Protecting Private Property Rights from Regulatory Takings

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Mr. Chairman, distinguished members of the subcommittee:

My name is Roger Pilon. I am a senior fellow at the CatoInstitute and the director of Cato's Center for ConstitutionalStudies.

I want to begin by thanking Congressman Hyde for inviting me tospeak before this subcommittee on the subject of Protecting PrivateProperty Rights from Regulatory Takings. I want also to thankCongressman Canady for calling hearings so early in the term of the104th Congress on so important and timely a subject.

Uncompensated regulatory takings of private property have becomean immense problem across the nation. As federal, state, and localregulations have increased in number and scope, property ownershave increasingly found themselves unable to use their property andunable to recover the losses that result.

The problem begins, therefore, with the growth of governmentregulations that deny owners the legitimate use of their property.It should end with the relief that courts might give in the form ofcompensation to those owners, as required by the Fifth Amendment'sTakings Clause. Unfortunately, the courts have been locked intowhat the Supreme Court itself has called 70-odd years of ad hocregulatory takings jurisprudence. As a result, they give relief inonly a limited range of cases. That means that property owners,both large and small, bear the full costs of the public goods theregulations bring about, when in all fairness those costs should beborne by the public that orders those goods in the first place.

As the voters made clear last November in race after race, theprotection of property rights is a burning issue on which they wantaction. The time has come for Congress to address this issue, toredress the wrongs that have been imposed on individual owners byCongress itself and by countless state and local officials.

To do that, Congress needs to reexamine the vast regulatorystructure it has erected--largely over the course of this century--to determine whether those regulations proceed from genuineconstitutional authority and whether they are consistent with therights of the American people to regulate their own lives. Butsecond, and more immediately, Congress needs also to breathe newlife into the Fifth Amendment's Takings Clause, making it clear toa Court too encumbered by its past that the clause means preciselywhat it says when it prohibits government from taking privateproperty for public use without just compensation.

Let me address those two issues, the first briefly, the secondin somewhat more detail.

1. Relimit Government in the Constitution

The federal government, as every student of the Constitutionlearns, is a government of delegated, enumerated, and thus limitedpowers. Delegation from the people gives power its legitimacy.Enumeration limits that power. Unfortunately, that doctrine ofenumerated powers, which the Framers meant to be the centerpiece ofthe Constitution, today is honored in the breach. Whereas earliercongresses asked first whether they had constitutional authority toundertake whatever proposal might be before them, and earlierpresidents vetoed measures for lack of such authority, the 20th-century concern has been to pursue public ends without even askingwhether the Constitution permits those pursuits. And the Court,following Franklin Roosevelt's notorious Court-packing scheme, haslargely looked the other way, inventing doctrines about Congress'scommerce and spending powers that are no part of the Constitution--indeed, that are in direct contradiction to the very purpose anddesign of the Constitution. The result has been the regulatory andredistributive juggernaut that has produced the Leviathan we nowcall government in America.

Because I have addressed this issue in some detail in the CatoInstitute's new Handbook for Congress, which was released here inthe Capitol and distributed to each member just this week, I willlimit myself today to saying simply that if we are to come to gripswith the problem of regulatory takings, the first order of businessis to start thinking seriously about rolling back many of theregulations that are doing the taking. And the most fundamental wayto do that is to revisit the centerpiece of the Constitution, thedoctrine of enumerated powers. If this subcommittee were to dothat, it would soon discover, I submit, that much of the regulationthat plagues property owners across this nation today--and notproperty owners alone, let me note--is unconstitutional becauseundertaken without explicit constitutional authority. Right fromthe start, that is, there is a constitutional problem. A Congressimbued with the idea that we need to relimit government infundamental ways, as this Congress surely is, should appreciatethat to go forward we need first to look back, to our foundingprinciples. And what better part of Congress to do that than thisSubcommittee on the Constitution?(1)

But even if Congress were to do nothing about relimiting itspower in so fundamental a way, even if it were to continue on theregulatory path it has followed for most of this century, therewould remain the problem of what to do when the exercise of suchoverweening power takes property--and the courts, acting almost asif they were extensions of the political branches, refuse to orderthe compensation the Constitution requires. This brings me to myprincipal concern in these hearings, that Congress make crystalclear its view that the Fifth Amendment's Takings Clause is meantto compensate owners when regulatory takings of otherwiselegitimate uses reduce the value of their property.

2. Breathe New Life Into the Takings Clause

The Fifth Amendment's Takings Clause reads: "nor shall privateproperty be taken for public use without just compensation." Aspresently interpreted by the Court, that clause enables owners toreceive compensation when their entire estate is taken by agovernment agency and title transfers to the government; when theirproperty is physically invaded by government order, eitherpermanently or temporarily;(2) when regulation for other thanhealth or safety reasons takes all or nearly all of the value ofthe property;(3) and when government attaches unreasonable ordisproportionate permit conditions on use.(4)

Although that list of protections might seem extensive, amoment's reflection should indicate the problem--and it is a verylarge one. Most regulations do not reduce the value of a person'sproperty to zero or near zero. Rather, they reduce the value by 25percent, 50 percent, or some other fraction of the whole. In thosecircumstances--the vast majority of circumstances--the owner getsnothing. Only if he is "lucky" enough to be completely wiped out bya regulation does he get compensation. Surely that is not what theFramers meant to happen when they wrote the Takings Clause.

