Takings Clause: Fifth Amendment

The Takings Clause of the Fifth Amendment of the U.S. Constitution provides that private property shall not “be taken for public use, without just compensation.” This is the most explicit protection of property rights in the Constitution, and so it is potentially a substantial limitation upon the regulation of private property by states and localities. But for several reasons, the impact of the clause is limited, and the definition and regulation of private property rights remain largely state concerns.

On its face, the Fifth Amendment does not pertain to the states. It is part of the Bill of Rights, which the Supreme Court has long held applies only to the federal government (see Barron v. Baltimore 1833). The First Amendment, after all, begins with “Congress shall make no law.” Except for a few specific limitations in the original Constitution, federal constitutional limitations were not applied to the states until after the Civil War. The Fourteenth Amendment, ratified in 1868, declares that, among other things, “No state shall . . . deprive any person of life, liberty or property, without due process of law.” Just what “due process” entails has been subject to considerable controversy, but over time the Court has “incorporated” various parts of the Bill of Rights into the Due Process Clause of the Fourteenth Amendment, which effectively makes most of the Bill of Rights applicable to the states. The first clause to be so incorporated and applied was the Takings Clause, in Chicago, Burlington and Quincy Railway v. Chicago (1897).

Despite over a century of application to the states, the impact of the Takings Clause on federalism has been modest, at least until recent years. Generally the Takings Clause has not been aggressively applied by the Supreme Court, so its impact on states and localities is nowhere near as great as, for example, the First Amendment, the Equal Protection Clause, or the criminal rights provisions. Also, nearly every state constitution has similar language requiring compensation when property is taken, and about half the states have language also requiring compensation when property is merely damaged, not taken—language that arguably could impose more stringent requirements on governments. And finally, state courts generally follow the outlines of Supreme Court doctrine even when interpreting similarly worded state constitutional language, although they are not required to do so, and occasionally impose stricter standards. The pedigree of takings doctrine also stretches back deep into Anglo-American common law, or law made by the courts through legal opinions, and the common law is the province of state, not federal, courts. Thus, state court interpretations of state constitutional principles and common law doctrine are most influential in determining the rights of property owners, within the broad limits of federal takings doctrine.

The few simple words of the Takings Clause raise at least four major questions: what is private property? What is a “taking”? Is it for public use? And, has just compensation been provided? In the legal sense, property is not so much a “thing” as a bundle of rights, including the rights to own property, sell it, occupy it, keep others out, and use it. To say property is “taken” is not to say that the state hauled it away, but rather that it has taken away the property rights of the owner. The legal process by which property is taken is “eminent domain,” in which a government entity goes to court to formally take title to the property, such as to build a highway or a post office, and agrees to pay money for it. In those cases the main question may be whether the compensation offered by the government is “just,” and that will be determined based on evidence about fair market value and so forth. Of course, an owner could choose to fight the condemnation by claiming it is not for a “public use.” But the U.S. Supreme Court and state courts have generally been very deferent to how the government defines public use, equating it with any legitimate public purpose, whether the property is literally used by the public or not, and trusting to political officials to decide what serves public purposes. As Justice William O. Douglas proclaimed in Berman v. Parker (1954), “Once the legislature has spoken, the public interest has been declared in terms well-nigh conclusive.” In that case, the Court upheld the District of Columbia’s use of eminent domain to condemn entire neighborhoods for redevelopment. In Hawaii Housing Authority v. Midkiff (1984), the Court found constitutional the use of eminent domain to force land redistribution in Hawaii, where a small number of landowners historically owned most of the residential land. These cases seem to violate the classic dictum that a government may not legitimately force a transfer of property from one individual to another. Some of the more notable state cases have involved the condemnation of a large swatch of Detroit so that General Motors could build a new plant, and the California Supreme Court considering the notion that the City of Oakland, California, might “condemn” a football team to keep it from leaving the city.

The liberal interpretation of public use leaves just compensation as the main constraint on state and local use of eminent domain. Condemnations can be expensive, and citizens generally like public amenities but do not like taxes. One way that government officials may serve public needs at a lower cost is by emphasizing regulation of private property, rather than condemnation and compensation. Not surprisingly, then, most takings litigation today is not over eminent domain, but rather cases in which the owner claims the government has so substantially restricted their property rights that it might as well have taken it, and should pay compensation. These “regulatory takings” cases result in “inverse condemnation” suits, in which the property owner initiates legal action and seeks compensation for a taking they claim has already happened, rather than the government going to court in order to pay first and then take property, so these cases are the “inverse” of traditional eminent domain.

