The Magazine

Taking 'Takings' to the Voters

The California, Idaho, Arizona, and Washington initiatives.

Oct 30, 2006, Vol. 12, No. 07 • By LEONARD GILROY and SHIKHA DALMIA
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THE LIFE STORY of Leo Hayashi, 75, is the stuff of Hollywood epics. Arriving penniless on these shores at age 17, a refugee from war-ravaged Japan via a Siberian concentration camp, he painstakingly scaled the heights of the American dream. He put himself through college, started a one-man real-estate company, and raised a family. Then the trouble began.

Thirty years ago, he bought a piece of land in Brea, near Los Angeles, as a nest egg. But recently city authorities proposed draconian new regulations that, if approved, will nullify most of the long-accumulated value of his land: The 300-acre property will be allowed to hold only 15 houses--instead of the 400 permitted when he bought the land--and only if the owner swallows the cost of a new fire station, sewage lines, and other infrastructure.

Why are they doing this? The official reason is that the slope of the property doesn't allow more homes. But the slope is no steeper now than when Hayashi bought it. The real reason, Hayashi believes, is that the city commission wants to preserve the hills and end development. "I spent years setting aside money to buy this land, paid taxes on it for 30 years," he laments. "For what?"

Not much--if a coalition of big government and big business defeats Proposition 90 in California this November. This proposition would prevent cities like Brea from using their zoning and other regulatory powers to destroy property values without compensating owners like Hayashi. Three other Western states--Idaho, Arizona, and Washington--have similar initiatives on their ballots.

This growing movement against regulatory takings follows hot on the heels of the "Kelo revolution"--the widespread movement to limit eminent domain takings that was sparked by the infamous Supreme Court Kelo decision supporting New London, Connecticut's use of eminent domain to take property from poor home owners and give it to rich developers. Yet, as Hayashi's lawyer, Greg Reiger, explains, what Brea is doing to Hayashi is actually far worse than what New London did to Susette Kelo. "If Brea had used its condemnation [eminent domain] powers instead of its regulatory powers to take away his land, it would have had to at least pay him fair market value," he points out. But with regulatory takings--which leave you in possession of the land but take away the most profitable use of it--there is no compensation at all.

Hayashi is not the only victim of overzealous planners bent on combating sprawl or preserving open space or protecting the environment. Ever since the Progressive Era popularized the notion that expert management of land would alleviate all manner of social ills, notes Stephen J. Eagle, a law professor at George Mason University, land-use planners have employed their regulatory powers not to enjoin nuisances, the original purpose of zoning, but to ensure that all uses of private property conform with their vision. The result is that millions of property owners--farmers, homeowners, small businesses, churches--have faced financial losses, even total ruin, as ever more aggressive land-use regulations have barred them from any use of their property that doesn't serve the planners' ends.

Oregon, for instance, home to arguably the most draconian land-use policies in the nation, drew growth boundaries around urban areas to combat sprawl. City cores were lavished with government subsidies for mass transit and other infrastructure, while suburbs and villages were starved of the most basic infrastructure. Development was severely restricted in these outlying areas, as well: Farmers were prevented from subdividing their property; individuals had to jump through hoops to get permits to build homes; and loggers were barred from harvesting trees in their own forests. Overnight, farmers and families lost their nest eggs, and businesses shut down. In 2000, the state estimated that these restrictions forced private owners in Oregon to absorb $5.4 billion in uncompensated costs each year.

These restrictions alienated even Oregon's deep blue voters. Two years ago, they overwhelmingly approved Measure 37, a ballot initiative requiring government to compensate owners for losses stemming from regulations that reduce property values in the name of providing public goods. This move--combined with the public outrage over the Kelo decision--has sparked a veritable wildfire in the West to give property owners "comprehensive" protection from the government.

Indeed, while voters in many other states will vote on ballot initiatives to curtail eminent domain abuses, those in California, Idaho, and Arizona will vote on twin protections against eminent domain abuse and regulatory takings. In Washington, which already has relatively decent constitutional protections against eminent domain abuses, there is a stand-alone initiative targeting regulatory takings.