States Take Action To Protect Property Rights

Oregon's Measure 37 has inspired a national property rights movement to restrict local regulatory takings and dramatically reduce eminent domain powers, writes Leonard Gilroy, AICP, in this Op-Ed.

Leonard Gilroy

States Take Action To Protect Property Rights

After decades of increasingly burdensome state and local land use regulation, a majority of Oregon voters took a decisive stand in favor of property rights in November 2004 by passing Measure 37. This important ballot initiative will help provide relief to landowners whose properties have been devalued by three decades of regulation, and protect Oregon's property owners from economic hardship that may result from future regulations.

Measure 37 requires that local governments either: (1) compensate landowners when land use restrictions reduce the value of their property (so called "regulatory takings"), or (2) waive the restrictions and reinstate the rights that property owners had at the time they bought their land.

Measure 37 represents a major advance for the national property rights movement by establishing a system that restores to private landowners the rights that had previously been taken away via regulatory action. It also provides a check on government power by ensuring that state and local governments adequately weigh the costs and benefits of public action.

Capitalizing on the momentum generated by Measure 37's passage and the state Supreme Court ruling upholding the measure's constitutionality in February 2006, property rights activists and legislators in several states are following Oregon's lead and taking steps to enact their own regulatory takings reform. In some cases, proponents are advancing what have been termed "Kelo-Plus" measures: regulatory takings reform combined with curbs on the use of eminent domain in response to the U.S. Supreme Court's 2005 Kelo vs. New London decision. For example:

  • Arizona: The citizen-led Homeowners Protection Effort (HOPE) is gathering petitions to place a property rights protection initiative on the November 2006 ballot. The initiative would stop local governments from using eminent domain to take private property for private development in order to generate more tax revenue. It would also give property owners an opportunity to seek compensation when the government adopts land use regulations that decrease their property's fair market value.

  • California: Property rights activists are gathering signatures to place the "Protect Our Homes Act" on the state's November 2006 ballot. This initiative would amend the California Constitution to tighten the rules on the use of eminent domain and ensure just compensation to landowners whose properties have been devalued through government regulatory actions.

  • Georgia: Senate Resolution 1040 (S.R. 1040) passed the Senate Judiciary Committee on March 3, 2006. S.R. 1040 would create a constitutional amendment authorizing the General Assembly to pass a bill in 2007 requiring local governments to pay compensation to property owners for the imposition of "unreasonably burdensome governmental actions," including land use and zoning regulations.

  • Idaho: Activists in Idaho collected over 75,000 signatures by May 1 to place the Idaho Private Property Rights Protection Initiative on the November 2006 ballot. Similar to Measure 37, the initiative would provide just compensation when a government entity reduces one's home or property values through zoning and other land use regulations. It would also limit governments' ability to take private property and give it to another private party or person.

  • Missouri: The supporters of two competing citizen initiatives aimed at curbing eminent domain abuse face a May 9 deadline for collecting the signatures necessary to get these initiatives placed on the November ballot. One of the initiatives, a constitutional amendment proposed by the group Missourians in Charge, would restrict the use of eminent domain while also providing compensation to landowners whose property values decline because of government regulations enacted after October 7, 2006.

  • Montana: Citizens are currently collecting signatures to place Initiative 154 (I-154) on the November ballot. I-154 would require state and local governments to compensate property owners for diminished value resulting from a regulation enacted after the acquisition of their property, unless the government repeals the regulation or waives its application to the affected property. I-154 would also prohibit the government condemnation of private property if it intends to transfer an interest in the condemned property to a different private party.

  • South Carolina: On March 15, by an overwhelming vote, the state House approved H.B. 4503, which tightens state statutes governing the exercise of the eminent domain power and includes a provision that requires local governments to compensate landowners if new regulations decrease private property values. The regulatory takings provision was stripped from a companion bill, H.B. 4502, which would place a constitutional amendment on the ballot in November.

