Freeman

ARTICLE

Today's Fight for Property Rights

Regulatory Takings Hit Small Property Owners Hard

JUNE 01, 1996 by NANCIE G. MARZULLA

Bob and Mary McMackin bought property in Pennsylvania’s Pocono mountains and obtained all the necessary permits to build a retirement home. But four years after they moved in, the U.S. Army Corps of Engineers decreed that their property was a “wetland” — even though it was dry.

Result: they were ordered to destroy all landscaping outside a five-foot perimeter of their home and driveway and restore the land to the way it was before construction. Moreover, they were ordered to buy twice as much property as they had to provide land off-site for a new “wetland.” In this case, there was a happy ending. Defenders of Property Rights, representing the McMackins, helped reach a settlement which rescinded the orders. The Corps issued new guidelines allowing small parcels to be exempted from “wetlands” regulations.

Others haven’t been so lucky. Again and again, civil liberties are violated despite the Fifth Amendment to our Constitution, requiring that when government takes property for public use, it must pay the owners just compensation. While courts have long enforced just compensation when government takes title to private property through eminent domain, such as for building a road–courts generally fail to protect individuals who retain title but lose some or all the value because of government regulations which supposedly benefit the public. These are the so-called regulatory takings.

Hardest hit are small property owners who usually cannot afford the time or money to mount a proper defense of their rights. In some cases, property owners surrender their rights rather than incur legal expenses. In other cases, small property owners fight the government without an attorney, risking ruinous fines and the possibility of imprisonment for acts they believed were perfectly lawful because they didn’t harm anyone.

Litigation to defend property rights can drag on for a decade, wiping out the life savings of ordinary people. Only the rich can easily afford to defend their property rights against government regulators whose legal costs are financed out of the public treasury.

Government officials are not concerned about how their regulations hurt people, because they aren’t telling themselves what to do. They are telling other people what to do. Officials do not suffer when their regulations make someone else’s property worthless. They still get their pay, perks, and pensions.

The Takings Clause

In 1985, University of Chicago law professor Richard Epstein wrote Takings, the book reminding everybody that there’s a takings clause in the Fifth Amendment. It has been there for more than 200 years, ever since the Bill of Rights was enacted, but as far as government officials were concerned, the takings clause did not exist. The only part of the Fifth Amendment officials seemed to care about was the part saying they couldn’t be forced to testify against themselves if they are charged with a crime.

Now finally, large numbers of Americans are discovering that the Constitution provides a basis for defending their property. They want the Fifth Amendment enforced and strengthened. That is what the property rights movement is all about.

At the federal level, these are the principal ideas being discussed:

Require a private property impact statement. This means determining whether a proposed regulation would involve taking private property for public use. If yes, the government agency involved must either avoid the taking or budget just compensation for property owners. This idea is based on President Ronald Reagan’s Executive Order 12630, which requires government to minimize the “takings” potential of proposed regulations.

Require government to provide just compensation when a regulation has devalued it by more than, say, 20 percent. The specific percentage is referred to as a “trigger point.”

Give owners the option of requiring government to buy property when a regulation has devalued it more than 50 percent.

The point here and everywhere else is to make government more accountable for its actions. When people go shopping, they are aware they must pay for what they take out of a store. If an individual takes something without paying, it’s stealing, which in some places is still treated as a crime. Regulators who devalue private property without paying just compensation are just as guilty of stealing, as U.S. Appeals Court Judge Jay Plager ruled in Hendler v. United States: “The intruder who enters clothed in the robes of authority in broad daylight commits no less an invasion of these rights than if he sneaks in the night wearing a burglar’s mask. In some ways, entry by the authorities is more to be feared, since the citizen’s right to defend against intrusion may seem less clear.

While Washington is discussing these ideas, much has already happened at the state level.

On March 16, 1995, Mississippi became the first state to enact a property rights law that compensates owners for the taking of their property. It says just compensation is due when a regulation devalues property 40 percent. Texas enacted an important property rights bill on June 12, 1995. It took effect September 1, 1995. It requires a property rights impact statement, mandates just compensation when a regulation has devalued private property more than 25 percent, and reforms the legal process so that it’s easier for property owners to get their claims settled. On May 18, 1995, Florida enacted a property rights bill with no defined trigger point. This could mean just compensation is due whenever a regulation devalues property.

As you can imagine, Big Government opponents of protecting private property rights do everything they can to stop this trend. For example, they mount well-financed scare campaigns against property rights ballot initiatives. They claim that paying just compensation would cost a fortune and wipe out regulations protecting the environment. Such claims alarmed enough people that in Arizona (1994) and Washington (1995), voters rejected property rights initiatives by a margin of three to two.

The Environment

What about the environmental issue? Pollution means there’s a public nuisance that a property owner must take care of. Just compensation applies only when a government regulation devalues property that is being reasonably used–not harming anyone.

Polls generally show that while people want a cleaner environment, they also want their freedom protected. They are worried when they hear how government officials take people’s property without just compensation.

Most people know little about the impact of government regulations and can change their views as they learn more. For example, a recent poll by American Viewpoint found the average citizen is not aware of the extent of some regulations. Take Superfund, the federal program which supposedly cleans up toxic waste: 35 percent of people initially polled thought it was successful while 33 percent didn’t, although only 38 percent even claimed to know what Superfund did! Upon learning more about Superfund, 49 percent called it unsuccessful, and just 3 percent advocated no basic changes. Almost a third of those polled totally changed their opinion when they learned more.

Bearing the Cost

As for the cost issue, since when does protecting individual rights depend on costs? Imagine the uproar if government officials ruled that freedom of speech, for example, must be abandoned because it costs too much.

Just consider the hypocrisy in the cost objections. In one breath, environmental extremists object to the alleged cost of protecting property rights, and in the next breath they say hang the costs when it comes to protecting an endangered rat.

The obligation to pay just compensation will probably make government officials think twice before enacting regulations which harm people’s property rights. This is happening in Florida. Although the state’s new property rights law hasn’t been tested in court, it has had an impact on regulators there. For example, in West Palm Beach environmentalists promoted a city growth plan which would establish a five-story limit for new buildings around the waterfront. Instead, officials adopted a 15-story limit which compares with an average height now of 18 stories. West Palm Beach Mayor Nancy Graham remarked:

“Originally, I was opposed to more than five stories. But I could’ve done it for free back then . . . [now] you can say that and you can vote that, but you’ll have to back it up with your pocketbooks.”

Indications are that the property rights movement is in its early stages. It will go much farther as people learn more about what is at stake. This could result in major limits on the runaway welfare state.

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June 1996

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