Regulatory takings in the United States
In United States constitutional law, a regulatory taking refers to a situation in which governmental regulations restrict the use of private property to an extent that the landowner is substantially deprived of the reasonable use or value of their property. This principle is grounded in the Fifth Amendment to the United States Constitution, which stipulates that governments are obligated to provide just compensation for such takings. This amendment is applicable to state governments through the Due Process Clause of the Fourteenth Amendment, thereby ensuring that property rights are protected at both federal and state levels.
Supreme Court jurisprudence
''Pennsylvania Coal Co. v. Mahon''
In 1922, the Supreme Court held in Pennsylvania Coal Co. v. Mahon that governmental regulations that went "too far" were a taking. Justice Oliver Wendell Holmes, writing for the majority of the court, stated that "he general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." Before the court, was a Pennsylvanian law that forbade all mining under inhabited land. The Court held this law to be a taking of the coal owned by the Pennsylvania Coal Company.The early mining operations often removed so much of the underground coal that the mines became a hazard to the miners underground and to those residing on the surface. For this reason, the Pennsylvania legislature acted to limit the amount of material that could be removed from the mines below in order to leave sufficient underground support below. Pennsylvania Coal Co. v. Mahon involved an action by an individual landowner who sought to prevent a mining operation from violating this law, undermining his or her home. Under Pennsylvania law, the deed also conveyed the right to surface support to the coal company which could thus remove subsurface coal even if that caused subsidence. The coal companies argued in Pennsylvania Coal that they had acquired a right to mine the coal and the right to allow the surface to collapse because these rights had been purchased from the original landowners. The owner's deed conveyed the surface but in express terms reserved the right to remove all the coal. The state and the surface landowners argued that the right to cause surface collapse was not property. The deed provided that the grantee takes the premises with that risk and waives all claim for damages that may arise from mining out the coal. The coal company essentially owned a property right to mine as much as it wished. Over a dissent by Justice Brandeis, the court ruled that Pennsylvania's statute deprived the coal companies of the right to mine their coal.
The Holmes opinion is considered one of the most important opinions in the history of takings law.
While it is often asserted that the doctrine of regulatory takings originated with the Supreme Court’s decision in Pennsylvania Coal Co. v. Mahon, it is argued that the roots of this doctrine extend far earlier, tracing back to developments in American jurisprudence after the Civil War. Early cases, such as Pumpelly v. Green Bay Co. , opened the door to a broader interpretation of takings, allowing for challenges to regulations that interfered with property use. However, the U.S. Supreme Court initially maintained a more restrictive approach, focusing primarily on physical takings. In contrast, various state courts advanced the doctrine by invalidating regulations that affected property rights, even in the absence of physical invasion or title issues. Influential jurists of the period, including Justice David Brewer and Justice Oliver Wendell Holmes Jr., began to articulate foundational theories regarding regulatory takings. They posited that governmental regulations could amount to takings if they significantly impaired the economic viability or practical use of private property, reinforcing the notion that property rights extend beyond mere physical control. Consequently, the Pennsylvania Coal Co. v. Mahon decision did not emerge in isolation; rather, it served to crystallize and formalize a line of legal reasoning and precedents that had been gestating within the broader contours of 19th-century American legal thought.
''Bituminous Coal Ass'n v. DeBenedictis''
In Bituminous Coal Ass'n v. DeBenedictis, the Supreme Court revisited the issue of mining restrictions. In this case, the Pennsylvania legislature enacted the Bituminous Mine Subsidence and Land Conservation Act, which required coal companies to leave at least 50 percent of the coal in place beneath certain structures to prevent subsidence. The Court, in contrast to Mahon, took a more favorable view of the legislation, finding that it did not constitute a taking under the Fifth Amendment. The Court emphasized that the regulation was designed to serve a legitimate public interest by protecting the surface from damage caused by mining and did not deprive the coal companies of all economically viable use of their land.The Court wrote:
he character of the governmental action involved here leans heavily against finding a taking; the Commonwealth of Pennsylvania has acted to arrest what it perceives to be a significant threat to the common welfare. here is no record in this case to support a finding, similar to the one the Court made in Pennsylvania Coal, that the Subsidence Act makes it impossible for petitioners to profitably engage in their business.
Under our system of government, one of the State's primary ways of preserving the public weal is restricting the uses individuals can make of their property. While each of us is burdened somewhat by such restrictions, we, in turn, benefit greatly from the restrictions that are placed on others. These restrictions are "properly treated as part of the burden of common citizenship".
''Penn Central Transportation Co. v. New York City''
To determine the presence or occurrence of regulatory taking, modern jurisprudence predominantly employs the ad hoc, factor-based test articulated by the Supreme Court of the United States in the landmark case of Penn Central Transportation Co. v. New York City. In this framework, courts are instructed to assess three primary factors:- the economic impact of the regulation on the claimant,
- the extent to which the regulation has interfered with distinct investment-backed expectations and
- the character of the governmental action.
These factors have been criticized because the court failed to provide guidance as to exactly what they mean, what must be proven to establish a taking using them as a test, and whether all three, two, or any one of them is sufficient to show a taking.
In regulatory takings jurisprudence, invoking the Penn Central balancing test almost invariably favors the government. This three-factor test, which considers the economic impact of the regulation, the interference with reasonable investment-backed expectations, and the character of the government action, has been criticized for its indeterminacy and lack of predictable outcomes. In practice, courts applying Penn Central Transportation Co. v. New York City, have overwhelmingly ruled in favor of the government, making it a highly deferential standard.
Legal scholars have noted that Penn Central has become a black hole for property rights claims, in which the balancing of factors rarely results in a finding for the property owner. According to Professor John Echeverria, "...the Penn Central test...is so vague and indeterminate that it invites unprincipled, subjective decision making by the courts." Similarly, Professor Daniel R. Mandelker observes that, "...a takings claim is almost impossible to win" when litigated under this framework.
The U.S. Supreme Court held that: the owners could not establish a "taking" merely by showing that they had been denied the right to exploit the superadjacent airspace, irrespective of the remainder of the parcel; the fact that the law affected some owners more severely than others did not itself result in a "taking," and that the law did not interfere with owners' present use or prevent it from realizing a reasonable rate of return on its investment, especially since preexisting air rights were transferable to other parcels in the vicinity, which acted as a form of compensation for the claimed taking of air rights.
''Penn Central'' economic impact factor
Under the Penn Central test for regulatory takings, courts consider the economic impact of a government regulation on the property owner. However, courts have been inconsistent in determining the degree to which a regulation's economic impact constitutes a compensable taking under the Penn Central framework.Some courts do not require any specific percentage of economic loss to satisfy this factor and declined to establish a fixed numerical threshold. Other courts treat percentage loss as a significant, and sometimes decisive, consideration, but disagree on what percentage is sufficient. In Colony Cove Properties, the court held that a 92.5% diminution in value was not enough to constitute a taking. By comparison, courts in other cases have found smaller losses sufficient, such as an 87% loss in Formanek v. United States. Courts also diverge on whether economic impact should be measured by lost property value or lost profits. In Bordelon v. Baldwin County, a taking was found where the property owner was deprived of $600,000 in rental income, representing approximately 18% of the property's value. By contrast, in CCA Associates v. United States, a similar $700,000 loss in net income, also representing 18% of the property's value, was held insufficient to support a taking. As a result, scholars and courts alike have noted the absence of a clear standard. Professor Richard A. Epstein observed that "o one knows how much diminution in value is required." Similarly, Robert Meltz has commented that "the Supreme Court has never given us definite numbers" or "a specified percentage" or any "threshold".