I. Rights in Property Are Fundamental to All of Our Liberties
We are here today to speak about a fundamental right, a right that is essential to protection of all of our liberties. But, like all of our rights, it can be "inconvenient" to the achievement of other important societal goals. And, if we are truthful about it, while we all acknowledge the importance of preserving the right to own and use our own private property, we are all to some degree guilty of infringing upon the property rights of others in order to achieve various objectives.
We recognize that private property rights are essential to all of our liberties. After all, if the government owned our churches, who would control the ministers, priests, rabbis, and imams? If the government owned the printing presses and newsprint, how would we ever get balanced reporting not that it is particularly easy today? And if the government owned our homes and farms, who among us would dare speak out at government corruption and injustice?
Property rights are also important to individuals and their liberty because the owner of private property has something which he or she controls, where the owner has dominion, and where the owner can be free from outside intrusions. A place where one can be left alone to satisfy the Greta Garbo in all of us. As Garbo said in Grand Hotel, "I want to be alone... I just want to be alone." Or, more elegantly, as the great legal scholar Blackstone wrote in 1765:
"There is nothing which so generally strikes the imagination, and engages the affections of mankind, as the right of property; or that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe." - W. Blackstone, Commentaries 2 (1765).
The United States Supreme Court has on a number of occasions noted that:
"[T]he dichotomy between personal liberties and property rights is a false one. Property does not have rights. People have rights. The right to enjoy property without unlawful deprivation, no less than the right to speak or the right to travel, is in truth a 'personal' right.
"... In fact, a fundamental interdependence exists between the personal right to liberty and the personal right in property. Neither could have meaning without the other." - Lynch v. Household Finance Corp.
Fredrich Hayek, in his classic examination of the parallelisms between fascism and socialism in The Road to Serfdom made a compelling case that liberty cannot exist under a government that does not respect private property. In short, the respect of private property is essential to the preservation of a government that is not hostile to individual liberties.
II. How Can Our Government Be at Odds With Our Property
However, this government that we control at the local, state, and federal levels can be openly hostile to the very rights that are essential to its character. How can this be? It is because our government is a reflection of ourselves. Our form of government has been variously characterized as a representative democracy or a democratic republic. (After several idyllic people's paradises such as Yemen and the nation formerly known as East Germany appropriated the words "democratic republic" I will refrain from using that term to describe our form of government.) What this means is that we can be our own worst enemy. We do not need kings and queens to tyrannize us when we can do it ourselves.
For centuries philosophers and other students of government have warned against unchecked majoritarian impulses. For example, the eighteenth century philosopher Edmund Burke noted: "The tyranny of a multitude is a multiplied tyranny." On another occasion he wrote:
"Aristotle observes that a democracy has many striking points of resemblance with a tyranny. * Of this I am certain, that in a democracy the majority of the citizens is capable of exercising the most cruel oppressions upon the minority whenever strong divisions prevail in that kind of polity, as they often must; and that oppression of the minority will extend to far greater numbers and will be carried on with much greater fury than can almost ever be apprehended from the dominion of a single scepter."
Our founding fathers were well aware of the dangers of pure democracy. During the debates on the adoption of our Constitution, James Madison explained that
"a candid examination of history, we shall find that turbulence, violence, and abuse of power, by the majority trampling on the rights of the minority, have produced factions and commotions, which, in republics, have, more frequently than any other cause, produced despotism." - Madison 1788, Elliot's Debates
Who are the minorities? The minorities that the Founding Fathers were worried about were not just religious minorities. The Founding Fathers were also particularly concerned about the owners of property. Today, New York City has many more renters than apartment owners. In a pure democracy what would happen to the owners? In rural counties what would happen to farmers if the urban populations were hungry for food? What would happen to the owners of vast tracts of undeveloped land if the urban and suburban populations wanted to preserve open space?
The United States Constitution was designed to have enough checks and balances so as to avoid any one group from having the power to trample the rights of any one minority, including the owners of property. In Federalist No. 10, James Madison wrote that the Constitution would prevent, "A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project." We know, of course, that paper money in and of itself is not evil, but the manipulation of it has a potential of great mischief, as the Weimar Republic showed all too well. And the Constitution itself allows for limited debt relief in calling for federal bankruptcy courts. But what Madison was most concerned with was the wholesale direct abolition of debts of entire classes of citizens, the use of paper money to create inflation to indirectly abolish debts, and the "leveling" instincts of some of the rabble to take the property of others.
