NYC Zoning and Land Use Exam
Land Use Controls Outline
I. Introduction: Causes and Theories of Land Use Regulation (~6 pages)
A. Basic Themes
1. Key Points of Course
a. How the government regulates land; and
b. What limits the law places on these government regulations.
2. Key Questions
a. Why do we want public land use controls?
b. Why do we need public land use controls?
c. Why not use private bargaining instead of public land use controls?
3. Possible Rationales
a. Externalities: Costs in bilateral transactions imposed on 3rd parties WHICH ARE NOT BORNE by the entity/person imposing the cost.
i. Note: If an entity/person tries to bargain with the entity/person imposing the externality, the cost is no longer an externality (but is still a cost).
ii. Example – Pollution: We want to create systems where polluters have to internalize their costs. (e.g., pay polluting industries to pollute)
b. Maximize the Utility of Land: People are not rational in their decisions on land, SO we want to create a system where land is used in the best manner possible (and in the best hands of people to utilize that).
c. Problems with Private Transactions: Unequal bargaining power leads to bad outcomes, SO it’s important to bring the *stick* of government into the equation.
d. Adjusting Expectations: Government can shift the baseline around which bargaining can occur.
e. Health Concerns: (e.g. pollution or environmental concerns)
f. Quality of Life
g. Transaction Costs: The private market would cause transaction costs to be sky high, SO we want to reduce these costs from the top down in order to increase efficiency.
h. Historical Preservation: (e.g. tend to involve inter-generational externalities)
i. Sustainability/Environment: Government can prevent a *tragedy of the commons* BECAUSE entities/people can overuse resources.
j. Maximizing Efficient Infrastructure: (e.g. roads)
k. Enforcement Issues
l. Homogeneity/Heterogeneity Concerns
m. Sustaining Cultural Identity
n. Aesthetics
o. Profit: Government can enhance property values
B. Theories of Metropolitan Suburbanization (Mieszkowski & Mills)
1. *Natural Evolution Theory* of Suburbanization: Suburbanization is driven by
1) development of infrastructure; (e.g. creation of roads through highway system)
2) transportation innovations;
3) travel time considerations;
4) employment decentralization; (e.g. people commuting to work, truck transport for goods)
5) effects of rising real incomes over time; (e.g. wealthiest people live outside city because they can afford to commute and want large houses with space) and
6) demand for new housing and land.
2. Flight to Homogeneity: Suburbanization is driven by the fiscal and social problems of central cities, such as
1) high taxes;
2) low quality public schools and other government services;
3) racial tensions; and
4) crime, congestion and low environmental quality.
This causes people to leave cities to the suburbs to seek greater homogeneity.
a. Key Point: INCOME STRATIFICATION. By residing in income-stratified communities, affluent citizens avoid local redistributive taxes. (e.g. benefits to *free riders* are subsidized through higher property taxes from more expensive properties)
i. Note: Stratification may occur by community interest in services (e.g. retired communities don’t care about schools). REMEMBER, people want to live around people who share their needs in services (e.g. property taxes = fee for services).
b. *Free Rider* Problem: Essentially, poor people chase rich people for services. This causes taxes to go up and/or service quality to go down.
i. Preventing *Free Riders*: Institute zoning, which keeps poor people out and/or minimizes difference in property values by minimizing the extent of cross-subsidization in communities.
ii. Problem: Relegates poor people to poorer communities and inner cities.
iii. Possible Responses: Limit the ability of governments to create land use controls in suburbs.
C. The Regulators: Local Governments
1. Traditional View – Dillon’s Rule: Local governments only possess police powers that are expressly delegated by state government.
a. Result: Courts construed narrowly any police powers that state government confers through enabling legislation. This caused lots of judicial actions that challenged local ordinances.
b. SZEA: Legislation enacted by states that gave local governments the power to zone. SZEA was promulgated because of Dillon’s Rule.
i. Key Point: SZEA requires that zoning be consistent with a “well-considered plan”. This raises the question of whether there needs to be a separate plan.
2. Modern Changes
a. SZEA Departures: States have departed significantly from the SZEA to enact tailor-made zoning and planning statutes.
b. Erosion of Dillon’s Rule: Courts more broadly construe enabling legislative powers than under Dillon’s Rule.
c. Home Rule Jurisdictions: States grant local governments all of the police powers of the state provided the local government adopts a municipal charter.
D. Coasian Bargaining and Comesar
1. Coase Theorem: In the absence of transaction costs, the allocation of property rights is unimportant because parties will bargain to the efficient outcome.
a. Problem: There are always transaction costs in the real world.
b. Solution: Allocation of property rights should minimize transaction costs.
c. Achieving the Solution: POLITICAL ACTION (e.g. impose a land use regulation, i.e. a form of collective action that overcomes market failures). This, at minimum, creates a Kaldor-Hicks efficient outcome (not Pareto since we’re not paying the entity/person regulated).
i. Result: Theoretically, there should some efficient land use control in any place, BUT land use control should prevent more harm than it imposes (at minimum, Kaldor-Hicks efficient)
ii. Problem with Result: Figuring out when and whether a land use regulation is preventing more harm than it imposes.
d. Wealth Effects: Ignored in the Coase theorem – essentially states that the wealth of the affected parties may influence how much the parties value particular entitlements.
2. Komesar and Models of Zoning: Whether an efficient outcome in the zoning process occurs or not depends on 1) what all parties involved can know about the situation (see e.g. pp.35-36); and 2) depends on which parties control the mechanics of the transaction.
a. Model #1 – Omniscient Dictator Model: In a perfect public land use control world, we would think government is omniscient and would know values and costs with certainties. (e.g. we would allow single-family residences to be built and not high-rise condominiums, see pp.35-36)
i. Problem – Influence Model: Government is not omniscient. Thus, government may make decisions based upon the effectiveness of the arguments made for or against the regulation. (see public choice theory below)
b. Model #2 – Majoritarian Model: In a majoritarian system where the restriction is imposed by the majority, we may worry about overregulation. (e.g. the most stringent open space restriction (vacant land/open space) would be imposed, pp.35-36)
i. Takings Clause Restriction: Prevents majoritarian abuse by preventing majority of voters from ganging up on individuals.
ii. Theory: Makes government weigh the costs of regulation because the government will have to compensate the landowner (e.g. forces government to internalize costs of its regulatory actions, leading to efficient levels of regulation – Posner, economic account of takings clause).
iii. Problems: 1) Taxes are not borne evenly by everyone, so which taxpayers will pay for the taking (and will they pay evenly); 2) Who determines what the compensation amount is; 3) Compensation doesn’t cover all costs (all externalities); 4) What if governments don’t internalize monetary costs, but instead internalize political costs?
iv. Complicated Issues
A. #1: Some suggest compensation works perniciously (e.g. public choice models). Compensation may buy off a group that was well situated to oppose the issue with efficient outcome.
B. #2: Compensation may not stop a powerful group from imposing its will either (e.g. Atlantic Yards).
v. Note: We must be aware of the traditional economic account (Posner) when analyzing the takings clause.
c. Model #3 – Public Choice Model: Governments are not motivated by voting majorities, but are rather motivated by people who are best able to mobilize political costs or benefits (not masses, but rich developers), so the political process is the most important factor.
i. Influence Model Problem: Governments don’t have all the information; we don’t know who controls government (or the nature of the political process), SO we only have the regulation. Thus, we must engage in close scrutiny of political process to decide what we think of regulation. (same with market failures)
ii. Question: When do we expect a group of people to form an effective political group?
iii. Answer: 1) Per capita stakes must be high (not just actual cost); 2) Relatively small numbers of people (to create organizational advantages) because of the transaction costs in maintaining political pressure.
iv. Note: We must take into account the public choice model when analyzing the takings clause.
d. Serkin Corollary to Komesar: He thinks that the Comesar story applies very differently to local governments than to state or federal governments.
E. Competing Conceptions of Local Politics
1. Fischel “Homevoter Hypothesis”: Small local governments fit the majoritarian model, NOT the public choice model BECAUSE small local governments dominated by homeowners who share one common interest – PRESERVING PROPERTY VALUES.
a. Key Point: Property taxes and other public services are capitalized (i.e. affect) into property values. As a homeowner, you care most about the amount you’re going to have to spend each year, SO THE HIGHER YOUR PROPERTY TAXES, THE LOWER YOUR PROPERTY VALUE.
b. Conclusion: Government will raise taxes ONLY when it gives out more in public services than the sellers are giving out in property taxes.
c. Relation to Takings Clause: In small local governments, forcing the government to pay compensation will force governments to internalize costs because compensation will come out of property taxes.
i. Problem: Small local governments then may be averse to litigating takings claims because of the costs (leads to bargaining).
d. Limits: This theory only works in small, relatively homogenous suburbs and towns (not NYC).
2. Michelman’s Public Interest Model: Views the legislature (or local government) as a forum where citizens determine conclusions through joint deliberation relying on the use of reason. Majority rule filters the good from the bad, the reasonable from the unreasonable, etc. (contrary to public choice model)
3. Tiebout Hypothesis: Consumers benefit from being able to “vote with their feet” among municipalities offering varying packages of spending and taxing policies (e.g. families may want jurisdictions with excellent schools, older residents may want excellent police), SO THAT the specialization of municipalities and competition among them will enhance the efficiency of metropolitan organization.
a. Problem: What are the effects of cost or benefit spillovers between communities?
b. Waring-Blender Model: The opposite of the Tiebout Hypothesis, IN THAT it proposes all land uses and all types of households should be represented in each neighborhood in proportion to their representation in the larger regional area.
F. The Comprehensive Plan
1. State Statutes
a. Key Questions
1) When does a comprehensive plan have to be in writing?
2) When does zoning have to be consistent with the comprehensive plan?
3) To what extent is a land use regulation preferable to just letting the market work?
4) What is a good comprehensive plan? (see Jane Jacobs vs. separation of uses)
b. Description of Comprehensive Plan
1) Describes in general terms the goals of a community;
2) Identifies the challenges of a community;
3) Identifies the strengths and resources of a community;
4) Describes goals of land use issues within a community.
c. Effect of Comprehensive Plan: Where there is a comprehensive plan, subsequent land use decisions by local governments must be consistent with the plan (e.g. like a land use constitution)
d. Evolution: Comprehensive plans do evolve and may be revisited over time by local governments.
i. Note: NYC does not have a comprehensive plan. NYC has 197(a) plans, which allow creation of comprehensive plans for specific areas of the city. (so far only 10 such plans have been adopted)
e. Advantages to Requiring Comprehensive Plan
1) Forces the community to look at its goals through a process (i.e. self-reflection).
2) Protects potentially marginalized views of the community.
3) Promotes efficiency.
4) Moderates or controls change of the community (e.g. historical preservation).
5) Promotes consistency of zoning board implementations.
6) Creates or facilitates reliance when an entity/person purchases land (e.g. you know what you’re buying)
7) Generates more information about what the ideals of the community are.
8) Promotes neighborly harmony. (which connects with reliance and expectations).
9) Counteracts market failures (e.g. blight)
f. Disadvantages to Requiring Comprehensive Plan
1) Not representative of the community (may only benefits activists who drive the plan)
2) Difficult to predict social needs and technological changes in the future (government is not omniscient).
3) May be waste of time and resources (too costly).
4) Instead of promoting efficiency, the comprehensive plan impedes efficiency by putting decisionmakers above the market.
5) Could create negative regional externalities.
6) Creates inconsistencies with the democratic process by limiting the delegation of powers.
7) Creates agency costs, since the planner’s incentives are not necessarily aligned with community’s interests.
2. Examples
a. Williamsburg Comprehensive Plan
i. Theme: Williamsburg is transitioning from an industrial area to a residential area (but leaves possibility for manufacturing). The plan presents a very general picture of what Williamsburg should look like (e.g. maybe a waterfront or park).
ii. Purpose: The plan tries to address different needs in different communities. BECAUSE the planners are concerned that developmental pressures will impact lower-income communities. (see p.2 about Latinos, Hasidic communities)
iii: Key Issue: From this purpose we must infer the political story or the interest groups that lead to the plan and who are not in the plan.
A. Key Questions
1) What gives the entity/person who wrote the plan the right to speak for the community?
2) Is this an appropriate statement of the community’s interests?
iv. Note: The land use changes in Williamsburg occurred because of market forces, not because of comprehensive plan. The comprehensive plan does not create change BUT RATHER manages change instead.
b. Marlboro, VT Comprehensive Plan
i. Theme: Marlboro is concerned over preserving its rural character while providing sufficient housing for lower and moderate income.
ii. Problem: If you want to provide affordable housing, you want to build on small lots BECAUSE it’s the least expensive method; HOWEVER, if you want preserve a rural character, you want large sections of land that are undeveloped, BUT this also pushes prices up by reducing supply – Note the conflict.
iii. Purpose: Marlboro, VT seems to think that the best way to preserve its rural character is to have high density zoning within the center of the town and totally undeveloped land outside the town.
iv. Key Question: How much consistency is created within a comprehensive plan when actually implemented?
v. Note: This comprehensive plan is probably sufficient under Florida and South Carolina (see pp.60-62).
3. Criticisms of Comprehensive Planning
a. Can planners gather and process the pertinent information?
b. Do planners have appropriate incentives to adjudge the effects of proposed development?
c. Can planning be reconciled with democracy?
II. Zoning and the Rights of Landowners and Developers (~25 pages)
A. The Evolution of Zoning
1. Village of Euclid v. Ambler Realty Co.
a. Facts: Euclid was designed litigation after the passage of the SZEA as to whether zoning was constitutional. P says that it his property (zoned residential) is now worth $2,500 an acre, whereas it would be $10,000 an acre industrial (not takings clause argument however). P argues that it is a substantive violation of the due process clause and that it is arbitrary and irrational.
b. Surrounding Situation: Remember, court at this time was very concerned about property and contract rights, SO the case was not a foregone conclusion.
c. Holding: USSC holds that the zoning power is constitutional on its face (facially).
d. Reasoning
i. USSC says that there are non-arbitrary reasons for government to engage in zoning, SUCH AS 1) minimizing the impact of industrial uses on residential uses; and 2) allowing government to segregate inconsistent (or incompatible) uses so that each use doesn’t feel the negative effects of the other, thus minimizing harms. (in Euclid, this is done by creating use and area zones)
ii. Tougher Question: USSC says it is fine to separate residential uses from industrial uses (analogizes to nuisance), but what about apartment buildings from other residential uses?
iii. Answer: Court thinks this is fine, characterizing apartment buildings as parasites. Zoning protects property rights, instead of destroying them (or interfering with them). Thus, our concern is allocating property rights between neighbors (protection vs. interference)
iv. Note: Zoning can discriminate along economic lines, but cannot discriminate along racial lines (Buchanan v. Warley).
e. Aftermath Post-Euclid: After the New Deal, economic substantive due process is pretty much dead in most contexts, BUT IT STILL ARISES IN THE LAND USE CONTEXT!
i. Effect #1: Sometimes, the court will substitute their judgment for the government’s view, but this is ALMOST NEVER A WINNING CLAIM!
ii. Effect #2: P usually alleges substantive due process and takings clause arguments together in the land use context.
2. Interaction Between Property Rights and Police Powers
a. General Rule: Property rights come from the state’s general police powers.
b. Property Rights v. Police Powers: A property owner owns property subject to the state’s police powers, which defines what can and can’t be done on property.
c. Limits on Police Powers: If the state is not acting beyond the scope of its defined police powers (i.e., validly exercising its police power), it may regulate anything it wants to, SO LONG as the regulation is not irrational or arbitrary.
3. Efficiency in Land Use Regulations as a Basis for Judicial Review
a. Theory: The nature of judicial review of land use regulation is to ask WHETHER THE REGULATION IS EFFICIENT OR INEFFICIENT (may become substitute for irrational).
b. Key Question: Is it creating greater benefit than causing harm? (Kaldor-Hicks efficient)
c. Types of Efficiency
i. Pareto Efficiency: Both parties are made better off by the transaction (i.e. a formal version of a voluntary transaction).
ii. Kaldor-Hicks efficiency: Only requires that the party/parties being made better off could *in theory* make those parties worse off BETTER OFF IF THEY CHOSE TO DO SO (they don’t have to do so, of course)
iii. Key Sub-Question: Do the courts know REALLY KNOW what is going on in these transactions? (can they make appropriate judgments based on the information)
4. The Modern Zoning Ordinance: Essentially, the modern zoning ordinance gives effect to the comprehensive plan.
a. Characteristics
1) A zoning ordinance typically has two parts: a map and a text. The map classifies the land into zoning districts; the text spells out the uses permitted and details restrictions.
2) Zoning ordinances have evolved from static plans towards a case-by-case review of proposed development. Flexibility is the key.
3) Zoning ordinances today tend to confirm existing use patterns, rather than impose use patterns from above.
4) Zoning ordinances tend to assign undeveloped areas to the most restrictive classification to allow for bargaining.
5) Zoning ordinances have become more specific in design.
b. Flexibility Devices: Procedures that allow zoning designations to be changed. REMEMBER, if you are in compliance with the zoning ordinance, you are entitled to build on the property as of right (subject to getting permits, of course)
i. Traditional – Variances: Waives the application of specific provisions of the zoning ordinance to a particular piece of land.
ii. Traditional – Rezonings: Revisions of the zoning ordinance’s applicable text or map. (legislative action)
iii. Conditional Uses: Uses that the zoning ordinance says are generally permitted within the zone, but not permitted as of right within the zone, SO the property owner must seek a conditional use permit. (usually NIMBY uses)
iv. Overlay Zoning: Allows local government to create new regulations within the same basic use zone on top of the basic zoning ordinance. (e.g. wetlands)
v. Planned-Unit Developments (PUD): Says that the zoning ordinance will be waived for any specific parcel of land, SO LONG AS the average of the entire property is consistent with the zoning ordinance (e.g. large developments – Brooklyn Law School)
vi. Transferrable Development Rights (TDR): Authorizes landowners in certain designated areas to buy zoning rights from landowners in other designated areas. (e.g. Penn Central, historic districts)
c. Example – Brooklyn Zoning
i. Floor-to-Area Ratio (FAR): The ratio of total building floor area to the area of the parcel of land. In this zoning ordinance, you can only cover 80% of a corner lot or 60% of an interior lot. REMEMBER THE SETBACK REQUIREMENTS TOO!
B. Substantive Due Process Challenges to Zoning Measures
1. Nature of the Inquiry
a. General Rule – As-Applied Challenges to Zoning (Substantive Due Process): A court should not set aside the determination of public officers in a zoning ordinance UNLESS the determination *is merely an arbitrary or irrational exercise of power having no substantial relation to the public health, public morals, public safety or public welfare.* (Nectow v. City of Cambridge)
i. Key Question: What is irrational or arbitrary?
ii. Answer: e.g. “shocks the conscience”, “truly irrational”, “grave unfairness”. THIS IS A HIGH BAR!
iii. Note: Remember, these are substantive due process challenges to zoning ordinancse, as applied to the property owner.
b. Benefit vs. Harm: Courts may often compare the regulation’s benefit to the regulation’s harm in determining whether the zoning ordinance is constitutional – often substantial (great) harm is needed.
c. Remedies
1) Injunctive relief (the most common and typical solution, which enjoins the zoning ordinance from applying to the property in question – see Nectow v. City of Cambridge )
2) Judicial rezoning;
3) Give damages for a reduction of property value (important and difficult to value!)
d. Case Example: Nectow v. City of Cambridge (pp.96-98)
i. P owns a narrow strip of land, which the city’s zoning makes it useless to the property as residential property. P sues under the due process clause claiming the zoning ordinance is unconstitutional as applied to him.
ii. Court holds that the zoning ordinance is invalid because it isn’t creating any benefit to the surrounding area, but rather causing substantial harm to the property (not Kaldor-Hicks efficient).
2. Role of Federal Courts in Land Use Cases
a. General Rule – As-Applied Challenges to Zoning (Procedural Due Process): The procedural due process necessary for land use/zoning decisions relies on whether the decision is *legislative* or *adjudicative* in nature. (Coniston Corp. v. Village of Hoffman Estates)
b. Analysis Pointers: Does the regulation apply to one person (like a judicial decision) or does it apply to a large groups of people (like a statute)?
i. Note: Look to the nature of the decision, rather than just the form or name of body making it! (hard to distinguish in land use process)
c. Legislative Decisions: If the decision is *legislative* in nature, the “true” purpose of the decision is irrelevant, RATHER the question is only whether a rational relationship exists between the decision and a conceivable government objective.
i. Note: The actual legislative purpose is not necessarily controlling, so long as the court can come up with plausible justification for the zoning decision. THIS IS A HIGH BAR!
ii. Rationale: The basis for deference to a legislative body is that the aggrieved party has recourse through the electoral process.
d. Adjudicative Decisions: If the decision is *adjudicative* in nature, the court reviews the evidence before the decisionmaker to determine whether the decisionmaker has paid attention to the evidence adduced and acted rationally on it. LESSER BAR!
i. Note: State courts in applying the federal constitution may apply slightly stricter standards of review to due process challenges in adjuciative actions.
ii. Note for Test: ALWAYS BRING UP THE SUBSTANTIVE/PROCEDURAL DUE PROCESS VIOLATION!!!
e. Property Interest - Note: Some courts have refused to consider due process challenges to the denial of discretionary permits such as rezonings or special use permits on the grounds that the developer has no property interest in receiving such permits UNLESS there is either a certainty or a very strong likelihood that the application would have been granted ABSENT THE ALLEGED DENIAL OF DUE PROCESS!
f. Case Example: Coniston Corp. v. Village of Hoffman Estates (pp. 99-102)
i. P owns 17 acres and wants to build 5 single-story commercial buildings on the land. On its face, the plan look consistent with zoning use, but the Board of Trustees disapproves of the plan and gives no reasons for its action. P sues.
ii. Court upholds the Board of Trustees action.
iii. Court thinks that the Board of Trustee’s decision is based on the fact that there’s too much office space. So, although there’s been transfer from P to owners of unused office space, this does not rise to level of substantive due process violation. (at best protectionist and mistaken)
C. Equal Protection Challenges to Zoning Measures
1. Discriminatory Line Drawing
a. General Rule: A zoning classification that distinguishes between property uses and fails to have a zoning purpose that bears a substantial relationship to the health, safety, morals or general welfare of the community, it is discriminatory line drawing and thus unconstitutional. (Layne v. Zoning Board of Adjustment)
i. Note: Most courts are hesitant to second-guess line-drawing decisions by legislative bodies.
b. Case Example: Layne v. Zoning Board of Adjustment (pp. 126-128)
i. P wished to occupy the property she leased as a boarding house. The Zoning Board of Adjustment denied her request based on the fact boarding houses were excluded by zoning. P appealed, saying there was no rational reason for excluding boarding houses from the zone where rooming houses were allowed.
ii. Court upholds the Zoning Board of Adjustment’s decision, finding that 1) a distinction based upon the availability of food service is not unconstitutional line drawing and that 2) the regulation relates to the health and welfare of the community because it invokes the city’s health code.
iii. Under the statute, boarding houses provided meals and lodging (and were thus more commercial), whereas rooming houses only provided lodging.
2. Discrimination Against a Particular Landowner
a. General Rule: A particular landowner may bring an equal protection claim as a “class of one”, where the landowner alleges he has been intentional treated differently from similarly situated persons and there is no rational basis for the difference in treatment. (Village of Willowbrook v. Olech)
i. Intentionally Treated Differently: Some courts have interpreted this to require proof that the government intended to discriminate against the landlord.
ii. Similarly Situated Persons: P usually needs to show evidence to produce a standard by which he was similarly situated to other persons. (not just in a similar location)
b. Possible Limit – *Ill Will* Requirement: Equal protection cases with *class of one* plaintiffs require proof that the cause of the differential treatment was a *totally illegitimate animus*, *vindictive action* or *ill will* towards P by D. (J. Breyer, concurring, Village of Willowbrook v. Olech)
c. Possible Advantage: Unlike due process claims, *class of one* claims need not be tied to a property interest.
d. Case Example: Village of Willowbrook v. Olech (pp. 129-130)
i. P wanted to connect his property to the municipal water supply. The town first conditioned the connection on a 33-foot easement, but relented three months later when P pointed out that other property owners only were required to give a 15-foot easement. P sues town claiming there was personal animus against P because of prior issues with the town.
ii. Court holds for P, saying there is enough to get past Rule 12b6.
