NARRATOR: Thanks for joining this episode of the No. 86 lecture series, where we discuss the foundational principles of Property Law as well as current topics in the academic literature. Today’s episode features Eric Claeys, Professor of Law at Antonin Scalia Law School. As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker. PUBLIUS: We generally think of property as a matter of private concern. But certain types of property, especially land, are also subject to several public regulations. Can you discuss zoning laws? What is their purpose and how do they affect the rights of property owners? ERIC CLAEYS: Zoning is a system of administrative law that states established for what I'll call municipalities, and I mean by municipalities, cities, counties, towns, the entities that are in the state that are incorporated to run life in some small part of the state. In a system of zoning, a state legislative enacts an enabling statute, a zoning enabling statute. The zoning enabling statute gives municipalities authorities to make policies that have the force of law in their boundaries. These policies are typically called zoning ordinances. Zoning laws or zoning enabling statutes authorize municipalities to then make ordinances. The ordinances then let the municipalities restrict what buildings can go in what neighborhoods, how high buildings can be, how streets need to be laid out in those neighborhoods, and do lots of other things to make the use of land in their different neighborhoods in the municipality more orderly. A system of zoning gives the authority in a municipality, the city council or if there is one, the zoning commission authority to regulate land use. Then that authority is going to be driven or it's going to be exercised in a way that's consistent with the wishes of an electoral majority. Zoning is political. The zoning policy then is influenced by the wishes of the different residents of that municipality, and there'll be insiders. There'll be development companies that want to build more houses or more commercial structures. There will then be voters who want the city to pursue certain policies that increase the benefit of their homes. All zoning commissions try to do to some extent to make different land uses specialized and to keep different kinds of land uses apart from each other. The simplest forms of zoning will put industrial uses in one neighborhood, business uses in another neighborhood, and then residential uses in other neighborhoods. Many of the pressures that municipal councils and zoning commissions feel come from homeowners who want zoning also to keep property values high in their communities because a home will be one of the biggest financial assets those homeowners have. When that happens, then zoning commissions feel pressure also to split residential zones even up more finely. Apartments can be with apartments, but they cannot be with standalone houses, or you can have standalone houses on lots that are a fifth of an acre, but they need to kept away from houses where the lot is going to be an acre big. The smaller, more specialized the uses become, then the fewer opportunities there are for somebody who wants into a neighborhood to then get land that's suited to the exact specifications that that buyer wants to have. When that then happens, people who do not own land can be dissatisfied because they can't buy in, and so they can bring lawsuits about what's called exclusionary zoning. There may be people who want to put their land to uses different from the way in which the neighborhood is zoned, and then those owners can then complain. If somebody is concerned about exclusionary zoning, then what has to happen is usually then there'll be some advocacy group that's representing people who want to buy into the neighborhood and cannot. That person will work together with the developer who wants to build for the people who want to buy in, and they will have to bring a series of administrative law challenges to the zones and its exclusionary effects. If they can't get satisfaction, then they could try to bring state level constitutional challenges on theories like equal protection against the policies that tend to exclude people. If you have an owner and the owner says, "I want to change the way my land is used, and the zones don't let me do so," the owner can then try to petition to the city council or the zoning commission. The owner can petition for a rezoning or a variance and then make arguments that given the facts on the ground and given the authority the commission has by law, the commission really ought to change the zone. If the commission doesn't go along, then the owner then needs to bring a public law lawsuit asking for judicial review of the council's decision or the commission's decision. Then if the owner loses those challenges, then the owner tries to being alternative constitutional challenges as well. PUBLIUS: What is eminent domain? ERIC CLAEYS: Eminent domain is a power that every country has and every state has to condemn land for public uses. Eminent domain is understood at once as a power but also powers with built-in limitations. On one hand, the word domain in eminent domain means, you're talking about a power, a government by being a sovereign over a territory has authority to take private property in that territory and take it for public purposes. Now eminent domain traditionally has been understood as a limited power. If the government is going to exercise the power, it's impliedly understood that the power needs to be used for public goals. It's also traditionally understood that the government needs to pay people compensation when it takes their private property. Now in all U.S. jurisdictions, these ideas about eminent domains have been reduced to writing in constitutional guarantees. Then you understand that there will be constitutional clauses that talk about eminent domain or takings, and those referring to those eminent domain power, but then you go to the constitutional text to see when the power can be exercised and on what limitations it can be exercised. Governments have lots of discretion to act on property, and zoning laws, environmental regulations, and preservation policies, just to take three really common ones, those are all government policies that governments use to try to make property better in a community. When governments pursue policies having to do with zoning, environmental policy or historical preservation, governments are using powers called police powers. It's expected that when a government acts under