Under the US Constitution, people are entitled to compensation from a government when it takes their property. This is known as a taking. A taking is most commonly the result of direct condemnation when a government uses its eminent domain authority. In contrast, a regulatory taking arises when government regulation is so extreme and burdensome that it leads to a reduction in property value, even though the government did not intend that result.
Some states have adopted inappropriately broad definitions of what counts as a taking and the amount of compensation due the property owners. These laws can effectively shut down the government’s ability to adopt planning, zoning, and regulatory activities that seek 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. Supreme Court precendent on takings should be followed.
The US Supreme Court has established three clear rules identifying situations that amount to a regulatory taking. The first situation is one in which the landowner has been denied “all economically viable use” of the land (Lucas v. South Carolina Coastal Council, 1992). The second situation is one in which the regulation forced the landowner to allow someone else to enter onto the property (Loretto v. Teleprompter Manhattan, 1982). The third situation is one in which the regulation imposes burdens or costs on the landowner that do not bear a reasonable relationship to the impacts of the project on the community (Dolan v. City of Tigard, 1994).
Proponents frame new compensation laws as takings legislation even when those laws go far beyond Court precedent on what constitutes a taking. The two main categories of these types of proposals 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.
BUDGETARY IMPACT OF LIMITING REGULATORY AUTHORITY: Policy
Limiting regulatory authority
Governments should avoid enacting laws that are inconsistent with US Supreme Court precedent on takings. Such laws and associated regulations could seriously 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.