3. Arbitrary Wealth Redistributions: Zoning for Purely Fiscal Purposes
a. Example #1: It is unconstitutional for a local government to impose a land use restriction for the sole purpose of decreasing the value of land it plans to acquire through eminent domain. (p. 131)
b. Example #2: It is unconstitutional for a local government to impose land use restrictions intended solely to force the owner to use the land in a way that would maximize the local government’s tax revenues (p. 131)
c. Limit: It is fairly rare for a court to find that an illegitimate purpose is the sole reason for a land use regulation.
D. Confiscatory Zoning Classifications: Regulatory Takings
1. The Original Focus on Physical Takings
a. Origins of the Takings Clause (Tranor)
i. Colonial America – Rule: No judicially enforceable compensation requirement existed, RATHER the political process (the legislature) determined when compensation was due in situations where government acted in ways that affected private property. (e.g. two colonial charters recognized a compensation requirement)
ii. Colonial America – Diminution of Value: No colonial charter mandated compensation when regulations affected the value of property, nor did courts compensate for the regulations (e.g. no slaughterhouse ordinaces, tobacco).
iii. Key Change – American Revolution: This event 1) increased government actions that challenged or destroyed property rights; 2) led to governments seizing private goods without compensation; and 3) redistributed wealth among Americans.
iv. Result – Fifth Amendment Takings Clause: Contemporary actions indicate this clause was only mandated compensation when the government physically took property, BUT not if it merely regulated the owner’s use of property.
b. The Mugler Rule – Nuisance Exception to Takings Liability: When a government entity is acting pursuant to its police power to prevent a nuisance-like harm, the government may act without paying compensation to the property owner (no taking). (Mugler v. Kansas)
i. Key Question #1: What is a nuisance?
A. Possible Answer: Scalia/Rehnquist have suggested that the Mugler rule only applies to common law nuisances (e.g. “noxious uses of property”).
B. Related Question: Who gets to decide what is a nuisance is? (presumably the legislative government? courts?)
ii. Key Question #2: What is a regulation that prevents a “harm”, as opposed to a regulation that secures a “benefit”?
iii. Key Question #3: If something is legal for a long time, and the government subsequently bans it, should there be compensation to the property owner. (i.e. reliance issue)
A. Answer: Mugler court says this doesn’t matter – the government can change its mind whenever it wants to.
iv. What is the Police Power?: State legislation not delegated from the federal government is subject to being rationally related to the public health, morals, safety or health of the community. (substantive due process requirement)
A. Property Relation: Property owners own property subject to the state’s police power.
B. Connection to Takings: The question of whether there is a taking DEPENDS ON whether the legislation is valid in the first place (if not, no taking). THUS, the content of property protection is connected to the due process analysis.
C. Supplemental Question: Is there any independent content to property outside the due process analysis?
v. Case Example: Mugler v. Kansas (pp. 137-138)
i. The state of Kansas bans the manufacture and sale of liquor. It proceeds to define bars that sell liquor as a nuisance.
ii. USSC says that the property owners have no takings claim and deserve no compensation because alcohol is injurious to the health, morals or safety of the community and the state may regulate pursuant to its police power.
2. Policy Justifications for the Compensation Requirement
a. Michelman – Utilitarian Theory of Compensation: Offers theory of when government should be required to compensate property owners.
i. Element #1: SO LONG AS the regulation provides a net benefit (i.e. more gain than harm, however defined), our analysis must compare two particular costs – DEMORALIZATION COSTS AND SETTLEMENT COSTS.
ii. Element #2: IF demoralization costs are higher than settlement costs, the government should pay compensation BUT IF settlement costs are higher than demoralization costs, the government shouldn’t pay compensation.
iii. Formula Chart
1) If B (benefits) are less than C (costs other than demoralization costs), do not regulate.
2) If B is greater than C, BUT B minus C (efficiency gains) is less than the lower of S (settlement costs) or D (demoralization costs), do not regulate.
3) If B is greater than C, AND B minus C is greater than the lower of S or D, regulate.
4) In example 3, if S is less than D, compensate. If D is less than S, do not compensate.
iv. Definition – Demoralization Costs: The costs imposed by a lack of compensation. (i.e. presumably landowners are demoralized if the government doesn’t compensate, so they won’t build new buildings or forgo economic activity – CAUSES HARM)
v. Definition – Settlement Costs: The costs of compensating property owners. (e.g. search costs, information costs, etc.)
i. Note: Settlement costs DO NOT INCLUDE the compensation actually paid the landowner (otherwise you’re doubling the costs – see chart above)
vi. Key Questions
1) How do you measure demoralization costs and settlement costs?
2) Prof Question – If demoralization costs are higher than settlement costs, can we only pay partial compensation? (because demoralization costs are not linear)
b. Levinson – Internalization of Costs/Gains
i. Fiscal Illusion Principle: Asserts that government will ignore or undervalue costs if it does not have to pay for them (i.e. bear them) AND will thus act under an illusion about efficiency and value of its policies.
ii. Problem: Government therefore obviously has to internalize costs, BUT how does government internalize gains?
iii. Solution: Government mechanisms for internalizing costs and gains should be symmetrical, THUS if the government internalizes costs on its balance sheet, that is how government should internalize gains.
iv. Solution As Applied to Property Owners: Government should force the property owner who reaps gains to pay the person who incurs costs (we do this already through increased property taxes as a proxy)
v. Key Question: What is the political account of this story on both sides?
c. Blume & Rubenfeld – Efficiency of Regulatory Decisions: In examining use of the takings requirement for regulatory efficiency, we need to examine regulatory incentives AND the incentive effect on property owners
i. Takings Requirement and Regulatory Efficiency – Standard View: If government did not have to pay for regulation, it would lead to underdevelopment.
ii. Blume & Rubenfeld View: Says that inefficient decisions often occur because of the promise to compensate and can lead to overinvestment in property.
iii. Key Point: There may be some mismatch between the compensation requirement and investment in property.
v. Analogy – Takings Clause as Insurance: Blume & Rubenfeld theorize that the Takings clause is akin to public insurance of the regulation of property – the risk of regulation is no different conceptually than the risk of fire or flood, SO property owners should internalize their costs before developing. (the Takings clause acts as an “out”)
d. Basic Lenses to View Regulatory Takings
i. Fairness Rationale: Government cannot burden one person alone with a regulation when fairness dictates that the costs of a regulation should be born by everyone.
ii. Efficiency Rationale: See above – Michelman, Levinson and Blume & Rubenfeld.
3. Going Too Far – Penn Coal
a. Penn Coal Rule – Diminution-in-Value: When government regulation of a use that is not a nuisance works too great a burden (i.e. “goes too far”) on property owners in terms of diminution-in-value, it cannot go forth without compensation. (Pennsylvania Coal v. Mahon – regulatory takings can exist!!)
i. Key Question: What is “going too far”?
ii. Possible Answer: In Penn Coal, the court construes the statute as a 100% wipeout of the company’s ability to mine the support estate (sub-surface rights) – SO, a 100% diminution of value in a property right is a taking if caused by a government regulation..
b. Limitation on Penn Coal Rule – Reciprocity of Advantage: If government regulation provides average reciprocity of advantage to a property owner, it is not a taking. (Pennsylvania Coal v. Mahon)
i. Definition of “Average Reciprocity of Advantage”: If government provides a distinct reciprocal benefit to the property owner, such that it provides sufficient implicit compensation to the property owner to meet a takings claim, the government does not need to provide compensation. (Plymouth Coal Co. Pennsylvania)
c. Big Problem – Conceptual Severance (Denominator Problem): Extent to which we allow people to divide up property so that it looks like a governmental taking. (informed by what chunk of property you think applies to a takings claim)
i. Key Point: How you define the property affected defines the taking!
d. Tax as Alternative to Regulation: If a state wishes to accomplish a regulatory action, they may impose a tax and it will not incur Takings liability (is there a difference?)
e. Case Example: Pennsylvania Coal v. Mahon (pp. 140-42)
i. Deed between homeowners and coal companies gives companies the right to mine the property so as to remove the supports and subside the homeowners land. Statute is passed in PA forbidding such mining.
ii. USSC holds the statutory regulation unconstitutional as a violation of the Takings Clause.
iii. USSC construes the state’s regulation as affecting the companies sub-surface mining rights to make a 100% taking – the prevention of all mining.
iv. As compared to Mugler, USSC says this law doesn’t prevent harm because the companies sub-surface mining rights only damage one house.
v. Dissent: Says that you can’t distinguish between a release of noxious gas and subsistence of people’s homes.
vi. Note: In Keystone Bituminous Coal Association v. DeBenedictis, USSC upheld a law which looks similar to the law in Penn Coal, distinguishing between anthracite and bituminous coal – SO, maybe Penn Coal is not the strongest precedent.
4. The Ad Hoc Balancing Test – Penn Central
a. Penn Central Balancing Test: In ad hoc factual inquiries as to what constitutes a regulatory “taking”, we must examine three particular variables:
1) The economic impact of the regulation on the claimant.
2) The character of the regulation. (government action, e.g. physical invasion vs. public program)
3) The extent of the regulation’s interference with distinct (CHANGES TO REASONABLE!) investment-backed expectations. (Penn Central Transportation Co. v. City of New York)
b. Analyzing Penn Central
i. Element #1 – Economic Impact: This element focuses on the diminution-in-value inquiry.
A. Key Question: How much has the regulation reduced the value of the property?
B. Answer: If the value is reduced too much, we get a taking (tough to measure, BUT this is cornerstone of takings liability nowadays)
C. Other Factor – Transferable Development Rights (TDRs): Where a government gives a right to a property owner to develop on another piece of land where development is fine when developing on the piece of land at issue is unavailable.
1. Key Point: USSC suggests in Penn Central that it is a part of diminution-in-value test (value need not be the same to meet just compensation)
2. Key Question: Should a TDR relate to the “taking” requirement or should it relate to the compensation requirement? (see p. 166)
3. Note: A property owner does not need to try to sell or transfer the TDR to bring its claim (as ripe) – see below (p. 166)
ii. Element #2 – Character of Regulation: This element essentially says that physical invasions of property more likely requires compensation.
A. Problem: After Loretto, which found that a “permanent physical occupation” of property by the government is per se a “taking”, does this factor continue to do any work in the inquiry?
B. Possible Answer: Perhaps this requirement examines the purpose of the regulation.
iii. Element #3 – Investment-Backed Expectations: Typically, this requirement is used nowadays by the government to argue that the developer’s expectations were unreasonable. (henceforth the change from “distinct” to “reasonable”)
A. Key Question: What are “distinct (REASONABLE) investment-backed expectations”?
B. Possible Tests
1) These expectations are only frustrated when the regulation denies all economically viable use of land;
2) These expectations are only frustrated when the regulation limits possible future investment activities.
3) These expectations are only frustrated when the regulation limits the property owner’s present use of the land. (problem here is the developer who buys property to develop)
C. As Applied in Penn Central: The distinct (REASONABLE) investment backed expectations for the property owner are a train station.
c. Case Example: Penn Central Transportation Co. v. City of New York (pp. 158-63)
i. City landmarks Grand Central Station. Penn Central wants to build an office tower on top of Grand Central and applies for permission. The Landmarks Commission rejects Penn Central’s proposal. Penn Central sues, saying the Landmarks Preservation Law is an unconstitutional taking (100% of air rights – note distinction with Penn Coal).
ii. USSC upholds the law as valid, finding that the regulation did not affect a taking.
iii. Note: Penn Central seems to follow the dissent of Penn Coal by arguing we should not analyze the regulation based on the total deprivation of air rights, RATHER we need to analyze the regulation based on its impact to the whole lot! (i.e. parcel as whole)
5. Per Se Takings – Exceptions to Penn Central
a. Loretto Rule – Permanent Physical Occupations: A permanent physical occupation of property by a third-party authorized by government regulation is a per-se taking of property that is impermissible without compensation. (Loretto v. Teleprompter Manhattan CATV Corp. – cable lines on property)
i. Rationale: A permanent physical occupation effectively destroys ease of the rights possess, use and dispose of the affected property.
ii. Clarification #1: Loretto applies to an interloper with a government license, not to a landlord enforcing a commercial lease agreement. (FCC v. Florida Power Corp.)
iii. Clarification #2: The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land (i.e. not a rent control ordinance in a mobile home park, see Yee v. City of Escondido)
iv. Successful Application: A requirement that interest earned on accounts containing client funds that could not generate income for their owners be used to fund programs to provide legal services to the poor is a per se taking. (Brown v. Legal Foundation of Washington)
b. Lucas Rule – Total Wipeouts of Value: Government regulations that eliminate all economically beneficial uses of property (“total wipeout of value”) are per se takings. (Lucas v. South Carolina Coastal Council)
i. Exception: If the government regulation is consistent with “background principles of the state’s property and nuisance laws” in preventing a common law nuisance, the government may effect a total wipeout of value without compensation (Lucas v. South Carolina Coastal Council)
ii. Rationale
A. Problem With Harm/Benefit Exception: Mere harm prevention cannot protect the government with regards to a per se rule BECAUSE the distinction between preventing a harm and conferring a benefit is merely in the eye of the beholder.
B. Advantage of “Background Principles” Exception: The property owner should already be aware of these rules, MEANING THAT this is a right the property owner never had to begin with.
iii. Views of the Lucas Rule
A. Traditional View: The Lucas rule is one end point on the diminution-in-value analysis, where the regulation has left the value of the property at zero.
B. Prof View: May elimination of all economically beneficial use of property is not synonymous with diminution-in-value.
iv. Interaction With Mugler/Penn Central: The dissent in Lucas is concerned that USSC limiting Mugler, BUT maybe this concern is invalid AND the “common law nuisance exception” only applies to Lucas WHEREAS a more robust harm prevention defense is available in the Penn Central analysis.
v. Aftermath of Lucas: Parties settled the case, where SC paid Lucas $850,000. A few years later, SC changed its mind on developing a public park and sold the land for $730,000.
i. Fischer View: The aftermath of Lucas is a perfect example of the cost-internalization story BECAUSE SC discovered after coming into possession of the land that it needed to pay attention to economic value and acted accordingly.
ii. Other View: Hurricane Hugo caused this result by wiping out all the houses – SO, it became politically unpalatable to say that you couldn’t rebuild.
vi. The Irony of Lucas: Bringing a Takings claim under the Lucas rule has not succeeded post-Lucas, BUT the common-law nuisance defense has become quite robust.
vii. Case Example: Lucas v. South Carolina Coastal Council (pp. 169-77)
i. Lucas buys coastal land for $1,000,000. He had developed other land around it before. SC enacts law that essentially prevents Lucas from building any improvements on the property. SC is trying to prevent harm by erosion, but only prevents future building (not houses already there).
ii. USSC holds that this regulation is a taking of property and Lucas is due compensation.
iii. Dissent: Focuses on this fitting within the nuisance exception to takings liability, like in Mugler (also concerned USSC is restricting Mugler).
6. Tensions Between Penn Central and the Per Se Rules of Loretto and Lucas
a. Palazzolo Rule – Post-Enactment Transfers of Property: A transfer of property that occurs after enactment of a regulation does not eliminate a takings claim NOR does a post-enactment transfer make the regulation a “background principle of the state’s property and nuisance laws”. (Palazzolo v. Rhode Island)
i. Application: Palazzolo was not analyzed under the Lucas per se rule, BUT was rather analyzed though the Penn Central analysis, although the regulation did wipe out a lot of property value.
ii. Unanswered Question #1 in Palazzolo: Are post-enactment transfers of property relevant in the Penn Central analysis? (majority here says relevant, but not dispositive)
A. O’Connor Concurrence: Says that post-enactment transfers of property should not be ignored in a Penn Central analysis.
B. Scalia Concurrence: Says that post-enactment transfers of property are unimportant whether in a per se world or in the Penn Central analysis.
C. Stevens Dissent: Says that post-enactment transfers of property are dispositive in the Penn Central analysis.
D. Other Theory: Maybe there should be a difference in the Penn Central analysis between a person who transfers the property through sale and inheritance (i.e. the nature of the transfer)
iii. Unanswered Question #2 in Palazzolo: When do regulations become so settled as a fabric of our property rights that they form part of the “background principles of the state’s property and nuisance laws”? (and thus don’t trigger takings liability)
A. Possible Answer: Perhaps this should be an ad hoc (totality of the circumstances) analysis?
iv. Policy Goal: A person should have the right to transfer his rights against the government.
v. Case Example: Palazzolo v. Rhode Island (pp. 180-84)
A. P is trying to build on his property for years. State in 1971 passes a wetlands statute that prevents him from developing almost anything. After the statute is passed, he transfers title to himself from his corporation and tries to develop, but his application is rejected. P files an inverse condemnation action against the state, saying that the government effectively condemned the property but didn’t commence condemnation proceedings. (note for later)
B. Court holds that a post-enactment transfer of property does not forbid P from bringing his claim and remands.
b. Tahoe-Sierra Rule – Temporal Conceptual Severance Analysis: A temporary regulation which denies all economically viable uses of property is not a per se taking under Lucas, BUT MUST BE DECIDED under the Penn Central analysis. (Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency)
i. Key Point – Temporal Conceptual Severance: The extent to which we allow people to divide up property so that it looks like a governmental taking EXTENDS TEMPORARILY, so that examining the “parcel as a whole” means not just the whole piece of property, BUT ALSO examining the piece of property through time.
ii. Importance to Prong #1 of Penn Central – Economic Impact: How we sever the property conceptually determines the diminution-in-value of the property owner’s rights.
iii. Rationale for Ad-Hoc Rule: Government won’t be able to impose short moratoriums on anything without fear of the requirement of compensation.
iv. Unanswered Question: How do we distinguish between temporary and permanent takings? (government can say that regulation is temporary, but keep extending it)
v. Case Example: Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (pp. 185-92)
A. Lake Tahoe creates a three-year moratorium to protect Lake Tahoe where developers are forbidden from building. P says this denies all economically viable uses of land for the three-year period.
B. Court upholds the regulation, finding that it is only a temporary taking denying all economically viable uses – not a permanent taking AND that these types of takings are subject to the Penn Central analysis.
c. Lingle Rule – Limitations of the Takings Inquiry: The inquiry in a Takings claim is fundamentally distinct from the inquiry in a Due Process claim. (except exactions – Lingle v. Chevron U.S.A., Inc.)
i. Substance of the (Regulatory) Takings Inquiry: Aims to identify regulatory actions that are functionally equivalent to the classic taking in which the government directly appropriates or physically invades private property.
A. Corollary #1: This inquiry reveals something about the extent of the burden a particular regulation imposes upon private property rights.
B. Corollary #2: This inquiry proves information about how the regulatory burden is distributed among property owners.
C. Important Point: The Takings inquiry presupposes that the government has acted in pursuit of a valid public purpose.
ii. Substance of the Due Process Inquiry: Aims to identify whether a regulation of private property is reasonably related in achieving some legitimate public purpose (facial challenge) OR whether the enforcement of the regulation by legislative or adjudicative bodies was irrational or arbitrary. (as applied challenge)
A. Key Point: The Due Process inquiry examines the means and fit of a regulation. (FAIRNESS AND MEANS-END ANALYSIS!).
iii. Why Clarification? An earlier case (Agins v. City of Tiburon) suggested that the due process inquiry was more searching under the Takings clause, ASKING whether the regulation substantitally advance a legitimate state interest. Court eliminates this.
E. The Law of Nonconforming Uses and Vested Rights Doctrine
1. Nonconforming Uses: Preexisting inconsistent uses on land that differ with the present allowed zoning uses.
a. Nonconforming Use Transferability: The right to maintain a nonconforming use runs with the land and survives a change of ownership.
i. Application
A. Some jurisdictions allow for nonconforming uses to expand in order to meet natural changes in demand.
B. Some jurisdictions allow for nonconforming uses to change to another non-conforming use, but only if the change reduces the impact of the use.
b. Destruction of the Nonconforming Use: May occur by
1) Act of God (destruction of a building);
2) Abandonment (requires intent);
3) Discontinued employment of the nonconforming use for a certain period of time (in some jurisdictions).
c. Key Question for Governments: What should the government do with these prior nonconforming uses? (problem is that nonconforming uses undermine the purpose of zoning)
d. Early Theory: As the nonconforming uses expire naturally, the zone will come into conformance. (doesn’t work – non-conforming uses often thrive)
e. Possible Government Responses:
i. Mild: Zoning rules limit the government’s ability to rebuild or fix non-conforming uses (problem is that this creates eyesores);
ii. More Aggressive: Amortization periods (i.e. we’ll let you stay open for a while, then you have to close with no compensation);
iii. Super Aggressive: Government takes property with compensation.
2. Key Issue in Nonconforming Uses – Amortization Periods: Allows a nonconforming use to amortize its value in the property for a period of time during which they may phase out their operations or make other arrangements. The government forces the nonconforming use to discontinue without paying compensation, because the amortization is “just compensation”. (Village of Valatie v. Smith)
a. Majority Rule: Amortization periods are presumed valid, UNLESS the property owner is able to make a showing that the loss he will suffer is so substantial that it outweighs the public benefit to be gained by the elimination of the nonconforming use. (Village of Valatie v. Smith – sounds a lot like Mugler or due process inquiry. FAIRNESS!)
i. Possible Factors for Property Owner:
1) Nature of the present use;
2) Length of the period of amortization;
3) Present characteristics of and foreseeable future prospects for development of the area and other relevant facts and circumstances.
ii. Note: Amortization usually turns on the length of time allowed to the business – local governments like to make them very short (e.g. billboards usually get 6 months to 2 years, porn shops can get up to 1-5 years)
b. Minority View: Amortization is per se unconstitutional. (PA Northwestern Distributors, Inc. v. Zoning Hearing Board)
i. Note: The minority view may also occur because courts find that the state’s SZEA does not authorize amortization. (but others think the SZEA may be used retroactively)
c. Policy Justifications
i. The present value of loss created by the amortization is smaller than the future value of loss.
ii. Amortization acts as implicit compensation BECAUSE if you stretch the amortization period out long enough, the damage to the property owner in loss of value is zero. (prof says be skeptical of this reason)
iii. Alternative of condemnation may be worse. (e.g. if business is renting, fair market value may be much less for the business)
iv. Problem: There is usually a flurry in development before a change in zoning uses.
v. Prof Questions:
1) Should existing uses be entitled to compensation?
2) Is this protection of expectations?
3) If, as in Mugler, harms don’t deserve compensation, does it follow that “not” harms deserve compensation?
4) Also, since Penn Central changed from “distinct” to “reasonable” investment-backed expectations, is a non-conforming use part of this framework?
d. Case Example: Village of Valatie v. Smith (pp. 197-99)
i. Town enacts ordinance that prohibits mobile homes outside of mobile home parks. The ordinance grandfathers in existing mobile homes, BUT is no longer good after a change of ownership (amortization period). D inherits the property and the village sues to get the unit removed.
ii. Court says that D hasn’t shown that the ordinance is arbitrary or irrational, so the village can remove the mobile home.
3. Vested Rights Doctrine: Protects a developer’s planned use of property if sufficient commitments have been made in reliance on existing zoning requirements, and the zoning requirements are changed to invalidate the proposed use. (Valley View Industrial Park v. City of Redmond)
a. Key Question: When do the developer’s development rights vest?
i. Possible Answers
1) When the developer buys the property.
2) When the building application is complete.
3) When the developer spends money in reliance on the regulation.
