Chapter 2.21

A Reinvigorated Property Rights Movement

Urban Land, May 2007.

By Richard H. Carson

Sometimes a state voter initiative catches people’s attention and becomes a national movement. Examples of such trends are term limits, property tax caps, and bans on same-sex marriages. Now, the next big trend, property rights, is well underway in 23 states, driven by two events—passage in November 2004 of a property rights initiative in Oregon called Measure 37, and the U.S. Supreme Court decision in Kelo v. City of New London in June 2005. (See “States Restrict Eminent Domain,” November/December 2006, page 126; “Oregon’s Measure 37,” February 2006, page 115.)

Similar ballot measures in other states are described by opponents as the most draconian property compensation laws in America, but their proponents are happy to see these measures reinvigorate the property rights movement. These initiatives have one thing in common: they exceed U.S. Supreme Court rulings in terms of what constitutes “taking” a property.

The Fifth Amendment to the U.S. Constitution protects a private landowner from the government taking his or her property without fair compensation, and the case law on this subject has been widely accepted for over 70 years. However, in Kelo, the U.S. Supreme Court ruled that land use regulations have to be so restrictive as to completely deprive the landowner of his or her land’s economic vitality before it constitutes taking and compensation required.

In other words, the government has to compensate the landowner for taking all the land’s value, but not for a “partial” taking.

Partial property compensation laws have been passed in Louisiana, Texas, Mississippi, and Florida—the first three essentially creating partial takings thresholds at which a government must pay compensation; these thresholds range from 20 to 40 percent.

The 1995 Harris Act in Florida, the first real precursor of the Oregon voter initiative, affords landowners the right to sue municipalities should their property value be “inordinately burdened” or “restricted” by government regulations. However, it also only applied to government regulation that occurred after the act was implemented. Many of the new property rights initiatives go further because they apply retroactively.

It is ironic that the state where the property rights movement was born is Oregon. In the early 1970s, Oregon legislated state-mandated land use planning in a move touted as cutting-edge public policy and hailed by some as a grand experiment. In 1973, a bipartisan Oregon legislature and progressive Republican governor Tom MacCall approved the first statewide land use planning program in the country, requiring use of comprehensive plans and urban growth boundaries, all in the name of saving farms and forests. For over a quarter century, Oregon has received national media attention for this innovative land use planning program.

The vaunted planning program was crippled by the very citizens it purported to serve with the passage of Measure 37 in November 2004. After 30 years, and with decisive 61 percent support, the voters impeded the Oregon experiment by passing the severest property compensation law in the country.

Measure 37 sets a historical precedent because city, county, and state government must now pay for any and all partial takings. According to a state explanation of the measure, “If a property owner proves that a land use regulation restricts the use of the owner’s property and reduces its value, then the government responsible for the regulation will have a choice: pay the owner of the property an amount equal to the reduction in value, or modify, change, or not apply the regulation to the owner’s property.” The primary caveat to this is that the regulations in question must have been in effect when the current property owner bought the property. Whether such a right is transferable to a new property owner is being hotly debated and is unclear at this point.

The Oregonian newspaper reported that on the first day the law went into effect, citizens filed claims with local city and county governments for such developments as a coastal subdivision with 400 one-acre lots and a farmland subdivision consisting of 350 two-acre lots. The Oregonian added that planners are “expecting proposals to build large retail centers or destination resorts on farmland that’s been in the same families for generations.”

Dorothy English is an unlikely poster child for a cultural revolution. The 92-year-old grandmother bought 19 acres (7.7 ha) in the scenic hills overlooking Portland in 1953. When she went to the city of Portland to subdivide her land in order to give some to her children and finance her retirement, she received a rude awakening. “There were no restrictions on the land when we bought it,” said English. “To come in and put new restrictions on it 20 years later I think is stealing.”

English’s story resonated with Oregon voters who had stood by and watched a state planning regime that literally ignored the will of the voters. In 2000, a similar compensation law was passed by a 54 percent vote. However, a land use watchdog group called 1000 Friends of Oregon challenged the law at the Oregon Supreme Court, which nullified the vote. The level of regulation reached in Portland was perceived to be so onerous by the city’s homebuilders association that it advised its members not to build in the city anymore.

