One of the favorite targets of those who are concerned with protecting private property rights is so-call regulatory takings. In Lucas v. South Carolina Costal Council, 505 U.S. 1003 (1992), the U.S. Supreme Court held that a land use regulation which eliminates all economically beneficial uses of a parcel constitutes a taking and just compensation must be paid to the landowner by the jurisdiction that enacted the regulation.
For property rights advocates the Court did not go far enough; so they have resorted to legislative efforts in numerous states. Some of the more noteworthy measures include those in Oregon, Florida, Arizona, and Texas have enacted measures either legislatively or by referendum that require compensation be paid when a regulation reduces the value of a parcel of property by a state amount (e.g., 25% diminution in Texas). There is a wealth of literature about the effectiveness of these measures, their impact on land use regulation and the lawsuits they have spawned.
Most recently this issues has been raised in Maine where the legislature is wrestling with a proposed regulatory takings bill that would required compensation when 50% or more of a parcel’s value is lost due to regulation.
Delving into all of that is not the purpose of this post. I simply want to ask if landowners should be compensated when a land use regulation diminishes the value of their property, should the state or local jurisdiction be compensated by landowners when they increase zoning densities or construct infrastructure at public cost that increases the value of a private party’s property?
The truth of the matter is that in its natural state the value of most land is attributable to one’s ability to raise crops, harvest timber, harness water power, and extract minerals. In order to make use of land for anything other than extremely low density residential development requires a combination of infrastructure that is usually publicly funded (e.g., roads, sewer, storm water, water, electricity, telecommunications, schools) and regulations that bestow the right to make use of this infrastructure for various land uses and at various densities. All of this focus on how land use regulation may reduce the value (though not render it without economic value) of individual parcels of land loses sight of the forest for the trees as it ignores the fact that much of the value that remains is in fact the result of public investment and public regulation.