  • Washington: In February, the Washington Farm Bureau filed final language with the Secretary of State's Office for Initiative 933 (the "Property Fairness Act") that would require state and local government to compensate landowners when regulations "damage the use or value" of private property. While it bears some similarity to Measure 37, Initiative 933 would go further by requiring agencies and local governments to detail any "actual harm or public nuisance" that proposed regulations are designed to stop or prevent, the extent to which they affect private property owners, and whether the goals of the proposed regulations could be achieved by less restrictive means, such as voluntary programs with willing property owners. Under the initiative, property owners would be entitled to waivers or compensation for restrictions imposed any time after January 1, 2006. Initiative 933 supporters must gather the signatures of roughly 235,000 registered voters by July 7 to qualify for the November 2006 ballot.

  • Wisconsin: In March, the Wisconsin Assembly passed AB 675 by a vote of 56-40, creating a process for a property owner to seek compensation from a municipality when the value of his property is reduced due to the imposition of land use regulations. The bill, introduced by Rep. Sheryl Albers (R-Reedsburg), is modeled after Oregon's Measure 37. It has been sent to the Senate and referred to the Senate Committee on Housing and Financial Institutions.

This upsurge of activity in a diverse group of states across the country suggests that the national property rights movement has been galvanized by the Kelo decision and Measure 37. Landowners in many communities have been restricted in their ability to use their land in the ways that they had intended when they purchased their property, dramatically reducing their property's value and imposing an economic hardship on them. And Justice Sandra Day O'Connor's stinging dissent in the Kelo case perfectly captured the feelings -- and fears -- of most homeowners when she wrote, "Any property may now be taken for the benefit of another private party."

As a result, property owners and citizens are increasingly aware of the need to protect their property rights from the expanding reach of government. Measure 37 represents the boldest response yet to the use of regulation to provide public benefits at private expense, and the fact that a majority of voters in a state with a long tradition of (and public support for) growth management supported Oregon's Measure 37 suggests that urban planning may not be sustainable unless it incorporates property rights into the regulatory framework. For those in the urban planning profession, voters have started to send the clear message that protecting property rights will be increasingly critical to successful planning efforts in the United States.

Leonard Gilroy is a certified planner and policy analyst at the Reason Foundation. He is the author of the new study Statewide Regulatory Takings Reform: Exporting Oregon's Measure 37 to Other States, which can be found online at http://www.reason.org/ps343.pdf [PDF, 596 KB]. An archive of Gilroy's research and commentary and Reason Foundation's growth and urban planning research are also available online.

Comments

Comments

Oregon's Measure 37

"After decades of increasingly burdensome state and local land use regulation...." This claim is unsupported, how are Oregon's regulations burdensome? Were they depriving people of the full value of their properties? How is it that throughout much of the last 20 years property values have gone up in Oregon cities, if the land use regulations are burdensome? Wouldn't they have gone down?

Mr. Gilroy makes unsubstatiated claims and cites the knee jerk reactions of activists in nine states as evidence of what? A movement? Measure 37 and its ilk will either be de-fanged or circumvented because the same people complaining about the oppressive hand of goverment are the same people who freak out when someone builds a McMansion next to their house.

Response: Oregon's Measure 37

When Measure 37 was being debated, opponents trumpeted an estimate produced by the State of Oregon regarding the costs of compensating landowners for the impacts of state/local land use regulations. The state estimated that it would cost $5.4 billion annually to compensate landowners for the regulatory impacts of Oregon's planning system. It's my understanding that this figure was calculated as part of a fiscal impact estimate for Measure 37's predecessor - Measure 7 - and was included in a voter pamphlet.

Using this figure, opponents argued that Measure 37 would impose unreasonable costs on government. But viewed from the landowner's perspective, this figure approximates the uncompensated costs imposed on property owners by Oregon's system of land use regulation.

As to your point on property values, it is reasonable to expect that land within Oregon cities would appreciate in value, in part due to the implementation of urban growth boundaries. But at the same time, the value of rural land has been held artificially low due to the same UGB mechanism, since the potential uses of that land have been significantly restricted. And this is no small amount of land: over 95 percent of the state's total land mass is either owned by government or is zoned for farm or forest use.