Madison believed that a nation that could not resist these impulses would be very short lived indeed:
"Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths." - Constitutional Debates, Eliot
But with the Bill of Rights and a Constitution designed to avoid the concentration of power by relying on the natural and varying associations of individuals so that no one group or faction would overwhelm the other, the nation was founded upon principles conducive to the protection of private property. In 1835 Alexis De Toqueville marveled in his classic Democracy in America, at how successful we had been in avoiding the dangers. "At the present time the liberty of association is become a necessary guarantee against the tyranny of the majority." De Toqueville also saw two great weapons we had against tyranny: the lack of a centralized bureaucracy and the legal profession. One-hundred and sixty-three years later, we appear to be one for two.
It is no great task to speak about the obvious dangers to property represented by a pure democracy: debt leveling, or forced redistribution of assets. But there is a more subtle and far more pervasive challenge to property ownership: land use controls in the guise of zoning or environmental regulation. When I said earlier that we, the people, were the greatest threat to property rights I mean all of us, our neighbors, and ourselves.
The problem is simple. Everybody loves property rights. People cherish and respect the property rights that they own and will fight for those rights. Most people also would like very much to own or at least control the property that they do not happen to own. And they will fight to get the property rights that they do not own. The British author G.K. Chesterston put it best: "Thieves respect property. They merely wish the property to become their property that they may more perfectly respect it."
But in America one does not have to steal to acquire property. Nor work. One must simply vote. In 1840 De Toqueville also wrote,
"In no other country in the world is the love of property keener or more alert than in the United States, and nowhere else does the majority display less inclination toward doctrines which in any way threaten the way property is owned."
That was then, this is now. Are you a renter tired of seeing your landlord exercising his or her right to charge market rent? Vote for rent control! Are you concerned that a greedy developer might want to build "affordable" (code word for minority) housing in your neighborhood? Vote for more restrictive zoning! Are you concerned that the country roads you take for your weekend getaways are getting too crowded? Vote to put rural America into a museum! Do you lose sleep at night over the fate of songbirds, butterflies, brown flies, black flies, and rats? Call for the strengthening of the Endangered Species Act!
The ease at which government can trample property rights today would be an enigma to our forefathers. The great philosopher John Locke, who so heavily influenced our founding fathers, wrote in his Second Treatise on Government: "Government has no other end but the preservation of Property," and that "whenever legislators endeavor to take away and destroy the property of the people ... they put themselves at a state of war with the people." But how can government be at war with the people when the people are the government? That is the enigma of a democracy. But a greater enigma may be how property owners have often been their own worst enemy.
How can those who own property often be as responsible as non-owners for some of the most troubling anti-property rights trends in recent years? An example may begin to explain how this has occurred. For about ten years I have been corresponding with an owner of a large amount of property in another state. He is a developer and makes a living by building homes. But at every turn the bureaucracy is there to thwart his plans. NIMBYism has captured the local bureaucracy and government where he lives and he is incensed. There is no stronger advocate for property rights. Yet, when a neighboring property owner wanted to develop his land by putting a trailer park on it, my friend was equally upset. "How dare they allow such trash to destroy my property values. ..."
III. The Rise of the Takings Doctrine and the Power to Zone
While there were some fits and false starts towards developing a doctrine of regulatory takings in the nineteenth century, the doctrine first appeared on the legal landscape in a 1922 case, Pennsylvania Coal v. Mahon. In that case, property owners who had sold, or whose predecessors in interest had sold, the coal rights to their land, including the right to have the surface supported and protected against collapse convinced the Pennsylvania legislature to prohibit coal mining that would cause the surface to collapse. Thus it was one type of property owner, surface owners, who vastly outnumbered another type of property owner, mine owners, that prevailed in a great legislative usurpation of property rights. Justice Holmes called the statute a taking, noting that "while property may be regulated to a certain extent, if the regulation goes too far it will be recognized as a taking."
