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Public control over the use of private property is a very different matter from the public taking (with "just compensation") of private property. The evolution, over several decades, of the right of government to exercise some control over the use of privately owned property is one of the central stories in the history of modern planning. Were local governments unable to exercise control over the use of privately owned land, the practice of planning in the United States would be vastly different and more limited.

Public control of the use of private property involves the imposition of uncompensated losses on property owners. This point requires a word of explanation. Consider someone who owns a building lot in a downtown area. Market forces such as the demand for office space and the cost of construction create a situation in which the most profitable use for the site is a 12-story office building. If the municipality, however, limits the height of structures on the site to six stories, the difference in profit between the 12- and the six-story building is a loss imposed upon the owner of the site. This principle is true whether the owner would develop the site, sell the site to another party who would develop it, or lease the site to someone else who would build on it. In the first case the owner would take the loss directly in the form of reduced operating profits. In the latter two cases the loss would be manifest as a lower selling price or lower rental fee for the site.

The land-use control technique that has evolved over the years, namely zoning (see Chapter 9 for details), does exactly what is alluded to: it limits the uses to which land can be put. If the most profitable use is not among the permitted uses, a loss is necessarily imposed upon the owner. However, no compensation need be paid to the owner, nor is a judicial procedure required for the community to exercise control and thereby impose the loss. The community's zoning law stands unless the property owner brings a successful lawsuit against the community. This capacity to obtain the benefits of limiting an owner's use of his or her property without having to pay compensation clearly accounts for the popularity of zoning. The community obtains partial rights of ownership—some control over the use of the property—without having to go to the expense of becoming an owner. Note that this is very different from taking with compensation under eminent domain. In that case, the municipality does become the owner of the property.

Given the apparent conflict between such community powers and constitutional guarantees regarding property rights—most particularly the requirement for just compensation in the taking clause of the Fifth Amendment—it is not surprising that it took many years and many court cases to establish the zoning rights of communities. Even today the legal structure of zoning is still evolving, and many an attorney earns his or her living in zoning-related litigation and negotiation. Some on the political right view all zoning as fundamentally illegitimate because it represents an uncompensated taking and hence a violation of constitutionally guaranteed property rights.3

The legitimacy of zoning rests on the legal concept of the police power. That perhaps misleading term refers to the right of the community to regulate the activities of private parties to protect the interests of the public. Very often a phrase like health, safety, and public welfare will be used to indicate the range of public interests that may be safeguarded through exercise of the police power. Thus a law that limited the height of buildings so that they not cast the street below into a permanent shadow might be justified as an exercise in the police power. So, too, might a law that prevented certain industrial or commercial operations in a residential neighborhood. So, too, might laws that prevented property owners from developing their lands so intensely that undue congestion resulted in nearby streets.

The rights of the community under the concept of the police power and the rights of the property owner under constitutional and other safeguards push in opposite directions. Exactly where the equilibrium point is located is a matter to be decided by the courts. The question of how much and for what purposes government can take some of the value of privately owned property, as in the building height example, is generally referred to as the taking issue and is the subject of a very large literature.4 The question of what regulatory actions do or do not constitute a taking is crucial because, if it is determined that a taking has occurred, then the Fifth Amendment of the Constitution requires that payment be made to the property owner. If no taking has been made, then no compensation is required.

The process by which municipalities acquired some control over the use of private land began in the late nineteenth century. It started typically with the passage of legislation which limited the use, and hence took some of the value, of privately owned property. The legislation was then appealed in court by the property owner because of the loss it imposed. Very often the loser of the first trial appealed to a higher court. Through this process of litigation and appeal, the extent and the limitations of the public power to control private land use has been and continues to be defined.

A very early case in this long history was Mugler v. Kansas in 1887. The U.S. Supreme Court sustained a Kansas prohibition law that forced the closure of a brewery without compensation. The owners of the brewery argued that compensation was due, but the Court held that a loss imposed through exercise of the police power to protect the health or safety of the community required no compensation. Note the distinction between police power and eminent domain here. Had the brewery been taken under eminent domain, compensation would clearly have been required. In 1899 a bill passed by Congress limited the heights of buildings in residential sections of Washington, DC to 90 feet, and heights of buildings on some of the widest streets to 130 feet. Light, air, and traffic congestion in the streets were the considerations behind the ordinance. In 1904 the Massachusetts legislature passed somewhat similar legislation for Boston. Structures in the business district were limited to 125 feet, and structures elsewhere to 80 feet.