Lastly, I would indeed argue that Measure 37, in combination with the Kelo vs. New London decision, have led to a major push for property rights protections at all levels of government. Just look at eminent domain...thirteen states have already passed eminent domain legislation in the last year, and legislation is still active in another 25 states. Factor in the regulatory takings/Kelo-Plus measures, and it seems to me that there is a lot of momentum in the direction of increased property rights protections.

What M37 doesn't tell you.

[sadly, the italics are carrying over into comments. Hopefully this will fix it and this will be clear]

Mr Gilroy states:

"Lastly, I would indeed argue that Measure 37, in combination with the Kelo vs. New London decision, have led to a major push for property rights protections at all levels of government."

Yes, the property-righters are emboldened.

Hopefully some sanity will appear on this issue and the pendulum will not swing all the way over to property-rights point of view, as this will complicate natural resource management issues, community values issues [this may erode community identity and solidarity: every person out for themselves, and to heck with the neighbor], transportation issues, CIPs, infrastructure delivery issues. The "free" market can't provide these things and if you can't plan, well, what a waste of taxpayer money.

The farming issue, BTW, is a function of big ag and subsidies. We should be examining the economic system that allows the folk that feed us to exist as paupers.

Best,

D

"Property rights" means "speculator guarantee"

David Jon Russ, AICP, Attorney at Law russ_law_office@yahoo.com
The "property rights" movement has already blown through Florida. It is nothing but a scam to get the general public to support a scheme to reward speculators, developers, and large property owners for uses that harm the community around them.

Notice, these schemes never increase the value based on the public goods provided to the site, nor do they credit the increase value ascribed to having a community with good growth management and development control. Nationally, those areas that pay attention to protecting the environment and other aesthetics have the highest values, not those areas that "flip" the fastest.

Holmes' comment on compensation for regulation that "goes too far" is sophomoric and shows no insight into regulation in the public interest. His opinions on takings and against the First Amendment label him a troglodyte, his reputation notwithstanding.

Speculators want to pour their negative externalities into the community, slip out of town with their profits, and leave the public holding the bag.

Not true that many cases brought

David Jon Russ, AICP, Attorney at Law russ_law_office@yahoo.com

In Florida, not many cases have actually been brought so the hackneyed cliche about "lawyer's benefit bill . . . la la la" is not true. What it will do is frighten local governments and their planners (who have weak backbones anyway) into succumbing to the threat of resort to the measure. It has been the law in Florida for at least 10 years and I estimate fewer than a dozen cases have been brought. When they are brought, they are hugely complicated, expensive and theoretical, and judges hate them. Nobody ends up with much money after all is said and done, with the exception of the exceptional landowner with huge potential value regulated down to almost zero.

Not about current cases

This article is a libertarian argument about property rights.

My point being, David, that absent regulation the courts will have to hear every single little complaint about harm, as the mechanism for preventing harm has been taken away.

HTH,

D

Yeah but...

It's too bad landowners don't have to compensate the government when government financed infrastructure/improvements create higher land values for them. Why isn't anybody complaining about that?? Maybe because we all love our free lunch...

But..

Trevor,

I'm sure you've heard of this little thing called taxes. Lets just leave it at that. Also lets not even talk about the fact that a private company generally would never be allowed to self finance an infrastructure improvement and then charge access fees for it.. that little public utility monopoly thing..

yeah..

Yes, But...

Of course I’ve heard of taxes. The problem is that the bulk of property taxes fall on the structure instead of the land under the structure. Look it up. Typically, about 80% of your property tax bill comes from the value of your house and improvements while only 20% comes from the land. Speculators who use land the least efficiently pay the lowest taxes while those who use land more efficiently get stuck paying the bills. Ass backwards in my view. Millions of land owners profit handsomely off of rising land-values…values that are created by the general community/government and not by their own labors. Why don’t we see more people complaining about this? Our present tax system does very little to fix this misallocation. As for government compensating landowners for falling land values (or values that aren’t rising as fast as other areas) I say, “remove the beam out of your own eye before you pick the speck out of theirs.”