As far back as 1922 in Pennsylvania Coal Company v. Mahon, the Court recognized that when regulation goes “too far,” it may deprive owners of their rights, and so could be a taking and require compensation, and the Court has struggled since then to clarify what it means by “too far.” This uncertainty about what is a taking hampers owners in planning their investments, and raises a cloud of doubt among state and local officials as to what obligations they can legally impose on private property. For about half a century after Pennsylvania Coal, the Supreme Court declined to review regulatory takings claims. In Euclid v. Ambler Realty (1926), it upheld local zoning against due process and takings challenges, and then was silent for decades. This created an atmosphere in which state and local governments could regulate property with little concern that federal constitutional principles might require compensation. Also, Congress never passed any major land-use law, so land use remained a local concern.

The Supreme Court shook this status quo in 1987, when it dusted off the old Mahon doctrine and ruled, in First English Evangelical Lutheran Church of Glendale v. Los Angeles County, that regulatory takings would indeed require compensation. Soon afterward, the Court actually found a taking, in Nollan v. California Coastal Commission (1987). Both of these decisions provoked heated dissents on the Court and sharp criticism in the planning community. The cases did indeed create a new line of precedents of importance to state and local officials. In hindsight, however, these cases apply to relatively unusual circumstances, not to most state and local policies. Indeed, the Court has kept alive an alternative line of more lenient precedents that apply in most regulatory settings, and so the impact of the new takings doctrines has been less than many had predicted. But the Court is closely divided in these cases, and the replacement of a justice or two could make quite a difference in doctrine.

Close followers of the Court were not surprised by the 1987 decisions. For many years, the Court had struggled to find a case to overturn a curious California Supreme Court policy that the remedy for a regulatory taking would be invalidation, but not compensation. This seemed to fly in the face of the plain meaning of the Takings Clause, but each time the Court heard arguments in a land-use case, it decided that there was no sufficiently “final judgment” by a regulatory agency or lower court to determine whether there had been a taking. Most famously, Justice William Brennan wrote an elegant dissent in San Diego Gas and Electric Company v. City of San Diego (1981) calling for compensation for regulatory takings, even if temporary, and Justice William Rehnquist made it clear in his concurring opinion that he would agree with Brennan if the case were sufficiently “ripe.” That chance finally came in First English, in which a church was prevented from rebuilding its camp for handicapped children by a moratorium on construction in fire- and flood-prone canyons, and the California courts refused to let the church even seek compensation in court. Chief Justice Rehnquist wrote for the Supreme Court, making it clear that takings even if only regulatory and temporary, require compensation. But before any money can be paid, a taking must be found, and on remand the lower court rejected the takings claim.

Shortly after First English, the Court did find a taking, when the California Coastal Commission required that a property owner donate an easement for public beachfront access in exchange for permission to build a nicer house. Writing for the majority in Nollan, Justice Antonin Scalia characterized such a forced concession as extortion, and said that its “exactions” from property owners would be constitutional only if they substantially furthered a governmental interest that would justify denial of the permit. More simply, the condition has to be related to the impact of the property use. For example, if the Nollans’ house would impede existing public access to the beach, the commission might deny the permit or allow them to build if they granted the beach easement. But there was no such “essential nexus.”

It was immediately clear that Nollan could be a very big case. For the first time since Pennsylvania Coal, the Court had found a regulatory taking and, Justice Brennan argued in dissent, had imposed “a standard of precision for the exercise of a State’s police power that has been discredited for the better part of this century.” State and local officials were concerned that governments could now be required to show a substantial justification for every burden imposed on property owners. But viewed narrowly, Nollan was unremarkable. The state was demanding public access to private property along the beach. That might be a worthy goal, but the Court had always ruled, even through the decades of deference, that such “physical invasions” were takings requiring compensation. The case made clear that demands for easements were not exempted from compensation requirements simply because they might be conditions upon development. Most regulatory restrictions, however, do not demand public access and so might not be subject to the more demanding Nollan standard.

In Dolan v. City of Tigard (1994), the Court refined the Nollan test by adding that the conditions imposed on owners must be “roughly proportional” to the impact of their property use. Florence Dolan wanted to enlarge her plumbing and hardware store, and the city, citing the potential of more customers and thus more traffic, conditioned approval on Dolan giving the city an easement along an adjoining creek for flood control and a bike path. Again writing for the Court, Justice Scalia criticized the bike path as hardly proportionate to the impact of the larger store, making humorous comments about patrons trying to bring plumbing fixtures home on their bicycles. After Dolan, localities could be expected to provide some evidence of rough proportionality. This could be a fairly burdensome imposition on state and local governments, as documenting likely effects can be costly. But without such a requirement, the provision of broad public needs might be imposed on a single or a few property owners. In any case, Dolan involved yet another physical invasion, this time on bicycles, and so the Court may limit its application to those circumstances.