In 1909 the city of Los Angeles carried the idea of public control over the private use of land further by dividing the city into a number of commercial districts plus a residential district. In the latter, commercial uses were permitted only as exceptions. In what became a landmark case, the city compelled a brickyard in a residential area to cease operations. The item of public welfare being protected was the interest of residents in having an environment not subject to undue noise, dust, and traffic. The owner sued the city, a series of appeals followed, and the case ultimately went to the U.S. Supreme Court. In Hadacheck v. Sebastian the Court sustained the city. Although this was, literally, a nuisance abatement rather than a zoning case, the effect of the decision was clearly a strengthening of municipal rights under the police power.5

The city that enacted what might be considered the first modern zoning ordinance—though it left much to be desired by present standards—was New York. In the early twentieth century, lower Manhattan was growing rapidly as a commercial center. Steel-frame construction and the elevator were making it practical to build to unprecedented heights of 40, 50, or even 60 stories. The horizontal expansion of the business district was limited by the fact that Manhattan is an island. In fact, at the latitude of Wall Street— then, as now, the center of the financial district—one can walk across the island from the East River to the Hudson River in perhaps 15 minutes. To add to the congestion, the city was in the process of building a subway system, which permitted employers in the business district to reach far out into the other boroughs for their labor forces. Thus the same rapid transit that permitted central residential densities to fall was, paradoxically, permitting increased employment densities downtown.

With downtown space at a premium, builders tended to cover the entire lot and to build without any setbacks. The result was a building shaped like a child's building block set on end. Such buildings darkened the streets below and cast shadows several blocks long. By being allowed to build straight up from the property line, builders could accidentally or otherwise impose major losses upon adjacent property owners by casting the facing wall of an adjacent structure in a perpetual shadow.

At the same time that concern over skyscraper development was growing, merchants in the fashionable Fifth Avenue retailing area were concerned that the invasion by manufacturing firms displaced from lower Manhattan would lower the tone of the area and drive away customers. They thus put pressure on the city government for some sort of relief.

Prompted by these concerns, the city in 1916 enacted a comprehensive zoning ordinance covering all five boroughs. The city was divided into three districts on the basis of land use: residential, commercial, and

The stepped-back configuration of the old- style office building in the foreground shows the effect of New York's 1916 zoning law. The modern structure at the rear rises without distinct setbacks but has a gradual taper in its lower floors and does not cover the entire lot.

Midtown Manhattan zoning districts as designated in the 1916 plan. The numbers are building height limits expressed as multiples of street width.

mixed. Overlaid on these use districts were five height districts, where the heights were expressed as multiples of street widths, ratios justified on considerations of congestion and sunlight. Also overlying the entire city were five districts that specified ground coverage requirements such as minimum lot sizes. Beyond that, the ordinance also specified a building "envelope" for skyscrapers, which mandated that there had to be setbacks from the street at higher levels. The stepped-back design that can be seen today in dozens of Manhattan office buildings comes from this ordinance and has been caricatured by some as a modern ziggurat (from a Babylonian temple built as a series of stepped-back terraces). But regardless of the aesthetic merits (or lack thereof) of many of these stepped-back structures, they were a major improvement over structures that rose straight up from the lot lines.6

The ordinance was designed by an attorney, Edward M. Bassett, who is generally regarded as the father of zoning in the United States. Bassett designed it in such a way as to ground every facet in some matter of public health, safety, or welfare. Thus he produced an ordinance that proved invulnerable to the inevitable court challenges. Again, the fact that the provisions of the ordinance rested on the police power further established the principle that compensation need not be paid for any loss of property value that the zoning might impose. This point is critical, since if compensation had to be paid, public control of land use would be more expensive, far more cumbersome, and far less widespread than is now the case. A theoretical argument may be made that there are some disadvantages to the fact that municipalities can essentially treat the zoning power as a free good, but we reserve this more modern view for Chapter 9.

In 1926 any lingering doubts about the constitutionality of zoning were relieved when a zoning case finally reached the U.S. Supreme Court. In the case of The Village of Euclid v. Ambler Realty Co., the Court sustained a village zoning ordinance that prevented Ambler Realty from building a commercial structure in a residential zone. The point that a municipality could impose an uncompensated loss upon a property owner through the mechanism of land-use controls was now firmly established. In effect, the Court had ruled that such a loss need not constitute a taking of property, since a taking of property would require compensation as in the taking clause of the Fifth Amendment quoted earlier. The term Euclidean Zoning, named for the town of Euclid, is now used to refer to conventional zoning ordinances rather than to some of the more modern and flexible types discussed in Chapter 9.

In the years after 1926, backed by the Euclid decision, state and local courts supported and expanded the power of municipal governments to zone and otherwise regulate the use of privately owned land, and zoning became almost universal in urban and suburban areas. With one minor exception, the Supreme Court did not hear another zoning case for half a century.