4) When the developer’s final discretionary permit is approved by the local government.
b. Doctrinal Hook: The vested rights doctrine can either rest in Takings clause analysis or Due Process clause analysis, which makes a difference. (courts can be confused)
i. Taking Clause: The focus of inquiry should be on the extent of the property owner’s investment in the property. VESTING CAN HAPPEN EARLY! (i.e. focus can be on acquisition of property, or on the obtaining of plans)
ii. Due Process Clause: Focuses not on the property owner’s investment, BUT rather on his actions later in the process.
c. General Rule Possibility #1 – Early Vesting Rule: A developer’s rights vest only if the developer files a building permit application that:
1) Is sufficiently complete;
2) Complies with existing zoning ordinances and building codes; AND
3) Is filed during the effective period of the zoning ordinances under which the developer seeks to develop. (Valley View Industrial Park v. City of Redmond)
d. General Rule Possibility #2 – Late Vesting Rule: A developer’s rights vest only if the owner has made substantial expenditures in good faith reliance on the issuance of a building permit or other approval, the critical variables being:
1) How far the developer had progressed in obtaining necessary governmental approvals;
2) The amount of unrecoverable expense incurred in good faith; AND
3) Whether the expenditures were for preliminary activities or for construction.
e. General Rule Possibility #3 – Really General Rule: The more the developer puts into the project, the less flexibility government has to change.
f. Implicit Assumption of the Vested Rights Doctrine: Once a developer has done enough development of a property, he should be entitled to special protection
g. Connected Doctrine – Doctrine of Equitable Estoppel: Bars a local government from enforcing its zoning rules when a property owner:
1) Relies in good faith;
2) Upon some act or omission by the government; AND
3) Has made such a substantial change in position or incurred such extensive obligations and expenses that it would be highly inequitable and unjust to destroy the rights he has acquired.
i. Note: This doctrine is sometimes applied when a developer reasonably relies to their detriment on the issuance of a permit and makes substantial expenditures.
h. Case Example: Valley View Industrial Park v. City of Redmond (pp. 202-06)
i. Valley View owned the property for a while. In 1970, the zoning changes from agricultural to light industrial. Relying on this zoning, Valley View submits plans to build an office park of 12 buildings. Valley View submits permit applications to the city for five buildings, but doesn’t get to the other seven before the zoning changes back to agricultural. Valley View sues.
ii. Court holds that Valley View’s rights to build all twelve buildings vests BECAUSE when the rights to build the first five buildings vest, so do the rights to build the other seven.
F. Civil Liberties Challenges to Zoning Measures
1. Freedom of Religion
a. Constitutional Test – Free Exercise Clause: Governmental acts that violate the Free Exercise Clause, requiring an examination of strict scrutiny (i.e. government must show a compelling government interest to legislate), only occur if P shows a substantial burden on religious exercise (i.e. free exercise of religion – see Congregation Kol Ami v. Abington Township).
i. Key Point: A showing of a “substantial burden” must involve some actual interference with P’s religious belief in some way. (e.g. parking spaces not religious belief)
ii. Neutral Laws of General Applicability and “Free Exercise”: The right of free exercise does not relieve an individual of the obligation to comply with a valid and neutral law of general applicability on the ground that the law proscribes (or prescribes) conduct that his religion prescribes (or proscribes) (Employment Dicision, Department of Human Resources v. Smith)
iii. As Applied: The nature and centrality the religious activity is a major consideration, SO THAT there is no violation of the Free Exercise clause when the burden imposed on religion is merely incidental, economic or aesthetic.
iv. Traditional Test – Land Use Regulation: Most state courts struck down ordinances that excluded houses of worship from all residential zoning districts AND some courts in fact granted religious uses a virtual exemption from zoning.
b. Religious Freedom Restoration Act (RFRA): Redefines a “substantial burden” SO THAT government shall not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability, UNLESS the government demonstrates that
1) It is in furtherance of a compelling government interest; AND
2) It is the least restrictive means of furthering that compelling government interest. (overrules Smith)
i. Problem: Court strikes down RFRA as unconstitutional legislation (i.e. Congress didn’t have the power to enact it)
c. Religious Land Use and Institutionalized Persons Act (RLUIPA): Instead of prohibiting local government from enacting land use regulations that burden religion, RLUIPA says that the burden on “free exercise” includes the use and development of property for the purpose of religious exercise.
i. Key RLIUPA Text – § (a)(1)
1) The term “religious exercise” includes any exercise of religion, whether or not compelled by, or central to, a system of religious belief.
2) The use, building, or conversion of real property for the purpose of “religious exercise” shall be considered to be religious exercise of the person or entity that uses or intends to use the property for that purpose.
ii. Government Decisions Affected – General Rule: When land use regulations require government to engage in individualized assessments of property, RLUIPA is triggered, requiring governments to show a compelling government interest in the regulation. (see 42 U.S.C. § 2000cc(a)(2)(B-C)
A. Examples & Questions
1) Variance and rezoning decisions count as individualized assessments.
2) Building codes do not count as individualized assessments because they affect citizens generally.
3) Should this affect historical preservation?
iii. Defenses to RLUIPA: Local governments must make a showing that the purpose of the land use regulation is a compelling government interest.
A. Problem: We don’t know whether strict scrutiny from RLIUPA is fatal-in-fact OR whether a compelling government interest exists in land use regulation.
B. What Governments Should Do: The government should try and show that the burden is minimal on the religious institution and that the harm to the public is substantial (BUT EVEN THIS MAY NOT WORK)
d. Case Example: Congregation Kol Ami v. Abington Township (pp. 210-18)
i. Synagogue buys property from a church. The zoning applicable to the property has changed – only single-family residences allowed now. This requires the synagogue to get a variance, but the government denies the variance. The synagogue wishes to expand its use, especially parking. It sues.
ii. Court holds for the synagogue, finding that RLUIPA applies to the variance request and that the local government has provide no compelling government interest for its action.
2. Freedom of Speech
a. Constitutional Framework – Free Speech Inquiries
i. Content-Based Restrictions: Governmental acts and regulations enacted for the purpose of restraining speech on the basis of its content presumptively violate the Free Speech Clause AND receive strict scrutiny analysis by the courts (i.e. compelling government interest necessary).
ii. Content-Neutral Restrictions: Government acts and regulations that are “content-neutral” time, place and manner regulations are acceptable SO LONG AS they are designed to serve a substantial government interest (i.e. intermediate scrutiny) and do not unreasonably limit alternative avenues of communication (i.e. they can go somewhere else)
b. The Renton Test
1) Zoning ordinances designed “by their terms” to combat the undesirable secondary effects of speech, such as crime and blight, as the government’s purpose are “content-neutral” restrictions, even if they simultaneously reduce/restrict the content of speech.
2) Courts must then examine as to whether these restrictions are designed to serve a substantial government interest and do not unreasonably limit alternative avenues of communication.
i. Key Question #1: How much information must the government provide on the effects of the speech regulation?
ii. Answer: Court says that local governments can rely on past studies in providing “secondary effects” rationales.
iii. Permissible Secondary Effects (Renton & Alameda)
1) Preventing crime;
2) Protecting retail values;
3) Maintaining property values; (prof doesn’t like this one)
4) Protecting urban life.
iii. Case Example: City of Renton v. Playtime Theatres, Inc. (pp. 220-22)
A. A zoning ordinance prohibited adult movie theatres from being located within 1,000 feet of any residential zone, church, park, public school, etc., essentially limiting externalities on the neighbors and their surroundings. P sues.
B. USSC upholds the restriction, finding that the primary purpose of the regulation was to suppress the secondary effects of the adult movie theatre and that the regulation did not unreasonably limit alternative avenues of communication.
c. The Alameda Test – Kennedy Concurrence
1) Difference – Zoning measures where the city advances some basis to show that its regulation has the purpose and effect of suppressing secondary effects, such as crime and blight, WHILE leaving the quantity and accessibility of speech substantially are content-based, but are subject to intermediate scrutiny.
2) Courts must then examine as to whether these restrictions are designed to serve a substantial government interest and do not unreasonably limit alternative avenues of communication.
i. Impermissible Regulation: If a government regulates the secondary effects of speech by suppressing the speech itself, the Free Speech Clause will be violated
A. Contrast: A government regulation that is likely to cause a significant decrease in secondary effects and a trivial decrease in the quantity of speech the Free Speech Clause will not be violated.
ii. As Applied: Courts will defer to the legislature on the second part of the test, BUT NOT on the first part of the test (i.e. lynchpin of the test).
iii. Unanswered Question – Renton & Alameda: How broad can government limit alternative avenues of communication before it becomes unreasonable?
A. Answer: Seems to be pretty broad – Renton says 5% of the town is fine, even if the area is supposedly not viable.
iv. Tax Distinction: In Alameda, USSC says that it would be impermissible to tax adult book stores because of their secondary effects (how is this different from land use regulations?)
v. Case Example: City of Los Angeles v. Alameda Books, Inc. (pp. 222-27)
A. City passes ordinance that forbids adult entertainment businesses from locating within 1000 feet of another such business, later amended to forbid more than one adult entertainment business in the same building. P sues.
B. Court upholds the ordinance.
C. Dissent: Thinks that the zoning ordinance is essentially the same as a tax on adult businesses, whose primary goal is suppressing the speech of those adult businesses.
G. Procedural and Remedial Aspects of Constitutional Rights
1. Jurisdiction
a. Takings Challenges to Federal Regulations
i. How Brought: A takings challenge to any federal regulation limiting the use of land generally must proceed under the Tucker Act (28 U.S.C. § 1491)
ii. Where Brought: The Court of Federal Claims has jurisdiction over Takings claims seeking compensation.
b. Due Process/Equal Protection/Civil Liberties Challenges to Federal Regulations
i. How Brought: The jurisdiction basis for a due process, equal protection or civil liberties claim is 28 U.S.C. § 1331(a).
ii. Where Brought: Federal district courts have jurisdiction over the claims seeking invalidation of the regulation (as listed above)
c. Key Point in Challenges to Federal Regulations: A property who seeks both to invalidate the regulation on due process or other grounds AND to claim that the regulation effected a taking while in effect MUST LITIGATE IN TWO DIFFERENT COURTS.
d. 42 U.S.C. § 1983 Actions: If the developer/landowner believes that state or local land use regulations violate the federal constitution or federal laws, (e.g. due process, civil liberties, etc.) the developer may sue in federal court under the federal civil rights statute (42 U.S.C. § 1983).
i. Note: A developer may also sue in state court under 42 U.S.C. § 1983
2. Ripeness
a. General Constitutional Guidelines: The ripeness requirement comes from the “case or controversy” requirement of Article III, WHICH ESSENTIALLY SAYS that the dispute between the parties is a dispute that is ready to be resolved (i.e. usually not a future harm)
b. Williamson County Ripeness Test for Takings Claims: Comprises two prongs:
i. Prong #1 – Final Determination: A takings claim is not ripe UNTIL the government entity charged with implementing the regulations has reached a final determination regarding the application of the regulations to the property at issue (MUST EXHAUST ALL REMEDIES FROM A SPECIFIC ADMINISTRATIVE PART OF GOVERNMENT! – see Williamson County Regional Planning Commission v. Hamilton Bank)
A. Element #1 – Exhaustion of Remedies (As Applied): This usually requires the landowner to make a “meaningful” application for development AND THEN requires the developer to seek a variance or special permit SOMETIME EVEN REQUIRING the landowner to ask for a rezoning of the property or amendment to the comprehensive plan.
1. Futility Exception: A developer need not apply for such secondary relief (i.e. variances) after the application has been denied if the application will be “futile”. (i.e. government probably has to show what other uses of property may be available, maybe “inevitability” necessary)
B. Element #2 – Finality: Involves the question of whether the government has made a final determination on the property in question (i.e. yes or no)
C. Limit: The landowner/developer does not have to make a final appeal to the zoning board (just through the administrative agency) OR seek remedial relief from a local government if all the remedial procedure allows is review by these bodies, AS OPPOSED TO the situation where the local government/zoning board that administers the appeal ALSO made the actual distinction.
D. Limit #2 – Transferable Development Rights (TDR): A landowner has no obligation to attempt to actually sell the TDY the government has provided to soften the impact of its regulations in order to establish a ripe takings challenge.
E. Possible Limit #3: Some courts have held that this limitation does not apply to procedural due process or equal protections claims, while others have. Courts have held that this requirement does not apply to substantive due process claims.
F. Rationale
1) The courts don’t know how far the regulation has gone or the amount of takings claim UNTIL the landowner has exhausted all administrative remedies.
2) We don’t want property owners running local governments into court all the time.
3) Ripeness requirements will force both parties to the bargaining table, creating a negotiation model with the local government.
4) We don’t want developers making ridiculous proposals just to cause litigation for the federal courts and local governments.
G. Problem: Ripeness requirements could prevent property owners from getting into federal courts BECAUSE local governments may just lead the property owners on with promising compromises.
ii. Prong #2 – Proper Procedure: A takings claim is not ripe UNLESS the respondent seeks compensation through the procedures the State has provided for doing so.
A. As Applied: In most states, this requirement means that the landowner/developer must file an inverse condemnation action in STATE COURT, WHICH claims that the government has effectively condemned property, without instituting a formal taking.
B. Implication of the Takings Clause: The takings claim ripens ONLY WHEN the government has not paid compensation, WHICH ONLY happens when the claimant brings an inverse condemnation action in state court which is the defeated and appealed through the rungs of state court appeals. (COMPLICATED!)
C. Limit – Due Process and Equal Protection: This requirement only applies to takings claims, NOT due process or equal protection claims.
iii. Limit to Williamson County Ripeness Test: A facial takings challenge are not subject to the Williamson County ripeness test (as opposed to as-applied challenges)
iv. Case Example: Williamson County Regional Planning Commission v. Hamilton Bank (pp. 234-39)
A. A large developer plans a development and submits a preliminary plan, which is approved. The developer spends $3 million on infrastructure and gives some property back to the government for a parkway. In 1977, the county changes its zoning ordinance on the property. In 1980, the developer submits a new plan and the county denies it on eight grounds. Developer first goes to state court and brings administrative action, then goes to federal court and brings a takings claim.
B. USSC dismisses the case, saying that the developer’s takings claim is premature and that it must bring an inverse condemnation action in state court.
c. San Remo Rule – No Full Faith and Credit Exception: A landowner who brings an inverse condemnation action in state court AND is denied just compensation IS BARRED through the Full Faith and Credit Clause from re-litigating his Takings claim in federal court on the same issues and claims decided in the state court judgment, EVEN IF the landowner reserves their federal claims of action for federal courts. (San Remo Hotel, L.P. v. City & County of San Francisco)
i. Result: San Remo makes it very difficult for takings claims to get into federal court.
ii. Possible Court Reasoning
1) USSC may be saying that a landowner shouldn’t care whether he’s in federal court or state court; OR
2) USSC may be trying to get federal courts out of the takings claims business altogether.
iii. Possible Methods Around San Remo (seems hard)
1) Maybe the landowner can claim the futility exception applies to him in state courts; OR
2) Maybe the landowner can assert that state law is different than law in the federal system.
iv. Case Example: San Remo Hotel, L.P. v. City & County of San Francisco (pp. 245-250)
A. San Francisco imposed a conversion fee on San Remo Hotel (P). Procedural battle follows: P sues in state court and the proceeding is stayed. P sues in federal court, but the court dismisses the claim as unripe. P appeals and loses, BUT says that if P wishes to preserve its federal claims, it should say so. P does this and returns to state court, filing an inverse condemnation action, asking the court not to rule on the takings claim. Court denies compensation and does rule on the takings claim. P appeals to the USSC.
B. USSC holds that the state court decision on the takings claim precludes the federal court from hearing the claim under the Full Faith and Credit Clause.
3. Remedies
a. First English Rule – Temporary Regulatory Compensation: If a government regulation is found to act as a taking of all uses of a landowner’s property, the government must provide compensation for the period when the regulation was effective to the point when it is abandoned or invalidated. (First English Evangelical Lutheran Church of Glendale v. County of Los Angeles)
i. Limitation: “Normal delays” in regulatory approval, such as obtaining building permits, changes in zoning ordinances, variances, etc. do not trigger compensation.
ii. Key Question #1: What exactly are “normal delays”? (see below)
iii. Key Question #2: What exactly should be the amount of the compensation? (In First English, the courts suggests fair rental value – see below)
iv. Case Example: First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (pp. 258-64)
A. Church purchases land in canyon flood plan and builds building. Later on, the land is destroyed by a flood. Los Angeles passes a regulation that essentially prevents the church from building on the flood plain. Church sues to get a declaratory judgment that invalidates the regulation. Court dismisses the action. The church appeals, saying that compensation is a remedy for temporary regulatory takings.
B. Court holds that church has a valid cause of action and that it can receive compensation to the point up to when the regulation is invalidated, then invalidation afterwards.
C. Dissent: Says that regulations have width, breadth and length (like Penn Central) AND asks whether we can assume that a regulation which enacts a temporary taking deserves compensation (it may be consequential).
D. Note: Under the CA law, if the government continued to try and enforce the declaratory judgment after invalidation, then the church could have received compensation.
b. Reconciliation of First English and Tahoe-Sierra
i. Orthodox Doctrinal Analysis: We should distinguish between
1) Regulations intended to be permanent regulations from the outset and then are abandoned, withdrawn or invalidated; (we require compensation for the period in-between – see First English) AND
2) Regulations intended to be temporary from the outset. (do not create takings liability – see Tahoe-Sierra)
ii. Non-Orthodox Analysis: Perhaps the width and breadth of a regulation is more important than its length, as Stevens would seem to suggest in Tahoe-Sierra.
iii. Key Question: How much are we concerned about how local governments might use these distinctions to misbehave?
c. “Normal Delays” Under First English: Presumably at some point a “normal delay” becomes a “permanent delay” and thus, a regulatory taking, but when is this point?
i. Book Answer: Even seven years might be a “normal delay” under these parameters.
ii. Government Errors: One court held that “an error by a government agency in the development approval process does not necessarily amount to a taking even if the error in some way diminishes the value of the subject property UNLESS the government’s position was so unreasonable that the conclusion must be made that it was taken for no purpose other than to delay the development project (pp. 266-67).
iii. Not Public Use: What about when a government regulation is invalid because is was not acting for a public use? Does the property owner receive compensation?
d. “Compensation” Under First English: What exactly should the amount of compensation be that the government is required to pay? (see question above)
i. Outright Condemnation – Total Taking: Compensation is measured as the fair market of the property.
ii. Inverse Condemnation (Regulatory Taking) – Total Taking: Compensation is measured as the fair market value of the property.
iii. Regulatory Taking – Not Total “Wipeout” (Taking): Generally, the view is that compensation is the decrease in value to the landowner due to the regulation.
e. “Valuation” of the Compensation – Theory
i. General View: Property should be valued by its highest and best use MINUS the development costs required to achieve its highest and best use, so the compensation for a takings claim puts the property in the same position that he would have been in IF allowed to build the property.
ii. Problem – Fair Market Value of Property: The value of the undeveloped property should always be the base value, but it normally isn’t (usually less).
A. Connected Problem – Development Costs: What do we include in development costs OVER AND ABOVE normal fixed costs?
B. Concerns – Why Lower Fair Market Value?
1) The developer may not have the means to get money to build the development (i.e. lending costs)
2) There may be risk to the developer involved (e.g. cost overruns, permit denials, market changes, etc.)
3) Even normal fixed costs may rise and fall (more likely rise)
C. Result: The more risks a developer has, the less government has to pay the developer in the form of compensation. HOWEVER, if you remove risks from the analysis, you essentially push them off onto the government. (this often turns into a battle of experts)
D. Practical Note: These questions leave a good amount of room for creative lawyering.
iii. Problem – Subjective Valuation: The fair market value of a property does not include subjective or consequential damages. (e.g. how the property owner values the property)
A. Key Question: Does the value of the compensation make the property owner whole, since he may have subjectively valued the property more? (important outside of total takings)
f. Wheeler Rule – Valuation of Temporary Regulatory Takings: Property owner should be awarded as compensation the market rate return computed over the period of the temporary taking on the difference between
1) The property’s fair market value without the regulation; AND
2) The property’s fair market value with the restriction, REDUCED BY
3) The property owner’s equity in the property (i.e. subtract mortgage)
MEANING THAT
The property owner’s compensation is the return on the fair market value lost as a result of the regulation. (Wheeler v. City of Pleasant Grove (Wheeler III))
i. Unanswered Question #1: What if the value of property in the area (including the affected property) has gone up in value because of the regulation?
ii. Unanswered Question #2: When does the temporary regulatory taking begin in which compensation is due? (most courts say from the date of the denial of the challenged regulatory action, AS OPPOSED to the Williamson County “final determination”.)
iii. Other Methods of Valuation in Temporary Regulatory Takings
A. Probability Method: Courts award compensation based on probability of certain developmental events occurring (see pp. 270-71)
B. Fair Market Rental Value: Government’s temporary regulatory taking acts as if the government had condemned a leasehold interest in the property and should pay this amount.
1. Problem: The fair market rental for certain types of property (e.g. undeveloped land) is very small.
C. Option Value: Temporary takings are treated as equivalent to holding an option on the land – the government must award compensation for the value of an option to buy the land for the period of the taking.
D. Cost of Delay: Government compensation should be the difference between the return on the cash flows the developer would have enjoyed with and without the regulation (i.e. what would the developer have charged to delay development for the period of the taking)
E. Ad Hoc Approach: Take in the facts and circumstances of the case and come up with your own formula.
iv. Developer Requirements: The developer must show that he would actually have built the development, but for the government regulation.
v. Case Example: Wheeler v. City of Pleasant Grove (Wheeler III) (pp. 267-69)
A. Developer buys land to build apartment complex, but the community opposes the development and passes an ordinance which outlaws the construction of apartment complexes within the community. The district court rules for the developer, but refuses to allow damages because the value of the property went up. The circuit court remands, saying that you should award damages (and on and on…) This is the third appeal.
B. Court holds that the developer is due damages, with the formula set out above.
H. Legislative Measures to Increase Landowner and Developer Rights
1. Oregon Measure No. 37
a. Controversial Aspect – Paragraph (1): If a public entity enacts/enforces a new land use regulation or enforces a land use regulation enacted prior to the effective date of this amendment that restricts the use of private real property AND has the effect of reducing the fair market value of the property, THEN the property owner shall be paid just compensation.
b. Key Effect: This is a major ratcheting up of takings liability, especially since there can be retroactive compensation.
c. Usual Result – In Practice: When a property owner challenges a land use regulation, the local government usually chooses not to enforce the land use regulation as to that person/entity. (do the developers prefer this?)
d. Problem in Bringing Challenge: If the property has changed title since the land use regulation was enacted, the ability to challenge the regulation is gone BECAUSE it does not run with the land. (anti-Palazzolo)
i. Result: Because of this issue, banks often don’t want to lend to developers because when a change of property ownership occurs, the property value declines as the builders lose their right to unrestricted development!
2. Florida Private Property Rights Protection Act: Essentially protects the existing uses of real property.
a. Note: Prof likes these statutes – thinks that it is better so have state legislation ratcheting up takings liability as opposed to constitutional principles BECAUSE of statutory flexibility.
III. Zoning Changes and the Rights of Neighbors (~15 pages)
A. Introduction
1. Government Structures
a. SZEA Structural System: The SZEA contemplated a specific three-tiered structure for zoning authorities, which largely remains unchanged to this day.
i. 1st Tier – Local Legislative Body: The top legislative body of local government (e.g. City Council) possesses the sole power to amend the text or map of a zoning ordinance, BUT ALSO delegates some requests for changes to two administrative agencies.
ii. 2nd Tier – Lower Administrative Body – Planning Commission: Has responsibility for legislative-type issues involving zoning ordinances, like:
1) Conducting public hearings on zoning amendments proposed by landowners (reporting recommendations to the legislative body);
2) Possessing a major role in processing special exemptions;
3) Possessing a major role in considering proposed subdivision maps and site plans; AND
4) Possessing a major role in preparing comprehensive plans.
BUT major decisions of the Planning Commission are usually reviewed/appealed by the legislative body.