Lawyers for property owners tend to favor categorical rules that make clear where the constitutional lines are drawn, while government officials favor more ad hoc approaches that take the peculiarities of particular situations into account and most likely result in upholding the governmental action. Each of these positions finds some support in Supreme Court takings doctrine. In most situations the Court seems to favor ad hoc consideration, but has developed two categorical rules: first, physical invasions require compensation, at least absent a showing that the burden substantially advances the public interest and is roughly proportional. Second, total deprivations of economic value must be compensated.

The latter rule had often been declared as dicta in Supreme Court opinions. In Lucas v. South Carolina Coastal Council (1992), the Court affirmed that it meant what it had always said. The state had denied Lucas permission to build a house on his beachfront property, and wiped out its value, but argued that no compensation was required because important interests of environmental preservation were served. The Court recognized that no property owner had a right to create a nuisance, but asserted that a nuisance could not simply be whatever a state legislature declared, but rather must be found in the “background principles” of the state’s common law of property. Otherwise, a government could simply declare a use to be a nuisance whenever it wished to avoid compensation. This doctrine might appear to be an intrusive interference with state policy making, but this rule applies only when the entire value of the property has been wiped out. Tremendous reductions of value, as high as 90 or 95 percent, have been tolerated by the courts without compensation. And the background principles of property are determined by state courts, minimizing the federal intrusion.

Other than these two categorical exceptions—total deprivations and physical invasions—a majority on the Supreme Court still seem to favor ad hoc balancing approaches that weigh the strength of the government’s justification of restrictions on property use against the degree of interference with the owner’s investment-backed expectations. This was the approach endorsed by the Court in Penn Central Transportation Company v. New York (1976), when it refused to recognize historic preservation restrictions that substantially deprived quite valuable building rights above the Grand Central rail terminal as a taking. Nollan and Dolanraised doubts as to whether Penn Central was still good law, but they were answered in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (2002), when a majority of the justices rejected arguments that an extended moratorium on home construction near Lake Tahoe was a taking. Even though it essentially wiped out value, the moratorium was an important tool for land-use planning, Justice John Paul Stevens reasoned, and was not permanent. He explicitly endorsed the Penn Centralad hoc approach, rejecting a categorical rule that moratoria were takings.

In one sense, the impact of Takings Clause cases since 1987 has been dramatic. In his famous San Diego Gas dissent, Justice Brennan asked rhetorically, “[I]f a policeman must know the Constitution, then why not a planner?” and indeed planners and other local and state officials must now be familiar with the outlines of takings jurisprudence. The long decades of unquestioned judicial acceptance of government rationales are over, and federal standards may seem to be a significant intrusion upon the states. But in practice, the autonomy of state and local regulators remains substantial. Takings litigation is a costly annoyance—for both owners and officials—but the vast majority of land-use restrictions continue to be upheld, even in the face of great deprivation of value.

Even in the situations where the Supreme Court is more strict—total deprivations and physical invasions—the outcome is still largely in the hands of state officials and judges. This is primarily due to obscure technical rules of pleading in inverse condemnation suits: finality and exhaustion. For decades the Court has held that a regulatory agency must make a “final judgment” about the use of property before courts can determine whether there has been a taking. Just because one plan—or ten—is rejected does not mean the government will not allow any development, and so some value may remain. Of course, officials realize this and can delay undesirable projects for years simply by refusing to make a definitive ruling on allowed development.

Secondly, once a final judgment is in hand, owners are required to “exhaust” state administrative and court remedies before seeking relief in federal courts, which can be a very long and costly procedure. This means that most takings claims will be resolved by state bodies applying state rules. Federal takings principles may be invoked in state judicial proceedings, but typically state courts interpret them narrowly, rejecting takings claims and maximizing the discretion of public officials. If an owner then sues in federal court, the suit may be rejected under res judicata principles, that the matter was settled in state court. The only significant direct involvement by federal courts, then, is in those rare cases that are litigated up through a state court system and accepted for review by the U.S. Supreme Court. Since these are the most high-profile cases, a false impression may be created that Supreme Court takings doctrine dominates local and state land-use planning, when in fact it creates only a limited set of principles that are rarely successfully invoked. The Court will likely continue to allow regulators broad latitude in most cases, while perhaps modifying procedural rules that can effectively deny owners their day in court.

SEE ALSO: Lucas v. South Carolina Coastal Council; Nollan v. California Coastal Commission; Substantive Due Process