Lucas properties
A 1994 photo of David Lucas’ two vacant lots, located on either side of the square building (William A. Fischel, Dartmouth College).

A Taking ‘Too Far’

Property owners seldom receive compensation when a taking leaves even a small portion of their property’s value intact. But in Lucas v. South Carolina Coastal Council in 1992, the U.S. Supreme Court ruled that when a regulation suddenly deprives a property of all value, the owner is entitled to compensation.

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Government takings involve more than just physical seizures of private property. A taking also occurs when government regulations substantially reduce a property’s usefulness or value.

In such cases, property owners rarely receive compensation. Yet they should. Their private losses ostensibly benefit the public, and compensation is meant to redress the imbalance.

The U.S. Supreme Court first recognized regulatory takings in the 1922 case Pennsylvania Coal Company v. Mahon. Justice Oliver Wendell Holmes Jr. wrote, "While property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking."

Ever since this ruling, the courts have struggled to define how "far" a regulatory taking must go before property owners are entitled to reimbursement.