In the subsequent 65 years, however, "too far" was a highly elusive quantity. The court virtually never found a land use regulation it did not approve of. Thus when the community of Euclid, Ohio, decided to adopt zoning to protect the property rights of those who already had homes in the town, the Supreme Court affirmed. The principal rationale in support was the notion of "reciprocity of advantage," meaning that if all landowners were prevented from putting their land to an unpopular use, all landowners would benefit equally, thus wiping out the disadvantage to any particular owner.
Time does not permit a discourse on the monumental fiction the notion of "reciprocity of advantage" has meant in practical terms. Time does not permit an analysis of how zoning laws have spawned a vast and powerful bureaucracy in the United States that specializes in making the sort of decisions that landowners and the free market made in the past. Nor does time permit me to discuss how utterly futile zoning laws have been in stemming the inexorable patterns of growth and how the advent of zoning has in large part been a driving force behind the cartelization of land development in the United States a cartel that in many instances has had some very curious relationships with the bureaucracy designed to regulate it. For those who want to delve into these issues, I suggest beginning with Professor Siegan's Land Use Without Zoning.
What I do want to suggest, however, is that the embrace of zoning by landowners has been the single most important force in the acceptance of the destruction of property rights by American citizens. Put another way, when we sleep with the devil sooner or later the devil will have his way with us.
Thus when we talk about the recent Supreme Court decisions on takings and property rights, we must recognize that none of the situations that gave rise to those cases would have ever come to pass if American citizens, through its democratic processes, had not embraced zoning as the natural duties of government. Marilyn and Patrick Nollan would not have had to give up one-third of their beach front property if the people of California had not given its Coastal Commission vast regulatory powers along the coast. The City of Tigard could not have gotten away with asking Mrs. Dolan for a greenbelt and bike path if the people had not given the city the power to plan by the inch. The State of South Carolina would not have faced the wrath of David Lucas if the people had not put the environment of the coast, and their views of the ocean, above their rights to own and put property to reasonable use. And Mrs. Suitum, now 84 years old and completely blind, would be sitting in her retirement cottage in Lake Tahoe today if it were not for the people of the United States giving Congress the authority to create a bistate agency with dictatorial powers over an entire watershed.
Fortunately for us, we have not lost one-half of the equation that De Toqueville described as America's bulwark against the usurpation of property by the masses. While we may have a centralized bureaucracy, or many bureaucracies, there is a legal profession that knows how to fight for property rights. There is a long way to go, certainly, but this is a fight that we have only begun. The Nollans have their home and their beach. David Lucas was paid for his beach. The late Mrs. Dolan's son now has $1.5 million in payback, and Mrs. Suitum is heading back to court.
IV. The New York Court of Appeals Has Declared War on Property
Many serious threats, however, remain. Perhaps the most serious is here in New York. On a fine June day in 1990, the City of New York dumped dirt on top of 2400-square feet of land used by Mrs. Soon Duck Kim for a service station and car wash in Queens. The city needed the dirt to support a roadway that it raised by four feet. Was Mrs. Kim entitled to compensation for land that was buried? When Joseph Gazza was denied a permit to build a home on Long Island by the New York Department of Environmental Conservation, leaving his lot worthless in a developed neighborhood in exclusive Quogue, Long island, was he entitled to compensation? And when the Town of Southampton, also on Long Island, decided to condemn a lot owned by Dorothy Basile, was she entitled to just compensation for the full fair market value of her property?
On February 18, 1997, the New York Court of Appeals, that state's highest court, said "no," "no," and "no" to each of these landowners. In what has become a distressing trend from courts across the nation, the promise to property owners embodied in Lucas v. South Carolina Coastal Council has been abandoned through a judicial sleight of hand. Unless the United States Supreme Court acts, the rule of New York could undo the protection that the Fifth Amendment provides to private property owners against government abuse.