A. Note: The planning commission is usually comprised of lay persons (not paid).
iii. 3rd Tier – Board of Zoning Appeals (BZA): An adjudicative-type body who makes final decisions on what typically are minor matters, such as:
1) Applications for variances in cases of hardship;
2) Appeals from application of the zoning ordinance to certain property; AND
3) Appeals from building-permit denials by the local government’s building agency.
A. Note #1: The Board of Zoning Appeals is usually comprised of lay persons (not paid).
B. Note #2: The BZA is often called the Zoning Board of Appeals or the Board of Adjustment or some other name.
b. Issues in Application
i. Delegation of Powers: A local legislative body may violate the SZEA of the state by delegating too much authority to its lay bodies OR by delegating authority to a different agency than the state SZEA envisions.
ii. Local Legislative Body vs. Planning Commission: Local legislative bodies typically receive deferential examination by courts when their decisions differ from the planning commission.
2. Process of Zoning Changes
a. “Wait and See” Zoning – Beginning of Process: In modern times, local governments typically place undeveloped land in a “holding category”, WHICH IS a restrictive (i.e. downzoned) zoning use, such as agricultural or single-family.
b. The Development Process: When the land becomes attractive to a developer, the developer:
1) Makes a plan proposal to the local zoning authorities;
2) Negotiating occurs between the developer and the government; AND THEN
3) Government often grants a variance to the developer OR rezones the land so that the developer can build his development.
c. The Antagonist – “Neighbors”: The persons who tend to be unhappy with this negotiation process are – NEIGHBORS!
i. Solution: Neighbors typically won’t have a takings claim, SO they challenge the statutory and procedural requirements under which the government granted the variance or rezoning.
B. Constraints on Zoning Changes by Administrative Bodies
1. Variances
a. Definition: Variances are a mechanism for excusing application of the zoning ordinance to a property owner WHEN the zoning ordinance does harm to that owner’s property. (i.e. as applied challenge)
i. Takings Note: Variances also prevent governments from inflicting enough harm to constitute an unconstitutional taking of property.
b. Types of Variances
i. Use Variance: Permits a use other than one prescribed by the zoning ordinance in the particular district (i.e. ordinance prohibits this use).
ii. Area (Non-Use) Variance: Authorizes deviations from restrictions which relate to a permitted use, RATHER THAN limitations on the use itself (e.g. restrictions on bulk of buildings, height, size and extent of lot coverage, etc. – see p. 287)
iii. Problem With Distinction: The distinction between use and area variances can sometimes be hard to differentiate, especially when the variance involves an increase in density.
c. General Rule: Authority to grant a variance should be exercised sparingly and only under exceptional circumstances.
d. Applicable Standards – Use Variances vs. Area Variances: In general, use variances are harder to obtain than area variances because of the fear that the granting of use variances will destroy the segregation of uses purpose of zoning. OFTEN, they have two different tests, sometimes both variances are subject to the unnecessary hardship test.
i. Use Variance Test – Unnecessary Hardship: To grant a variance upon the ground of unnecessary hardship, the property owner must show:
1) The land in question cannot yield a reasonable return if used only for a purpose allowed in that zone; (looks like Penn Central, but is broader)
2) The plight of the property owner is due to unique circumstances and not to the general conditions in the neighborhood which may reflect the unreasonableness of zoning ordinance itself; AND
3) The use to be authorized by the variance will not alter the essential character of the locality (i.e. how out-of-line with neighboring uses is this use? – see Matthew v. Smith)
A. Note: This test looks like a balancing test of the impact on the community with the impact of hardship to the property owner.
ii. Area Variance Test – Practical Difficulties: No one factor controls a determination of practical difficulties, but all these factors may be considered:
1) Whether the property in question will yield a reasonable return or whether there can be any beneficial use of the property without the variance;
2) Whether the variance is substantial;
3) Whether the essential character of the neighborhood would be substantially altered or whether adjoining properties would suffer a substantial detriment as a result of the variance;
4) Whether the variance would adversely affect the delivery of governmental services (e.g. water, sewer, garbage);
5) Whether the property owner purchased the property with knowledge of the zoning restriction;
6) Whether the property owner’s predicament feasibly can be obviated through some method other than a variance; AND
7) Whether the spirit and intent behind the zoning requirement would be observed and substantial justice done by granting the variance.
e. Practical Notes
i. Zoning Board Granting of Variances: Zoning boards grant variances all the time and most variances go unchallenged, BUT when variances are challenged, it is quite common for them to be struck down by the courts.
ii. Protecting the Variance: As a developer, make sure when applying for a variance that you get the consent of all the neighbors, so they lack the ability to challenge the variance in the future.
f. Other Issues
i. Findings Requirements on Variances: Some courts impose fact-finding requirements on zoning boards so that they can enforce substantive standards on appeal (whereas must times the record is cursory – also applies to special exceptions).
ii. Preferred Uses: In NY, public utilities are entitled to a more favorable version of the unnecessary hardship test than are other uses (should this apply in other areas).
iii. Self-Created Hardships: In some states, a variance is not available if the hardship is self-created. In other states, this merely works against the grant of the variance. These arise in three ways:
1) The applicant subdivides a tract to create a lot that will be difficult or impossible to develop in conformity with the applicable zoning restrictions;
2) The applicant develops the property in violation of applicable zoning restrictions; OR
3) The applicant purchases the property knowing that it is not economically feasible to develop it unless a variance is obtained (courts divided on this one – also consider in light of Palazzolo)
g. Case Example: Matthew v. Smith (pp. 286-89)
i. P owns two single-family houses on one and one-half lots of land in area zoned single-family. City official *suggests* that they apply for a variance and the variance is approved. The neighbors sue the zoning board about granting the variance.
ii. Court holds that this variance is a use variance (two houses in a single-family neighborhood) and denies the variance based on the fact that P has not shown substantial hardship.
iii. Concurrence: Says this should be an area variance because they are single-family houses, just on too small of a lot (density issue).
2. Special Exceptions (Conditional Uses)
a. Definition: A special exception (conditional use) is a flexibility device within the zoning ordinance that allows the landowner to employ a certain use of property SO LONG AS the landowner receives acceptance from the zoning board/planning commission.
b. Types of Special Exemptions: Tend to be certain types of uses, like LULUs and NIMBYs, that are desirable to the community, but people don’t want too many of them (e.g. gas stations, hospitals, schools, churches, etc.)
c. General Rule on Granting Special Exemptions – “Shall”: If the provision directs the zoning board/planning commission says that it “shall” grant the special exception if consistent with the zoning ordinance, THEN the property owner must be granted the special exception AS OF RIGHT. (Gladden v. DC Board of Zoning Adjustment)
i. With “May” Language: Gives the zoning board/planning commission greater flexibility to deny the application of the landowner.
d. General Rule on Judicial Review: Decisions by the zoning board/planning commission on special exceptions are only subject to rational review (rationally related to a legitimate government interest), meaning that the decision must be:
1) Legally consistent with the zoning regulations; AND
2) NOT clearly arbitrary or capricious in both a factual and legal context. (DEFERENCE!)
i. Problem: Often local governments make it difficult for applicants to prove the “compliance with the zoning ordinance” prong by adopting deliberately vague language (courts sometimes don’t like this – purpose is to extract concessions)
e. Variances v. Special Exceptions – In Court: Basically, courts assume that variances should be granted rarely, WHEREAS they presume that special exceptions are too frequently denied.
f. Purpose of Special Exceptions: Gives local government more discretion to
1) STRIKE BARGAINS WITH PROPERTY OWNERS;
2) Extract concessions from property owners; AND
3) Figure out exactly where these LULUs and NIMBYs are going to be located.
g. Possible Wild Solution: Make agricultural and single-family residential uses “uses-by-right”, and designate everything use “conditional uses”, EXCEPT for those things you want to totally prohibit. (has been struck down)
h. Equal Protection: An argument could be made by an unsuccessful applicant that the zoning board denied his claim inconsistently with previous grants of similar applications (probably gets nowhere – remember “class of one”)
i. Case Example: Gladden v. DC Board of Zoning Adjustment (pp. 296-99)
A. D files an application with the BZA to establish a youth rehabilitation home as a special exception and the BZA approves. P (neighbors) object, saying that this will heighten crime rates, the youths are transient and it will damage the neighborhood. Also, the neighborhood already has a lot of these and doesn’t want any more. (connect with nonconforming)
B. Court upholds the BZA finding, giving deference to the BZA.
C. Note the special exception provision: Granted as of right, with two exceptions:
1) There can’t be two within 500 feet.
2) If the rehabilitation center adversely affects the neighborhood, it can be rejected. (these are your outs!)
d. Court essentially says that adverse impact must be beyond general impact in this situation.
C. Constraints on Zoning Changes by Legislative Bodies
1. General Rule – Legislative Rezonings: Persons challenging legislative decisions concerning rezonings and map amendments are typically confronted with deferential judicial review, UNLESS falling under the categories below WHERE neighbors can successfully challenge a legislative rezoning of property. (see pp. 98-112)
2. Spot Zoning
a. Definition: The process of singling out a small parcel of land for a use classification totally different from that of the surrounding area – for the benefit of the owner of such property AND to the detriment of other owners (i.e. spot zoning is the antithesis of planned zoning – see Griswold v. City of Homer)
i. As Applied - Upzoning: The local government permits some small part of the community to be used for a more intensive use than is permissible in the areas around it.
ii. As Applied – Downzoning (Reverse Spot Zoning): The local government restricts some small part of the community to be used only for certain less intensive uses than is permissible in the areas around it.
b. General Rule: When faced with an allegation of spot zoning, courts typically employ a two-part analysis:
1) Determine first whether the rezoning is compatible with the comprehensive plan OR, where no plan exists, with surrounding uses; AND
2) Examine the degree of public benefit gained AGAINST the benefit to the property owner, SO THAT if the owner’s benefit is merely incidental to the general community’s benefit, the rezoning should be upheld. (cost-benefit analysis to the public that depends on the facts and circumstances of each case – see Griswold v. City of Homer)
i. Possible Alternative General Rule: This occurs when courts:
1) Look first at whether such factors as the size of the parcel OR the rezoning’s inconsistency with the comprehensive plan signal that spot zoning has occurred, THEN
2) Engage in cost-benefit analysis to determine whether the spot zoning is justified.
ii. Applicable Factors for 2nd Part (Cost-Benefit Analysis)
A. “Spots” vs. “Slops”: Courts often find spot zoning in situations where the newly implanted zone is entirely surrounded by other zonings, BUT are less likely to find spot zoning when the rezoning has “slopped over” by extending the perimeter of an existing zone to include the rezoned area.
B. Nonconforming Use: If the ordinance is designed to achieve the statutory objectives of the City’s zoning ordinance, EVEN WHERE the purpose of the change is to bring a nonconforming use into conformance or allow it to expand, courts are more likely to uphold the rezoning.(as opposed to single owner benefit)
C. Neighborhood Character: Courts are more likely to invoke spot-zoning doctrines to protect stable residential areas THAN TO protect mixed use areas or areas in transition.
D. Motive: Courts will often look hard at whether the rezoning was solely, or even primarily, motivated by a desire to benefit a particular individual rather than the public at large (or maybe vice versa).
E. Procedural Irregularities: Courts are suspicious of rezonings that result from expedited or otherwise irregular procedures.
F. Sized of the Rezoned Area: The rezoning of a smaller area will often be treated with more suspicion than the rezoning of a larger area.
c. Purposes of Review of Spot Zoning
1) Spot zoning opens the door into the legislature’s discriminatory interpretation of zoning, arbitrariness and possible corruption.
2) Spot zoning is the opposite of planned zoning BECAUSE it harms the public by interfering with the effects of comprehensive zoning.
d. Case Example: Griswold v. City of Homer (pp. 309-15)
A. The zoning ordinance in the Central Business District (CBD) does not allow car sales, but grandfathers original car lots in. Lot 13 was car sales, but the owner lets it laps by abandoning the prior nonconforming use. He files to get a rezoning with the Zoning Board and they approve. Another property owner (probably competitor) sues.
B. Court holds that this rezoning is not impermissible spot zoning, as the property owner had argued.
3. Incentive Zoning
a. Definition: A local government stipulates in advance some basic terms of deregulatory deals, SO THAT the developer can “buy” their way out of a zoning regulation at present “prices”.
i. Note #1: Remember Calabresi and Melamed – this is liability rule protection where the landowner compensates the government to free itself of regulation.
ii. Note #2: In effect, incentive zoning is a less ad hoc version of the “bargaining” model of land use regulation.
b. Examples of Incentive Zoning: Where the government announces that developers can receive an increase in:
1) Allowable floor area;
2) An exemption from height or setback requirements;
3) Reduction in the required number of parking spaces the project must provide
IN EXCHANGE, the developer agrees to provide specific public amenities.
c. General Rule: Incentive zoning is generally allowed to mitigate local externalities, SO THAT if a development produces local harm, the local government is allowed to “bargain” the developer for concessions IN EXCHANGE for the more extensive use.
i. Enforcement Problem: If the government approves the more extensive use, the developer may not keep up with the end of his bargain to provide specific public amenities to limit harms. (e.g. Atlantic Yards)
ii. Most Common Application #1 – Inclusionary Zoning: Inclusionary zoning, where a developer builds affordable housing in exchange for greater floor-to-area ratio (FAR).
iii. Application #2 – Cluster Zoning: Where developers are given waivers from area and setback requirements to encourage them to preserve open space and common recreational areas (e.g. Brooklyn Law School).
d. Exception: Local government is not allowed to “sell” zoning changes is exchange for cash. (see Municipal Art Society v. City of New York)
i. Purpose: We worry about the incentive effect on government.
ii. Important Constitutional Note: The Constitutional doctrine of “exactions” limits what governments can exact from developers as well, AND sometimes incentive zoning runs afoul of the “exaction” doctrine.
e. Case Example: Municipal Art Society v. City of New York (pp. 332-33)
i. City agrees to sell a public site for private development. City provides for a bump from an FAR ratio of 15 to 20 if the developer rebuilds the subway. If the FAR ratio is denied approval from the zoning board, $57 million is reduced from the purchase price, but the developer must apply for a zoning change. P sues.
ii. Court holds that the city is selling zoning illegally because the city, by granting the FAR ratio bump, is pocketing $57 million dollars that it would otherwise have to pay.
iii. Note: Maybe this result would be different if the developer provided more work for the city than the subway work \ instead of cash, BUT the opportunity costs would be harder to figure.
4. Consistency with the Plan
a. The Requirement of a Comprehensive Plan: The original SZEA said “zoning regulations shall be made in accordance with a comprehensive plan.”
i. Early Rule: This provision does not mean that a government must adopt a formal plan before beginning to zone (plan only needs to be revealed in the end product – the zoning ordinance).
ii. State Legislative Changes: Many states have passed legislation specifically requiring local governments to engage in comprehensive planning, BUT many fail to provide consistency requirements.
b. Majority View – No Consistency Requirements: Most courts do not require that zoning ordinances or changes to zoning ordinances be consistent with, or subservient to the comprehensive plan if one has been adopted.
c. Minority View – No Consistency Requirements: The comprehensive plan must be given preference over conflicting prior zoning ordinances or changes. (Baker v. City of Milwaukie, in upholding a challenge to the grant of a building permit in an area zoned for more intensive use than the city’s comprehensive plan envisioned)
i. Exception – More Restrictive Uses: The determination of when to conform more restrictive zoning ordinances with the comprehensive plan is a legislative decision, subject to judicial review for patent arbitrariness. (i.e. comprehensive plans are ceilings, not floors – also applies in states with consistency requirements)
ii. Rationale: The comprehensive plan is similar to a “zoning constitution for all future development in the city, SO the zoning ordinance must be subservient to the plan if he plan is to have any efficacy.
d. Consistency Requirements: Many states have passed a statutory directive that requires zoning to be consistent with comprehensive plans the local government has adopted.
i. Majority View – Consistency Requirements: Presume the rezoning is valid and uphold its validity if the legislature provides a legitimate reason to believe the rezoning was consistent with the general plan.
ii. Minority View – Consistency Requirements: View the record before the legislative body and determine if, from that evidence, the legislative body could have decided that, despite any deviation from the letter of the plan, there was consistency. (Haines v. City of Phoenix)
iii. Burden of Proof: Lies with the plaintiff to show that there was inconsistency.
iv. Written Findings: In some states, a local agency may be required to prepare written findings to support the plan consistency of its decisions.
v. Problems with Consistency Requirements
1) Encourages local governments to favor plans that severely restrict development.
2) Strict construction of consistency requirements will likely encourage increasing numbers of ad hoc amendments to comprehensive plans.
vi. Interesting Question: Do adjudicative actions, such as special exceptions, variances or building permits have to be consistent with the comprehensive plan? (some say yes, others say no)
e. Case Example: Haines v. City of Phoenix (pp. 337-38)
i. Phoenix adopted a comprehensive plan, which limited the height of building along a portion of Central Avenue to only 250 feet. Later, the city council approved a rezoning that authorized the construction of 500 foot-high office building in the same area. P sued, based on the consistency requirement in statute.
ii. Court upholds the zoning change, finding that the city council could have decided there was consistency, despite the deviation from the comprehensive plan.
5. Rejection of Deferential Review
a. Key Question: When is it appropriate for a court to conduct deferential review of a zoning decision AND when should a court to conduct a more searching review?
b. General Rule: Courts should conduct deferential view when the zoning decision tends to be more legislative, BUT should conduct a more searching review when the zoning decision tends to be more adjudicative (quasi-judicial).
i. Possible Distinction #1: When a zoning decision applies to the whole community (e.g. comprehensive plan), it is more likely to be legislative, WHEREAS when a zoning decision applies to one property, it is more likely to be adjudicative. (Snyder v. Board of County Commissioners – but is this really such a great test?)
ii. Possible Distinction #2: A zoning decision is legislative when it involves the creation of policy, AS OPPOSED to when the zoning decision is merely the application of the policy, in which case it is adjudicative. (problem: this is a fuzzy line)
iii. Possible Distinction #3: Perhaps there is a difference between government actions that are proactive and government actions that are reactive (but how do you figure out what is proactive and what is reactive?)
iv. Important Point in Distinctions: The form of the body that made the zoning decision is not important, RATHER it is the accountability of the process (can the public influence the changes?)
c. Possible Test #1 – Strict Scrutiny: If the local government denies a landowner’s application for use of his land:
1) The initial burden is upon the landowner to demonstrate that his application for use of privately owned lands (through rezoning, special exception, conditional use permit, variance, etc.) complies with the reasonable procedural requirements of the ordinance AND that the use sought is consistent with the applicable comprehensive zoning plan.
2) Upon such a showing, the government must assert and prove by clear and convincing evidence that a specifically state public necessity requires the denial of the request.
3) The burden then shifts back to the landowner to assert and prove that the specified more restrictive land use constitutes a taking of property for public use for which he is entitled compensation (prof thinks this is weird – see Snyder v. Board of County Commissioners).
i. Note: Only the landowner receives this heightened standard of review upon challenge – both the government and neighbors receive deferential review on their challenges (Fasano is different),
d. Possible Test #2 – Less Deferential: If the local government denies a landowner’s application for use of his land:
1) The landowner has the burden to show that his proposal is consistent with the comprehensive plan and complies with all procedural requirements of the zoning ordinance (same as other test).
2) Upon such a showing, the government must demonstrate that maintaining the existing zoning classification (or present use) with respect to the property accomplishes a legitimate public purpose.
i. Key Question: Is this less deferential? (probably just a little bit of extra bite)
ii. Note: This less deferential (but still more searching) analysis usually only occurs in the area of rezonings. (see Fasano case, p. 344)
D. Procedural Rights of Developers and Their Neighbors
1. Fair Proceedings
a. Key Question: When are landowners guaranteed procedural due process protections, SUCH AS cross-examination rights, confrontation rights, impartial decision-makers in land use decisions?
b. Balancing Test of Procedural Due Process - Generally: Courts should weigh the private interest affected by the government interest AND the value of additional procedures in guarding against erroneous deprivations of that interest AGAINST the fiscal and administrative burdens that the additional procedures would impose on the government.
c. General Rule – Land Use Decisions: The full rights of due process present in a court of law, (e.g. presentation of witnesses, cross-examination, confrontation and impartial decision-makers) do not automatically attach to a quasi-judicial (adjudicative) hearing, BUT MAY ATTACH after examining three factors to determine whether the specific procedures required to satisfy due process at the hearing are met:
1) The private interest which will be affected; (often the right of the landowner to put the property to its best use)
2) The risk of an erroneous deprivation of such interest through the procedures actually used AND the probable value, if any, of additional or alternative procedural safeguards (e.g. loss of potentially vital evidence); AND
3) The governmental interest including the burden that additional procedural safeguards would entail. (i.e. we don’t want government decision-making to grind to a halt – see Korean Buddhist Dae Won Sa Temple of Hawaii v. Sullivan)
i. Key Tension: How much is reasonable for landowners to expect of local decision-makers, BALANCED AGAINST concerns of fairness for the landowner?
ii. Notice and Opportunity to be Heard: Some SZEAs specify to whom notice must be given and the minimum form of the notice, WHILE OTHERS leave notice requirements to the agency in question, BUT technical mistakes in the notice or insufficiently specific notices may violate due process.
d. Purpose of Due Process Requirements – Generally
1) We are concerned that governmental decisions about individuals are made correctly and efficiently (efficiency interest).
2) We are concerned that the person affected by a decision should be able to argue before the relevant body about the substantive rules that are to be applied and how these rules should be interpreted (representational interest).
3) We are concerned about protecting individual dignity by requiring that the government explain its actions to those directly affected (dignity interest)
e. Case Example: Korean Buddhist Dae Won Sa Temple of Hawaii v. Sullivan (pp. 353-58 – examine case more closely in the future)
i. Temple gets a building permit to expand, but builds 9 feet taller than the zoning ordinance and permit allows. It applies for a variance. “Concerned citizens” object. At hearing, Temple says taller building is necessary for religion. Temple complains about procedure, saying it should be able to cross-examine the government and that it should have the right to examine certain evidence. Court rules against temple, saying they have to remove the 9 feet. Temple sues.
ii. Court holds that the ZBA’s procedures did not meet due process standards (wins the three-part test), but the error was harmless constitutional error, so the permit denial stands
iii. Court seems skeptical that the right to cross-examine is important to bring out the religious bigotry of the government and its neighbors. (is this legally relevant?)
iv. Note: Although the case is pre-RLUIPA, prof thinks that if the variance gets denied under RLUIPA, it probably gets overturned.
2. Qualified Decisionmakers
a. General Rule – Impartial Decision-makers in Adjudicative Actions: Decision-makers in adjudicative-type land use decisions must be impartial, which means their actions, when challenged for conflict of interest problems, must be analyzed under the following standard.
1) The more the officer or agency purports to act as a court; (more = less deference)
2) The closer the issues and interests at stake resemble those in traditional adjudications; (more = less deference) AND
3) As the disqualifying element moves from appearances though possible temptation and generic self-interest to actual personal interest in the outcome of the decision (more = disqualification)
MEANING THAT there must be some actual conflict-of-interest, not just the appearance. (1000 Friends of Oregon v. Wasco County Court)
i. Minority Rule – Washington: Would a disinterested person, having been apprised of the totality of a board member’s personal interest in a matter being acted upon, be reasonably justified in thinking that partiality (i.e. impropriety) exists?
b. General Rule – Decisions by Legislative Bodies: Where there are no conflict of interest statutes or ordinances, courts traditionally have declined to invalidate decisions of legislative bodies because some participating legislators were tainted by bias or self-interest.
i. Note: The Fasano/Snyder rule that small rezonings are essentially adjudicative actions has eroded this hands-off approach somewhat.
c. Other Issues
i. Actual Bias: Some states have statutes that disqualify a zoning official from voting or otherwise participating in a matter in which the official has a personal or financial interest.
ii. Political Contributions: A zoning board member or legislative official will not be disqualified from participating in the process simply because a developer made a campaign contribution to that member.
iii. Inattentiveness: The fact that legislative officials are talking on their cell phones, talking with each other, doing paperwork OR EVEN sleeping during evidence and argument does not mean they should be disqualified from making a decision on the matter.
iv. Remedies: When a biased decision-maker casts the dispositive vote, courts generally invalidate the decision – BUT what happens when that vote was unnecessary for the decision (some courts say no invalidation, others say yes)
d. Case Example: 1000 Friends of Oregon v. Wasco County Court (pp. 360-64)
i. Indian mystic wants to incorporate his ranch and turn it into a local government. He needs the permission of the board of county commissioners, who approves the plan 2-1. P challenges, concerned about removing the property from that tax rolls. P argues that one of the commissioners was not impartial because he sold his cattle to the Indian mystic on favorable terms.
ii. Court upholds the decision because the level of conflict of interest with the decision-maker was small and not direct.