its police powers, it acts in ways that seem genuine exercises of police powers, genuine exercises of the power to coordinate how people and their property behave for individual rights and public benefits. If a government does something that seems to have very little relation to police functions and seems more like a backdoor exercise of eminent domain. Courts then reserve authority to say, "This government action was a sham exercise of the police regulatory power and instead really it's in substance, an exercise of the eminent domain power." PUBLIUS: What is a “taking”? And does it always have to be for public use? ERIC CLAEYS: Assume that a state has a constitutional clause about eminent domain. That clause is going to have a few different features or a few different moving parts. The sequence of questions that you ask are first, does the clause mention property? Usually it does, so usually eminent domain has got a focus on private property. Then the clause is going to prohibit or it's going to focus on some government actions, and those government actions can come in a few forms. I'll talk about some form of takings. Then if there's a taking, then eminent domain law typically requires that the taking be for public use. If the taking is for private use, then it's not at all a taking under the eminent domain power, and it's unconstitutional. If the taking is for public use, the government can take the property for public use, but then the government must pay just compensation, and the owner is entitled to demand fair market value for the rights taken. Far and away the most controversial topic of the four of those is what counts as a taking. There are three main kinds of takings. Far and away, the most controversial topic when you're thinking about eminent domain is what counts as a taking. Maybe it's helpful to bracket out four different kinds of takings. The simplest one occurs when the government says, "We are exercising eminent domain, and we hereby condemn this property." I'll call that an express act of condemnation. The government says it's using eminent domain. The other three kinds of takings are what I sometimes call backdoor takings. Lawyers call these inverse condemnation. An inverse condemnation means the government is not saying that it's taking, but in substance what it's doing is taking. Then one kind of inverse condemnation occurs when the government puts something on the property. Imagine a government law that says, "This strip of land now it's going to be a highway." The government never uses the rights of eminent domain to condemn the land, but it says, "We're using our police authority to lay down a highway." Courts would say, "That's inverse condemnation. You didn't say you were taking the land for a highway, but that's what you did. You might as well come out and say it, and we're going to declare what you did was a taking." There's another set of inverse condemnations that are usually called damagings. Imagine that a government acquires land and does something with the land, but then the things it does generates water spills or oil spills or smoke, and the water, the oil, the smoke ends up on someone else's land. That person then might say, "Well, you the government didn't take title to my land, but you've trespassed on my land, or you've done something that if common law, would've been a trespass or a nuisance. I now have lost rights of control or rights of use that I would've had in trespass and nuisance." Most of the time, the governments of course will say, "Yes, those kinds of damagings are inverse condemnations too." The third and the most controversial and the conceptually hardest kind of condemnations are regulatory takings. Regulatory takings occur when a government leaves somebody with title to a resource, but then says, "We're going to set by public policy a police regulation that extinguishes this owner's rights to use the land or the other resource or to dispose of the land or the other resource in some specific ways." The government will say, "You still have title. Look on the bright side, there are all the ways you can still use and dispose of your land. There's just these few ways you're not allowed to use or dispose of it. We haven't taken anything from you." The owners will say, "At common law, we had broader rights to use, dispose, and hold than we do after the restriction." The government has in substance engaged in another form of inverse condemnation, using the power to regulate to extinguish a couple of legal rights to use or dispose. The core kinds of takings are takings when a government expressly condemns land. The core kinds of takings occur when a government condemns private property, and then in the most ordinary takings, the government keeps the property. A government keeps land for a courthouse. It keeps land for a military base. It keeps land for a public park or a public highway, or it keeps personal articles like food for the use by the military or by some other government organization. Those are all takings for public use, and those are completely uncontroversial as long as the government pays just compensation for what it's taken. Now what though if the government takes this private property and gives it to a private entity? If the private entity is what's called a common carrier, a railroad, a utility, no problems arise constitutionally. There's a lot of law saying that the common carrier uses property it holds for the public. If you have a subscription for cable service from your electric provider or your cable provider, you as a subscriber get to use the facilities that the electric company and the cable company have by getting a subscription for the service. Those aren't controversial either. Most controversial is when the government condemns private property and then gives it to a big box retailer or to a private developer. On paper, it's assumed by everybody, it's conceded by everybody that a government may not take property from one private owner and transfer it to somebody else who's a private actor and do this constitutionally. That's a taking for private use. In effect though, most lawyers see the public use clause as a dead letter or one step away from being a dead letter. That happened through a series of cases. In the period around let's say 1860 to 1920, the U.S. Supreme Court and a lot of state courts dealt with cases in which a government condemned land that wasn't really that developed, and the land was transferred to a private entity. In some of these cases, it was riparian land, land next to a river, and the