Every day, thousands of people across the country are casualties of governmental excess. In New York City, a family that purchased a single-family house that had been converted by prior owners into small apartments with the intent of reconverting the building into a single-family residence in which they and their children would live was prohibited from restoring the house to its original character by an ordinance passed by the City four months after they bought the house and began proceedings to reclaim the house. The ordinance left the family of four living in two rooms with a total floor space of approximately 350 square feet, barely larger than the average hotel room. Two years later, they were able to reclaim only an additional 350 square feet. Only after six years in which the Zimans spent enormous emotional and other resources to challenge the ordinance in court (including approximately $100,000 in legal costs), they won the right to make their house their home when the New York Court held that they qualified under an exemption of the newly revised law. In the meantime, two of their tenants, both single men, occupied apartments at a monthly rent of less than $200 each in a city where the market rent for a one room apartment was over $1200 per month.

 Similarly, in Santa Monica, California, an 89-year-old woman who owned an eight unit apartment building was denied the right to live in the only single floor apartment in the building after she suffered a stroke which obliged her to give up her split level apartment because of mobility problems caused by the stroke. The Santa Monica rent control board refused to allow her to occupy the only single-level apartment in her own building unless and until the apartment’s tenant either voluntarily left the apartment or seriously breached the lease in some manner even after the tenant’s lease expired. Elsewhere in the same state, the California Coastal Commission insisted that owners of existing homes donate portions of their property to the state in return for its allowing residents to build a revetment needed to keep their homes from being swept into the ocean while on the other side of the continent, a 50-year old Hungarian immigrant was sentenced to three years in prison and was subjected to $202,000 fine for cleaning up 17 acres of land without the government’s permission — and for refusing to believe that the government had the authority to require that he obtain its permission to clean the land — property that had for years been the site of an unofficial town dump. Unfortunately for him, the property met the federal government’s highly technical definition of a wetland, although nobody who looked at the site — other than a regulatory body or an expert consultant — would readily have identified it as such. His actions had threatened neither health nor safety and was not, for that matter environmentally sensitive or important land. He was in essence sent to prison and fined for irritating government officials.

Writing about the daily violation of civil rights is not a comfortable position in the best of times. It is even less so when those violations are carried out in the name of achieving important social goals with which, in some instance, I might agree. What I do not — and cannot — agree with is the premise, accepted by many, that it is either necessary or desirable to sacrifice individuals’ rights to reach those goals, however important they may be.

 The book from which this article was abstracted — Grand Theft and Petit Larceny: Property Rights in America — is about one civil right in particular or, perhaps more accurately, one class of civil rights: the rights of individuals to acquire, own, and use and enjoy property. For simplicity’s sake, I use the term "property rights" to describe this class of rights. However, as was recognized by Supreme Court Justice Potter Stewart, "Property does not have rights."

 The rights of people to acquire, own, and use and enjoy property may themselves be viewed as a subset of a larger class of rights, the economic liberties. These liberties have been virtually stripped of all protection and their existence almost forgotten since the U.S. Supreme Court decided The Slaughter-House Cases in 1872. Their violation has often occurred at the hands of people with unquestionable good will, as well as by those with illegitimate goals. While there are far too many people in this latter group, the greater tragedy occurs when people of good intention willingly violate rights or, worse, simply refuse to recognize them — in the name of some higher good. This violation is even more tragic because it is easier to guard against villains than against truly well-meaning people. Worse, the well-meaning often provide the rhetoric and the legal and political devices than the less well-meaning can, and do, use to devastate rights with virtual impunity. In fact, the devastation of property and economic rights is often carried out with the active cooperation of those who were intended to be the very guardians of rights: the courts.

 An individual’s rights to acquire, own, and enjoy property have been recognized as being among the most fundamental of civil rights and as being the foundation all other civil rights. Those who framed and ratified the Constitution and Bill of Rights regarded those rights as being natural liberties, that preexisted and were independent of the Constitution. The Framers considered the protection of property rights to be one of the primary purposes of government. These early Americans’ belief that these rights should be protected was partly moral; that is it was based on a philosophy that held that individuals have natural and inalienable rights in their property and that those rights cannot legitimately be encroached upon except in the most limited of fashions. But the Framers’ belief in the need to protect the rights of individuals in their property was also based a profound pragmatism. They considered private ownership of property to be the foundation on which safety, security, and prosperity exist. Other countries in eastern Europe, which have for decades been hostile to the very notion of private property and private economic enterprise have now realized that they need such rights.

 We should not be surprised that the Framers concluded that protection of private property yields practiced benefits. The new government was devised by people intimately acquainted with both the philosophy and the lessons of history. Their own experiences and the experience of history demonstrated to these early Americans’ satisfaction that private ownership of property, together with other liberties, provides incentives that maximize creativity and initiative. To find support for this view, they had to look no further than the demise of the feudal system. The collapse of feudalism led to the spread of property ownership from the nobility to the common people and to the rise of a merchant class, which in turn, resulted in widespread prosperity. Failure to protect property rights wastes resources and, ironically, has its greatest adverse impact on minorities and the disadvantaged.

