Property Rights, Regulatory Takings, and Environmental Protection

Executive Summary

Under current environmental laws individual Americans have been prevented from building homes, plowing fields, filling ditches, felling trees, clearing brush, and repairing fences, all on private land. Many believe that such regulations infringe upon private property rights and violate the Fifth Amendment to the U.S. Constitution’s admonition “…nor shall private property be taken for public use without just compensation.” When the federal government condemns a piece of private land to create a publicly-desired resource, such as a military base, road, or wildlife preserve, it pays the land’s owner for the value of the property. However when the government regulates the use of the same private land to achieve the same purpose, it rarely pays a dime. In this manner, private land is taken for public use — through a “regulatory taking” — without just compensation.

The Supreme Court held in Armstrong v. United States that the Constitutional prohibition on uncompensated takings “was 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.” Private individuals should not be forced to bear the costs of providing public goods desired by other people. Owning property should entitle the owner to the full use of that property, so long as the use of that property does not lead to the harming of other people or their properties. Ensuring compensation for regulatory takings will not only restore much-needed property protections, it also serves as the first step toward the development of a new generation of environmental protection.

Federal environmental laws are not the sole source of so-called regulatory takings by the federal government. However they are the most prominent. For two decades, federal land-use control has been the dominant means of achieving many environmental objectives. Two federal laws, in particular, have been the focus of the debate over compensation for regulatory takings: the Endangered Species Act (ESA) and Section 404 of the Clean Water Act (CWA), the source of regulations limiting the development of wetlands.

Numerous legislative proposals have been introduced in response to the growing demand for a greater protection of private property. Twenty-three states have enacted property rights legislation of some kind. The two primary property rights proposals under consideration in Congress are S. 605 and H. R. 925, both of which would require the payment of compensation to landowners for regulatory takings.

Groups opposing compensation for regulatory takings suggest that requiring compensation for regulatory takings would impose an extreme financial burden upon the federal government. Such claims are overstated. Under most proposals, compensation is paid directly out of those funds appropriated to the agency responsible for the taking, and therefore would have no impact on the deficit. Requiring federal agencies to pay compensation for regulatory takings would also make agencies more aware of the financial risks of over-relying on land-use regulation to achieve statutory goals.

There is a fundamental distinction between government actions that incidentally affect land values — positively or negatively — and those that affect property values because they are directed at particular properties. Property values are not the fundamental issue in the property rights debate. Compensation should be paid when the federal government acts so as to deprive a property owner of a right to use and enjoy that property. Yet property rights, properly understood, do not include the right to injure or harm the person or property of another. This means that when the government limits or prohibits the use of property in a manner that is likely to harm another person or property — what would be considered a nuisance under common law — no compensation is called for. However, should the government limit the use of property for some other purpose, such as the provision of wildlife habitat or some other “public good,” compensation should be paid.

Because the government does not pay for the costs of regulatory takings, it overuses coercive land-use regulations to achieve environmental goals, even when other approaches are available. Reviews of incentive-based wetland conservation programs have concluded that such programs are far more cost-effective than land-use regulation. Forcing agencies to pay for the private property rights that they take through regulatory action will encourage them to examine non-regulatory approaches to achieving their statutory goals. Being forced to bear the costs of regulation can markedly change agency behavior.

It must also be recognized that efforts to regulate land use — to “take” private property without compensation — are often bad for both landowners and the environmental values that the government regulation is designed to protect. By making the ownership of wetlands or endangered species habitat a liability, federal land-use regulation actually discourages stewardship by private parties.

Private property should be viewed as the cornerstone of environmental protection. Whether the owner is seeking a profit on the property or not, self-interest still provides a powerful incentive to preserve, if not enhance, the value of the resource. Not all property owners will follow the incentives, but, in the aggregate, most property owners will. The institution of private property promotes stewardship and conservation. In fact, the private sector provides a wide array of environmental amenities, typically in a more effective and responsive manner than the federal government. Moreover, if private property rights are respected by the federal government, then those lands protected privately are not dependent upon the vicissitudes of politics for their preservation.

Property rights are important for both economic and environmental reasons, and must be protected from both government regulation and private malfeasance. Compensating landowners when they are deprived of the reasonable use of their land will not produce environmental catastrophe. Far from it. In many cases it will eliminate the negative environmental incentives created by the heavy hand of existing government regulations. Properly understood, property rights do not undermine sound environmental conservation, they lie at its foundation.