Lake Tahoe Ripples Reach New Jersey

April 30th, 2002 by Tim Evans

The U.S. Supreme Court ruled last week that a temporary moratorium on property development, even when it lasted years, did not automatically amount to a “taking” of private property requiring compensation to the landowners.

The case involved a prolonged (32-month) ban on development along the shores of Lake Tahoe, to allow a regional planning group time for environmental studies and development of a long-range development plan.

New Jersey law specifically prohibits municipalities from enacting building moratoria, absent a clear and imminent health threat.

Yet charges of “taking” surface commonly when New Jersey communities attempt to “downzone” land for conservation by reducing the number of units that can be built on a parcel, thus affecting the land’s market value. The Supreme Court refused to label categories of regulatory action as takings, and said such cases must be decided case by case.

LAND REGULATION AND PUBLIC GOOD GET BOOST FROM COURT
The April 23 Supreme Court decision in the Lake Tahoe case should make claims of “takings” more difficult, and provide government bodies with renewed confidence in regulating land uses for the public good. Several aspects of the Tahoe decision are especially relevant for New Jersey: The court refused to adopt a strict test to determine whether a regulation constitutes a “taking,” giving communities the flexibility to make zoning changes that meet the community’s needs even if these changes impact property values.

The court reiterated that compensation is due a landowner only when the regulation deprives the landowner of “all economically beneficial use” of the land. Thus, taking is not automatically assumed, even if a regulation diminished property value by as much as 95 percent. The decision suggests that what’s relevant in deciding a taking is the restriction’s effect on “the parcel as a whole.”

The decision did not address “physical” takings, where government must compensate a landowner for its physical use of private property, as example for a road. The April 23 ruling means that property owners who are subject to various land-use and zoning regulations are not necessarily eligible for government compensation. Any different interpretation, the court said, “would transform government regulation into a luxury few governments could afford.”