Can the government rezone your property over your objection? And if it does, can you make the government pay for it?
These questions are often in the background of public discussions of various city zoning actions designed to preserve "amenities," "open space," "lifestyle," and "neighborhoods." Threats of legal action are common, and the rhetoric often escalates. To better understand the legal basis of these discussions, let's take a look at the legal reality: the law as it actually exists today.
Any time property is rezoned over the owner's objection, the action is subject to three distinct legal challenges: First, it may be challenged as an invalid exercise of police power. Second, it may be challenged as an unconstitutional taking of private property. Third, it may challenged on grounds that the existing zoning has become vested. Often, these three issues — although distinct legally — are described in the public debate simply as a matter of "property rights".
In what is probably the most typical case, the government will rezone raw land to a less valuable use. For instance, a city may rezone commercial land to residential, or multi-family to single family, often to implement its general land use plan. In other cases, the city may change zoning on developed land to preserve an existing use. For instance, property used as a golf course may be rezoned from residential (which usually permits golf course and other uses) to a category that allows the property to be used only as a golf course. This prevents redevelopment and presumably insures that the property will continue to be used as a golf course.
The zoning of property — or the changing of existing zoning — is an exercise of the police power. This is the power possessed by legislative bodies to adopt laws and regulations governing the actions of its citizens. Any exercise of the police power restricts the actions of certain people, and sometimes causes an economic loss. This loss to certain individuals is said to be justified because of the benefit to the community in general. The truth is that without a police power, civilization could scarcely exist.
The courts will rarely invalidate a zoning ordinance on grounds that it is an invalid exercise of the police power. In order to do so, they must find that the law or ordinance is not reasonably designed to promote the public health, safety, morals or general welfare. In making this determination, the courts give the broadest latitude to the legislative bodies, and will rarely second-guess their actions unless it is clear that the law or ordinance advances no legitimate public purpose. The courts have often held that zoning intended to enhance the “quality of life,” is a valid exercise of police power. In general, it is usually extremely difficult, perhaps next to impossible, to challenge a zoning case on the grounds that it is an invalid exercise of the police power.
Both the Federal and the State Constitutions provide that private property cannot be taken for a public use without just compensation. The question thus becomes, when does rezoning amount to a "taking" of property?
The famous Supreme Court Justice Oliver Wendell Holmes set forth the often-quoted (if rarely helpful) general rule in a zoning case decided in 1915, when he wrote:
"Government could hardly go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.... But...the implied limitation must have it limits.... When it reaches a certain magnitude, in most if not all cases there must be an exercise of eminent domain and compensation."
In the years since that decision, the courts have gradually developed a body of law to determine the limits of the zoning power. If a zoning ordinance goes "too far", the law requires compensation for the property owner. Contrary to the popular opinion, zoning does not go too far simply because it causes a loss. Thus, commercial property can be rezoned to low density residential, regardless of the fact that the property owner may suffer a huge financial loss. Similarly, property being operated as a proprietary golf course clearly may be rezoned in a manner that will permit only that use.
Zoning goes too far — and amounts to a confiscation of private property that must be paid for — only when the zoning precludes any reasonable use. This means that property cannot be rezoned as open space, or as a public park, or as a protected wetland, unless the government is willing to pay the owner the fair market value of the property.
Sometimes a city will grant a property owner a "density transfer" in connection with the rezoning of his property. Some courts have held that this is not sufficient, even if the value of the density transfer is equal to the value lost by the rezoning. The Constitution requires that condemned property be paid for in cash, not development rights or density transfers.
The third challenge a property owner may mount against a rezoning is to claim that his existing zoning has “vested.” This is not a constitutional argument at all--it is merely an issue of estoppel. It is based on the theory that at some point, after a property owner has acted in reliance on existing zoning, he is entitled to prevent the government from changing it. It is a principle based on fairness and equity, not constitutional requirements.
This issue is treated somewhat differently in different states. However, in most states, zoning is not considered vested until the property owner has (1) obtained a valid building or similar permit for his intended development, and (2) has undertaken substantial physical construction on the site or has incurred substantial expenditures in preparation for construction. The determining factor is the activity that has actually occurred at the time of the rezoning, not the owner's plans for the future. Clearly, the mere purchase of a parcel of property, even if the purchase price reflects the value of the current zoning, is not enough to vest zoning and prevent it from being changed.
In all but the most rare cases, it is impossible to mount a successful legal challenge to a rezoning. To rezone or not to rezone is a political issue. High-profile zoning cases are fought out among those with vested interests ostensibly based on arguments of private fairness and public good. The reality, however, is that they are often decided by elected officials not unmindful of the political consequences of their decisions.