3. Informed Decisionmakers: The Example of Environmental Impact Statements (EIS)
a. Introduction to the EIS
i. Federal Text (National Environmental Policy Act of 1969): All federal agencies must include in every recommendation or report on proposals for legislation and other major Federal actions significantly affectin the quality of the human environment, a detailed statement by the responsible official on:
ii. State Statutes: The requirements of these statutes mirror and deviate from the Federal statute, but most states (especially CA and NY) require an EIS from state agencies on certain types of projects.
iii. Key Legal Issues
1) When is an EIS required?
2) When is an EIS “adequate”?
3) What consequences, if any, follow if an EIS contains information that a proposed project will have adverse environmental effects?
b. Process of an EIS
i. Project Requirement: Public Agency determines whether the activity is a project. (if not, then no EIS).
ii. Exemptions: Public Agency determines if the project is exempt (i.e. ministerial, no significant effect, statutory or categorical exemption – if so, then no EIS).
iii. Significant Effect on Environment: Public Agency evaluates project to determine if there is a possibility that the project may have a significant effect on environment (if so, then EIS – connect to EIS requirement question)
iv. Decision for EIS or Negative Declaration: After preparing an initial study, Public Agency decides whether to prepare an Draft EIS or Negative Declaration.
v. Drafting of EIS/Public Review Period: Public Agency prepares an Draft EIS or Negative Declaration with the Responsible Agency, which is reviewed by the public and the Public Agency, specifically, for accuracy. (connect to EIS adequacy question)
vi. Final Approval: After reviewing the Draft EIS or Negative Declaration, Public Agency will consider and approve a Final EIS or Negative Declaration drafted by the Responsible Agency.
vii. Approval of Project with Minimization of Environment Impact: Finally, Public Agency will decide on the project, conditioned on the minimization or avoidance of environmental problems as laid out in the EIS. (connect to EIS adverse impacts question)
c. Justification for the EIS
1) Government officials generally fail to give adequate weight to the future effects of decisions.
2) Political pressures often cause officials to overvalue concentrated, concrete economic benefits and undervalue diffuse environmental benefits.
3) Officials can be insensitive to environmental concerns.
4) Ordinary political processes do not always generate sufficient information to enable officials to make good decisions.
5) Provides the public with reassurance that the agency has considered the environmental effects of a project.
i. Criticism of 4th Justification: We can’t assume that public agencies are capable of acquiring comprehensive information and generating accurate predictions on environmental impacts WITHOUT undue expenditure of time, effort or money.
d. When Is an EIS Required?
i. Initial Determination Requirement (NY Statute): The public agency has sole discretion to determine when an EIS is required WHICH DEPENDS on whether an action may have (or will not have) a significant effect on the environment.
ii. Definition of Environment (NY Statute): Defined as the physical conditions which will be affected by a proposed action, including land, air, water, minerals, flora, fauna, noise, objects of historic or aesthetic significance, existing patterns of population concentration, distribution or growth AND existing community or neighborhood character.
A. Specific Application – Displacement of Residents: Potential displacements of local residents and businesses is an effect on population patters and neighborhood character. (Chinese Staff & Workers Association v. City of New York)
B. Note: NY has a fairly low threshold requirement for triggering an EIS.
iii. General Rule – Consider the Entire Community: In considering the effects on population concentration and neighborhood character, courts (and the agency) must consider more than the potential effects to one parcel BUT RATHER the potential impact on the surrounding community. (Chinese Staff & Workers Association v. City of New York)
iv. Key Issue – Segmentation: A problem that occurs when the division of environmental review of an action such that various activities or stages are addressed as though they were independent, unrelated activities.
A. Related Problem: When a number of small projects with potential minimal impact on the environment cumulatively have disastrous consequences. (see below)
v. Types of Projects Applicable (NY Statute): EIS requirements apply to the local/state government’s own projects, as well as private development projects.
vi. Standard of Review: Courts will only overturn agency decisions when a determination was made
1) In violation of lawful procedure.
2) Was affected by an error of law; OR
3) Was arbitrary and capricious or an abuse of discretion.
vii. Who Brings Challenges? Typically involve assertions by project opponents that the project should not be permitted until an EIS is completed.
viii. Case Example: Chinese Staff & Workers Association v. City of New York (pp. 370-74)
A. Developer plans on building a condominium tower in Chinatown and gets a conditional negative declaration from the public agency. Chinatown residents sue, challenging the approval of the special permit.
B. Court holds that the agency’s determination was arbitrary and capricious BECAUSE they not consider the potential displacement of local residents as effects on the environment in their analysis (as they should have).
e. When Is an EIS Adequate?
i. Adequacy Requirements in the EIS (CA Statute)
A. Future Activity and Effect: An EIS must include an analysis of the environmental effects of future expansion or other action IF:
1) It is a reasonably foreseeable consequence of the initial project; AND
2) The future expansion or action will be significant in that it will likely change the scope or nature of the initial project or its environmental effects. (Laurel Heights Improvement Association v. Regents of the University of California)
B. Alternatives: An EIS must explain in meaningful detail a range of alternatives to the proposed project and, if the developer finds them infeasible, the reasons and facts to support this conclusion. (Laurel Heights Improvement Association v. Regents of the University of California)
1. Problem (CA Statute): Says that public agencies should not approve projects as proposed if there are feasible alternatives or feasible mitigation measures available that would substantially lessen the environmental effects.
2. Note (CA statute): Developers who have access to alternative sites are required to consider them in their EIS.
ii. Conclusion Requirements – Mitigation Measures (CA Statute): Studies in the EIS that lead to a final finding that environmental effects will be mitigated NEED ONLY BE sufficiently credible to be considered as part of the total evidence in support of the finding. (Laurel Heights Improvement Association v. Regents of the University of California)
iii. Case Example: Laurel Heights Improvement Association v. Regents of the University of California (pp. 380-84)
A. The USF plans to build a 10-acre site to expand its campus. It prepares an EIS, which is reviewed and then approved. The residents of the neighborhood where the site will be built sue.
B. Court holds that the EIS is inadequate and will need to be redone, BUT holds that the Regents’ finding that there was sufficient mitigation of environmental impact was adequate.
f. What If an EIS Identifies Adverse Impacts?
i. General Rule – Approval of Project (NY Statute): The agency evaluating the EIS in its decision concerning approval of a proposed project must balance the benefits of a proposed project AGAINST its unavoidable environmental risks (as prepared in the EIS – Town of Henrietta v. Dept. of Environmental Conservation).
ii. General Rule – Authorization of Conditions (NY Statute): The public agency is authorized to impose conditions necessary to minimize or avoid adverse environmental impacts in the EIS. (Town of Henrietta v. Dept. of Environmental Conservation)
iii. Standard of Judicial Review of Agency Decision – Reasonableness Test (NY Statute): Determine whether substantial evidence reasonably support the public agency’s findings and whether these findings reasonably support the agency’s decision. (Town of Henrietta v. Dept. of Environmental Conservation)
iv. Case Example: Town of Henrietta v. Dept. of Environmental Conservation (pp. 387-90)
A. Miracle Mile wants to build a development but must get an EIS before final approval. The public agency approves the project contigent on a number of environmental conditions that must be fulfilled. Miracle Mile sues.
B. Court holds that the public agency had power to attach conditions on approval of the project.
g. Criticisms of the EIS Process
1) Focuses on procedure RATHER THAN substance (causing the decision-makers to avoid taking actions on EIS results of environmental harm).
2) EISs fail to provide sufficient or objective information. (either too long and technical or shallow and conclusory)
3) Decision-makers may use the EIS process to delay, recast or kill environmental projects they don’t like (possibility for abuse).
h. Conditional “Negative Declarations”
i. Definition: Issued by the public agency when the action is originally proposed may result in significant adverse environmental effects (to require an EIS), BUT the agency believes that mitigation measures will modify the proposed action SO THAT no environmental impact will result.
ii. Result: Leads to opportunities for deal-making between the developer and the agency, leading to developer concessions.
A. Problems
1) The public agency may pay too little attention to the environmental concerns a project will pose.
2) Developer may fail to follow through on mitigation measures.
IV. Subdivision Regulations, Building Codes and Aesthetic Controls (~7 pages)
A. Unregulated Subdivisions
1. Applicability of Subdivision Regulations:
a. Basic Definition - Subdivision: The division of one lot into many lots.
b. Importance of Legal Definition: The legal definition of a subdivision tends to define when a subdivision triggers regulations. Planned subdivisions typically must comply with specific requirements.
c. Examples of Non-Regulated Subdivisions: e.g. one lot divided into only two lots; easements (see NJ/ME definitions, p. 441)
d. Preemption: A state’s statutory definition of a subdivision generally preempts municipal efforts to tighten or loosen the regulatory net of subdivisions.
e. Why Landowners are Interested in Legal Definitions
1) The review process causes delay because the regulations prohibit sale and building of structures until a final map has been approved.
2) Design standards for regulated subdivisions are often higher than the developer would adopt in the absence of regulation.
3) Developer who does not need subdivision approval may be able to elude municipal exactions.
2. Evading Subdivision Regulation:
a. Example #1: If a regulation says that subdivisions do not apply if “every lot within the tract has frontage on a public way*, a developer may try to do this, no matter how unreasonable (and it will likely get struck down by a court).
b. Example #2: If a subdivision of four or less lots every two years is exempt from regulation, the developer may divide the property up very slowly (e.g. three lots every two years).
3. Purposes of Subdivision Regulation:
a. Purpose #1: Protects purchaser or lessee from unscrupulous developers.
b. Purpose #2: Allow local governments to bargain with a developer of a subdivision, using the threat of denying a permit as an incentive (similar to *EIS* procedure)
c. Purpose #3: Purchasers often lack good information about many problems, creating market failures, because the purchasers can’t evaluate the problems and developers may not internalize. Some examples are: 1) Purchasers may not be able to evaluate the regulations; 2) People may discount risks that they can’t evaluate; 3) Subdivisions may create externalities for the neighbors (e.g. fire truck can’t get to certain parts of subdivision).
B. Building Codes
1. The Maze of Building Codes
a. Specification vs. Performance Standards: Builders and building officials find specification standards much easier to understand (specific standards), WHEREAS performance standards (how well the materials perform) encourage the development and dissemination of innovative technologies.
b. Rehabilitation Codes – Typical Rule
1) If renovations exceed 50% of building’s total value, the building code is enforced against the entire building;
2) If renovations are 25% to 50% of building’s total value, the building code is applied only to the renovated portions;
3) If renovations are below 25% of building’s total value, officials have wide latitude to determine how stringently to apply the codes.
c. Manufactured Housing: This is subject to federal statute, which preempts state and local standards on the construction of mobile homes.
i. Why? Local governments may over-regulate (e.g. ratcheting up the building code) mobile homes because they don’t like them
d. Widening Scope of Building Code Regulation
i. Energy Efficiency (e.g. 1.6 gallon flush toilet)
ii. Disabled Access (e.g. ADA requirements to improve access to buildings for handicapped individuals)
iii. Earthquake Safety
iv. Protection against Terrorism
e. Purposes of Building Codes
i. Responds to externalities by requiring that the potential external costs be considered in deciding how much safety will be built into the building (e.g. the costs of faulty buildings to neighbors, such as fires)
ii. Responds to consumer lack of sufficient knowledge to make informed decisions about the building’s structural integrity (e.g. market failure of lack of knowledge).
2. Evaluation of Building Codes
a. Asserted Inefficiencies
i. Requires all consumers to purchase a minimum package of safety features, instead of letting the market reach its own equilibrium point.
ii. Requires homebuyers to invest present dollars to ensure future soundness at the time when they can least afford it.
iii. Stifles innovation by preventing new building products from gaining foothold into market unless incorporated into building codes.
A. Antitrust Liability: USSC has held that persons who urge a private code-writing organization to engage in anti-competitive action are subject to antitrust liability.
iv. Note: Building codes are not ubiquitous – many small towns lack them for the above reasons (e.g. Marlboro, VT lacks them, though VT has regulations on plumbing and electricity).
b. Builders’ Constitutional Challenges to Excessive Code Requirements
i. Substantive Due Process – General Rule in Building Codes: Exercise of the state’s police power in a building code regulation must be 1) reasonable in accomplishing the protection of the general public; and 2) reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. (Boise Cascade Corp. v. Gwinnett County – rationally related to a legitimate purpose)
A. Free Exercise: Think about how RLUIPA might religious objectors to building code enforcement.
ii. People Building Their Own Homes
A. General Thought – Prof: If the owner is living is his home, we would feel better THAN IF the property is owned by the owner and passed on to someone else.
B. Key Question/Rebuttal: What about externalities on other home owners? (remember, owners will be internalizing most of the costs of crappy repair work until the property is sold).
C. Constitutional Violations: Probably no constitutional violation if a local government limits a home owner from building without a permit, BUT if a local government limits a home owner from doing his own repairs, there may be a substantive due process violation.
iii. Case Example #1: Boise Cascade Corp. v. Gwinnett County (pp. 461-63)
A. P used plywood decking of 3/8 24/0 inch thickness instead of ½ inch thickness as required by the code. D tried to enforce this requirement against P. Industry requirements showed P’s decking performed just as well as the required decking.
B. Court holds the regulation unreasonable as applied to P, since the provision is unreasonable to accomplish the protection of the general public.
iv. Case Example #2: State v. Cook (pp. 463-65)
A. P purchased a house, intending to rent it. He found that he had to do plumbing work and applied for a permit. The county denied the permit because he was not a certified plumber. P sues, claiming that since he intends to comply with code standards, the code requirement that homeowners be licensed is not reasonably related to the public health.
B. Court holds for the county, saying that the licensing of plumbers is related to the public health, regardless of whether it is done by commercial or non-commercial plumbers, with such exceptions as the statute provides (see p. 464)
3. Applying Standards Retroactively: Housing Codes
a. Housing Codes v. Building Codes: Housing codes apply retrospectively, meaning that they apply to existing buildings and new buildings, WHEREAS building codes prospectively, meaning that they only apply to new buildings when the building is built.
b. Nature of the Inquiry: Professor views in two steps: 1) Does the regulation bear a reasonable relation to public health and safety; 2) Is the regulation an unconstitutional deprivation of property rights (an diminution in value inquiry – see Penn Central, also City of St. Louis v. Brune)
c. Who Enforces Housing Codes?
i. Constant Inspection: Some local governments have ordinances which require that a residential property be inspected for housing code consistency each time a new occupant is about to move in.
ii. Warranty of Habitability: Other local governments have housing codes that set the standard of quality as the warranty of habitability implied in residential leases.
d. Merits of Housing Codes
i. Key Points Against Housing Codes: Housing code regulations may have the effect of 1) impairing the welfare of poor households by forcing them to purchase housing of a higher quality than they would choose voluntarily; or 2) pricing the poor out of housing altogether (if landlord has to do certain things, he won’t rent at all).
ii. Key Point for Housing Codes: Without housing codes, we may have a race to the bottom in the housing provided poor people.
iii. Possible Line-Drawing Point: When the lack of a housing code is imposing externalities upon other people, regulation may be necessary (e.g. toilets vs. showers, see City of St. Louis v. Brune)
e. Case Example: City of St. Louis v. Brune (pp. 465-68)
i. Property owner is criminally convicted for not having a tub or shower in a separate room of each apartment (or not having a tub and shower at all – hard to tell from statute). He says the statute is unreasonable because he would have to spend $7,800 for each unit. He also says that it’s not reasonably related to public safety and health.
ii. Court holds that this regulation is arbitrary as applied to this property owner, but is valid concerning the general public.
iii. Court does inquire into the extent of regulation’s impact (cost-wise), finding that the buildings are worth nothing (straight from property owner’s evidence) and that the net result would be a total loss of the buildings.
iv. Note: This is criminal case, so a takings inquiry would not absolve someone of criminal conviction. Rather, the court just says that the statute is no good as applied.
C. Aesthetic Regulation
1. Architectural Review
a. Definition: An architectural review board connects with the building permit and land use process employed by local governments, whereby the local government requires review of the developer’s plans by this board.
i. Key Question #1: Should architectural review responsibility be proscribed to the local government’s general-purpose land use board or to a special-purpose review board?
ii. Key Question #2: Should the architectural review board consist of professional architects or rather other professionals, like appraisers and real estate brokers?
b. Advantages
i. Allows the parties to have a fight up front about the effects of development (i.e. it minimizes externalities on neighbors, because they may hate it and stop it)
ii. Aesthetic preservation and contextual consistency (within the surrounding area)
iii. Increases the value of the property in the area (positive externalities)
iv. Makes outside property owners (McDonalds) meet the standards of the community.
v. Fosters and maintains community identity (cultural – see Carol Rose)
c. Disadvantages
i. Administrative costs (note: in most places, ARB members work for free)
ii. Paternalistic and too intrusive
iii. ARB may require subjective or arbitrary standards. (see Anderson v. City of Issaquah)
iv. Could suppress property values if people don’t want to live in the area.
v. Stops innovation of architectural design.
vi. Increases the cost of development (a tax on property owners)
vii. Creates incentives for the property owner not to do repairs.
d. Constitutional Restrictions – Void for Vagueness Doctrine: A statute which either forbids or requires the doing of an act in terms so vague that a reasonable person must guess at its meaning and differ as to its application fails to put individuals on notice as to the requirements of the statute and thus violates due process. (Anderson v. City of Issaquah)
i. Concern – Void for Vagueness Doctrine: This type of statute opens the door for arbitrary and capricious decision-making.
ii. Best Type of Statute/Regulation: Such statutes shouldn’t be too precise because the more precise you get in trying to match the neighborhood, the less interesting the architecture is. (e.g. becomes like Levittown)
iii. Aesthetic Regulation – Due Process Concerns: Some jurisdictions are hostile to aesthetic regulation as a legitimate government purpose to meet substantive due process, BUT these jurisdictions may still allow architectural review so long as there are other valid purposes for the regulations.
iv. Takings Inquiry: The problem typically is that if it appears like something can be built on the property, there is no taking, unless it fails the Penn Central test.
v. Standard of Review: Most courts defer to architectural review decisions (adjudicative vs. substantive)
vi. Interesting Question: What is the constitutional validity of a city authorizing an ARB to survey existing structures and compel owners to make architectural improvements that would enhance the beauty of the city?
e. Case Example: Anderson v. City of Issaquah (pp. 489-92)
i. P wants to develop a commercial building and applies for a land use certification. ARB approval is required under statute and the ARB, after much examination, denies the application. P sues.
ii. Court strikes down the statute as being void for vagueness.
iii. Court points to examples in the statute that say that building projects should be *interesting* vs. *monotonous* and *harmonious* with the valley and mountains.
iv. Note: Organization of architects filed amicus brief in favor of developer here.
2. Historical Preservation: Historical preservation is closely related to architectural review, and thus many of the same advantages and disadvantages apply.
a. Additional Advantage: Inter-generational externalities, which means that future generations are not represented in the political process of deciding whether the historical architecture is worth preserving (classic market failure – think old Penn Station)
b. Additional Disadvantage: Historic preservation imposes real costs in reducing the supply of available housing (which increases prices)
c. Key Question #1: What counts as a historically significant property (a *historical resource*) that deserves preservation?
i. Possible Factors (see State by Powderly v. Erickson)
1) Who built the structure?
2) Who lived in the structure?
3) Location of the structure?
4) Architecture of the structure?
5) Possible unique materials used to construct the structre?
6) Quality of workmanship on the structure?
7) The structure’s association with builders, important people or events in the area?
8) The structure’s interaction with other buildings?
ii. Case Example: State by Powderly v. Erickson (pp. 494-95)
A. D wants to tear down row houses built in the 19th century to expand his shopping center. Three citizens (not the owners) object and file suit saying that the structures are historically protected.
B. Court rules for the three citizens, finding that the three row houses constitute historic resources under the MERA statute because they meet certain factors required.
d. Key Question #2: Who should get to decide the question of whether a structure deserves historic protection?
i. Federal Government Protections
A. National Register of Historic Places: If a building or site is placed on the Register, this requires that federal agencies must “take into account the effects” on their decisions on registered places. (lawsuits normally fail, however)
B. National Historic Landmark: A subset of the Register – requires that federal agencies considering actions that would adversely affect Landmarks it owns or controls must “to the maximum extent possible minimize harm to the Landmark. (stronger standard)
ii. State and Local Governments: Normally controls the question of whether a structure deserves historic protection – they may nominate properties for inclusion in the Register AND adopt independent procedures for designating landmarks and restricting their alteration.
iii. Preservation Through Acquisition: Governments or preservation trusts can acquire by consensual purchase (or eminent domain) an easement over historically important facades of a building.
e. Key Question #3: Should governments be able to preserve historically significant interiors as well as exteriors?
i. General Rule: Historical preservation regulations only apply to exteriors of structures. (NY is an exception)
ii. Possible Distinction: Maybe the answer to this question should depend on the public’s access to the interior of the building (going to the intergenerational justification)
f. Constitutional Constraints on Historical Preservation/Landmarks
i. Free Exercise Clause: In interpreting the 1st amendment, there are no problems if the landmarks law is facially neutral and doesn’t target religious beliefs in the designation of landmark sites. (Rector of St. Bartholomew’s Church v. City of New York)
A. RLUIPA: Requires a government, when it makes a burdensome *individualized assessment* of a proposed religious land use, to have a *compelling government interest* that it is pursuing by the *least restrictive means.*
1. Key Question: Is historic preservation a compelling government interest?
B. State Protections: Some states immunize the buildings of religious organizations from the exercise of historic landmark designations by cities and counties (CA).
ii. Takings Clause: The key question is usually whether the land-use regulation impairs the continued operation of the property in its originally expected use. (see Rector of St. Bartholomew’s Church v. City of New York, also Penn Central)
A. Single Landmark vs. Historic District: A single landmark designation creates the greater possibility of takings liability, WHEREAS a larger historic district designation creates positive externalities through a *reciprocity of advantage* for the larger community (e.g. increased property values) AND spreads costs throughout the community.
B. Single Landmark Protections for Local Government: Give the landowner property tax reductions or transferable development rights (see Penn Central).
iii. As Applied Due Process – Empty Lots: Courts usually uphold historic preservation regulations as applied to empty lots in historic districts, finding that educational, cultural and economic values are preserved, in addition to aesthetic values. (A-S-P Associates v. City of Raleigh)
A. Criticism: Does the imposition of historical preservation to empty lots implicate intergeneration externalities, as it does to already-built structures?
iv. Case Example #1: Rector of St. Bartholomew’s Church v. City of New York (pp. 498-99)
i. City designated St. Bart’s as historical landmark. Later, the church wanted to raise the community house to build a 47-story tower. The Landmarks Preservation Commission denied it permission to demolish. St. Bart’s sued.
ii. Court upholds the Landmarks Preservation Commission’s ruling under both the Free Exercise Clause and the Takings Clause.
v. Case Example #2: A-S-P Associates v. City of Raleigh (pp. 500-04)
i. P wished to build an office building on an empty lot in a historical district. The Historic District Commission denied his application based on two ordinances. P sues, claiming both ordinances are unconstitutional.
ii. Court upholds the ordinance finding that it is within the scope of the local government’s police power.
