Also known as: economic impacts of the regulation · economic impact of regulations
Written by attorneys · grounded in primary & secondary sources — see below
A factor in regulatory takings analysis that examines the degree to which a government regulation diminishes the value or utility of the claimant's property. Courts weigh this factor together with interference with investment-backed expectations and the character of the governmental action. The factor focuses on the magnitude of any loss in economic use or return while leaving the owner with a reasonable beneficial use.
Grand Rail Trust bought air rights above a historic depot intending a sixty-story tower. The city then capped new construction at three stories to preserve the landmark. The trust can still build a profitable three-story office and retail project. The economic impact factor weighs against a taking because the regulation leaves a reasonable beneficial use and does not destroy all economic value.
A landlord owns a Manhattan apartment building. The city requires permanent installation of cable television equipment on the roof. The equipment occupies only a small portion of the building yet prevents the landlord from using that space for other purposes. The economic impact is minimal because the regulation affects only a tiny fraction of the property and leaves the building's primary rental use intact.
Select any source to read its text and confirm it supports the definition.
Lucas purchased two beachfront lots for residential development. The state then enacted a law barring all construction on the lots to protect the shoreline. The ban eliminated any economically beneficial use of the parcels. The economic impact factor supports a categorical taking because the regulation leaves the owner with no productive use of the land.
A coal company owns subsurface rights and plans to extract coal that would cause surface subsidence. State law requires the company to leave fifty percent of the coal in place to prevent damage to surface structures. The company can still mine the remaining coal at a profit. The economic impact is not severe enough to constitute a taking because the regulation leaves a viable mining operation.
Eastern Enterprises previously operated coal mines but later sold its operations. A federal statute assigns Eastern liability for health benefits of miners it never employed. The liability reaches hundreds of millions of dollars with no corresponding benefit to Eastern. The economic impact factor weighs heavily toward finding the statute effects a taking.
Chevron owns gas stations in Hawaii and leases them to dealers. A state law caps the rent Chevron may charge dealers. Chevron continues to earn a reasonable return on its investment in the stations. The economic impact factor does not support a taking because the regulation leaves Chevron with profitable ongoing operations.
Courts weigh the economic impact of the regulation together with interference with investment-backed expectations and the character of the governmental action. A severe economic impact alone does not establish a taking when the regulation advances a legitimate public purpose and leaves reasonable beneficial use. The three factors are balanced on an ad hoc basis rather than applied as a rigid formula.
Supporting sources
No. A reduction in expected profit is relevant but not conclusive. Courts require that the regulation leave the owner without a reasonable beneficial use before the economic impact factor supports a taking. Many land-use regulations that lower profitability are upheld when viable economic use remains.
Supporting sources
Evidence that the owner can still operate the property profitably or lease it at a reasonable market return demonstrates that economic impact is not severe. Continued positive cash flow or a viable alternative use after the regulation weighs against finding a taking even when value declines substantially.
Supporting sources
…they effect a taking. In deciding this question, we have identified several factors that are particularly significant. The economic impact of the regulation on the claimant, the extent to which the regulation has interfered with distinct investment-backed expectations, and the character of the governmental action are all relevant. A The…