Regulatory Takings

Three Factors, Two Shortcuts: When a Zoning Change Becomes a Taking

The baseline is a standard, not a rule. The Court "has been unable to develop any ‘set formula’ for determining when ‘justice and fairness’ require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons"; instead, "[i]n engaging in these essentially ad hoc, factual inquiries," three factors carry "particular significance" — "[t]he economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. So, too, is the character of the governmental action" Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). A taking "may more readily be found when the interference with property can be characterized as a physical invasion by government" than "when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good" — and zoning is the paradigm of the latter, because "[g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law." The math also runs against segmentation: "‘[t]aking’ jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated" — the court measures "the nature and extent of the interference with rights in the parcel as a whole."

Two per se categories skip the balancing entirely. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) gives categorical treatment "where regulation denies all economically beneficial or productive use of land": in "the extraordinary circumstance when no productive or economically beneficial use of land is permitted," it is "less realistic to indulge our usual assumption that the legislature is simply ‘adjusting the benefits and burdens of economic life.’" The only defense left inheres in title — "Any limitation so severe cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State’s law of property and nuisance already place upon land ownership," because a "State, by ipse dixit, may not transform private property into public property without compensation." The second shortcut is physical: Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021) treats physical appropriations as "the ‘clearest sort of taking’" assessed with "a simple, per se rule: The government must pay for what it takes," and it is emphatic that "when the government physically appropriates property, Penn Central has no place—regardless whether the government action takes the form of a regulation, statute, ordinance, or decree." Nor does brevity save the ordinance: "a physical appropriation is a taking whether it is permanent or temporary," and duration "bears only on the amount of compensation due."

The recent decisions police the framework’s borders. Sheetz v. County of El Dorado, 601 U.S. 267 (2024) held that "[t]he Takings Clause does not distinguish between legislative and administrative land-use permit conditions" — "conditions on building permits are not exempt from scrutiny under Nollan and Dolan just because a legislative body imposed them," and the test "applies regardless of whether the condition requires the landowner to relinquish property or requires her to pay a ‘monetary exactio[n]’ instead of relinquishing the property" — putting legislatively scheduled impact fees under nexus-and-proportionality review. Outside the exaction context, courts keep routing zoning fights back through the three factors. Wampus Mills, LLC v. Town of North Castle, No. 7:25-cv-01582 (S.D.N.Y. Mar 26, 2026) held that "Penn Central’s regulatory takings analysis—and not the Nolan/Dolan unconstitutional exactions framework—governs" a facial attack on an affordable-housing set-aside, stressing that "[t]he caselaw uniformly rejects the proposition that diminution of property value is grounds for a regulatory taking" and that "[t]he reasonableness of owners’ expectations ensures that compensation is limited to those owners who can demonstrate that they bought their property in reliance on a state of affairs that did not include the challenged regulatory regime." Mogan v. City of Chicago, 115 F.4th 841 (7th Cir. 2024) ran the same logic against a short-term-rental crackdown: "in light of the language in the Declaration prohibiting short-term rentals of less than 30 days, Mogan cannot demonstrate any economic impact of the Ordinance on him, nor can he demonstrate that the Ordinance has interfered with any reasonable investment-backed expectations," because "the property interest that he obtained in the unit never included the right of short-term rentals, and in fact expressly excluded that right." And the forum question is settled — under Knick v. Township of Scott, 588 U.S. 180 (2019), "[a] property owner has an actionable Fifth Amendment takings claim when the government takes his property without paying for it" and "may bring a takings claim under § 1983 upon the taking of his property without just compensation by a local government," with no state-court detour first.

Pick the lane before drafting the complaint. If the zoning change leaves any economically viable use, the claim lives or dies on the Penn Central record: appraisal evidence quantifying the economic hit against the parcel as a whole, acquisition-era proof that the investment predated the regulatory regime, and facts framing the enactment as concentrating a public burden on a few owners rather than adjusting benefits and burdens for everyone. Timing is the quiet killer — expectations are measured against what the owner actually bought, so a buyer who took title subject to the restriction, or to private covenants that mirror it, starts the analysis already behind. If the change operates as a permit condition or impact fee, run the exaction theory instead, where nexus and rough proportionality now apply even to fee schedules set by legislation. And whichever lane, the claim is ripe in federal court the day the regulation bites — no state litigation required first.