The Kelo decision concerns a different kind of taking: New London used its eminent domain powers to condemn private property so it could be used for a private sector development. The question involved whether this action was a violation of the “public use” section of the Fifth Amendment—the argument being that a street, library, or school is a public use, but a private commercial development is not. The U.S. Supreme Court took up the case and decided in favor of New London, enraging property rights advocates nationwide, who began to campaign in states to ban this practice at the ballot box.

Measure 37 and the Kelo decision have planted the seeds of discontent nationally. Just as the 1978 Proposition 13 property tax limitation movement spread from California to the nation and just as the 1994 “Contract With America” made term limits all the rage, the issue of property rights is now gaining national political attention and was put before voters in at least 23 states last year.

One example was Washington state’s Initiative 933, the Property Fairness Initiative. Similar to Oregon’s Measure 37, the initiative states, “An agency that decides to enforce or apply any ordinance, regulation, or rule to private property that would result in damaging the use or value of private property shall first pay the property owner compensation.” The initiative, even more severe than Oregon’s Measure 37 in that it vested the property—not the owner—in any past regulations, was defeated in November by 59 percent of the voters.

To the south in California’s Napa Valley, the Fair Payment for Public Benefit Act was modeled on both Oregon and Washington’s compensation requirements, with the law retroactive to February 2005, the date of the initiative filing. With that fairly recent retroactive date, the main impact appeared to be that the county would avoid adopting any new land use ordinances, thus creating a static regulatory environment. The measure, on the state’s primary ballot last June, was rejected by 64 percent of the voters.

This past November, 13 states decided through either legislative referral or initiative petitions whether local governments must limit eminent domain, pay property compensation, or both. (See figure below.) Initiatives in Colorado, Missouri, Montana, and Oklahoma failed to make the ballot because of either state supreme court rulings or failure to get legislation through the state legislature.

Property Rights Initiatives, 2006
State                                  Type Yes No
Arizona  (Proposition 207)    ED/C       X 
California     (Proposition 90)      ED/C                    X
Florida         (Amendment 8)       ED          X 
Georgia              (Amendment 1)       ED          X 
Idaho           (Proposition 2)        ED/C                    X
Louisiana     (Amendment 5)       ED           X 
Michigan      (Proposition 06-04) ED           X 
Nevada        (Question 2)           ED           X 
New Hampshire  (Question 1)           ED           X 
North Dakota(Measure 2)           ED           X 
Oregon         (Measure 39)         ED           X 
South Carolina    (Amendment 5)      ED           X 
Washington   (Initiative 933)       C                           X

ED=eminent domain; C=property compensation.
Source: American Planning Association.

The similarity of the political tactics employed in various states is striking. The thinking appears to be that if it worked in Oregon, then it is exportable anywhere. The common theme is that big government is not fair to the small property owner, so proponents seek the most egregious examples of trampled property rights and the most sympathetic victims.

In Washington, they copied Oregon’s “little old lady” approach with an unusual twist: they featured 86-year-old Grayce Fremouw, who said that since the county approved development uphill from her, the county should compensate her for the flooding on her property.

Many of these initiatives are not homegrown, but rather funded nationally by conservative, out-of-state, nonprofit organizations. In Washington, the single largest contribution, $360,000, came from the Chicago-based Americans for Limited Government.

Another common denominator in the latest property rights initiatives is that they are meant to curb government land use and environmental regulations through the threat of required compensation for property takings. The fact is, local and state governments cannot afford to pay landowners compensation for the regulations that the government imposes on them. Both the property rights movement and local governments are playing the “unfunded mandate” card: local governments tell state governments that if the state creates a mandate, then the state should pay for it; the property owners, in turn, are telling local governments they need to pay for their own mandates.

The result of passage of these initiatives will be more than the unraveling of the environmental and land use planning laws created in America in the 20th century. There is also a major economic impact to deal with. In Washington, the state’s office of financial management estimated that Initiative 933 would have cost local and state governments about $9 billion in claims, litigation, and administration. Oregon’s secretary of state estimates that Oregon taxpayers will spend almost $350 million per year just to administer Measure 37.

Finally, there is now the question of buyer’s remorse. A poll conducted in Oregon last October, sponsored by the environmental and conservation groups Defenders of Wildlife Action Fund and the Izaak Walton League of America, found that 48 percent of the voters who approved Measure 37 now disapprove of it. This prompts the question of whether a new measure will be filed in Oregon to undo Measure 37.

Richard H. Carson is a writer, lecturer, and practicing planner in the Pacific Northwest.

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