As for the economic justification of what I’m talking about, I encourage you to read Chapter 11 of Adam Smith’s “Wealth of Nations” called “Of the Rent of Land.” You may also check out “Libertarian Party at Sea on Land” by Kyriazi. Our present tax and property structure rewards land owners at the expense of everybody else. See Jim Kunstler’s book “Home from Nowhere” and his chapter on this topic called “A Mercifully Brief Chapter on a Frightening, Tedious, But Important Subject.”

Land taxation

Trevor,

I'm already familiar with the idea of taxation based on land instead of improvements. That has problems as well - buildings have a more defined method to determine value via rent streams or replacement costs. Land does not. You become solely dependent on the calculation of what usage your planning board allows for that specific piece of land. This may make more fluid and dynamic land usage patterns more difficult to achieve in the future.

Also, instead of fueling speculation you instead potentially fuel abandonment. Suppose that poor minority neighorhood thats currently right next to a thriving downtown all of the sudden gets switched to a land tax. Guess what happens to the tax bills for those 1 or 2 story homes? They get taxed at the same rate as the commerical development next to it. Want to place a wager on who ends up staying and who ends up having to leave?

If there is one thing that the government is supposed to do - it is to act in the general public interest partially by performing infrastructure upgrades and transportation upgrades. This is their public duty, not to maximize their own wealth. If the government runs a zero sum game and charges back all value gained for their 'improvement' than what public service have they done, really?

RE: Land Taxation

Fuelling “abandonment” is far from the right phrase to be using. Sure in highly valued areas (right next to downtown or some commercial district) the tax would be highest. But this wouldn’t lead to abandonment, it would lead to higher use. It seems counter intuitive at first but consider it for a minute. If the tax was too high and residences were required to leave the end result would be a lowering of the land-value (and therefore the tax on the land) until it reached a level that could be afforded. This is true because ultimately the market determines the value of land, assessors just assess it. Since the holding cost of land would be high (due to the tax) it is highly doubtful that valuable land would go unused. So, far from “fuelling abandonment,” the land-value tax would fuel urban revitalization. Gentrification would also be kept in check since the land-values would tend to drop and level off as they are taxed more and more heavily. Speculation would be a thing of the past.

Higher land values in a land value tax system would not lead to abandonment. It would, if anything, lead to densification.

Also, in your example, it is important to qualify what type of commercial development is neighboring the 1-2 story homes. If it’s a Walmart, chances are Walmart would be paying the higher tax due to their wasteful use of land. If it’s a real vibrant downtown, chances are they need to grow or lose business to the suburbs. Those 1-2 story buildings are keeping the city from meeting its economic potential. In both cases, the land value tax produces the commendable results and more efficient land use.

You’re right that the government should maximize public welfare. That should presuppose equality. If the government has to buy out all the landowners via eminent domain to build a road, that’s not equality. That’s giving cash giveaways to some lucky few. And why should the few which benefit via increased land values from the new road and infrastructure be allowed to pocket that increase?? Instead, in a land-value tax system those increases in land-value could be redistributed to all citizens via a citizen’s dividend much like what Alaska does with oil profits. In this way we would all benefit equally from increases in public welfare.

Once again, I encourage you to read the economists on this issue. Read what Tom Pain, Adam Smith, Ricardo, and Milton Friedman have to say. Look at what Winston Churchill, Albert Einstein, Leo Tolstoy, and Thomas Jefferson and to say about it as well. There has been a lot of good thought on this topic and I encourage you to check it out

Trevor,

Trevor,

First and foremost again, is the measurement question. Land has intrincisally no tangible worth except for what some some individual decides to put on it. In fact, in many cases land will sell at a value that is pegged on how many units or sq/ftage can be derived from that land. What then, was the real 'value' of that parcel before the building was put on it? How do you decide?

Just as taxation of buildings distorts the amount of building, the taxing of land distorts the ownership and interest in ownership of land. This may be just as unhealthy as speculation and sprawl.