Plainly, the Court has gone about its business backwards. Ratherthan ask whether there has been a taking and then ask what thevalue of that taking is, the Court asks what the value of the lossis to determine whether there has been a taking. And it has donethat because it has never set forth a well-thought-out theory oftakings, one that starts from the beginning and works its waysystematically to the end. It is just such a clear statement of thematter that Congress needs to provide.

A. Provide a clear definition of "property." In providing such astatement, the first and most important order of business is togive a clear definition of "property." In every area of the lawexcept the law of public takings, as every first-year law studentlearns, "property" refers not simply to the underlying estate butto all the uses that can be made of that estate. James Madison putthe point well in his essay on property: "as a man is said to havea right to his property, he may be equally said to have a propertyin his rights."(5) Take one of those rights--one of those sticks inthe "bundle of sticks" we call "property"--and you take somethingthat belongs to the owner. Under the Fifth Amendment, compensationis due to that owner.

When "property" means simply the underlying estate, however,then government can take all the uses that go with the property--leaving the owner with the empty shell of ownership--and get outfrom under the compensation requirement. That definition is whatmany opponents of greater protection for property owners haveargued for. But it is also, by implication, the definition theCourt starts from, making an exception only when the loss of use(and value) becomes near total. When a thief takes 75 percent ofhis victim's property, no one has difficulty calling that a taking.When government does the same thing, however, the Court has beenunable to call it a taking.

Congress must make it clear, therefore, that "property" includesall the uses that can be made of a holding--the very uses that giveproperty its value, the taking of which diminishes that value. Whenthose uses are taken through regulatory restrictions, the ownerloses rights that otherwise belong to him.

B. Provide for a nuisance exception to the compensationrequirement. Not all the uses an owner may make of his property arelegitimate. When regulation prohibits wrongful uses, nocompensation is required.

Owners may not use their property in ways that will injure theirneighbors. Here the Court has gotten it right when it has carvedout the so-called nuisance exception to the Constitution'scompensation requirement. Thus, even in those cases in whichregulation removes all value from the property, the owner will notreceive compensation if the regulation prohibits an injurious use.(Such cases are likely to be very rare, of course, since there isusually some other productive use the property can be put to.)

In carving out such a nuisance exception, however, care must betaken to sweep neither too broadly nor too narrowly. Thisexception, in essence, is the police power exception. As has longbeen recognized, a broad definition of the police power will devourthe compensation requirement, leaving owners with no protection atall. That has been the trend over the 20th century, with everyregulation "justified" as serving someone's or some majority'sconception of "the public good."

By the same token, if the police power is defined too narrowly,then property owners themselves might suffer when their neighborsare thereby able to despoil the neighborhood through injurioususes. This is a concern that environmentalists who oppose greaterprotection for property owners often misstate, even if the concernitself is not without foundation.

In general, the police power--through which nuisances areregulated or prohibited--needs to be defined with reference to itsorigins. It is, as John Locke put it, the "Executive Power" tosecure our rights, which each of us has in the state of nature,before we yield it up to the state to exercise on our behalf.(6)Accordingly, just as the origins of the police power are in thepower to secure rights, so too the limits of the power are set bythe rights that we have to be secured. Properly conceived andderived, therefore, the police power is exercised to secure rights--and only to secure our rights. Its origins, and justification,set its limits.

In defining the nuisance exception, therefore, care must betaken to tie it to a realistic conception of rights, which theclassic common law more or less did. Thus, uses that injure aneighbor through various forms of pollution (e.g., by particulatematter, noises, odors, vibrations, etc.) or through exposure toexcessive risk count as classic common-law nuisances because theyviolate the neighbor's rights. They can be prohibited, with nocompensation owing to those who are thus restricted.

By contrast, uses that "injure" one's neighbor through economiccompetition, say, or by blocking "his" view (which runs over yourproperty) or offending his aesthetic sensibilities are notnuisances because they violate no rights the neighbor can claim.Nor will it do to simply declare, through positive law, that suchgoods are "rights." Indeed, that is the route that has brought usto where we are today. After all, every regulation has some reasonbehind it, some "good" the regulation seeks to bring about. If allsuch goods were pursued under the police power--as a matter ofright--then the owners from whom the goods were taken would neverbe compensated. The police power would simply eat up thecompensation requirement.