V. Residential Community Associations (~7 pages)
A. Functions and Structure
1. Key Issues in Residential Community Associations (RCAs)
a. Developer-to-Unit Control of Land Use Controls: When the management system of developer control over land use controls shifts to unit owner control over land use controls, specific issues often arise between the two in these power shifts.
b. RCA Land Use Controls: How do we feel about RCA implementing land use controls, as opposed to land use controls implemented by the local government?
c. RCA vs. Local Government Generally: What is the relationship between an RCA and the local government, including the potential for liability?
d. Note: Nowadays pretty much all private development takes the form of an RCA (500 in 1960 to 250,000 in 2008 – explosive growth)
2. Forms of Residential Community Associations (RCAs)
a. Condominiums
i. Individual Space: Each individual owner owns a fee simple interest in the units they occupy.
ii. Common Space: Each individual owner in the condominium RCA is a “tenant in common” in the common spaces. (e.g. hallways, laundry room, etc.)
b. Cooperatives (NY only): The individual unit owners do not own the units they occupy BUT RATHER own shares in the corporation that owns the building AND have proprietary leases in the individual units they occupy (number of shares do relate to the size of apartment)
c. Homeowners Association
i. Individual Space: Each individual owner owns a fee simple interest in the parcel of land where their house is located.
ii. Common Space: A separate legal entity (corporation) set up by the developer owns title to all common areas.
iii. Note: This form of RCA is by far the most common in the US – mainly suburbs.
d. Value of Condominiums v. Cooperatives: Typically, condominiums are more expensive than cooperatives because of the transaction costs in cooperatives (i.e. you can’t sell unit to whomever you desire to), BUT when you get above a certain price per apartment ($2.5 million), the premium value flips.
i. Why? The cooperative owners at that level clearly value social exclusion more than the other transactions, so they seek more control rather than less.
3. Functions of Residential Community Associations (RCAs)
a. Management of Common Areas: The elected board of directors manages and maintains the common areas the developer has deeded to it. (e.g. streets, sidewalks, parking areas, recreational facilities and open space)
b. Promulgation and Enforcement of Regulations: The RCA promulgates and enforces regulations on member behavior, SUCH AS the harboring of pets AND the alteration of the exterior appearance of an individual unit.
i. Note: A retroactive regulation to evict dogs already in the building is invalid, BUT a regulation that prohibits owners from bringing new dogs onto the premises is valid. (prof finds this interesting)
c. Levying Assessments: The elected board of directors is empowered to levy assessments enforceable by lien on a member’s individual unit.
4. Relationships Between Residential Community Associations (RCAs) and Local Governments
a. Key Dynamic: In a RCA, there are many services that residents pay for by paying their dues (e.g. garbage services, police, golf courses, public areas), BUT AT THE SAME TIME, these unit holders are residents in local government.
b. Problem: Unit holders can vote in the RCA BUT CAN ALSO vote on local government measures as a resident.
i. Key Question: What level of public services is an RCA member going to vote for in local government?
ii. Predictable Answer: Private homeowners in RCAs will impoverish the local government BECAUSE they have incentives to make sure the local government doesn’t provide services for others. (a double taxation problem – of course maybe the opposite is true).
c. Possible Solution: We should utilize the private interest scheme in the public sphere (through tax dollars) OR PERHAPS we should allow existing neighborhoods to create RCAs.
i. Judicial Effects
1) The more local governments emulate private entities, the less deference private interest communities should get from the judicial system.
2) Local governments may be allowed to enforce through certain measures they could never get away with, BUT THAT RCAs can (e.g. fines, liens, eventual foreclosure)
d. Preferences: If you give people the choice of where to live, people will choose to live where private property restrictions are strong.
B. Developer-Homeowner Relations in a New Community
1. Source of Tension – Developers vs. Homeowners: Tension between the homeowner often develops in the transitional period between the developer controlling the RCA and the unit owners controlling the RCA (i.e. developer relinquishes control)
a. Original Rule – Reciprocal Covenants: Originally, when developing a subdivision, a developer would impose reciprocal covenants on the subdivided property (through private land use controls)
i. Problem: Developers would often forget to properly burden all parcels of property with the reciprocal covenant OR lessen the reciprocal covenants if the properties stopped selling.
ii. Judicial Result: Courts would often apply a reciprocal covenant in these situations. (by inferring the covenants from a common plan).
iii. Limitation on Amendments in Reciprocal Covenants: Reciprocal covenants are completely inflexible BECAUSE they can’t change without the consent of all burdened property owners, UNLESS there is change in conditions (a high bar)
b. History – Rise and Creation of RCAs Through CC&Rs: RCA’s became popular and developers started using them when states enacted enabling legislation giving the developer the power to create a single instrument (CC&R) to impose on all subdivided property within the subdivision.
c. Definition of CC&R: The single instrument was called the CC&R (declaration of covenants, conditions and restrictions) AND it did two things:
1) Eliminated the possibility of individual lots being left out of the covenanted scheme; AND
2) Allowed the developer to amend the document.
d. Popularity of CC&Rs: CC&Rs are usually highly restrictive because developers anticipate most homebuyers will pay a premium to live in a closely-controlled environment (amending later on almost always reduces restrictions – see below)
2. Developer Retention of Powers: Issues typically arise where the developer’s interests ARE NOT in alignment with the homeowner’s interests in terms of amendments to the CC&R.
a. Voting Rights in RCA: To maintain control over the subdivision development during the early stages, developers are likely create special voting rules WHEREBY unsold lots get more votes in the RCA than sold lots (e.g. unsold lot gets 3 votes, sold lots get 1 vote, SO THAT the developer has control until 75% of the lots are sold)
i. Note: Some handbooks suggest that if the developer has ceased to offer any units for sale in the ordinary course of business after two years, there should be a transfer of control.
b. Architectural Review Power of Developer: Sometimes developers will vest architectural review in the developer entity – these powers will be enforced SO LONG AS the developer exercises its power reasonably and in good faith.
c. Developer Power to Amend the CC&R: If a developer retains power to amend the covenants unilaterally, some courts uphold this power, others don’t, BUT a growing standard is that the developer may only exercise this power to advance the general purposes of the covenant scheme.
3. Judicial Rights of Homeowner Against Developer for Subsequent Changes & Amendments: Judicial review of future developer amendments is most robust WHEN developers make representations to earlier purchasers and seek to amend covenants or doesn’t follow the representations later on! (Tobin v. Paparone Construction Co.)
a. Rationale: The developer is the guarantor of the community AND the representations it makes to each purchaser about what the community will look form reasonable contractual expectations.
b. Example #1: When developer wants to ratchet down building requirements as economic conditions change (e.g. single-family homes to mobile homes).
c. Example #2: When a developer makes representations to each purchaser about what the community will look like (e.g. advertising brochures) AND the result is different.
d. Case Example: Tobin v. Paprone Construction Co. (pp. 585-86)
i. P buys a house in the RCA. His neighbor builds a tennis court within one foot of the house. P never gets a notice a variance that the tennis court is being build. Developer made representations to P that this would be single-family (with no tennis courts). Developer also made representations to neighbor encouraging the building of the tennis court. P sues neighbor and developer.
ii. Court dismisses suit against neighbor, but finds liability against the developer, finding that P was damaged in his reasonable contractual expectations. (i.e. contractual privity)
C. Judicial Review of Residential Community Associations (RCAs)
1. Avenues of Judicial Review
a. Contractual Relief: Basic contract law entitles a member to compel a RCA to adhere to a valid rule set out in the declaration and other governing documents.
b. State Statutes: Typically, a RCA member can turn to state statutes governing the structure and operation of RCAs.
2. Legal Constraints on Association Structure and Procedures
a. Allocation of Voting Rights: RCAs have discretion to allocate votes (usually done by the developer) in their own manner, EXCEPT when state statutes compel the RCA to follow a specific ownership-based voting system.
i. Disenfranchising Tenants: Developers almost always confer votes on the basis on the basis of unit ownership, effectively disenfranchising tenants.
b. Electoral and Governance Procedures: Courts and legislatures may seek to regulate an association’s elections and internal procedures (but this isn’t common).
c. Constitutional Constraints: For RCAs to come under the guise of the 14th amendment (possibly including the takings clause), their activities must constitute “state action”.
i. Applicable Test – State Action: State action is present
1) When there is a symbiotic relationship between a nominally private entity and the government.
2) When the private entity is serving a public function.
3. Judicial Review of Association Decisions
a. Key Issue – Judicial Review of RCA Decisions: What is the level of scrutiny that should apply to private land use regulations COMPARED TO the level of scrutiny that applies to public land use regulations?
b. Majority View – Business Judgment Rule: SO LONG AS the RCA’s directors have not breached their fiduciary obligations to the RCA, the exercise of their powers may not be questioned, EVEN IF the results show that what they was unwise, inexpedient or unreasonable (backstop is fiduciary obligation to RCA – see Levandusky v. One Fifth Avenue Apartment Corp.).
i. Exception – Breach of Fiduciary Duty: RCA member must show that the board is acting in “bad faith” to harass the property owner.
ii. Justification for More Deferential Review: The RCA’s CC&Rs may be harder to change than other laws. (think popular vote vs. appointed board)
iii. Prof Note: He thinks this test is more deferential to substantive determinations of the RCA board, BUT more searching when it comes to singling out problems in the land use context.
iv Case Example: Levandusky v. One Fifth Avenue Apartment Corp. (pp. 591-93)
A. Ex-President of a cooperative board wishes to expand his kitchen, but it means he must relocate some of the steam risers. Board denies permission for the kitchen renovation. He sues.
B. Court upholds the board’s determination, finding that it did not violate the business judgment rule by being instituted in bad faith.
c. Minority View – Rational Basis Review: The RCA board’s actions will be upheld is the are rationally related to a legitimate government purpose (same test as public land use – and courts will strike down more often than under the business judgment rule – see Town & Country Estates Association v. Slater)
i. Case Example: Town & Country Estates Association v. Slater (pp. 593-95)
A. An RCA’s CC&R provides for architectural review. The standard requires “harmony in external design” with the rest of the subdivision. RCA then denies P’s application to build house because it isn’t in “harmony” (more likely because it didn’t cost enough money and would drive down property values). P sues.
B. Court applies rational basis review and strikes down the regulation because the standard of approval is too vague to be enforceable (think Issaquah case)
d. Compelling Homeowners for Follow Rules: Courts do not hesitate to compel homeowners to comply with design restrictions and the process of architectural review in RCAs. (so the rules can go both ways).
4. Judicial Review of Board Rulemaking
a. New Rules vs. Old Rules: Typically, courts are less deferential to a new rule or bylaw provision THAN they are to a provision that appeared in the original CC&R.
i. Standard for New Rules: Subsequently enacted rules by a RCA typically must pass a reasonable test (rationally related to a legitimate government purpose – see no dog rule case, p.597).
b. RCA Ability to Enforce Rulemaking Decisions: To enforce its rulemaking decisions (e.g. assessments, residents not following governing documents), the RCA may seek court enforcement OR adopt reasonable rules and procedures to encourage compliance and deter violations SUCH AS
1) The imposition of fines, penalties and late fees; AND
2) Withdrawal of privileges to use common recreational facilities and social facilities.
a. Possible Limitation: Courts have been receptive to member complaints about RCA enforcement actions that went beyond the letter of RCA rules.
4. Limitations on Amendments to the Basic Governing Documents
a. General Rule – Reasonable Test: An amendment or modification to the basic governing document (i.e. original CC&R) will not be void UNLESS it is:
1) Not consistent with the overall plan of development; OR
2) Is unreasonable or prohibited by law,
REGARDLESS of whether the amendment is more restrictive or not. (Harrison v. Air Park Estates Zoning Committee)
i. Minority Rule: Gives modifications or amendments to the original CC&R the same presumption of reasonableness that the original CC&R had.
b. Selective Relaxation Rule: If a RCA adopts an amendment that eases the original CC&R, it must apply to all lots, not just selected lots. (compare with zoning)
i. Justification: Concern about majoritarian oppression.
ii. Note: Sometimes the selective relaxation rule will apply to amendments that give a few selected lots more restrictive designations.
c. Termination of the RCA: Governed not by the common law, BUT RATHER by provisions in the original CC&R or applicable statutes.
d. Note: Some state statutes may require unanimous consent to make certain modifications or amendments to the original CC&R.
e. Case Example: Harrison v. Air Park Estates Zoning Committee (pp. 598-99)
i. In a RCA for people who like airplanes, the original CC&R said that an airplane hangar could be built without a house. The RCA board changes the rule to prohibit airplane hangars without houses. P, who bought under the old restrictions, sues.
ii. Court upholds the restriction, finding that it is not unreasonable and it is consistent with the overall plan of development.
5. Policy Justifications for Judicial Review of Residential Community Associations (RCAs)
a. General Rule: Courts are more deferential to RCAs than to local governments.
b. Policy Reasons
1) It is harder to escape a local government than a RCA.
2) RCAs are more voluntary organizations. (don’t have to be part of one)
3) People often voluntarily want more restrictive controls, so courts should get out of the way.
c. Negatives
i. Voluntary?
1) Maybe local governments are voluntary like a RCA is. (i.e. know what your going to get when you live in a town AND if you want something, you vote with your feet).
2) RCAs are less voluntary when you have no other choice BUT TO LIVE in an RCA (some places of this country are like that)
ii. Coercive? RCAs may be more coercive BECAUSE they can foreclose on you if you don’t pay an assessment.
iii. Problem: Do people understand what they’re buying into when they’re buying into a RCA?
D. Association Finances
1. Methods of Allocating Common Expenses
1) One vote per unit.
2) One vote per square foot of floor area.
3) One vote per dollar of unit value as established by the original CC&R, the property tax assessor OR an independent appraiser hired periodically by the RCA.
2. General Rule – Amendments to Common Expenses: If amendments to RCA common expenses that affect only certain members of the RCA are enacted without the approval of those members, the amendments are invalid AND the RCA members may not be charged more than the share of common expenses allocated to them in the original CC&R. (Thiess v. Island House Association)
a. Special Fees and Assessments: If fees and assessments are levied against the owners for specific repairs or issues distinct to their units, then fees and assessments are typically valid. (good alternative)
b. Implied Power to Levy Assessments: If the original CC&R is silent on the issue of assessments, the RCA nonetheless has the authority to levy them.
c. Case Example: Theiss v. Island House Association (pp. 601-03)
i. RCA amends CC&R to revalue the way common expenses (dues) are paid in, to ensure that apartment owners pay more dues than villa owners because of specific repair problems associated with the apartments. The villa owners had a voting majority. One apartment owner sues.
ii. Court holds the amendment invalid, finding that the apartment owners did not join in the amendment to the common expenses, SO they may not be charged more than allocated in the original CC&R.
VI. Financing the Urban Infrastructure (~7 pages)
A. Special Assessments and Local Government Finances
1. Fiscal Situation of Local Governments
a. Key Funding Mechanism of Local Governments: Local governments are generally funded through property taxes (which has become less so now because of fund redistribution).
i. Importance: The method by which local governments are funded impacts how local governments employ land use controls (connect to theoretical viewpoints)
b. Key Object of Local Government Expenditures: Primary and secondary education expenses!!!
i. Result: Local governments typically want keep out large numbers of school age children (because the expenses are so great).
c. Perfect Scenario for Local Governments: Maximize the amount of local services in a community WHILE minimizing the property tax burden (Fischer’s homevoter hypothesis in action).
d. Key Question (as a Result): If a local government doesn’t want to burden its property tax base too greatly, what other methods can it use to get money?
i. Solution: To the extent that local government needs extra funds for local services, they might focus on special assessments and exactions as benefit charges. (especially utilized to gauge the effect of development)
2. Special Assessments - Generally
a. Definition: A specifically targeted fee (or tax) charged to existing property owners for localized benefits.
b. Key Point: Impose the costs on the existing property owners who are benefitting from the local government’s public improvements.
c. Justification for Special Assessments
1) Special assessments constitute effective price discrimination SINCE we’re only charging people for what they consume or use.
2) Special assessments constitute a special payment of taxes for those who are getting government services.
3) Special assessments transform funding of public services from a general tax to a fee for specific
d. Problems with Special Assessments
1) Hard to accurately assess the specific benefits BECAUSE of administrative costs and other expenses.
2) Spillover effects occur. (e.g. a public service may affect others)
3) Special assessments impact a psychological difference on the property owner (i.e. a tax is abstract, but an assessment is particular AND when people know what they’re being charged for, they are more likely to react negatively to be charged for it)
4) Each property owner (or person) will have very different valuation of the benefits of the improvement.
5) Inequity (everyone may not be charge equally)
6) Property owners get no income tax deduction for assessments, WHEREAS they do for property taxes.
7) Inter-temporal spillover effects occur. (e.g. costs may be borne arbitrarily by existing property owners and not at all by future property owners)
8) Danger of political malfunctions, where people with political connections get improvements from general revenues, whereas people without such connections tend to get special assessments (goes to inequity problem)
e. How Assessments Are Calculated? A number of formulas are used. Most common are:
1) The special assessment is applied on the basis of the amount of foot frontage of the property owner.
2) The special assessment is applied to the area of the benefited parcel (common for storm sewers).
f. Practical Note: Special assessments are not in vogue any more for the reasons listed above – local governments prefer to assess from the beginning of the transaction now through exactions. (so that we can bargain)
3. Judicial Review of Special Assessments: In general, courts impose some type of judicial oversight to special assessments.
a. General Rule: If the exaction from the property owner for a special assessment exceeds the increase in value of the property conferred because of the improvement, it’s a taking. (McNally v. Township of Teaneck)
i. Prof Note: He finds this wild because it seems to apply some weird version of conceptual severance to special assessments.
b. Major Limitation on General Rule: Courts should not look closely as whether the general rule is true in a particular case BECAUSE having a fine-grained special assessment will eviscerate the benefits of these assessments. (Louisville &Nashville Railroad v. Barber Asphalt Paving Co. – helps with efficiency (Michelman))
c. Limitations on Use of Special Assessments
i. Rule #1 – Local vs. General Improvements: Local governments can impose a special assessment only for a local improvement (e.g. roads and sidewalks) RATHER THAN general improvements (e.g. libraries),
A. Rationale: Administrative costs make it difficult to calculate the amount of benefit provided for each individual concerning a general improvement.
ii. Rule #2 – Special vs. General Benefits: A landowner may be assessed only for special benefits of improvements, not for general benefits that also accrue to others in the community.
4. Business Improvement Districts (BID)
a. Definition - BID: If enough businesses in a particular area get together and coerce the local government (with the help of state statute granting such power) to create a BID THEN other businesses are forced by the BID’s Board to contribute special assessments to fund extra services within the area.
i. Classic Example: Think Montague St.
b. Types of Services Provided by BIDs: Litter removal, business promotion, prevention of graffiti and aggressive panhandling.
c. Exemptions from BID Special Assessments
i. Residential Properties: May be exempted from the special assessments BECAUSE the types of services provided by BIDs supplement traditional municipal services AND are typically designed to better commercial properties and promote economic growth within the area. (2nd Roc-Jersey Associates v. Town of Morristown)
A. Unanswered Questions
1) Does the BID benefit the residences anyway?
2) Or does it hurt the residences?
ii. Charitable Organizations: Most courts say no. (but how about RLUIPA?)
d. Judicial Review of BID Boundaries: Typically a heavy burden – must show that boundaries are arbitrary and irrational.
e. Vote Allotment in BIDs: Typically permit the conferral of significant voting power on the owners of the property assessed to finance BID operations. (compare with RCAs)
f. Purpose - BIDs: Allows for commercial improvement of an business area with WHILE eliminating the free rider problem.
B. Development Exactions
1. Introduction to Exactions
a. Definition: Exactions are a tool which local governments use to pay the costs of development WHERE fees are charged to a developer for the right to develop a property BEFORE the property is developed.
b. Types of Exactions
i. Physical Exactions: The developer may make two kinds of dedications of property:
1) On-site Dedications – where the developer dedicates land within the subdivision on which the government could construct streets, sidewalks, utilities, etc.
2) Off-site Dedications – where the developer dedicates land or facilities not within the subdivision (when on-site dedications are not possible).
ii. Monetary Exactions: The developer explicitly gives the government money in exchange for the right to develop.
2. The Theory Behind Exactions
a. Traditional Justification: We want to limit externalities that a development will create by making developers internalize infrastructure costs they will impose.
i. Problems with Traditional Justification
1) Exactions may be used to extort profits from developers AND have no real relationship to the costs that the development creates (Nollan/Dolan)
2) Exactions may be a method to pass costs onto future property owners in order to benefit present landowners (i.e. inter-temporal externality problem)
b. Key Question in Light of Problem #2: Which parties ultimately bear the cost of an exaction?
c. Traditional Answer: It will be the developer – developers are making money hand over fist, SO if we charge them money it will only be appropriate redistribution. (heard constantly in NY over last decade)
i. Problem with Traditional Answer – Inelasticity in Housing Markets: The developer may not bear the cost of the exaction, RATHER the end user will. (i.e. costs will get passed on to the future homeowner)
ii. When Does Problem Occur?
1) When the buying public is not price-sensitive. (i.e. inelasticity in demand).
2) When consumers can’t buy anywhere else (inelasticity in demand too).
d. New Conclusion on Exactions: When there’s inelasticity in market demand, the end consumers (homeowners) will bear the brunt of the exaction, BUT IF THIS ISN’T THE CASE, the developer will bear the cost.
i. Conclusion – Stated Another Way: Three solutions:
1) If the local community is unique, then developers pass on the costs of the exaction.
2) If the local community is elastic, then developers will pass on some of the costs of the exaction.
3) If the local community is fungible, then developers will eat the costs of the exaction.
ii. Possible Judicial Review: Maybe judicial review of exactions should depend on the elasticity in housing markets BECAUSE end consumers (homeowners) have no political choice, whereas developers do. (fine in theory, crazy in practice)
e. Effects of Exactions on Existing Homeowners: Existing property owners will get typically get an increase in property values from development that will be split between new and existing property owners (in favor of existing homeowners, especially if the exaction is undervalued)
i. If Exaction Overvalued: Existing homeowners may lose money.
f. Why Concern About Exactions: Do we need to be concerned about exactions at all, BECAUSE we don’t see a lot of exactions, even though perhaps we should?
i. Concerns About Exactions
1) Exactions stifle development.
2) Owners of undeveloped land will field some type of negative monetary impact BECAUSE exactions reduce the value of undeveloped property.
3) We might be concerned about competition between municipalities BECAUSE a municipality that imposes exactions will scare off development and not increase their tax base.
ii. Note on Inclusionary Zoning Exactions: In whether a community will allow inclusionary zoning, the most salient factor in a community adopting inclusionary zoning is whether their neighbors have adopted inclusionary zoning (so, an exaction may for inclusionary zoning may cut costs)
3. Constitutional Limitations – The Nollan/Dolan “Double Nexus” Standard
a. Prong #1 – Nollan “Substantial Nexus” Test: An exaction must bear some reasonable relationship (“substantial nexus”) to the purpose of the government action in order to be valid under the Takings Clause (the purpose in Nollan being that which would allow the government to deny the permit in the first place – Nollan v. California Coastal Commission)
i. Key Point: In analyzing the “substantial nexus” test, we must first examine the legitimate purpose the government would have had to deny the permit in the first place. (then compare the exaction to that purpose)
ii. Connect to “Unconstitutional Conditions Doctrine”: In land use, the doctrine takes this form, requiring denial of economically viable use of a property owner’s land to substantially advance legitimate state interests.
iii. Permanent Physical Occupation Context: Both Nollan/Dolan deal with government imposing a permanent physical occupation of land through an exaction – perhaps the USSC feels that less-than-deferential review should apply to these circumstances.
