The Supreme Court Just Handed Real Estate Developers a Huge Win


The Supreme Court handed down a decision Tuesday morning that’s gotten considerably less attention than this term’s blockbuster battles over same-sex marriage and voting rights. But Koontz v. St. Johns River Water Management District will likely prove a historic property-rights ruling, with far-reaching implications for the leverage local land-use agencies may use to extract concessions from property owners and developers for the common and environmental good.

The question lurking behind the case – how much and what can the public ask for when a private property owner’s actions cause wider harm or societal burdens? – has the potential for much broader impact than the technical details of one Florida man’s property dispute would suggest. And the 5-4 ruling surprised court-watchers who felt the government made a convincing case at oral arguments in January. In a majority opinion written by Justice Samuel Alito, the court sided with the property owner.

“It’s a very important decision that seriously undermines the authority of local communities across the country,” says John Echeverria, a legal scholar at the University of Vermont Law School who has written extensively on “takings” law. The two factions of the Supreme Court, on the other hand, disagree over whether this ruling will “work a revolution in land-use law.”

The case revolves around a 14.9-acre property – primarily wetlands – east of Orlando purchased by Coy Koontz, Sr., in 1972. In the 1990s, he sought a permit from the local water management district to develop 3.7 acres of the land, dredging and filling it in to construct a building, a parking lot, and a retention pond. Under Florida law designed to protect the state’s dwindling wetlands, anyone who wants to dredge or fill wetlands must get a special permit. And the land-use agencies that issue those permits can require property owners to offset any environmental damage to get one.

In this case, Koontz offered to permanently conserve the rest of his land from development in exchange for the permit to develop the 3.7 acres. The St. Johns River Water Management District argued that his offer was insufficient. The agency proposed instead that he develop only one acre and conserve the rest, or that he pay for contractors who would make improvements to other government-owned wetlands within the same watershed but several miles away. Koontz turned down both options and sued instead. In the 11 years this case has been winding through the legal system, Koontz died. The property owner is now his son, Coy Koontz, Jr.

The legal issue at play here comes from the Fifth Amendment – the Just Compensation Clause that states “…nor shall private property be taken for public use, without just compensation.” There is a long and complicated legal history sketching out what constitutes a government “taking” of private property, and when public agencies must compensate property owners for that taking. In Koontz, the central question was whether or not the St. Johns River Water Management District violated Koontz’ property rights by denying him a permit when he wouldn’t agree to the District’s conditions to develop his land. Continue reading

The Government’s Raisin Brand

The Supreme Court’s recent decision in a case challenging the Federal government’s regulation of the price of raisins as a takings did not establish any constitutional principles, but may make it easier to bring takings cases in the future by eliminating some of the procedural roadblocks usually employed by government in such cases. Stay tuned for the ruling on the merits in this case.

                                     -Jack Freund


Additional Sources:

A Modest But Potentially Significant Supreme Court Victory for Property Rights–  The Volokh Conspiracy, 6/10/13

The Government’s Raisin BrandThe Wall Street Journal, 6/10/13


Justices Broaden the Basis for Damages Over Floods

Published: December 4, 2012

Supreme Court Justices

WASHINGTON — The Supreme Court on Tuesday ruled that people whose property was damaged by intermittent flooding caused by the government may seek compensation. The decision, which was unanimous, reversed a lower court ruling that had barred claims for flood damage unless the flooding was “permanent or inevitably recurring.”

The case arose from the activities of the Army Corps of Engineers, which periodically flooded 23,000 acres along the banks of the Black River in northeastern Arkansas. The Arkansas Game and Fish Commission managed the land, harvesting timber and operating a wildlife and hunting preserve.

From 1993 to 2000, in response to requests from farmers, the corps changed its pattern of releasing water from the Clearwater Dam, which is 115 miles upstream from the commission’s land. The flooding destroyed timber and altered the character of the terrain, requiring expensive reclamation efforts.

The commission sued the federal government under the Constitution’s takings clause, which says that property cannot “be taken for public use, without just compensation.” A lower court awarded the commission $5.7 million.

The United States Court of Appeals for the Federal Circuit reversed that decision, saying that the takings clause did not cover damage from such intermittent flooding. Justice Ruth Bader Ginsburg acknowledged that stray comments in earlier Supreme Court decisions provided some support for that view.

But she said that “no magic formula enables a court to judge, in every case, whether a given government interference with property is a taking.”

“No decision of this court,” she continued, “authorizes a blanket temporary-flooding exception to our takings clause jurisprudence, and we decline to create such an exception in this case.”

In general, she said, two things are clear: permanent physical occupation of property by the government and regulations that forever make all valuable uses of land impossible are takings requiring compensation. In the context of flooding, she went on, a dam that permanently submerged a plaintiff’s land was a taking, and so was damage caused by seasonally recurring flooding.

Beyond that, Justice Ginsburg wrote, things get murkier, requiring case-by-case judgment. She listed several factors to be balanced in the analysis.

The length of the government’s interference with private property matters, she said. So does “the degree to which the invasion is intended or is the foreseeable result of authorized government action.”

“So, too,” she went on, quoting from an earlier decision, “are the character of the land at issue and the owner’s ‘reasonable investment-backed expectation’ regarding the land’s use.” Finally, “severity of the interference figures in the calculus as well.”

Justice Ginsburg said the court would not address a new distinction proposed by the federal government when the case was argued in October: that downstream flooding should never count as a taking, whether permanent or temporary. That question, along with whether Arkansas law has a role to play in the analysis, should be considered in further proceedings before the appeals court, she wrote.

Justice Elena Kagan was disqualified from the case, Arkansas Game and Fish Commission v. United States, No. 11-597, presumably because she had worked on it as solicitor general.

