A Troubling New Ruling on Property Rights

Why should taxpayers pay compensation because public programs affect land values taxpayers helped to create in the first place?

IN the final flurry of decisions from the United States Supreme Court, relatively little public attention seemed to focus on the court's decision on property rights - issued on the last day of the court's term.

But in Lucas v. South Carolina Coastal Council, the Supreme Court quietly planted the seed of a potential revolution - one that could drastically impair the ability of Americans to protect their communities, and could exacerbate the serious economic divisions in our country.

The Fifth Amendment to the US Constitution states in part: "Nor shall private property be taken for public use, without just compensation." The Fifth Amendment was originally understood to prohibit uncompensated government seizure of private land for a public road, a military base, or some other public facility. Early in this century, however, the US Supreme Court ruled that when regulation goes "too far," it too may constitute an unconstitutional "taking."

David Lucas purchased two oceanfront lots on the South Carolina shore for approximately $1 million. Two years later, South Carolina adopted its Beachfront Management Act to prevent hazardous development along the face of the ocean beach exposed to erosion and flooding. This new law, the trial court found, made Mr. Lucas's land "valueless."

The Supreme Court reversed the decision of the South Carolina Supreme Court upholding the constitutionality of the coastal law. But the court did not rule a "taking" had occurred. Instead, it sent the case back to the South Carolina courts for more development of the facts.

The precedent set in Lucas will have little or no direct effect on the ability of local, state, or federal government to carry out ordinary land use and environmental regulations. The court addressed only the very rare case when regulation makes land "valueless." Few environmental or land use measures have such drastic economic impact. Conservationists can rightfully claim partial victory in that the court refrained from issuing a more sweeping ruling.

However, in this narrow context, the court, borrowing from the writings of conservative legal scholar Richard Epstein, developed a new and quite radical approach in interpreting the Fifth Amendment. Justice Antonin Scalia, writing for a bare majority of the court, stated that, in general, the justification for any regulation making property valueless must be rooted in "background principles of the State's law of property and nuisance." While the scope of these "principles" is uncertain, it is clear they will be defined largely if not exclusively by judges rather than elected officials. Also, the burden apparently now rests on the state to demonstrate that these principles apply, rather than on the landowner filing suit to demonstrate that government has acted unreasonably.

The significance of this doctrinal shift can hardly be overstated. Since the 1930s, it has been an accepted tenet of constitutional law that judges, especially federal judges appointed to lifetime jobs, should defer to the judgment of elected representatives in matters relating to economic regulation. Judges, it is said, should not substitute their own economic policy preferences for those of the legislature. Without so much as a wave to history, Justice Scalia tossed this tenet in the direction of, if n ot into, the dustbin of history.

Does the Lucas decision only represent extreme doctrine for the extreme case? Or will Scalia and other conservative members of the court seek to apply the new doctrine more broadly to regulations that impinge on property values but still allow the owner to use the land productively? A move in the latter direction would destroy a sense of balance in this field of the law.

So-called property rights advocates tend to view regulation solely as a curtailment on their rights. But in reality regulation represents an effort to work out the competing claims of different property owners. Property rights are protected by land use regulations that keep a toxic waste dump out of a residential neighborhood. Property rights also are protected by wetlands laws that prevent flooding. The rights of society, and of future generations, are protected by laws that prevent the extirpation of e ndangered species.

Under Scalia's approach, if applied more broadly, efforts by elected representatives to work out these conflicts would be entitled to little or no consideration from the courts. Because the burden of proof would apparently rest on the government, the scales of justice would be tilted in favor of the property owner who claims the value of his land has been reduced by regulation, and against the property owner and other members of the public protected by regulation. In cases of uncertainty, unfortunately c ommon given the complexity of environmental cause and effect, the ruling would almost always come down against the public and in favor of paying compensation.

One potential consequence of an expanded reading of the Fifth Amendment would be to make government regulatory programs so expensive that they would have to be abandoned altogether. Certainly that was the ultimate goal of officials in the Reagan and Bush administrations, led by former Attorney General Meese, who fixed upon the Fifth Amendment as a potentially powerful tool with which to attack environmental and other measures they opposed on policy grounds.

Alternatively, taxes would need to be raised, or funds stripped away from other public programs, to pay more frequent compensation awards. It is no exaggeration to say that the Lucas case may really turn out to be about whether South Carolina can provide funding to ensure that the school children of Charleston will get an adequate education.

In either event, a broader reading of the Fifth Amendment would result in a further redistribution of wealth in favor of the privileged few, a trend already set in motion by the national tax and fiscal policies of the last 10 years. If regulatory programs had to be dismantled, landowners could reap greater profit from their land, and the external costs of their activities would fall on their neighbors and the community. If compensation had to be paid more frequently, landowners as a group would receive d irect transfers of wealth from taxpayers, with the largest landowners generally receiving the most.

Finally, a broad application of the court's new doctrine would be unfair to the community as a whole because the court's analysis of "takings" ignores the "givings" side of the equation. Land value represents in part the financial investment, skill, effort, and care of the landowner. But land value also is based, sometimes in very large part, on taxpayer-funded investments in highways, bridges, and other facilities that create value in private land. Why should taxpayers have to pay compensation merely be cause public programs affect land values that taxpayers helped to create in the first place?

A majority of the US Supreme Court will hopefully continue, except in the extreme case, to allow elected representatives to balance the claims of individual property owners and the equally legitimate claims of their neighbors and the community. It is a fair surmise that moderate members of the court, such as Justices Sandra Day O'Connor and Byron White, would not have joined in the court's opinion if Scalia had not limited the ruling to the extreme case. Yet Scalia was careful to leave openings in his op inion for consideration in subsequent cases of wholesale adoption of the conservative agenda for rewriting the Fifth Amendment.