Regulatory taking

Regulatory taking refers to a situation in which a government regulates a property  to such a degree that the regulation effectively amounts to an exercise of the government's eminent domain power without actually divesting the property's owner of title to the property.

Common law
In common law jurisdictions, governments traditionally enjoy police power, under which a government may regulate a variety of aspects of the lives of its subjects. Under American law, however, this power does not extend to the outright divestiture of title to private property, nor to the de facto equivalent of it. Instead, the power of eminent domain is a separate and distinct power which allows a government to divest a property owner of title to such property for public use, and with just compensation. This power is limited in the Fifth Amendment to the United States Constitution, and extends to the states under the Due Process Clause of the Fourteenth Amendment. (The Fifth Amendment prohibits the federal government from taking property for public use without "just compensation," which American courts have interpreted in the usual case to mean "fair market value.") This prohibition is deemed incorporated in the Due Process Clause of the Fourteenth Amendment (which bars state governments from depriving people of their property without due process of law.)

Physical Occupation
The most straightforward takings claim arises when the government physically occupies some part of a landowner's property without compensation: this runs directly into the plain language of the amendment itself. It is a "taking" of some property without compensation. With certain exceptions, a direct physical occupation, temporary or permanent, represents a taking. In some few cases, we find disputes surrounding whether a government action in fact constitutes a physical direct and immediate occupation of land. A leading case is United States v. Causby, 328 U.S. 256 (1946), in which a landowner was subjected incessant low-level military flights well below the federally recognized aviation airspace. In requiring compensation, the Court held: "The landowner owns at least as much of the space above the ground as the can occupy or use in connection with the land. See Hinman v. Pacific Air Transport, 9 Cir., 84 F.2d 755. The fact that he does not occupy it in a physical sense-by the erection of buildings and the like-is not material.  ... In this case, as in Portsmouth Harbor Land & Hotel Co. v. United States, supra, the damages were not merely consequential. They were the product of a direct invasion of respondents' domain. As stated in United States v. Cress, 243 U.S. 316, 328, 37 S.Ct. 380, 385, '... it is the character of the invasion, not the amount of damage resulting from it, so long as the damage is substantial, that determines the question whether it is a taking.'   Flights over private land are not a taking, unless they are so low and so frequent as to be a direct and immediate interference with the enjoyment and use of the land."

Regulatory Restriction on Use of Property
In contrast, it is fundamental that a regulation restricting the use of property to further legitimate public ends will not be considered a taking merely because it impairs the value of that land. There are numerous instances where the Court has found that state courts have reasonably concluded that "the health, safety, morals, or general welfare" would be promoted by prohibiting particular contemplated uses of land. And in this context, the Supreme Court has repeatedly upheld land-use regulations that destroyed or adversely affected recognized real property interests. Zoning laws are, of course, the classic example, see Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365 (1926) (prohibition of industrial use); Gorieb v. Fox, 274 U.S. 603, 608 (1927) (requirement that portions of parcels be left unbuilt); Welch v. Swasey, 214 U.S. 91 (1909) (height restriction), which have been viewed as permissible governmental action even when prohibiting the most beneficial use of the property.

The issue of regulatory takings arises from the interaction between exercise of the traditional police power and exercise of eminent domain. The police power is the inherent government power, usually exercised by the legislature, to do what is reasonably necessary to promote and protect public health, safety, welfare and morals. Governmental land-use regulation may under extreme circumstances amount to a "taking" of the affected property. See, e.g., Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985); Penn Central Transportation Company v. New York City, 438 U.S. 104 (1978). The general approach to this question was summed up in Agins v. Tiburon, 447 U.S. 255 (1980) which states that the application of land-use regulations to a particular piece of property is a taking only "if the ordinance does not substantially advance legitimate state interests ... or denies an owner economically viable use of his land." When a government regulation effects a taking of private property by such excessive regulation, the owner may initiate inverse condemnation proceedings to recover the value of the taken property, provided that a variety of substantive and procedural hurdles have been overcome.

In recent years, the concept of regulatory taking has been used more loosely--outside the constitutional sense-- by property rights groups, extending to include regulations that reduce property values by lesser amounts. Ballot initiatives based on this interpretation (such as Oregon's Measure 37) have been advanced in at least seven states in the years 2000 to 2006. All these states are in the American west, but a significant portion of the funding for the initiatives has come from sources on the east coast.

Inverse Condemnation
Inverse condemnation is a term which describes a claim brought against the government in which a property owner seeks compensation for a `taking' of his property under the Fifth Amendment. The term “inverse” is used, because usually condemnations are brought by the government. The inverse condemnation action seeks to compel compensation as if formal condemnation proceedings had been brought. See San Diego Gas & Electric Co. v. City of San Diego, 450 U.S. 621, 638 n.2 (1981) (Justice Brennan dissenting); United States v. Clarke, 445 U.S. 253, 257 (1980); Agins v. City of Tiburon, 447 U.S. 255, 258 n.2 (1980).

Evolution of regulatory takings law
Modern regulatory takings law has attempted to define the point when state or federal regulation impair the value of land so as to constitute a taking. The authority of state and local governments to engage in land use planning was sustained against constitutional challenge in Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926). Under current court decisions, a land use regulation does not effect a taking if it "substantially advance[s] legitimate state interests" and does not "deny an owner economically viable use of his land." Agins v. City of Tiburon, 447 U.S. 255, 260 (1980). But applying those principles can be difficult.

The Grand Central Station case is regarded as the most important case on regulatory takings relevant to Historic Preservation. In Penn Central Transportation Company v. New York City, 438 U.S. 104 (1978) the Court denied a takings claim brought by the owner of Grand Central Terminal following refusal of New York City Landmarks Preservation Commission to approve plans for construction of 50-story office building over Grand Central Terminal. Penn Central contended that under the New York City Landmark Preservation Law, it was entitled to derive a net income from Grand Central Terminal, but the city's reguilation had forced it into an indefinite deficit condition. The trial court agreed but its decisioon was reversed on appeal. Eventually 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 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.

The Court’s ruling essentially says that these questions are ad hoc determinations, made on a case by case basis. “The question of what constitutes a "taking" for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty. While this Court has recognized that the "Fifth Amendment's guarantee . . . [is] designed to bar 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," Armstrong v. United States, 364 U.S. 40, [438 U.S. 104, 124] 49 (1960), this Court, quite simply, has been unable to develop any "set formula" for determining when "justice and fairness" require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons. See Goldblatt v. Hempstead, 369 U.S. 590, 594 (1962). Indeed, we have frequently observed that whether a particular restriction will be rendered invalid by the government's failure to pay for any losses proximately caused by it depends largely "upon the particular circumstances [in that] case." United States v. Central Eureka Mining Co., 357 U.S. 155, 168 (1958); see United States v. Caltex, Inc., 344 U.S. 149, 156 (1952). In engaging in these essentially ad hoc, factual inquiries, the Court's decisions have identified several factors that have particular significance.

In making its decision, the Court would consider:
 * 1) the economic impact of the regulation on the claimant,
 * 2) the extent to which the regulation has interfered with distinct investment-backed expectations and
 * 3) the character of the governmental action.

Zoning laws generally do not affect existing uses of real property, but "taking" challenges have also been held to be without merit in a wide variety of situations when the challenged governmental actions prohibited a beneficial use to which individual parcels had previously been devoted and thus caused substantial individualized harm.