The Constitutional Foundation of Takings Jurisprudence

The Fifth Amendment to the U.S. Constitution contains a powerful protection for property owners: “nor shall private property be taken for public use, without just compensation.” This language establishes what we now call the Takings Clause. While physical appropriation of property clearly constitutes a taking requiring compensation, the Supreme Court has also recognized that government regulations that go “too far” in restricting property use can constitute a taking even without physical occupation. This principle emerged in Pennsylvania Coal Co. v. Mahon (1922), where Justice Holmes famously wrote that “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” This landmark decision established the foundation for modern regulatory takings doctrine by acknowledging that excessive regulation could effectively deprive owners of property rights just as completely as a physical seizure.

The Penn Central Balancing Factors in Regulatory Takings

The modern framework for analyzing regulatory takings emerged in the 1978 Supreme Court case Penn Central Transportation Co. v. New York City. When New York City’s landmarks preservation law prevented Penn Central from building a 55-story office tower above Grand Central Terminal, the company claimed a regulatory taking had occurred. The Supreme Court developed a three-part balancing test that remains the primary analytical framework today. First, courts examine the economic impact of the regulation on the property owner. Second, they consider the extent to which the regulation interferes with distinct investment-backed expectations. Third, they analyze the character of the governmental action. This flexible approach allows courts to consider the totality of circumstances rather than applying rigid formulas. The Penn Central test continues to govern most regulatory takings cases, particularly those involving partial diminutions in property value rather than complete economic losses.

The Lucas Rule: When Regulations Eliminate All Economic Value

In 1992, the Supreme Court established a categorical rule for an extreme subset of regulatory takings in Lucas v. South Carolina Coastal Council. David Lucas purchased two residential lots for $975,000, intending to build single-family homes. After his purchase, South Carolina enacted the Beachfront Management Act, which effectively prohibited construction on his property. The Supreme Court held that when regulations deprive property of “all economically beneficial or productive use,” compensation is required without the need to apply the more complex Penn Central balancing test. This per se rule applies in the rare case where regulation leaves property with no economic value whatsoever. However, the Court included an important exception: if the prohibited use would have been unlawful under background principles of property or nuisance law, no taking has occurred. The Lucas case created a bright-line rule for total regulatory takings while still preserving governmental authority to prohibit genuinely harmful uses of property.

Exactions and the Nexus/Proportionality Requirements

Regulatory takings doctrine also encompasses governmental demands for property interests in exchange for permit approvals. In two landmark cases, Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994), the Supreme Court established important limitations on such “exactions.” In Nollan, the Court held that an exaction must have an “essential nexus” to the legitimate government interest being advanced by the permit requirement. Building on this principle, Dolan added that the exaction must be “roughly proportional” to the projected impact of the proposed development. Together, these cases create the “nexus/proportionality” test that constrains governmental authority to demand property interests as conditions of development approval. More recently, in Koontz v. St. Johns River Water Management District (2013), the Court expanded this doctrine to cover monetary exactions as well as demands for real property interests, further strengthening property owners’ constitutional protections against excessive permitting conditions.

Temporary Takings and the Time Dimension

Regulatory takings jurisprudence also addresses the temporal dimension of property restrictions. In First English Evangelical Lutheran Church v. County of Los Angeles (1987), the Supreme Court established that temporary regulatory takings require compensation just as permanent takings do. The Court held that “temporary takings which, as here, deny a landowner all use of his property, are not different in kind from permanent takings,” entitling property owners to compensation for the period during which the taking was effective. This principle was refined in Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency (2002), where the Court held that temporary development moratoria—even those lasting several years—should generally be analyzed under the Penn Central framework rather than treated as per se takings under Lucas. The Court emphasized that conceptually severing the temporal dimension of property rights was inappropriate, and that a careful balancing of factors was necessary to determine whether a temporary restriction constitutes a compensable taking.

The Evolving Nature of Regulatory Takings Law

Regulatory takings doctrine continues to evolve, with the Supreme Court periodically refining the standards for determining when compensation is required. The 2017 case Murr v. Wisconsin addressed the crucial “denominator” question—determining what constitutes the relevant parcel of property for assessing economic impact. The Court rejected both the state’s position that adjacent lots should always be considered together and the property owners’ argument that legally distinct parcels should always be analyzed separately. Instead, it adopted a flexible approach considering the treatment of the land under state and local law, the physical characteristics of the property, and the prospective value of the regulated land. More recently, in Cedar Point Nursery v. Hassid (2021), the Court expanded takings protections by holding that regulations granting third parties access to private property constitute per se physical takings rather than being analyzed under the more deferential Penn Central framework.