In 1978, litigation over New York City's landmark preservation reached the court as Penn Central Transportation Company v. New York City.7 The company, which owned Grand Central Station, had sought to build a skyscraper atop the station, but it was blocked because the city Landmarks Preservation Committee had designated the station as a historic site. The company argued that the loss it sustained by being denied permission to build over the station was so severe that it constituted a taking. The company won in the lower court, was reversed in New York State's appellate court, and then appealed to the U.S. Supreme Court. In a split decision the Supreme Court rejected the plaintiff's appeal and sustained the city. Most planners were very pleased with the decision because it seemed to expand the scope of the zoning power. It made it clear that the behavior of a private property owner could be constrained for purely aesthetic reasons. It also made it clear that such control could be applied to a single structure or parcel rather than just to an entire district. In the years since the Penn Central decision, the U.S. Supreme Court has ruled in a number of land-use cases. These cases are summarized in the box beginning on page 78.

Beginning about the end of the 1980s, something of a property rights counterattack began, and this event bears explanation. The question of whether—and if so, how much—government should be able to regulate the use of private property has an ideological dimension. Those on the

The 42nd Street facade of Grand Central Station, part of what was saved by the Penn Central decision.

political right will generally take the view that government's ability to regulate should be sharply limited, since the relative sanctity of the rights of private property is a fundamental part of the right-wing political position. By contrast, those on the political left are far more likely to place less value on the rights of private property and thus to favor greater public regulation. As the United States moved to the right politically toward the end of the twentieth century, what came to be called the property rights movement became more powerful.

A number of states have passed laws that required "takings impact analyses" before the implementing of environmental regulations. These laws are too new to tell whether they will have a major effect. To the extent that they do, it will presumably be to reduce the ability of the states to control, without compensation, the uses to which environmentally sensitive land may be put—or, perhaps, to assert that land is environmentally sensitive. Bills to require governments to pay compensation for losses imposed by regulation have been proposed in approximately two dozen state legislatures, but so far only one bill has passed. That one, in Mississippi, applied only to forest land. Nationally, takings bills have been introduced in both House and Senate, but none have become law.

The movement to define as takings all reductions in property values caused by regulations has made most progress in Oregon. In November 2000, the voters passed Measure 7. This referendum, backed by a property rights organization called Oregonians in Action, required governments to "compensate landowners for loss of value resulting from government actions that restrict or curtail the use of their property." Opponents argued that converting almost any restriction on land use into a taking would impose a huge financial burden on both the state and the local governments. The state estimated the total cost of the measure at $4.5 billion annually, with about two-thirds of that falling on local governments and the remainder on the state government. They argued that because of this burden, the ability of governments to protect beaches, impose urban growth boundaries, and even enforce zoning laws would be greatly reduced. The opponents also took the position that although advocates of the measure couched their arguments in terms of fairness—government should pay for what it takes—the measure was actually a huge blow to government's ability to protect the public interest in land development and represented a type of initiative that Oregon voters had turned back several times before. One opponent of the measure, an attorney for the League of Oregon Cities, stated that "you have stripped the government of a fundamental power to regulate." Opponents of the measure made a procedurally based argument that the measure was impermissibly broad in that it affected, in a single action, a very wide variety of government powers. In 2002, to the relief of many planners and environmentalists, the court accepted the plaintiff's argument and struck down Measure 7. The planners' relief, however, was short-lived. On November 2, 2004, the voters of Oregon approved Measure 37, which essentially repeated the substance of Measure 7 but was more narrowly drawn to be able to resist challenge in court. The key passage in Measure 37 is:

If a public entity enacts or enforces a new land-use regulation or enforces a land-use regulation enacted prior to the effective date of this amendment [to prior state legislation, ORS Chapter 197] that restricts the use of private real property or any interest therein and has the effect of reducing the fair market values of the property, or any interest therein, then the owner of the property shall be paid just compensation.8

The measure does exclude from compensation regulations pertaining to public health, compliance with building codes, and some other matters. But it potentially makes almost any other kind of regulation that imposes a loss on a property owner a taking and thus subject to compensation. Further, the measure is retroactive to the time that the property owner acquired the property. Thus, for example, if some years ago after you had bought a piece of land it was rezoned from, say, single-family housing at two units to the acre to single-family housing at one unit per acre, you might have a potential claim against the municipality that did the rezoning.

Not surprisingly, Measure 37 has been the subject of litigation. On February 21, 2006 in MacPherson v. DAS the Oregon Supreme Court found for the plaintiff and sustained the measure, an obvious setback for the planners. But then, in November 2007, the voters of Oregon passed Proposition 49, which repealed some of what the planners had considered to be the more onerous aspects of Proposition 37. Property owners went to court to get Proposition 49 overturned but the court rejected their claims, to the relief of planners in Oregon. As might be expected, a wide array of environmental organizations are intensely opposed to takings bills. The American Planning Association (APA) is also strongly opposed and has mounted a serious lobbying effort. Should such requirements become commonplace, they could exert an enormously inhibiting effect on regulatory agencies at all levels of government. Fears of incurring huge bills for compensation would make agencies extremely cautious and prompt them to err on the side of under-regulation. They might also, as the APA has claimed, enrich attorneys and consultants by producing an explosion of litigation over whether or not a reduction in value sufficient to require compensation had occurred.

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