Back to your original point, I think that people don't pay for government improvements because how do you measure the value of that improvement to people, and how would you fairly assess that charge? A private company can determine the need for say, a toll road, build it and charge users based on their usage. In this way, price information dictates whether or not some piece of infrastructure gets built. Government does not have the same ability to determine the true costs and benefits of improvements, due to their monopoly position in the the ability to acquire land and collect taxes to finance themselves. IF I don't like the toll road and I don't feel like it benefits me, I don't use it. If I don't feel like the county road benefits me but i'm taxed for it I have two choices, Pay or go to Jail.

Once again

In the real world competition for land sites (location, location, location) drives land values not some individualist subjective theory of value. Assessors have learned scientific means of determining that market value fairly accurately. Those who advocate for the subjective theory of value seem to forget that value espoused in one’s head must be coupled with his ability to pay and that value will be bid against by others we also desire to use the site. An individual doesn’t determine the sale price of property, the market (a conglomerate of individuals) does.

Of course zoning effects the market value because it limits its use to what the government decides. Nevertheless it is still the market that determines the price, not a single subjective individual, and this value can be assessed fairly accurately. In fact, it is done regularly even today.

Yes the taxation of land “distorts” the ownership and interest of land. All taxes distort. We need to ask ourselves, what end do we desire? Taxing buildings leads to less building and a disincentive to fix them up. Taxing income leads to less income. Taxing sales leads to fewer sales. Taxing land will lead to less land use. In other words, it will lead to the more efficient use of land. I see this as a good end. Adam Smith said that a tax on land is the best tax for it distorts the market the least. We would all be wise to listen to him.

You asked the question “people don't pay for government improvements because how do you measure the value of that improvement to people, and how would you fairly assess that charge?” The answer is that the value of those improvements (and community created improvements) manifests itself in raising land-values. Once again, read the classics on this if you disagree. So I think the best way to compensate the government is to make those who profit the most from this infrastructure to pay the most. The best way to do this is levy a tax on land which captures that increase – which captures the “ground-rent” as Smith, Ricardo, and Paine call it.

If you are coming from the anarchist position, which your statements seem to warrant, than I could recommend other methods of capturing ground rent that are separate from government assessors. The mechanism is not my favorite but it would involve a system of bidding for land for a set term after which the land would reopen for bid. This would accomplish the same thing as the land value tax but without the government. The bid amount would be converted to a citizen’s dividend and redistributed to the community.

I’ve talked to many anarchists before and they seem to forget that large landowners are themselves small governments that tax their constituents through rent payments. Lockean Libertarians would trade one government (with representation) for another (without representation) it seems.

It should also be observed that everywhere the land value tax has been implemented it has resulted in urban renewal and a decrease in speculation. See Pennsylvania in the 80’s.

Trevor Wins Debate

Enough is enough, I'll call this one in Trevor's favor. It's clear that land taxation is the only system that produces benefits for the payer as well as the payee. This prompts a question though, what to do about taxing active farmland under such a system? Would there be some sort of waiver provided for farmers?

Property Rights Bills = the Lawyer's Full Employment Act

Sadly, this piece is rather well-written, and will likely dupe folks into thinking this is actually a good argument.

The clues and FUD phrases start right from page one and don't let up. There has been a curtailment of private property rights because the use of private property often does not consider the neighbor, and the neighbor has to sue to stop the nuisance (something that Libertarians love: suing people).

The simple fact is, full and free use of your land probably conflicts with your neighbor. How do you stop the conflict? If you say government regulation, you are anti-property rights. If you say 'allow "property rights"', then you will tie up the courts for years adjudicating your little dispute.

Best,

D

really?

I'd love to see anything that backs up that snarky comment that you have about libertarians that love suing people.

Last time I checked, the major legal class action legal issues lately: Mold, Tobacco, "Junk Food", etc. etc. are primarily supported by those on the left (and the right too, increasingly)..

Weewy.

My experience is that when you ask a large L how these things get worked out absent the regalayshun, the answer is always in the courts.

Perhaps you have a different experience, but I call them big L folk on their ideology a lot. And, gosh, forgive the left for pointing out things that may be harmful to your health. It's a flaw, I know.