For years it had been the unequivocal holding of the United States Supreme Court that, whenever the government physically invades private property, say by dumping truckload after truckload of dirt on it, it is an undisputed taking. Observers of the Court also thought that the United States Supreme Court held in Lucas that, when government denies a landowner the right to make economically beneficial use of private property there has been a taking, and the owner is entitled to just compensation. Thus when South Carolina passed a statute forbidding David Lucas the right to build a home on his property, which he had bought before the law was passed, the Court found that so long as he had the right to build a home in the first place, he was entitled to the land's fair market value if the state denied permission to build. The Supreme Court also recited the obvious principle that a court in a regulatory takings case must first identify the property right at issue. After all, the Court said, if a person does not have a right in the first place to build a nuclear power plant on the San Andreas fault, then that person is not entitled to just compensation when government denies a permit to build the plant.
If Lucas is the law of the land, how can New York get away with ignoring it? The answer is by the lawyerly art of twisting the logic of the law like a pretzel. First, New York points out that David Lucas bought his property before the law was passed that prevented him from building. Second, New York's lawyers note that Lucas requires that the property right at issue be identified in a takings case. This has led clever government attorneys in New York and elsewhere to suggest that there is no property right in the ability to use property in a manner that is contrary to a statute, local zoning ordinance, or mere permit requirement that was adopted before the current owner purchased the property.
In other words, suppose Mr. Jones owns several acres in 1960. In 1970, a new wetlands law is passed and the property is declared wetlands and unbuildable without a permit. Mr. Jones lacks the money to apply for a permit, so he sells the property to Mrs. Smith in 1980. Mrs. Smith applies for a permit and it is denied in 1990. Can she sue for a taking? According to the New York court, the answer is no, only Mr. Jones could have sued for a taking. Thus when Mrs. Smith bought the property in 1980 she did not buy the right to build in a manner contrary to the then-existing regulations. Of course, Mr. Jones cannot now sue either because (1) he no longer owns the property, (2) the statute of limitations has run, and (3) the United States Supreme Court has already held that it is nearly impossible ("an uphill battle") to prevail in a takings case unless one first applies for a permit (and one cannot apply for a permit to use property that has already been sold to a third party.) The net result is that government has acquired the development rights for nothing simply because the original owner was not able to sue for a taking when the regulation was passed.
In its February massacre of property rights, the New York court turned first to Mrs. Kim. The court noted that in 1962 the City of New York adopted an ordinance that said that property owners had a duty of providing "lateral support" for city roads. This seemed harmless enough as it has always been the law the property owners cannot dig next to roads in a way that causes them to collapse. But New York interprets this ordinance to place an affirmative duty on landowners to actually provide the dirt to support a roadway that is raised. Then, in 1978, the city filed a map somewhere in the local Borough president's office showing that it would raise the grade of the road next to Mrs. Kim's property by four feet. Mrs. Kim bought her property in 1988. With this chronology in hand, the New York court was able to find that Mrs. Kim never had a right to complain when the city dumped dirt on 2400 square feet of her property. Nor, apparently, did she have a right to complain when the City sent her a bill for the dirt!
Having taken down Mrs. Kim, Joseph Gazza was an easy target. He bought his lot after it had already been declared wetlands and after the prior owner was not able to get a permit. Gazza applied for another permit and sued when it was denied. But since he knew the property was a wetland he had no right to sue for a taking even if the entire economic value of the property was destroyed.
Mrs. Basile came last. She also bought her wetlands lot after an ordinance was passed requiring an owner to get a permit before developing on wetlands. The prior owner had also agreed in writing that he would have to get permits before he could build. When the town decided to condemn her property so it could be included in a wildlife refuge, it reasoned that there was no way it would have ever given Mrs. Basile a permit. Therefore the property was virtually worthless, and certainly not worth the price of a developable lot. And the New York court agreed that she was entitled to only a nominal amount when the town condemned her property.
Fortunately, not every court that has considered this issue has decided to bulldoze the Takings Clause. The Federal Circuit Court of Appeals ruled in a case called Preseault v. United States that just because the federal government began to regulate railroads in the 1920s it did not mean that the owner of a railroad right of way was not entitled to compensation when the United States turned the right of way into a public hiking trail. A New Jersey court ruled that a purchaser of property "steps into the shoes" of the prior owner, meaning the new owner has the same right to sue for a regulatory taking as the original owner. The Massachusetts Supreme Court has ruled on both sides of the issue. And the Michigan Supreme Court is presently hearing an appeal in a case where a developer won a lawsuit for a taking when the state denied a wetland permit. The landowner was a family corporation that acquired the land from family members who had purchased it years before the regulations were adopted. The lower Michigan court held that the "timing of the regulation and the transfer of the land do not dictate that plaintiffs are not entitled to just compensation."