Justice Ginsburg wrote that courts should be judicious in allowing takings claims for flood damage. “To reject a categorical bar to temporary-flooding takings claims,” she wrote, “is scarcely to credit all, or even many, such claims.”

“Today’s modest decision,” Justice Ginsburg wrote, selecting the apt metaphor, “augurs no deluge of takings liability.”


Source: New York Times

Tossed-Out $20 Tenants Turn Millionaires in Mumbai

Residential buildings sit at Napeansea road in Mumbai, India. Photographer: Dhiraj Singh/Bloomberg

By Pooja Thakur on June 25, 2012


Thousands of rent-controlled tenants in Mumbai paying $20 a month, and often less, are being turned into millionaires by developers tearing down crumbling colonial mansions to build luxury towers for the rich.

South Mumbai, including a stretch of prime land hugging the Arabian Sea, has about 500 dilapidated stone structures dating back to the early 1900s with a potential redeveloped value of about $40 billion, according to Pujit Agarwal, managing director at Orbit Corp. (ORB), a Mumbai-based developer that derives about 80 percent of its revenue from redeveloping old buildings.

“For generations, most tenants were living a hand-to-mouth existence, barely making two ends meet,” said Agarwal, whose firm is one of around 75 vying to oust Mumbai’s rent-controlled residents. “Now, with redevelopment, these tenants have become multimillionaires overnight as capital values of the properties they occupied soared.”

Home prices in Mumbai have climbed to a record 10,833 rupees ($200) per square foot, doubling in three years, according to Liases Foras Real Estate Rating & Research Pvt, a research company based in the city. Continue reading

A Hypothetical Housing Win–Win


By Amanda Williams, 05/31/2012
A Hypothetical Housing Win–Win


Last month, the Supreme Court declined to hear arguments on rent control’s constitutionality—a shame, in my view, given sound economic reasons rent control is rather misguided. Over and above those economic reasons, though (which I outlined in greater detail on Fisher Investments’ MarketMinder), it’s entirely possible ending rent control would help not only the rental market (renters and landlords alike), but could also incrementally help the housing market as a whole.

Consider: Rent control was intended to keep rent prices low for low-income individuals. A fine goal. However, doing so creates a market distortion. Keeping prices artificially low is not a cost-free decision. Rent control limits supply (since landlords receive typically below-market rents and are therefore less incentivized to rent out properties) and creates more intensive competition among renters, thereby ultimately resulting in higher overall prices for units which come on the market. Lower prices for some (many of whom are not, in fact, low income) and higher prices for many more seems to run counter to the original purpose of rent control—the law of unintended consequences. Continue reading

‘Ruined’ by rent control

Ny Post

‘Ruined’ by rent control

Landlords may lose home


Posted:2:37 AM, May 6, 2012

The lawsuit that almost overturned the city’s rent-control laws only succeeded in upending the lives of the Upper West Side couple who brought the case.

After the Supreme Court refused to hear New York’s highest-profile lawsuit challenging rent control, landlords James and Jeanne Harmon said they may have to sell the five-story town house at the center of the battle — a brownstone their family has called home for three generations.

James HarmonHELAYNE SEIDMAN                                                                             CRY POVERTY: Live-in-landlord James Harmon say she may lose his brownstone because half of his tenants pay $1,000 a month through rent control. 

The case has been costly. The couple had to put off retirement, they cannot provide homes for their grandchildren and they are treated like pariahs by some neighbors on West 76th Street.

“We feel total uncertainty about the future at age 69,” James Harmon, a Vietnam veteran and former federal prosecutor, told The Post. “This was devastating to our family because the house is part of our family. This is the place I grew up, and this is the place my mother died. We should be able to keep this house, but we don’t know if we can continue to do that.”

Harmon argued the city’s 43-year-old rent-regulation laws violated the Fifth Amendment, which protects private property from seizure for public use without “just compensation.” Harmon claimed the rent law denies him that compensation, forcing him to bankroll the lifestyles and second homes of his tenants.

The Harmons occupy an elegant one-bedroom apartment on the building’s parlor floor. They rent six one-bedroom units: three at market value and three at rent-stabilized rates 59 percent below market.

The Harmons moved into the building in 2005, after they took out a $1.5 million mortgage to buy Harmon’s brother’s share of the building they inherited. Continue reading

Rent Control Violates Property Rights: Why Occupy 76th Street Is Not Fair

OP/ED | 4/30/2012 @ 2:55PM


West 76th Street in New York City (Photo credit: Wikipedia)

West 76th Street in New York City (Photo credit: Wikipedia)

If James and Jeanne Harmon, residents of the Upper West Side of Manhattan, ever call 911 to report a home invasion, they probably shouldn’t expect the NYPD to respond.

Mr. and Mrs. Harmon are senior citizens and the owners of a five-story brownstone on West 76th Street.  They live in the first floor apartment and several unwanted tenants occupy the upstairs apartments.  Under New York’s Rent StabilizationLaw (RSL), Mr. and Mrs. Harmon are required to continue renting the apartments at vastly below-market rents.

The Harmons challenged the constitutionality of the RSL in federal court, claiming that the law violates the Fifth Amendment (“nor shall private property be taken for public use without just compensation”), the Contracts Clause (prohibiting States from “impairing the obligation of contracts”) among several others.  Having lost in lower courts, including a snide opinion from the U.S. Court of Appeals for the Second Circuit, the Harmons appealed to the U.S. Supreme Court.  Last week, the Justices refused to hear their case.  As a result, the Harmons will likely be forced to provide subsidized housing to their tenants (and their descendants) forever. Continue reading