Thanks!

Best,

D

reeeeaaaallly

The whole gist of any "L" libertarianism is the sanctity of contract, which can be had via many avenues that don't require lawsuits - mediation, arbitration or straight up negotiation just to name a few. Two parties negotiating terms almost always leads to better decision making than some lawmaker sitting in a faraway place making that same decision. But I suppose you might think that you can convene a panel of experts for any given problem and sit them in a room and fix whatever social problem they put their mind to?

Also.. there's quite a large difference between educating people about things that are harmful to their health and passing laws to take away the rights of individuals to express their food/drug/etc/whatever preference they have. If people don't lave the liberty to live their own lives, they aren't people so much as they are robots.

Real.

Thank you for your reply p.

My argument is - and continues to be - that these L actions are REactive rather than PROactive. That's not a plan (this is, after all, a planning site).

But to use your example, two parcel owners cannot possibly negotiate to ensure the downstream health of other properties; this can only be done regionally. Thus, all the downstream parcel owners must get together to negotiate and calculate Pareto optima via Coasian bargaining to achieve these ends in order to maximize outcomes.

It's inefficient and atomistically priveleges a small unit, in addition to priveleging individual goals over societal goals. And what about how one negotiates the justice bit or who pays for the negative externalities?

Note that I'm not arguing, as you project, for an expert panel (for what are experts good for, anyway? They just know stuff) for every little thing. I don't know why you'd say that, as I didn't advocate any such action.

And this passing laws thing to take away food preferences - what's that about? This is a M37-distribution-wide-and-far-how-to thread, not a general anti-regalayshun fetish thread - but perhaps you mis-posted, so no problem p.

Best,

D

Again..

Yes but the regulators who assume the right to decide the tradeoffs involved are more likely to rely not on local knowledge but instead rather on 'expert' analysis. There is no reason to believe that given a long enough timeframe, any party involved with a significant interest in any matter can not bargain with those holding an interest in order to reshape the outcomes. If I am as a matter of fact being directly harmed by the actions of an 'upstream' individual and have positive proof of that harm, I can negotiate with them either informally, contractually or yes, legally.

The whole fetish with regulations are that they help people avoid conflict, whether good or bad. Why bargain with people when you can just lobby politicians to pass a law forbidding the viewpoint of the person whom you disagree with?

Yet again.

Thank you, again, p.

I am quite familiar with this boilerplate. That is why I provided the linky above. Anyone can dislike findings that disagree with your ideology if ideology drives the boat ("experts" is the clue). I don't care for the L's inefficient solution, but on this we'll just have to agree to disagree, because this L ideology likes the inefficient reactive solution. This being a planning site, the topic will always be proactive, rather than reactive ideas.

Best,

D

Agreed.

..to disagree that is.

However, passing off regulations as being proactive just doesn't quite cut it for me. WIth the advent of the internet and the decreasing costs of information sharing, there is plenty of room for new methods of community decision making to be aided by technology. And enabling this communcation and decision making would seem to be rather pro-active to me. But hey, we can just agree to disagree about that as well.

Like I said - Lawyer's full employment scheme.

I just spent the morning in a room with ~2 dz landowners & I hope I don't have to do it again soon.

Folks who propose schemes such as yours have never actually tried to do what you propose - it's like herding cats and it won't work. You'll do your thing, someone will be angry, and it'll end up in court. Like I said.

Anyway, good luck in convincing the majority that your ideas are good.

Best,

D

David Renkert's picture

Dealing with Landowners

Dano, have you seen our site? We can make dealing with landowners much easier.

David Renkert, Founder
Landpool Partners
www.landpooling.com

Thank you David.

You've previously provided that link here, David, IIRC. Thanks.

Best,

D

Insurance for Property Takings

Why is there no insurance against a property taking? Or is there? That is the free-market solution when government has a legitimate need to take property. The landmark South Carolina case exemplifies this perfectly. The state denied a developer use of some oceanfront lots he had bought and held for future development because of beach erosion during the holding period. It's not up to the state to make him whole. That's what insurance is for.

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