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Derailing Penn Central: A Post-Lingle, Cost-Basis Approach to Regulatory Takings
By Joshua P. Borden
To illustrate the problems created by the Court’s current approach to regulatory takings, this Note examines a hypothetical situation.  After years of carefully saving, John decided to invest in a small business and purchase a popular trailer park for $400,000.  He rented out each lot, and the steady flow of rent payments promised to provide John with a profit.  All indications were that John had made a wise investment.

However, John was notified that the town had enacted a zoning ordinance prohibiting trailer homes.  The town believed that such properties were an eyesore and that new residents would be attracted to the area now that the trailer parks were gone.  Unfortunately, the regulation did not coincide with John’s interests.  He had invested his hard-earned life savings in the park, and although John could sell the property, the zoning ordinance had caused the property’s value to plummet to $100,000.

The economic deprivation, caused directly by government action, seemed manifestly unfair to John, and he promptly brought an inverse condemnation suit, claiming that the regulation constituted an unconstitutional taking of his property.  He argued that the Fifth Amendment required that he be given just compensation for the government’s taking of his land.  Unfortunately, John faces a difficult task and must overcome a complex, unclear, and often burdensome law of regulatory takings.

The Fifth Amendment’s Takings Clause prohibits the taking of private property for public use “without just compensation.”  The Supreme Court has long interpreted the Takings Clause as encompassing not only physical confiscations of property, but also certain scenarios where a government regulation detrimentally affects privately owned property.  The Justices of the Supreme Court, along with other legal scholars, have debated whether regulatory takings doctrine should take the form of an ad hoc balancing test, an exclusive set of strict per se rules, or a combination of both, as is currently the case.

Applying the Penn Central balancing test to John’s case, it is uncertain whether his inverse condemnation claim will be successful.  The meanings of the test’s factors are far from clear, which has led to varying interpretations and uncertainty as to the results of the test’s application.  John would spend a substantial sum of money in legal fees for his claim ultimately to be subjected to what this Note contends is a vague and indeterminate test that could easily turn on the judge’s subjective beliefs.  Although a regulatory takings doctrine consisting of only the per se rules would be more predictable in its application, Lucas and Loretto offer property owners like John incomplete protection.  The ordinance at issue, which prohibits trailer homes, neither denies John all economically beneficial or productive use of his land nor causes a permanent physical occupation.

This Note proposes a regulatory takings doctrine that addresses problems of uncertainty and insufficient protection of property rights that have long pervaded regulatory takings jurisprudence.  Specifically, the Note argues that the Lingle decision has threatened the character prong of the Penn Central balancing test, which ultimately may require the Supreme Court to revisit its method of regulatory takings analysis.  The Court may decide to continue with its application of the indeterminate, but more comprehensive balancing test of Penn Central, or, alternatively, it may choose to apply only the more predictable, but incomplete pair of per se rules.  This Note argues, however, that the Court should abandon Penn Central, and should instead apply a modified version of the per se rules, replacing Lucas with a new per se rule that holds a taking to occur if the regulation proximately causes property value to drop to such an extent that the owner is unable to recoup his cost basis.

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About This Content
Keywords: Borden, Penn Central, Lingle, balancing test, regulatory takings, just compensation, cost-basis, economics
Content Type: Note
Media Type: Print
Author: Joshua P. Borden
Publish Date: June 2010
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