• Video

Regulatory Takings Law: Penn Central v. City of New York

Why is a state or local government more likely to prevail against a landowner in a regulatory takings dispute? Eric Claeys, Professor of Law at Antonin Scalia Law School at George Mason University, gives an overview of the dispute in Penn Central Transportation v. City of New York 438 U.S. 104 (1978), the leading case in regulatory takings law. In this case, a New York court held that Penn Central had not suffered a regulatory taking when the City of New York prevented it from building office space above the station because they still had some use of the property. This case also established a three-part balancing test for measuring compensation in regulatory takings cases. https://youtube.com/watch?v=WV5aErZJIKU


It’s very common for landowners to bring takings challenges against zoning laws and against environmental restrictions. In all these cases, the landowners say that they’ve suffered a loss of property because they have right to use their property. The major case in this field is a case called Penn Central Transportation versus the City of New York. The company, Penn Central, was complaining that New York City was telling it it could not build an office building on top of Grand Central Railway, and Penn Central wanted to argue, “you have to look at the air rights that we had in our land, and those have been totally extinguished.” A New York court said that Penn Central had not suffered a regulatory taking because the Penn Central Company was getting benefits from land. The court said, “No, no, no, you have to look at the parcel as a whole,” and if we look at the parcel as a whole, Penn Central gets to use a train station and then all of the office space and lease space in the train station, and we look at the loss of the development on top of the train station in the context of all the things that Penn Central could still do in the station. Among takings lawyers, Penn Central is treated as the granddaddy, or the most important, the most comprehensive regulatory takings case. Penn Central applies to state and local restrictions on land use. It encourages courts to conduct a multi-factor balancing to decide whether regulatory takings occurred, and that balancing requires courts to look at the economic impact of this law on the owner, the extent to which the law interferes with the owner’s reasonable investment-backed expectations, and to look at the justification for the law, whether it has a good character. Ordinarily, courts will look at the factors giving the benefit of the doubt to the government. The courts will say if the law is a zoning law, that zoning is an action that has a high character. If it’s an environmental regulation, that also has a high character. The court is going to look at the effect of the law on the owner accentuating the positive. The court is going to say, “We know that this law stops you from using your land in a few ways, but be happy with the fact that you still have title and that you can still use your property in a lot of other ways.” Any regulatory takings case that’s litigated after Penn Central provides an opportunity to make clearer what the three Penn Central factors mean. The balancing test is flexible enough that a few cases can be singled out because a state or local government seems to be imposing a really drastic punishment on one landowner, but then most other land use restrictions are treated as innocuous or acceptable or ordinary exercises of zoning powers or environmental regulatory powers.

Related Content