It is important to recognize, however, that relating the policepower to the compensation requirement of the eminent domain poweris not simply a matter of "balancing" the two. Rather, those powersmust be related in a principled way, and that way is found in theclassic common-law theory of rights, which grounds rights inproperty. The principle, in fact, is just this: People may usetheir property in any way they wish, provided only that in theprocess they do not take what belongs free and clear to others. Myneighbor's view that runs over my property does not belong free andclear to him. (If he wants that view, he can offer to buy it fromme by purchasing an easement.) His peace and quiet, however, dobelong to him free and clear.(7)

Now I enter into details of the kind just discussed becausethere has been a considerable amount of confusion to date inpopular discussion about just how legislation aimed at protectingproperty owners would work. On one hand, many environmentalistshave charged that such legislation would require taxpayers to paypolluters not to pollute. Nothing could be further from the truth.A well-crafted statute would make it clear that property could notbe put to injurious uses, as just defined. Regulations prohibitingsuch uses would thus not give rise to compensation because thoseuses are wrongful to begin with.

But on the other hand, others have charged that even if suchlegislation is well-crafted to ensure that people are notcompensated for not doing what they have no right to do in thefirst place, the net effect will still be either a restraint onregulation or a drain on the taxpayer. To that charge, there is asimple, straightforward answer: That is exactly as it should be--exactly what the Takings Clause is for. That is why the Framers putthe clause in the Constitution--to restrain government or, failingthat, to make the public pay for the goods it wants rather thanhave the costs of those goods fall on individual victims, as theydo today.

C. Paying for public goods. Just as there are no freelunches--someone pays for them--so too there are no free publicgoods. As noted earlier, every regulation seeks to bring about somepublic good. Some of those goods are brought about in the course ofsecuring our rights. A good deal of the environmental legislationthat Congress has passed, for example, amounts to just that, toprohibiting people from violating the rights of others. That kindof regulation is thus not reached by the Takings Clause.

Other regulations, however, cannot be justified as bringingabout anything to which anyone can be said to have a right. We donot have rights to views, for example, even lovely ones, unless weown the conditions that give rise to those views. So too withgreenspaces, or historic sites, or habitat for endangered species,and much else. None of which is to say that those goods are notgood or valuable. They may very well be. But as with anything elsethat may be of value, we must obtain those goods legitimately. Wecannot just take them. Yet that, too often, is what we dotoday.

Taking something that way does not make it free, of course,except to us. To the person from whom we take it, our action isvery costly. Those who are concerned about the effect of takingslegislation on the taxpayer, therefore, are asking the wrongquestion. The proper question is not how much such legislation willcost the taxpayer but how much the goods we acquire throughregulation are costing period. Right now we have no way of knowingbecause we have driven the accounting "off budget." The directcosts are borne by the millions of people we prevent from usingtheir property. The indirect costs, in unrealized opportunities,are borne by all of us. In neither case do we have the remotestidea of the costs. Yet those costs are nonetheless real--asoccasionally successful litigation on the first category of costsmakes clear.

But our inability or unwillingness to account for the costs ofthe public goods we acquire through regulation has another effectas well, namely, that we demand more of the goods than we otherwisewould if we had to pay for them. Not every species may be worthpreserving--except, of course, if its preservation is "free." TheTakings Clause, then, was a brilliant stroke. When they wrote it,the Framers realized that there would be times when the publicwould have to achieve public ends by taking property from privateparties. That "despotic power" of eminent domain had to beaccompanied, however, by just compensation, for only if the victimwas made whole would the power have any semblance ofjustification.

To do otherwise would be to make the individual bear the fullburden of the public's appetite.

But the compensation requirement served to discipline thepublic's appetite as well, for without it, the demand for publicgoods would in principle be infinite. That is exactly what hashappened today. Without the discipline that is provided by thecompensation requirement, regulations have grown and grown. It istime to rein in that growth as the Framers meant it to be reinedin. The public appetite has been undisciplined for too long and thevictims today, both direct and indirect, are too numerous to letthis go on any longer.


(1) I have discussed these issues more fully in Roger Pilon,"Freedom, Responsibility, and the Constitution: On Recovering OurFounding Principles," 68 Notre Dame Law Review 507 (1993).

(2) Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419(1982).

(3) Lucas v. South Carolina Coastal Council, 505 U.S.(1992).

(4) Dolan v. City of Tigard, 62 U.S.L.W. 4576, June 24, 1994.(5) James Madison, Property, 1 NATIONAL GAZETTE, Mar. 29, 1792, at174. Reprinted in 4 LETTERS AND OTHER WRITINGS OF JAMES MADISON 480(1865).

(6) See John Locke, The Second Treatise of Government, TWOTREATISES OF GOVERNMENT 13 (Peter Laslett ed., 1960).

(7) I have discussed these issues more fully in Roger Pilon,"Property Rights, Takings, and a Free Society, 6 Harvard Journal ofLaw and Public Policy 165 (1983).

Roger Pilon

Subcommittee on Constitution
Committee on Judiciary
United States House of Representatives