorney general or government departments to thoroughly assess the impact of a proposed regulation on private property. Compensation laws require a government agency to pay a landowner for any reduction in property value caused by regulation.

Such laws and associated regulations could significantly affect governments’ ability to protect human health, create livable communities, ensure public safety, preserve the environment, enhance civil rights and worker safety, and deal effectively with other related concerns. In addition, these laws could have significant budgetary impacts.