A. Interesting Question: What happens if government demands an exaction that is not a permanent physical occupation of land? Does Nollan/Dolan still apply?
iv. Unanswered Question: Does the exaction need to be proportional to the amount of harm or impact caused by the development?
v. Case Example: Nollan v. California Coastal Commission (pp. 638-42)
A. P owns a coastal bungalow and wants to develop a three-bedroom home consistent with others in the area. P is not entitled to do this as of right, so he needs permission from California Coastal Commission (CCC) to build. CCC agrees to grant P permit to build if he grants the CCC an easement for the public to pass across their property on the beach so they can get to a county park. CCC had done this earlier on other lots. P refuses.
B. USSC invalidates the execution of the easement because the purpose of the exaction did not relate to the government purpose in denying the permit.
C. CCC argues many purposes in denying the permit, such as protecting the public’s ability to see the beach, but Court says that if that was a legitimate purpose (and it was), the easement to walk along the beach is not related.
b. Prong #2 – Dolan “Rough Proportionality” Test: Although no precise mathematical calculation is required, the government must make some sort of individualized determination that the exaction is related both in nature and extent to the impact of the proposed development. (Dolan v. City of Tigard)
i. Key Question: What type of individualized determinations (i.e. government findings) are necessary to meet this standard?
A. Dolan Answer: USSC found the findings in Dolan inadequate BECAUSE
1) The government never said why an exaction of a public greenway, RATHER THAN a private greenway, was required in the interest of flood control; AND
2) The government did not demonstrate that the exaction of a bicycle path would relate to the additional number of vehicle and bicycle trips generated by the development.
ii. Nollan/Dolan – A Means-End Test: The Nollan/Dolan inquiry focuses on the legitimacy of the government regulation itself as applied to the property owner (the means-end of the regulation) NOT the burden on the landowner created by the regulation on the property in general (which makes it look more like a due-process analysis, rather than Takings clause analysis)
iii. Case Example: Dolan v. City of Tigard (pp. 643-50)
A. P owns a supply store and wants to rebuild. City has a land use code on traffic and floodwater runoff. Part of P’s rebuilding includes paving over a parking lot on her property. City demands in exchange for the development, a public greenway to improve storm drainage and a permanent 15-foot easement for a bicycle path. P doesn’t agree and sues.
B. USSC strikes down the exactions, finding they are reasonably related, but not proportional to the impact of the proposed development.
c. Practical Problems with Nollan/Dolan “Double Nexus” Test
1) May restrict flexibility in bargaining between local governments and developers that we would like to see occur.
2) Restricting exactions may force local governments to make more onerous requirements like exclusionary zoning, growth controls and denial of zoning permits.
3) Requiring fiscal analysis could lead to higher exaction charges on developers.
4) Repeat developers are unlikely to bring Nollan/Dolan challenges because it will eliminate their ability to bargain with the government.
d. Equal Protection and Exactions: Judges faced with an equal protection challenge will typically defer to a government’s fiscal classifications UNLESS arbitrary or irrational (“class of one”, maybe)
4. Remedy for Physical Exactions After Dolan
a. General Rule: If P succeeds in removing the exaction under Nollan/Dolan, P does not receive compensatory damages AND the local government is not required to approve P’s permit/request for government action. (makes winning under Nollan/Dolan a Pyrrhic victory)
b. Result: Eliminates protection that Nollan/Dolan provides SO THAT property owners will probably not bring suit because there is nothing to gain.
c. Case Example: Goss v. City of Little Rock (pp. 660-61)
i. P files an application to have his property rezoned commercial. City conditions approval of the rezoning on his dedication of 22% of his property for a highway. P doesn’t agree. City denies application. P sues.
ii. Court holds this is an unconstitutional exaction because there’s no rough proportionality, but upholds the denial of rezoning.
iii. P is allowed to receive partial return on his attorney’s fees, but by another method.
5. Monetary Exactions After Dolan
a. Introduction – Preference for Monetary Exactions After Dolan: Local governments may prefer monetary exactions for certain reasons, but moreso after Dolan. Why?
i. Reason #1: Cash is fungible and therefore typically more valuable to a recipient than the transfer of an in-kind item costing the same amount.
ii. Reason #2: Cash transfers are administratively cheaper, partially because the transferee need not inspect the quality of the good transferred.
iii. Reason #3: The amount of a cash transfer can be scaled more precisely than a physical transfer, easing compliance with the “rough proportionality” requirement.
b. Relationship Between Monetary Exactions and Actual Impact: Local government cannot require a landowner to provide fees in order to build a particular public facility, BUT can require the costs of rezoning land for a particular public facility OR the costs to attract other development that would build a particular public facility. (Ehrlich v. City of Culver City)
i. Unanswered Question: Does Dolan apply to exactions imposed broad classes of property pursuant to a legislative set formula? (some courts say yes, others no)
ii. Case Example: Ehrlich v. City of Culver City (pp. 663-67)
A. P built money-losing tennis courts and now wants to tear them down and build townhomes. City will grant him the permit in return for P paying $280,000 for a rezoning of other land to build tennis courts and $32,000 for a required dedication of “art in public places” fee.
B Court upholds the “art in public places” fee and remands the rezoning fee for a determination of the value of such a fee (but essentially upholds it).
c. Impact Fees to Finance Utility and Transportation Systems: Impact fees (exactions) to finance utility and transportation systems are typically the easiest to defend, ESPECIALLY when a municipality commissions an engineering study to indicate the infrastructure needed with a formula apportioning that cost on developers.
d. Impact Fees for Schools and Parks
i. General Rule: Typically ok for schools. Sometimes ok for parks.
ii. As Applied – No Children Developments: A property development that would not receive any benefit from an monetary exaction to fund public schools may have that exaction declared unconstitutional as applied to that development. (Volusia County v. Aberdeen at Ormand Beach)
A. Question #1: Is this result correct – home values may rise? (of course, they may also fall)
B. Question #2: Are special assessments available for schools? (yes, but are they a good idea)
iii. Case Example: Volusia County v. Aberdeen at Ormand Beach (pp. 669-71)
A. Government passes a countywide law allowing for exactions to fund public schools. Aberdeen is a development where children are not allowed to live there (by private covenant). Developer sues, arguing there’s no chance his development will burden schools.
B. Court holds that the countywide law is unconstitutional as applied to the developer.
e. Exactions for Inclusionary Housing: Usually involves the exaction of either monetary fees (to be place in a housing development fund) or physical exactions (of actual dwelling units which the developer is required to sell or rent to qualifying households).
i. Requirements of Physical Exactions for Inclusionary Housing: Most programs typically require specificity as to:
1) The households that qualify for the inclusionary units.
2) The procedures for choosing recipients from among the larger pool of applicants.
3) The design and location of inclusionary units.
4) The depth of the subsidy that a recipient receives.
5) The restraints on a program-beneficiary’s power to rent or sell a unit previously acquired at a below-market price.
ii. Developer Benefits: If the developer does this, he may receive a density bonus or some other special development privilege. (is this good?)
iii. Judicial Review – General Rule: Courts are generally unwilling to strike down inclusionary housing exactions.
VII. Discriminatory Land Use Controls (~ 3 pages)
A. Discrimination Against Racial and Ethnic Minorities
1. History
a. Racial Classifications in Zoning
i. The Original Purpose of Zoning: When zoning statutes were originally adopted, the general assumption by many people was that racial classifications were a reason for zoning statutes AND most people found this appealing.
ii. Constitutionality of Specific Racial Classifications: USSC, in Buchanan v. Warley (1917), held unconstitutional an ordinance which forbade blacks from moving to city blocks that had white majorities AND vice versa.
b. Racial Classifications in Private Covenants: When the USSC struck down racial classifications in zoning, these types of land use controls moved into private transactions through racially restrictive covenants.
i. Early View on Racially Restrictive Covenants: Generally upheld because they were considered private contracts between persons and therefore there was no “state action”.
ii. Constitutionality of Racially Restrictive Covenants: USSC, in Shelley v. Kramer, held that judicial enforcement of racially restrictive covenants was sufficient state action to run afoul of the 14th amendment.
iii. Continued Use: Shelley does not make it unconstitutional to put racially restrictive covenants into contracts – it just forbids their enforcement – AS SUCH, these types of covenants are still inserted for “signaling methods”.
iv. Effect on Lending Practices
A Early Problems: The FHA refused to ensure loans for black owners who were going to buy in a neighborhood with racially restrictive covenants AND banks used to “redline” around areas where they wouldn’t give loans (typically minority areas).
B. Solution: Congress passes the Fair Housing Act to try and remedy these problems BUT in many ways this is unsuccessful.
C. Interesting Counter-Reaction: In 1980s, banks flipped their practices in dealing with “redlined” areas AND heavily market subprime mortgages to these areas.
c. Fair Housing Efforts Today and in the Future: Although the Fair Housing Act was in many ways unsuccessful, other processes will improve the diversity of neighborhoods, SUCH AS:
1) The increasing diversity of the U.S. population.
2) The current nature of discrimination in the housing market, which is less open and more subtle (need to improve this).
3) Neighborhoods are starting to become more and more minimally integrated.
i. Problems With Development of Fair Housing Efforts
1) Individual persons will be able to say that their neighborhood is integrated and segregation statistics will not be backed up by their personal experience.
2) It will be easier for individual persons to think that segregation is no longer a problem generally.
2. Constitutional Challenges
a. General Rule: To make a showing that a land use decision violates the 14th amendment, P must show that a racially discriminatory “intent” or “purpose” was a motivating factor in the decision, otherwise courts will defer to the decision. (Arlington Heights I)
i. Discriminatory Impact: It is insufficient, but not irrelevant to show that a land use decision has discriminatory impact.
ii. Key Question: What type of proof is going to be necessary to make a showing of intent?
iii. Factors in Showing “Intent” or “Purpose”
1) Historical background of the land use decision, particularly if it reveals a series of official actions taken for invidious purposes.
2) Specific sequence of events leading up to the challenged land use decision.
3) Departures from the normal procedural sequence.
4) Substantive departures, if the factors usually considered important by the decision-maker strongly favor a decision contrary to the one reached.
5) Legislative or administrative history of the land use decision, including contemporary statements by members of the decision-making body, minutes of its meetings or reports.
b. Issues of Standing: In order to have standing to bring a case against discriminatory land use decisions, P needs to show more than a “generalized grievance”, BUT RATHER that there was a “substantial probability” that if the relief sought were awarded, the housing opportunity he desired would materialize.
i. Examples of Standing Failures: See Warth v. Seldin for specific examples (e.g. plaintiffs can’t raise the rights of third parties – p. 703).
ii. State Standing Laws: Typically more liberally granted in state courts than in federal courts.
c. Case Example: Village of Arlington Heights v. Metropolitan Housing Development Corp. (Arlington Heights I – pp. 698-701)
i. Church in a neighborhood zoned single-family wishes to build lower-income two-story buildings on its land. This requires a rezoning, which the Village’s board refuses. P sues, along with three minority residents.
ii. Court holds that the decision does not violate the Equal Protection Clause, because although P showed that minority residents would be more affected than white residents, P did not show that the Village’s board made the decision for any other reason than preserving the neighborhood’s single-family characteristic.
iii. Question: Does this case come out differently today because of RLUIPA? (does it have enough to do with religion AND who exactly is developing the property?)
3. The Fair Housing Act
a. General Rule: P can establish a prima facie case under the Fair Housing Act (FHA) by showing that the challenged decision has a disparate (discriminatory) impact on classes protected under the FHA. (e.g. race, color, religion or national origin – see Arlington Heights II)
b. Factors in Showing Discriminatory Impact
1) How strong is P’s showing of discriminatory effect?
2) Is there some evidence of discriminatory intent, though not enough to satisfy the constitutional standard of Arlington Heights I?
3) What is D’s interest in taking the action complained of?
4) Does P seek to compel D to affirmatively provide housing for members of minority groups OR merely to restrain D from interfering with individual property owners who wish to provide such housing?
c. Problem in Factors/General Rule Combination: Courts are divided over whether proof of disparate impact therefore must be accompanied by at least some evidence of discriminatory intent.
d. Defendant’s Rebuttal: If P establishes a prima facie case under the FHA, Dmust prove that its actions furthered, in theory and in practice, a legitimate bona fide governmental interest AND that no alternative would serve that interest with less discriminatory effect.
B. Discrimination Against the Poor
1. Type of Challenge: Occurs when municipal policies explicitly seek to exclude residents on the basis of wealth.
2. Obstacles to Challenges
a. Discriminatory Showing: P probably has to prove that the motive of excluding poor families was a but-for cause of the adoption of the municipal policy. (Arlington Heights I)
b. Wealth Not Necessarily Suspect Classification: USSC has held that “wealth” is not a suspect classification UNLESS there is evidence that the financing system discriminates against any definable category or “poor” people OR that it results in the absolute deprivation of education. (San Antonio Independent School District v. Rodriguez)
c. As Applied: Local governments are usually not explicit about excluding the poor, BUT RATHER imposes regulations that drive the price of housing beyond the reach of those the government deems too poor.
d. Fair Housing Act: Poor people do not enjoy any protections under the Fair Housing Act or Title VIII.
VIII. The Regional Obligations of Municipalities (~11 pages)
A. Obligations to Consider the Negative Spillover Effects of Uses Located Near Municipal Borders
1. The Question of Regional Land Use Controls: Deals with issues that are when a proposed land use has significant impact beyond local boundaries (because if it doesn’t, local government should be making the decision – is that ever the case?)
a. Key Question #1: What is the right scale of government to be making land use decisions? (local government or higher levels of government)
b. Key Question #2: Should higher levels of government be making more regional land use control, ESSENTIALLY shifting land use responsibilities to higher levels of government?
c. Advantages to Regional Land Use Controls
1) Limits the extent of externalities on competing local governments
2) Improves fairness concerns, because there is a more equitable distribution of LULUs (local undesirable land uses) and NIMBYs (not-in-my-backyard uses).
3) Reduces sprawl.
d. Disadvantages to Regional Land Use Controls
1) Citizens have less direct political accountability (through local government)
2) Distribution of tax dollars is more equivalent (for rich this is bad; for poor this is good)
3) Less stability in land use decisions BECAUSE we’re more confident in knowing what certain local governments will do.
4) Distribution may be less equitable BECAUSE regional planning decisions may decide that the best policy is to concentrate all of these uses in one place.
e. Orthodox Justification for Regional Land Use Controls: Regional land use planning limits, to a great extent, the amount of inter-local externalities, BUT this occurs at some cost to local knowledge about local conditions BECAUSE regional governments are not as adept at understanding what a desirable land use would look like in a certain area.
2. Inter-local Externalities and Structural Remedies
a. Definition of Inter-local Externalities: Both positive and negative externalities that a local government land use decision spills over onto another municipality BECAUSE of the allowance of certain negative uses near its borders.
b. The Structural Problem of Inter-local Externalities
i. Shifting of Negative Externalities: Local governments will allow certain negative uses to be put on the edge of the municipality BECAUSE it can shift those negative externalities onto its neighbors. (e.g. landfill on edge of town shifts negative externalities onto other town)
ii. Shifting of Positive Externalities: If you put a hospital in a town (or on the edge of a town), the costs are imposed by the local government AND the positive externalities shift to the neighboring municipality.
c. Structural Solution: Regional land-use planning is thus a structural solution for this problem to eliminate the positive and negative gains.
3. Judicial Remedies for Inter-local Externalities
a. Key Questions
1) In addition to structural remedies, should there be judicial remedies?
2) Moreover, should judicial review be different when there are inter-local externalities involved?
b. Private & Municipality Challenges - Standard of Judicial Review: A local government enacting a land use regulation which affects outsiders must give as much consideration to the rights of residents of adjoining municipalities who might be adversely affected AS IT WOULD to those of the residents of the municipality. (what does this mean? – see Borough of Cresskill v. Borough of Dumont)
i. Process-Based Solutions
A. Discussion of External Effects: As long as the contents of planning-staff reports, environmental impact statements and other relevant inputs include discussion of any external effects, this duty is met.
B. Open Forum: As long as the municipality holds hearings on the land use decision and gives residents of neighboring municipalities notice and opportunity to be heard, this duty is met.
1. Problem: The local government won’t really pay attention to the other residents because they want the tax revenue AND the other residents can’t hold them politically accountable.
ii. Substantive-Based Solutions
A. Due Process: When a local policy affects outsiders, (inter-local externalities) a reviewing court is required to:
1) Drop any presumption of validity for the city’s decision;
2) Place on the local government the burden of proving the rational basis of its policy; OR
3) Insist that the local government have a rational basis for believing that the policy reasonably relates to the regional (not the local) welfare. (City of Del Mar v. City of San Diego – maybe burden should be different if municipalities are different)
B. Cost-Benefit Analysis: When a local policy affects outsiders, (inter-local externalities) a reviewing court is required to undertake a de novo cost/benefit analysis of the local policy, and strike it down if the court decides the policy is inefficient from a regional standpoint.
1. Problem: Can courts actually perform this task better than legislatures?
C. Outsider Approval: When a local policy affects outsiders, (inter-local externalities) a reviewing court is required to invalidate the policy IF the court concludes that the policy would not have been adopted if the affected outsiders had been entitled to vote in local elections.
iii. Remedy: A good possible solution is that violations would constitute illegal spot zoning (Borough of Cresskill v. Borough of Dumont)
iv. Case Example: Borough of Cresskill v. Borough of Dumont (pp. 733-34)
A. Dumont rezones one block of land on the exterior of the borough to allow the development of a shopping center. Residents of the three neighboring boroughs sue. Dumont argues that zoning ends at the municipal boundary.
B. Court holds that this constitutes illegal spot zoning by Dumont – zoning affects areas beyond arbitrary and invisible municipal boundaries – and Dumont must hear the concerns of its neighbors.
c. Special Issues of Municipality Challenges
i. Notice to Municipalities: Many state statutes require neighboring jurisdictions to report on zoning amendments affecting property within a certain distance of another municipality (NY)
ii. Standing of Municipalities: Municipalities have standing to challenge a neighboring jurisdiction’s zoning decisions in court IF the municipality can demonstrate that it would be “substantially, directly and adversely affected in its corporate capacity.”
A. Purposes
1) Local owners can sue, but their claims are more difficult to bring (no takings clause argument obviously).
2) Aggregate harms to the neighboring municipality may be greater than the local harm to one property owner.
3) We may want some type of liability (other than regional land-use planning) that requires local governments to internalize costs and benefits.
iii. Remedies
A. Key Question: What measure of damages should a municipality have against another municipality, ESPECIALLY in terms of money damages, as opposed to an injunction?
B. Problem: Who is most likely to pay the money damages? (i.e. how will costs be allocated?)
C. Possible Solution: Creates inter-local bargaining opportunities between municipalities!
D. Possible Scope of Recovery: Local governments could theoretically recover, as money damages, decreased tax revenues, losses from environmental impact and infrastructure costs, etc.
iv. Case Example: City of Del Mar vs. City of San Diego (pp. 735-738)
A. San Diego approves plans for a development in undeveloped area that will bring 40,000 people to 4,000 tracts. Del Mar sues because of the costs development have on its town infrastructure (e.g. roads, noise). Basically says that this plan creates significant regional costs and few regional benefits (e.g. lack of affordable housing).
B. Court upholds the zoning decision because San Diego will be absorbing most of the costs of the project AND if San Diego hadn’t given approval to the development, it would have happened anyway (and more haphazardly).
C. Note: Court suggests less deference to the legislature in certain situations here.
B. Obligations to Consider Regional Needs for Locally Undesirable Land Uses (LULUs)
1. Siting LULUs
a. Source of Problem: Siting LULUs is a necessity, BUT becomes a major source of frustration for governments on one hand AND for the communities targeted for the LULUs on the other hand BECAUSE they often provide benefits to a relatively large and diffuse group of people, BUT impose significant burdens on immediate neighbors. (internal local politics difficulty)
b. Typical Top-Down Approach to Siting LULUs – Decide, Announce, Defend (DAD): A “centralized planning process” in which a blue ribbon panel, applying largely engineering criteria, identifies a short list of “best sites” AND prospective firms bid on specific sites.
i. Invalid Assumptions
1) The establishment of facilities is largely a technical issue to be planned and decided by experts on the basis of technical knowledge and objective standards.
2) People living near a facility will not have a serious objection OR will be convinced that the decision is a reasonable one.
c. Solutions to the NIMBY Problem
i. Preemption: Trying to stem the tide of NIMBY movements by local residents, the next government approach was to preempt local authority in siting matters.
A. Problem: Local governments proved quite resourceful in thinking up novel and semi-legal ways to halt project they opposed.
B. Question: Does the government preemption need to be explicit or may it be implicit?
C. Note: Federal law may preempt local zoning controls where the federal government has a special interest. (e.g. EPA actions)
ii. Public Education: Governments next would engage in public education, trying to convince local residents that the projects were for their benefit. (but is this successful or counterproductive)
iii. Public Participation: Government also tried to facilitate cooperation, instead of engendering opposition with local governments by providing the local governments with the right of veto (this may increase likelihood of rejection – but is the opposite of preemption).
iv. Override: Governments also tried policies that said IF, after participation by local residents, they insisted on refusing a facility under the offered conditions, the government should override that opposition.
A. Faulty Assumption: The greater public good should prevail in the end over narrow local self-interest and emotionalism. (probably doesn’t work well, and doesn’t address local opposition)
v. Negotiation: Can compliment preemption or override techniques (as a last resort), but essentially involves governments negotiating with local citizens.
A. Faulty Assumptions
1) Assumes that interests are not permanently fixed and necessarily irreconcilable.
2) Assumes that both sides want to reach a solution to the matter (which siting opponents usually don’t).
vi. Compensation and Incentives: In combination with negotiations, governments will often offer various incentives or implicit compensation to the community in order to site the facility.
A. Faulty Assumptions
1) Individuals in the host community are rational economic actors.
2) The disparity between the diffuse social benefits from a facility and the disproportionate individual costs can be closed by compensation (what about if economic compensation isn’t the only thing a siting community is taking into consideration)
vii. Cost and Risk Sharing: Involves governments suggesting that communities share the social costs of these facilities, RATHER THAN concentrating the costs (and the facilities) in one local area (the YIMBY approach – take responsibility).
d. Proposed Solution – Voluntary-Choice Approach: Does not assume as a given that there will be a prior decision to site a facility in a particular locale, BUT RATHER that the decision will only be made after invitations to potential host communities who have expressed interest, studied the proposals and negotiated with the government.
i. Key Point: At every part of the process, communities can drop out of the siting process AND prior to acceptance, communities may negotiate with the facility proponent on details.
ii. Advantages
1) Non-threatening;
2) Seen to be legitimate; AND
3) Efficiency of the self-selecting process. (those communities who want these things will be the most likely to support them)
iii. Prof Note: He sees this solution as “highly optimistic”.
e. Judicial Solution – Total Prohibition Against LULUs: A local government that institutes a total municipality-wide prohibition of an activity which, on its face, does not give rise to an indication of the protection of a legitimate government purpose controllable by zoning law MUST establish the legitimacy of the prohibition by evidence establishing what public purpose is sought to be protected. (e.g. gas stations – see Beaver Gasoline Co. v. Zoning Hearing Board of the Borough of Osborne)
i. Original Burden on Zoning Applicant: MUST only meet his original burden of establishing constitutional invalidity of the zoning ordinance by showing that the total prohibition exists. (relatively easy if reason for denial of permit is because of prohibition)
ii. Exception to Rule: Common-law nuisances, generally, but this may go further.
iii. Case Example: Beaver Gasoline Co. v. Zoning Hearing Board of the Borough of Osborne (pp. 747-48)
A. Borough of Osborne completely bans gas stations. Beaver applies for a permit to erect a gas station and the permit is denied on the basis of the prohibition against gas stations.
B. Court says that the municipality must provide some evidence of the public purpose to be protected by banning a use which does not, on its face, give rise to the protection of a legitimate government purpose.
