October 7, 2019 1:38PM

Stop San Diego’s Homewrecking

Nina and Frank Bottini are young parents who for nearly a decade have been fighting the city of San Diego to build a single-family residence in the suburban community of La Jolla. At the time of their purchase of the lot, the land was occupied by a dilapidated house, which the city first deemed not historic, then declared unsafe and a public nuisance, and then ordered demolished. In a reality-defying flip flop, only after the non-historic, dilapidated house was demolished and removed from the property did the city mandate an infeasible time-traveling historical resource review of the then empty lot.

The city has at every turn delayed the couple’s efforts to build a home, goaded by local historical-preservationist groups upset over the Bottinis’ demolition of the cottage on the now-vacant property. Now, the city refuses to grant a permit to build a single-family residence until the Bottinis undertake an expensive environmental-impact review. The couple has sued, arguing that the city’s prolonged delays and irrational permit requirements amount to a “regulatory taking” under the Fifth Amendment.

The Bottinis lost in the California Court of Appeal, even though the court ruled that the city council acted unlawfully. Despite the city’s malfeasance, the court ruled that the Bottinis’ didn’t have “distinct investment-backed expectations”—a concept that comes from a case called Penn Central—that were thwarted by the city’s actions. That was because they did not know—and could not have known—at the time of purchase whether they would be required either to fix up the old home as a historical landmark or rip it down as a public nuisance. The Court of Appeal held that these uncertain expectations, wrought solely by government action, doomed the Bottinis takings claim.

Two pillars of Takings Clause jurisprudence have, in recent decades, proved untenable. One is the test from the 1978 Penn Central case. That test was meant to determine when a “partial regulatory taking” occurs if a government action or delay deprives owners of certain uses of their property. The second, from the 1987 case of First English, exempts “normal delays” in the land-use regulation process from takings scrutiny.

While these cases are oft-invoked by lower courts, both offer little practical guidance to judges who apply them. Delays in the land-use permitting process are a common occurrence across the country, but that does not mean that all such delays are “normal.” And the part of the Penn Central test that looks at “investment-backed expectations” of purchasers asks judges to identify an ill-defined concept that can be easily manipulated to produce whatever outcome a court desires.

Cato has filed a brief in support of the Bottinis’ petition to the Supreme Court. We argue that the Court should take the case to clarify the meaning of “investment-backed expectations,” particularly at what point in time courts should “measure” the property owner’s expectations. The city argues the expectations should be measured from the time of purchase. The Bottinis argue it begins to run after the demolition, at which point construction of a single-family residence on a vacant lot is exempt under the relevant state environmental law.

The difficulty in identifying the point in time at which a purchaser formulates “investment-backed expectations” is one of Penn Central’s fatal flaws—one that warrants the Court’s review. How could a purchaser, for example, account for the unexpected interplay between two regulatory regimes—in this case, between a local public-nuisance process and state environmental laws? The Bottinis could not have predicted, at the time of purchase, how exactly the two would interact, and that the application of one would negate the other. Because the old cottage is gone, whatever environmental impact its demolition might have had has already occurred.

The Bottinis’ case is a good vehicle for highlighting one of Penn Central’s major deficiencies and replacing it with a more precise test. Moreover, the question of what delays are “normal”—the Bottinis have been fighting the city for almost a decade—should be revisited. Unfortunately, the Bottinis bizarre fight against city hall is not uncommon. The Court should step in to make sure both the Bottinis and other property owners get compensated when the value of their property is regulated away.