land was condemned so that one riparian could build a mill and back up water upstream where all the other riparian lots used to be. In another famous case, a state gave a county irrigation authority power to condemn land to force people in a neighborhood to accept irrigation canals so that they could all get irrigation. The irrigation district was a private entity, and it kept the canals. Then there are other cases like this where a mining company got a right of way condemned so that it'd have an aerial right of way to send these buckets on a long cable of its ore to town over people's land. In all those cases, courts thought that these were condemnations of the property at stake, and the courts said, "Well, the property is being reordered in a way that generates a lot of general economic benefits, and those economic benefits create public uses." Now for my part, I think those cases can be still understood as regulatory takings that are justified regulatory takings, but that's my opinion as a scholar. I haven't had a lot of impact on the case law. Those cases establish some proposition that when you're talking about underdeveloped property and the property has been condemned to facilitate mining, to facilitate water power, to facilitate irrigation, these are public economic benefits that could create public uses. PUBLIUS: The definition of “public use” seems to have expanded in the last fifty years. Can you talk about the history of that and how we got to the relatively recent Kelo decision? ERIC CLAEYS: In the late '40s, lots of states and Congress enacted statutes called urban renewal statutes. Urban renewal statutes give municipalities power to condemn land that meets some statutory criterion. The criterion is something like deteriorated, blighted, substandard. The idea was that there's certain neighborhoods that in the '40s urban planners thought of as slums. The urban planners thought that municipalities ought to be able to condemn the land that was held as slums handed over to a private commercial developer. The commercial developer would then bring in new residential neighborhoods, bring in new businesses, new offices that weren't slums. Courts routinely held that these are acts of eminent domain, but the clearing of the slum conditions or the blight was a public use to everybody in the neighborhood. A U.S. Supreme Court case in 1954 called Berman versus Parker held as much, and it sent a lot of soft signals that public use determinations were things that courts should not focus on. They should defer strongly to legislative findings of blight. Then in the early '80s, the state of Hawaii condemned land in Hawaii. In Hawaii to that point, there had only been about 75 people who owned most of the land in the big islands of Hawaii. Most people who lived in land did so as long-term tenants on those 75-odd owners' lands. The state of Hawaii condemned the 75 owners fee simple absolute and gave their tenants new fee simple absolute. The previous owners said, "These are takings redistributing our land to our tenants." The court said, "No, if the state of Hawaii wants to break up an oligopoly in land, there's a public use in breaking up oligopoly and again, defer to the findings of the Hawaii legislature against oligopoly." Then most recently in a case called Kelo versus New London, the Supreme Court tackled a new question about a new kind of state statute. This statute is called an economic development statute. Some municipalities do not like to use urban renewal statutes. Urban renewal statutes cannot be used unless the authority targets a neighborhood as being blighted or a slum, and when a city council says some area is a slum, it really offends the people who live in that neighborhood. Many municipalities and urban planners went to state legislatures and said, "We still think we should conduct economic development, but please don't make us swallow this poisonous political pill of saying the neighborhood we want to redevelop is a slum." States enacted statutes saying that municipalities can redevelop land if they can put forward a comprehensive plan and show in the plan that the redevelopment is going to create lots of economic advantages like new jobs, new tax benefits, and new economic activity. In the city of New London, Connecticut, the city of New London tried to revitalize a neighborhood called Fort Trumbull using economic development powers, not urban renewal powers. Residents in Fort Trumbull said, "When you're condemning our land to build new office space, that's a taking for private uses to benefit the commercial developer who's going to keep the office spaces." New London said, "No, this is a taking for public use because there's this economic plan to revitalize New London, bring new economic activity from all the offices." By a five to four majority, the Supreme Court said, Cases like the Midkiff case from '84 and the Berman case from '54 signaled that courts ought to defer very aggressively towards local findings of public use." If you look at the taking to create economic benefits, that's not all that different from the mill act takings and the irrigation act takings and the mining district takings from 100 years ago where state is condemning private land to generate economic benefits. There's some precedent for saying that takings that transfer property from private owners to other private developers, that's also a taking for public use. That decision did not go down well with a lot of voters and a lot of homeowners. It's been contested. Lots of states have enacted amendments to their state statutes to make it hard to use the power that was upheld in Kelo, but Kelo on the constitutional issue is still the law of the land and still stands for the proposition that if a state or a state actor condemns land, gives it to a private entity expecting the private entity to create lots of general economic benefits, the economic benefits are public benefits for the public to use. NARRATOR: Thank you for listening to this episode of the No. 86 Lecture series on Property Law. The spirit of debate of our Founding Fathers animates all of the No. 86 content, encouraging discussion and critical reflection relative to how each subject is widely understood and taught in law schools and among law students. Subscribe to the No. 86 Lecture series on your favorite podcast platform to have each episode delivered the moment it’s released. You can also go to fedsoc.org/no86 for lectures and videos on Federalism, Separation of Powers, the Judiciary and more. Thanks for listening. See you in class!