2. Environmental Justice and Other Objections to the Siting of LULUs
a. Key Concern: Certain land uses (LULUs) impose environmental, perhaps even emotional harms, on the nearby residents, who overwhelmingly tend to be the poor and minorities.
b. Conclusion: The poor and minorities are negatively affected from these harms, so that these externalities from wealthier people affect poor people in many different areas, SUCH AS personal health, wealth, movement in society AND lower property values
c. Solutions
i. Special Assessments: Perhaps governments should impose some special assessment or impact fee on those persons who don’t have to live near landfills (but isn’t this already being done through higher property taxes on these prople)
ii. Fair Share Approach: Impose from the top-down a requirement that the burden of land use is spread out over all communities (i.e. the Mount Laurel solution – see below)
iii. Impact Statement Approach: Agencies responsible for siting LULUs maintain statistics regarding the location of existing facilities within neighborhoods AND take those uses into account when making decisions.
d. Key Issue: Are we better off having LULUs concentrated to reduce spillover effects as opposed to being spread out?
i. Possible Problem: Maybe some LULUs become worse uses to a neighborhood when combined with other uses.
e. Criticism of Environmental Justice
1) Even if LULUs tend to be sited in poor and minority areas, it is perfectly sensible to put negative uses in low-cost areas BECAUSE they will have the smallest impact on property values.
2) Coming to the Nuisance Issue – Did government purposely cite the landfill in a poor and minority neighborhood OR did the landfill come first and attract these people? (empirical studies say it’s a bit of both)
i. Rebuttal to Criticism
1) Poor areas may be more dense, SO siting LULUs in these areas may create harm to more people.
2) Property values aren’t always the most important issue – public health must always be an important consideration.
f. Key Point: Governments have incentives to put LULUs in poor and minority areas for property tax reasons and political concerns.
C. Obligations to Allow (or Provide) Low- and Moderate-Income Housing
1. Introduction to the Problems of Exclusionary Zoning
a. Key Question: How should we deal with the desire of local governments to exclude the poor from their jurisdictions (especially suburbs) and concentrate them in other jurisdictions?
b. Problems in Concentration of Poor People
1) Will the concentration of poor people increase harms to these people? (e.g. decreased social mobility, less opportunities)
2) Is the purposeful exclusion of poor people from certain communities merely a proxy for racial exclusion? (affordable housing issues always bring up racial problems)
i. Note: Studies have shown that people coming from poverty who move to richer communities tend to improve their economic standing.
c. Lack of Remedies: (e.g. local government engages in exclusionary zoning, like 10-acre zoning)
1) Due process (difficult).
2) Equal protection (proxy for race or class of one – unlikely to get).
3) Fair Housing Act (difficult).
4) Takings Clause (really difficult).
2. The Mount Laurel Solution
a. Question: May a developing municipality create land use regulations to make it physically and economically impossible to provide low and moderate income housing in the municipality SO THAT it effectively excludes these people from the municipality
b. Original Test – Mount Laurel I: A municipality’s land use regulations must make reasonably possible an appropriate variety of housing choices, SO THAT it may not foreclose the opportunity for poor and moderate income residents to live there. (i.e. local governments must carry a fair share of the burden in providing for all categories of people who may desire to live there – see Mount Laurel I)
i. Overcoming the Presumption: The municipality must sustain the heavy burden of justifying the land use regulations by demonstrating particular circumstances that dictate it should not be required to do so, BUT may not make such a showing through purely fiscal reasons.
ii. Reasoning: Since zoning is a police power that always belongs to the state, the zoning power must be exercised by a local government for the benefit of the state and not the municipality, SO IF the zoning power is not exercised for the benefit of the state, it creates a presumption of invalidity. (because this land use decision has a substantial external impact on the welfare of the state’s citizens outside the municipality)
iii. Remedy: The court may strike down the zoning ordinance, giving the municipality a certain amount of time to come into compliance.
iv. Criticisms
1) This result would create more local heterogeneity within towns by requiring each community to have affordable housing, but would lead to more homogeneity between towns (less choice for those who want it).
2) Form of progressive redistribution.
v. Case Example: Southern Burlington County NAACP v. Township of Mount Laurel (Mount Laurel I – pp. 763-68)
A. Mount Laurel adopts zoning ordinance where most property is zoned industrial, although very unlikely to be used as such. The rest of the property is zoned single-family, with lot requirements, which encourages large-scale, expensive housing. Basically, the restrictions mean that the poor aren’t going to get in, and a lawsuit is filed.
B. Court holds the zoning ordinance invalid, finding that Mount Laurel must provide an appropriate variety of housing choices, as much as reasonably possible.
C. Court gives Mount Laurel 90 days to get its zoning ordinance into compliance.
c. Second Test – Mount Laurel II: After Mount Laurel essentially ignores the NJ Supreme Court’s decision, the court adds bite to its ruling with the following requirements:
i. Affirmative Steps: All local governments (not just Mount Laurel) are required to take affirmative steps to attract low and moderate income housing to the municipality through their zoning ordinances.
ii. Specific Numbers: All local governments are required to make available specific numbers of low to moderate housing units in each municipality.
iii. Builders’ Remedy: Court allows the builder to obtain an injunction from the court to build low to moderate income housing, regardless of what is provided in the zoning ordinance.
A. Problem: Developers would often include low to moderate income housing in their developments to get the zoning ordinance invalidated as it applied to them and eliminate exactions too!
iv. Court Control: Any future Mount Laurel litigation will be handled by judges selected by the NJ Supreme Court only.
v. Result: Massive amounts of judicial control over the development process.
d. Aftermath of Mount Laurel – NJ Legislature Response: NJ legislature passed legislation which creates the Council on Affordable Housing, a government agency that essentially handled and redefined many of the requirements and issues of the Mount Laurel decisions AND the legislation also prohibited the courts from setting aside agency determinations except upon clear and convincing evidence.
i. Validity: NJ Supreme Court upheld the facial validity of this law AND has upheld most of the agency’s decisions afterwards.
ii. Regional Contribution Agreements (RCAs): Under the legislation, municipalities are alloed to transfer to other “receiving” municipalities up to 50% of their fair share obligation through RCAs.
iii. Result: The numbers say all of this litigation and legislation has had some effect on the amount of housing for low and moderate income households.
D. Municipal Obligations to Accommodate Pressures for Regional Growth
1. Justifications for Growth Management
a. Definition of Sprawl: Low-density, automobile-consuming, land-using, often haphazard developments on the fringe of central areas OR often near a deteriorating central city that protrude on rural, undeveloped areas (you know it when you see it – the key is the automobile)
b. Benefits of Sprawl
1) Less crowded through larger average lot sizes at a distance from the center of a metropolitan area.
2) Reflects consumer preferences for less crowded (low-density) areas.
3) Stronger tax base which provides better schools and social services.
4) Land and development are cheaper in suburbs than in the city (i.e. more for your money).
5) Political process that is easier for residents to participate in (smaller government) and is more responsive to consumer preferences.
6) Disperses environmental harms (i.e. better air quality in suburbs)
7) Reduces certain burdens of cities.
c. Costs of Sprawl
1) Environmental concerns because of increased automobile use and heating costs.
2) Takes important resources away from cities.
3) It costs more to bring municipal services to far-away rural areas than to urban areas.
4) Less diversity of population.
5) Provides greater and greater consumption of open space (with negative impacts on wildlife and agriculture).
6) Lessens cultural opportunities because people aren’t exposed to a diversity of experiences.
7) Causes disinvestment in urban infrastructure.
d. Orthodox Story for Sprawl: Regulations against sprawl are interferences with clear consumer preferences.
e. Orthodox Story Against Sprawl: Massive market failures and government intervention has contributed to sprawl AND towards consumer preferences for sprawl (i.e. transportation subsidization), SO IF we removed subsidies, these preferences might not occur.
f. Solution for Sprawl – New Urbanism
i. Basic Concept: We should create self-contained mixed-use areas instead of cookie cutter subdivisions where housing, parks and schools are placed within walking distance of shops, civic services, jobs and transit.
ii. Problems
A. Zoning: New Urbanism is inconsistent with the original idea of zoning.
B. Amount Of New Urbanism: If New Urbanism is a more appealing way of living, then why don’t we see this in new developments? (maybe because people really don’t want to live near certain things, say, factories)
iii. Possible Solution: Maybe eventually overconsumption of resources (i.e. Tragedy of the Commons situation) will make New Urbanism the answer.
iv. Actual Result: New Urbanism does appear, but not much (some developments in the 1970s and 1980s.
g. Problem with Sprawl Control Efforts: Can make development extremely tough and expensive AND reduce property values (see Vermont Act 250).
2. Moratoria
a. Definition: Moratoria stop all or most development for some limited period of time that the jurisdiction claims it needs to respond to a planning or infrastructure crisis.
b. Judicial Analysis: To be valid, the land use ordinance containing a moratorium must be reasonably related to the regional welfare (since moratoria affect areas outside the municipality – see Associated Home Builders, Inc. v. City of Livermore – stronger review than rational review)
i. Elements
1) The court must forecast the probable effect and duration of the moratoria (i.e. restriction);
2) The court must identify the competing interests affected by the restriction.
3) The court must determine whether the ordinance, in light of its probable impact, represents a reasonable accommodation of the competing interests.
ii. Exceptions: Moratoria often provide for the granting of variances and special exceptions AND rezonings and other land use decisions provided before moratoria are put into effect may fall under the vested rights doctrine.
iii. Other Methods of Challenge
1) Equal Protection (tough)
2) Takings Claims (impossible after Tahoe-Sierra)
3) State statutes (may be of some help – depends on the language)
c. Problems With Moratoria
i. Inter-local Externalities: Moratoria on development may increase sprawl in neighboring towns BECAUSE the moratoria may fail to address consumer preferences.
ii. Monopolistic Control: Moratoria gives owners of existing homes a benefit by creating a monopoly over available housing stock in the area. (which will drive up home prices).
d. Prevalence of Moratoria: Moratoria are relatively prevalent in certain areas of the country.
e. Case Example: Associated Home Builders, Inc. v. City of Livermore (pp. 797-800)
i. Livermore enacts an ordinance that prohibits issuance of further building permits until educational facilities, sewage capacity and water supply are improved. P sues.
ii. Courts says there is not enough evidence from P to determine whether the moratoria is reasonably related to the regional welfare to make a decision at this time.
3. Rate of Growth or Quota Programs
a. Definition: Programs which limit or cap:
1) The number of building permits issued each year;
2) The rate of change in jurisdiction’s population; OR
3) Some other indicator of growth.
b. Judicial Analysis: City of Petaluma asserts that these types of programs must be reasonably related to a legitimate state interest, BUT IT IS LIKELY the later Livermore test applies here (i.e. reasonably related to the regional welfare, see above).
c. Case Example: Construction Industry Association v. City of Petaluma (pp. 804-06)
i. City of Petaluma enacts a plan which fixes a housing development growth rate not to exceed 500 dwelling units a year. P sues.
ii. Court upholds the regulation under rational review (doesn’t implicate right to travel as lower court said).
4. Growth Phasing and Concurrency Programs
a. Definition: Growth phasing ties the location and timing of new development to the adequacy of the community’s infrastructure and other public facilities OR some other indicator of growth.
b. Judicial Review: Courts will likely apply or use the same reasoning as in the moratoria or rate of growth cases – Is the regulation reasonably related to the regional welfare?
c. Case Example: Golden v. Planning Board of Town of Ramapo (pp. 808-10) – PROF LIKES THIS CASE
i. Ramapo approves aggressive smart growth strategies within the town (in opposition to regionalism).
ii. It creates a new comprehensive plan, plus a zoning scheme that is tied to the development of infrastructure. In essence, the scheme phases growth with the development of the town’s infrastructure. The infrastructure development isn’t going to be built for 18 years, so developers of subdivisions are frozen out (not single-family houses). Developers could buy their way out of the restrictions (i.e. conditional exactions). One developer sues.
iii. Court upholds the zoning ordinance, finding that Ramapo had not exceeded its authority to zone under the NY SZEA.
iv. Interesting Afterstory: Ramapo also sought to limit the ability of people within the town to create incorporated villages (easy to do in NY) – this was struck down, SO the number of incorporated villages doubled as people opted out of the system.
v. Result: Ramapo is an example of the victory of local land use controls over regional control BECAUSE the local response was to go even more local.
5. Urban Expansion Limits
a. Definition: Draw lines around the jurisdiction to contain urban growth AND prevent the spread of development into the surrounding farms or countryside.
b. As Applied: Provides for “green zone” to transition between urban and rural areas, so that land outside the boundary can’t be developed. (e.g. Portland, Oregon)
c. Result: Increases urban density and property values inside the zone, but reduces property values outside the zone. (does this exclude poor people and minorities)
d. Solution to Developer Rights Outside the Boundary – Transferable Development Rights (TDRs): Since property owners outside the urban growth boundary can’t develop their land, the government will allow them a right to build more intensively within the urban growth boundary through a TDR that allows them to capture some of development.
IX. Government as Landowner, Developer and Financier (~3 pages)
A. Condemnation for Public Use and the Kelo Decision
1. Condemnation
a. Roads and Railroads: Yes – a settled question
b. Private Hospitals and Airports: Tougher – but still yes.
c. Public/Private Partnerships: Tougher question still, especially where government condemns property for the benefit of a private redeveloper through the rationale of economic redevelopment.
d. Private to Private: Greater problems (e.g. condemning a metal recycling center to sell to a race track builder is no good – see Southwestern Illinois Development Authority v. National City Environmental, LLC)
2. The Public Use Requirement and Kelo
a. Key Issue: How you draw lines in what the government should be able to condemn or not for some other (public) use.
b. Kelo – Ends-Based Test: Affords legislatures broad latitude in determining what public use needs justify eminent domain (deference). (Kelo v. New London – i.e. we’re not going to second-guess legislative determinations)
i. Under Kelo Standard
1) Economic development may be a public use.
2) Government may condemn and transfer property to private interests
c. Case Example: Kelo v. New London (CB 945-952)
i. City of New London condemns property to revitalize downtown and sell to Pfizer to build, but some property owners resist and file suit for injunction against taking. They argue that this is not for public use. New London says it is for economic revitalization.
ii. USSC holds for D because the evidence indicates that P’s well-known and public plan for the property is public use.
iii. USSC rejects P’s claim that economic development cannot be a public use and also rejects claim that condemnation which transfers property to private interests is not permissible (citing federal railroads in the 19th century)
iv. Dissent – O’Connor: Points out the slippery slope problem – that you could condemn a Motel 6 to sell to a Ritz-Carlton.
v. Dissent – Thomas: Points out there may be an equal protection problem here, because cities condemned largely black neighborhoods to build gentrified neighborhoods back in the 1950s and 1960s.
d. Test Example – Condemnation In The Context of Atlantic Yards
i. Difference #1: The ultimate beneficiary was undetermined when the government decided to condemn in Kelo; HOWEVER, we know the beneficiary in the Atlantic Yards project. (but does this matter constitutionally?)
ii. Difference #2: Maybe there is less process in the Atlantic Yards case than in Kelo, BECAUSE in this case, the government engaged in a long careful review. (but does this matter constitutionally?)
iii. Resolution: In the Atlantic Yards case, the Second Circuit denied the Ps public use argument, saying that no party can deny that some of the property will be used for public use (e.g. to improve blight, basketball stadium), SO WHERE THERE IS SOME PUBLIC USE, IT PASS CONSTITUTIONAL MUSTER!
e. Post-Kelo Solutions: The principal constraints on the condemnation power today are state statutes or constitutions, not the federal constitution. (e.g. post-Kelo legislation).
3. Issues in Government’s Condemnation Power
a. Key Question #1: Since government’s have broad condemnation powers, why don’t we see this power used more often?
b. Possible Solutions #1
1) State constraints on eminent domain actions.. (as mentioned above – post-Kelo legislation has been robust at Stevens’ suggestion)
2) The remedy for a government’s eminent domain power is political, SO the protection against eminent domain is political.
3) Government condemnation is expensive.
i. On Political Remedies: Typically, the groups most likely to exert political pressure are small groups with high stakes (see Komesar), WHILE the least likely are poor minorities.
ii. On Government Condemnation: Government will almost always prefer market transactions with property owners AS OPPOSED TO condemnation, even at premiums above market value, because it’s less expensive total-wise.
iii. Note: When NYC condemns property, it also has to pay compensation for fixtures (defined by Code) AND NYC has condemned about $400 million in property over past five years.
c. Key Question #2: Why do people not care about condemnation for a road BUT do care about condemnation for a shopping center?
d. Possible Solutions #2
1) Visceral dislike for the process.
2) It provides something that the market takes care of easily.
3) We prefer public benefits.
4) Maybe we’re concerned about the profit motive BUT is this a constitutional matter?
B. Tactics in Private Land Use Assembly
1. Problems With Private Land Assembly: Since most private land assemblies are made through shell companies, IF SOMEONE GETS WIND OF THE LAND ASSEMBLY, they will buy a piece of land just to wait for the holdout value (sophisticated practice in NY)
2. Government Involvement in Private Land Assembly: Achieves a number of purposes, must notably:
1) Prevents holdout value (big one)
2) Prevents inefficient assembly of land (connected).
a. Where Occurs: Government involvement in private land assembly typically occurs in the urban core (this is a good way to prevent sprawl)
b. Criticism: Do we need government involved in private land use assembly – after all Atlantic Yards was compiled with no condemnation?
c Responses
1) All of the bargains in Atlantic Yards happened in the shadow of eminent domain.
2) There are still holdouts to the process in Atlantic Yards.
C. Solutions to Condemnation Problems
1. Public Ruses
a. Key Observation: If government condemns your property, it is presumably conferring some reciprocal public benefit upon you through implicit compensation, BUT the less public benefit being conferred, the less implicit condemnation.
b. Basis of Theory: Compensation should vary with the reciprocal public benefit of the condemnation.
c. Theories of Compensation
i. 100% Public Benefit: Property owner should receive the fair market value for his property.
ii. Less Than 100%, More Than 0% Public Benefit: Use an appraisal method which says that economic assumptions are not based on the fair market value of the property today, BUT RATHER are the economic assumptions that the government is projecting as a result of the condemnation (i.e. let property owners get slice of the public benefit SO government will be more realistic in its projections);
iii. No Public Benefit: Property owner should receive all of the benefits that the government will receive from the condemnation.
d. Unanswered Question: Will the property owner actually receive any public benefits at all because he’s being kicked out of the area (maybe)?
2. Communities for Sale Theory
a. Basis of Theory: There should be a mechanism by which communities may put themselves up for sale at a certain price. (with a requirement of a supermajority for approval).
b. Rationale: This provide market mechanism for condemned community members to receive shares from market profit SINCE landowners usually pay a premium for already-assembled land.
i. Note: Market inefficiencies (such as the fact that developers and governments must pay a premium to assemble land) cause assembled land to be valued more than unassembled land (in perfect transaction – there would be no difference)
c. Question: Has post-Kelo enactments by state legislatures limiting condemnation powers increased the price differential between assembled and unassembled land?
X. Additional Theoretical Concepts (~3 pages)
A. Locke – “Labor Theory of Property”
1. Basic Principles
1) Property is acquired by mixing a person’s labor with some thing or resource.
2) The only thing a person owns is his/her labor; use of one’s own labor creates a property right in himself.
2. Key Questions
1) How much labor is necessary to count for proprietary interest?
2) What counts as labor?
3. Policy Purposes
1) Creates incentives to keep what you work for;
2) Limits ownership to productive amounts; AND
3) Individualistic.
4. Criticism
1) Encourages overuse;
2) Allocates property only to those who are able to work;
3) Prioritizes one form of use;
4) Creates ambiguities about the extent of labor;
5) Individualistic; AND
6) Discourages some forms of labor.
B. Demsetz – “Economic Theory of Property Law”:
1. Key Question: How does a “private property regime” arise?
2. Main Thesis: Private property rights develop to internalize externalities when the gains of internalization become larger than the costs of internalization. (utilitarian account of property)
3. Goals of “Private Property Regime”: The allocation of private property rights should create the allocation of efficiency in resources.
a. Problem: Transaction costs (freeloaders, information costs, etc.)
b. Sub-goal: To figure out which party has the lowest transaction costs.
4. Basic Concepts
a. Rule of Community: Property rights can only exist in relation to other people within a community. (see Keeble v. Hickeringill or e.g. problem 4, p.32)
b. Externalities: Costs imposed externally that the property owner does not have to bear. Costs can be practical or abstract. Externalities can be negative or positive.
i. Note: Costs cannot be externalities if the cost is being taken into account by the property owner; recognition of the cost is not enough. (e.g., a person pays another $50 to stop playing loud music; if person paid continues to play loud music with the $50 taken into account, the loud music cannot be an externality.
c. Coase Theorem: In the absence of transaction costs, parties would bargain to the efficient outcome.
d. Efficiency: The main goal of Demsetz. Two kinds of efficiency exist:
i. Pareto Efficiency: Consists of transactions where all parties are made better off and no further transactions are possible that will improve the parties’ condition (high bar)
ii. Kaldor-Hicks Efficiency: Doesn’t require that all parties be made better off in a transaction; rather it requires that parties who are made better off would be able to compensate the losing party if they want to. Occurs when a gain made may be greater than the cost imposed.
iii. Note: Efficiency does not tell society what the distribution of property should be.
e. Policy Concern – The Initial Allocation of Property Rights: The initial allocation of property rights is important because it is harder to negotiate with others once you have something (see behavior economics).
i. Behavior Economics: Divided into wealth effects and endowment effects:
A. Endowment Effects: You value things we have more than things we don’t have.
B. Wealth Effects: The more money you have, the less each additional dollar matters
f. Tragedy of the Commons: Property owned communally and used by a community can develop a race to consume resources as fast as possible because too many people have the right to use the property’s resources.
i. Why Does It Occur?
A. An inter-temporal externality problem exists, leading to individuals of the community imposing costs on people in the future that the individuals don’t have to bear now.
B. Provides incentives to over-invest in capture and consumption technologies (inefficient incentive to investing).
ii. When Does It Occur
A. When the value of the resource is important (e.g., if communal property resources are not worth anything, then there can be no interest in using it)
B. When the size and anonymity of the social group is important.
C. When there is visibility of the consumption within the social group.
D. Note: If there is no “tragedy of the commons”, there is no need for a “private property regime”. It might even damage social ties and bonds within the community.
iii. Solutions
A. Create a “private property regime” because it can confer costs on an individual’s consumption.
1. Advantage: You know who to negotiate with in order to internalize externalities.
2. Size Issue: For a “private property regime” to work, it needs to be within the right “bite-size” for the situation.
3. Concentration Issue: “Private property regimes” tend to work better with diffuse concerns rather than concentrated problems.
B. Rely on a community’s social bonds to prevent over-consumption.
C. Government regulations.
g. Tragedy of the Anti-Commons: Occurs when too many people have the right to exclude others from using a resource. Results in inefficient under-use of the resource.
i. Classic Occurrence: When there are many layers of exclusion to go through and each person wants to extract the full price from the person wanting to use the resource. (e.g. Creating patents on tiny parts makes it more difficult to create new patents involving combinations of the smaller parts.)
ii. Solution: Bundling property among people more efficiently.
C. Legal Insight Into Remedies in Nuisance Law – Calabresi & Melamed:
1. Basis of Theory: When two parties are in dispute over something, you can give entitlement to one of two people (P or D). Used to be yes or no answer, but this theory reveals the following dynamic:
| Entitlement Damages (liability rule) Injunction (property rule) Plaintiff Damages Injunction Defendant Damages (w/injunction) No nuisance P will have to pay D for injunction. |
Entitlement Damages (Liability Rule) Injunction (Property Rule)
2. Application
1) If the court rules something is not a nuisance, they may create a property rule in the conduct.
2) If the court rules something is a nuisance, they may create a property rule in the protection.
3) If the court rules something is not a nuisance, they may create a liability rule in ordering P to pay for an injunction against D.
4) If the court rules something is a nuisance, they may create a liability rule in order D to pay P damages.
3. “Coase Theorem” Relation: Calabresi & Melamed’s theory attempts to analyze when parties should be able to bargain to their efficient outcomes because courts interfere with a use of property.
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