A Taking by Any Other Name

Many Americans are outraged by the U.S. Supreme Court decision last June that allowed the city of New London, Conn., to take the home and property of Susette Kelo to make way for a private economic development project. In this case, the power of eminent domain was not used for a public function, such as a government building, school or highway, but instead to transfer an individual’s property to a private developer.

Many state legislatures, including Michigan’s, are moving to pass laws to prevent the abuse of power typified in the Kelo case. The Michigan Senate has passed and sent to the House legislation that would provide some protections against government takings of private property for economic development.

A landowner’s property should not be taken by the government for economic development purposes. But in Kelo-type cases, at least the government must monetarily compensate the landowner. Such is not the case with a "regulatory taking."

Regulatory takings differ from physical takings in that the government does not assume possession of the property. Rather, the owner’s use of the property is restricted by regulations — most commonly environmental prohibitions.

Regulatory takings of private property have become common in Michigan and throughout the country. Among the most common type of regulatory takings in Michigan is wetlands regulations enforced by the state Department of Environmental Quality. Wetlands may offer environmental benefits, such as providing wildlife habitat and improving water quality by filtering runoff near streams and lakes. However, the benefits of preserving wetlands accrue to society in general, not just the landowner whose property features wetlands. Often times, in fact, the presence of wetlands is a liability when the landowner is barred by regulation from using the property.

A regulatory taking is, in effect, a tax imposed on a single property owner. If the land is worth $200,000 before its designation as wetlands, but only $125,000 after such designation restricts use of the property, the cost of the regulation — $75,000 — is borne solely by the property owner. But the cost of protecting wetlands — or any other social good — should be carried by all of society.

The Michigan Constitution provides for compensation for private property takings in Article 10, Section 2:

Private property shall not be taken for public use without just compensation therefore being first made or secured in a manner prescribed by law. Compensation shall be determined in proceedings in a court of record.

It has been argued that some regulation of private property is permissible — such as the zoning of property as commercial or residential — and therefore does not amount to a government taking. The courts, however, have carried that rationale to an extreme, consistently ruling that in order for a taking to occur on property containing wetlands, nearly all use of the land must be lost. This extreme standard set by the courts results in the denial of compensation in most wetland cases, since parcels of property seldom contain 100 percent wetlands. Wetlands typically are interspersed with uplands. Furthermore, regulatory policy should be set by elected representatives of the people, not activist courts.

The protection of constitutional rights needs to be reintroduced to the system of regulation. If the government deems it necessary to restrict the use of private property for environmental protection (or any other reason), landowners should be compensated. It is one thing to protect wetlands on property held in public trust; it is entirely something else to require private landowners to bear those costs without compensation.

Government officials, with the assistance of judges who have shown little regard for private property rights, have been able to take private property for politically popular causes without having to pay for it. As lawmakers work to protect property owners from government takings for economic development, they would be wise to also address the widespread problem of regulatory takings.

If the Legislature fails to protect private property, it will fall to citizens to address the issue through a ballot initiative. That is precisely what happened a year ago in Oregon, where voters handily passed a ballot initiative requiring state government to pay landowners for the loss of use of their property. The Oregon law specifies that if the government cannot afford to pay the landowner, or chooses not to, then the land use restrictions do not take effect.

A lower court subsequently declared the Oregon law to be unconstitutional, and issued an injunction barring its enforcement while the case is under appeal. Nevertheless, it is past time for Michigan property owners to be afforded the protections demanded by Oregon citizens and which are among the most fundamental of our constitutional rights.

Russ Harding is senior environmental policy analyst for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.