If the New York rule were to prevail, owners of regulated property would be in a terrible bind. They would be forced to go through the trouble and expense of trying to develop their land just so they would not lose the right to sue for a taking. Sales of regulated property would evaporate as prospective purchasers began to realize that there could be no relief if permits were denied. Neighbors would have different rights in otherwise identical property, as those who purchased before regulations were passed would have more rights than those who purchased later. And because governments tend to pass new regulations with the frequency of the tides, the government could acquire some new property interest virtually every time property changes hands.
On October 6, 1997, the United States Supreme Court refused to hear the appeal on all three cases. This means that a regulatory nightmare will follow for property owners in those states adopting the New York rule. However, until the Supreme Court accepts responsibility to enforce the Fifth Amendment by taking up this issue, it is guaranteed that landowners will continue to knock on the Court's door reminding it that the Fifth Amendment to our Constitution has substance.
V. Rent Control Violates the Takings Doctrine
Since 1980, the United States Supreme Court has held on at least five occasions that when a regulation of property fails to substantially advance a legitimate governmental interest, it is a taking in violation of the United States Constitution. After the Supreme Court found that a governmental demand for the Nollan's beachfront property was an unlawful taking because the demand failed to substantially advance any legitimate governmental interest, we turned our attention to one of the most pernicious regulatory intrusions upon property rights in America: rent control. Economic theory has predicted for years that the consequences of rent control are inevitably fewer housing units of declining quality in a rent-regulated community. Practical experience has borne this out; there can be no more dramatic example than New York City. We decided to put the theory to the test and apply the takings doctrine to rent control.
In each and every community in California where rent control was adopted in recent decades the stated justification for rent control was that it would help the housing opportunities of the poor, the elderly, the disabled, minorities, and students. We commissioned a study that examined census data from 1980 through 1990 that compared trends in rent-controlled communities against those in nearby similar communities without rent control. In every single instance, as predicted by economic theory, we actually found that in rent-controlled communities, there were fewer poor people, fewer elderly, fewer disabled, fewer minorities, and fewer students in 1990 than there were in 1980 while in free market communities without rent control there were more housing units and more renters that could be characterized as poor, elderly, disabled, minorities, or students. In other words, not only has rent control failed to meet any of its stated objectives, it has actually worked to do just the opposite: reduce the housing opportunities for the "economically dispossessed."
What our studies have shown is that rent control utterly fails to substantially advance any legitimate governmental interest. That is a taking. We have filed a series of lawsuits on behalf of property owners in a number of different California cities challenging the application of various rent control laws. Because we are using a new legal argument we initially lost each one at the trial court level, but have had several stunning victories at the appellate level. We won an appeal against the City of Cotati and are heading to trial. We won an appeal against Santa Monica and are heading to California's Supreme Court, the highest court in California. We have cases pending on similar issues in Berkeley and the City of Escondido, near San Diego. Our hope is that we will prevail in demonstrating that certain rent control measures in California are unconstitutional takings of private property, not only before the California courts, but ultimately before the United States Supreme Court.
As the Supreme Court once said over 37 years ago, "The Fifth Amendment's guarantee ... [is] designed to bar Government from forcing some people alone to bear public burdens which in all fairness and justice, should be borne by the public as a whole." We intend to hold the courts to that standard throughout the nation. The Courts are an important bulwark against unchecked majoritarian tyranny against property rights. Property rights are essential to all of liberties. Or put more simply as George Washington said, "Freedom and property rights are inseparable. You cannot have one without the other."
We are a representative democracy. But a democracy that does not tyrannize the rights of the minorities is a rarity in history. So far we are, for the most part, lucky to live in a rarity. It is said that when Benjamin Franklin left the Constitutional Convention he was asked, "What have you given us?" He answered, "A republic, if you can keep it." Let us think about that the next time we consider making new laws that affect our property rights.
(1) Part IV is adapted from an article in the Fall 1997, edition of Liberty Matters.