Restoring Property Rights in Washington: Regulatory Takings Compensation Inspired by Oregon's Measure 37
| Publication year | 2006 |
| Citation | Vol. 30 No. 01 |
I. INTRODUCTION
You get what you pay for, right? Well, not always. There is a loophole in the law that allows the government to take away valuable private property rights, through regulation, without compensation.(fn1) Specifically, the government can impose regulations on private property that limit its use and result in a diminution in its fair market value, without having to pay the property owner a cent.(fn2) Accordingly, many property owners are denied the full benefit of their bargain because they are not compensated for a reduction in the value of their land caused by land-use regulations that restrict uses of the property that were permitted when the owner originally purchased the land.(fn3)
Imagine, for example, a developer who invests ten million dollars in acquiring 100 acres of undeveloped residential land. The purchase price reflects the fact that the property is zoned at a density of one house per acre. Thus, the developer makes this investment with the intent of building and selling 100 houses, yielding an estimated five million dollar profit. However, before the houses are built, the local government, in an effort to reduce urban sprawl, enacts a land-use regulation which restricts the land to agricultural use. Such a regulation would result in a vast diminution of the property's value, as well as a loss of the developer's five million dollar expected profit. Consequently, the developer whose land has been restricted is forced to bear the entire economic cost of a land-use regulation that is designed to benefit the public as a whole, in this case by reducing urban sprawl.
Furthermore, any private property owner, no matter how large or small, may be forced to bear disproportionate burdens resulting from land-use regulations designed to benefit society at large.(fn4) For instance, imagine a young couple who buys a house where they envision raising their children. Further, suppose the couple purchases the particular parcel because it abuts wetlands; thus, the property will always be ensured privacy, as nothing can be built on the wetlands. Additionally, suppose the property has a spacious twenty-foot-deep backyard in which they intend to build a pool and a swing set for their children. Unfortunately, these plans are destroyed by a subsequent government regulation which widens the buffer zone along the wetlands by an additional twenty feet. Such a regulation subsumes their backyard, leaving the couple with no usable land, as they are now prohibited from putting any structures in their backyard.
As a final hypothetical, imagine a diner that burns to the ground in an accidental fire. Despite the fact that the business might be in compliance with governmental regulations when it burns down, the government may later refuse to permit the owners to rebuild their business because the government has changed land-use regulations in the interim.
As these possibilities demonstrate, there are a myriad of ways in which a private property owner may be adversely affected by land-use regulations. This adverse effect is caused by the fact that, unlike the requirement for compensation when the government "takes" property via eminent domain,(fn5) there is no requirement that the government compensate a property owner when the "taking" is effectuated through burdensome land-use regulations not in effect when the property owner purchased the land.(fn6)
The legal term "property" denotes not merely a tangible thing, but also the rights in and appurtenant to that thing.(fn7) These rights, often collectively termed a "bundle of rights," include the rights to possess, to use, to exclude, to profit, and to dispose.(fn8) As early as 1900, it was noted that "when a person is deprived of any of those rights, he is to that extent deprived of his property, and hence, that his property may be taken, in the constitutional sense, though his title and possession remain undisturbed."(fn9) Accordingly, when a government regulation modifies the bundle of rights associated with owning property, the government is arguably "taking" the landowner's "property" in the constitutional sense, thus requiring the owner to be compensated.(fn10) This type of "taking" is characterized as a "regulatory taking."(fn11)
A "regulatory taking" occurs when the government diminishes the value or usefulness of private property "by a regulatory action that does not involve a physical occupation of the property."(fn12) However, the U.S. Supreme Court has conceded that "the attempt to distinguish 'regulation' from 'taking' is the most haunting jurisprudential problem in the field of contemporary land-use law."(fn13)
Although property rights are protected by the Fifth and Fourteenth Amendments of the U.S. Constitution, there is much debate over "the degree to which they are protected and the degree to which they are limited by the interests of the general public."(fn14) Thus, there is an inevitable tension between the government's right to regulate in the public interest and the constitutional right of citizens to the enjoyment of private property, free from unreasonable restrictions.(fn15) It is clear that the government must have the power to regulate property; however, the extent to which government may restrict private property rights in the name of the public interest is not as apparent.
While regulatory actions are generally intended to protect or improve the well-being of citizens and the environment, they may impose costs on isolated private property owners by limiting the use or development of their land.(fn16) This often results in an unfair distribution of the costs and benefits of the imposed regulation, as individuals are forced to bear the cost of a regulation whose benefits are enjoyed by society as a whole. Accordingly, one of the principal purposes of the Fifth Amendment's Takings Clause,(fn17) in prohibiting the taking of private property for public use without just compensation, is to prevent the government "from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."(fn18)
To effectuate that goal, in November 2004, Oregon voters passed a ballot initiative, Measure 37, which imposed the most progressive regulatory takings compensation statute in the country.(fn19) Although planners and environmentalists have praised Oregon's aggressive policies designed to preserve open space and limit growth,(fn20) the passage of the citizen-sponsored Measure 37 indicated that Oregon citizens were dissatisfied with the state's means of achieving its land-use goals. Measure 37 enacted a statute(fn21) requiring the government to pay just compensation when the government enacts or enforces a land-use regulation that restricts the use of the property and results in a reduction in the fair market value of the property.(fn22) As an alternative to compensation, the government may choose to modify, remove, or not apply the regulation to the owner's property.(fn23) Despite opponents of Measure 37 outspending proponents at a rate of more than two-to-one,(fn24) the measure was approved by Oregon voters with nearly sixty-one percent of the vote,(fn25) garnering more votes than any initiative in Oregon history.(fn26)
The overwhelming passage of Measure 37 in Oregon has inspired property rights advocates in other states to follow Oregon's lead in their own efforts to strengthen property rights.(fn27) In particular, Measure 37's success has revived the property rights movement in Washington and galvanized efforts to put a similar measure before the voters on the November 2006 ballot.(fn28) Washington should follow Oregon's lead by enacting a regulatory takings compensation statute so that society as a whole equitably shares both the costs and the benefits of land-use regulations, and individual property owners affected by such regulations are not unfairly deprived of the benefit of their bargain.
Part II of this Comment provides a background of regulatory takings jurisprudence, outlining both the U.S. Supreme Court's and Washington courts' respective analyses of regulatory takings challenges under the takings clauses of both the U.S. and Washington Constitutions. Part III discusses the threshold compensation statutes that have been enacted by four states in an effort to remedy the problem of regulatory takings. Part IV examines Oregon's Measure 37 and the lawsuit that validated its constitutionality. Part V analyzes Washington's proposed property rights measure, Initiative 933, and argues that Washington needs a regulatory takings compensation statute. Finally, Part VI concludes that Washington should restore its residents' private property rights by enacting a regulatory takings compensation statute modeled after Oregon's Measure 37.
II. BACKGROUND OF REGULATORY TAKINGS JURISPRUDENCE
Regulatory takings jurisprudence is grounded in the Takings Clause of the Fifth Amendment to the U.S. Constitution, which prohibits the federal government from taking private property for public use without paying the owner just compensation.(fn29) This prohibition has been extended to state and local governments through the due process conduit of the Fourteenth...
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