 As can be seen in Grand Theft and Petit Larceny, the spectrum of rights that can be lumped under the rubric of "property" rights is potentially very broad. It includes the entire realm of economic liberties and constitutional protections that had been designed to ensure respect for those liberties. These constitutional protections included not only the two most obvious constitutional provisions — the due process and just compensation clauses of the Fifth Amendment, and the due process and equal protection clauses of the Fourteenth Amendment — but also the contracts clause in Article I, Section 10 of the Constitution; the privileges and immunities clause in Article IV, Section 2; and the privileges and immunities clause of the Fourteenth Amendment, among others. However, to keep this look at property rights manageable, Grand Theft focuses on property rights in the context of the just compensation clause of the Fifth Amendment and examines particularly the application of that clause to regulatory conduct.

 Direct threats to property rights, in the sense of an unrestrained exercise of raw governmental power in physically seizing a property, are uncommon in the modern United States outside the criminal law arena. The principal situation in which property rights questions arise today is one in which some government agency purports the ownership, use or disposition of private property, thereby substituting a label for the exercise of physical power.

 The growth of governmental regulations affecting property or other economic rights has been nothing short of phenomenal since World War I.

 The depression of the 1930s and World War II served merely to further accelerate the rate at which the government has intruded into private life. In 1990 alone, the federal government issued more than 63,000 pages of new, revised, and proposed administrative regulations. This figure does not include new and amended federal legislation or court decisions that judicially amend laws that the courts are purporting to be only interpreting. Neither does it include state and local ordinances and regulations nor state court decisions, which add to, and sometimes confound, the federally imposed regulatory burden.

 The volume of regulation does not tell the entire story. Its scope is equally staggering. Virtually every aspect of our daily lives is subject to regulatory management. Directly or indirectly controlled by some government agency are what goods or services we may buy and from whom, how we may buy them, and what price we must pay. What activities we may engage in and with whom; the colors of our homes; and even the manner in which individuals may mow their lawns, sweep their sidewalks, clear dead leaves from their property, or cook in their back yards may be dictated or affected by some governmental body. Many California regulatory jurisdictions, such as the South Coast Air Quality Management District, propose to regulate lawn mowers and leaf blowers in the name of protecting air quality. One California court upheld the right of a regional air quality management district to regulate back yard barbecues in the name of protecting air quality despite the questionable quality of the science used by the involved agency in promulgating the regulation.

 The individuals or agencies responsible for exercising such control are certain to have little understanding of our personal needs. Their ability to understand the long-term effects of their actions is minimal at best. Yet, despite their power to affect our lives, administrative officials are not held accountable in the same manner that we insist that elected officials should be held.

 The threats to property rights and economic liberties posed by the dramatic expansion of regulatory activity at all levels of government are exacerbated by the development of public relations techniques that obscure rather than clarify issues, growing budget deficits, and voter imposed limitations on spending and taxing. Spending and taxing limitations prompt governmental bodies to impose program costs (for which voters are not willing to pay taxes) on the last persons to make use of their property in any given community. California’s Proposition 13, which rolled back property taxes in California and placed severe restrictions on re-raising such taxes, is perhaps the most famous and imitated such voter imposed limitation. Its passage stimulated the invention and development of exactions, dedications and developer fees as a means of avoiding the results of the taxing limitation.

 Growth of the regulatory state also poses a threat to rights because the regulatory arena has the greatest potential for breaking down the constitutional division of powers among the branches of government that are essential to the preservation of rights and liberty.

 Administrative agencies combine all the features of the legislative, executive, and judicial branches in one body; the combination most feared by the Framers of the Constitution and their contemporaries.

 Agencies promulgate regulations (a legislative function), interpreting statutes and their own regulations (an executive function), determine whether regulations have been violated, and assess sanctions against the purportedly offending party (judicial functions). Many agencies even have officials designated as "administrative law judges." If, as is now often the case, the courts abandon their constitutional role as guardians of rights and defer to the judgement of regulatory agencies in all their various functions, then the constitutional system as originally devised is radically altered.

Paying the Price: The Cost of Abandoning Property Rights

In the battle over whether property rights will be protected, more is at stake than the vindication of an abstract philosophy, the reduction of personal frustration and hardship, or even the attainment or non-attainment of personal or national prosperity. The failure to protect this constellation of constitutionally protected rights from encroachment — in the name of government efficiency — or to attain a particular goal — however laudable — has other unfortunate, and possibly disastrous, effects that must be avoided.

 For example, the most important function of recognizing and protecting property rights is the role that the protection of those rights plays in preserving other rights reserved in the Constitution.

 It is this value to which Supreme Court Justice Potter Stewart referred when he observed that there is a "fundamental interdependence ... between the personal right to liberty and the personal right to property."

 It takes only a moment’s reflection to comprehend the essential vulnerability of other personal rights and liberties if one’s property is subject to virtually unlimited regulation by the State. The chilling effect that fear of retaliation against one's property has on the exercises of other civil rights cannot be overestimated.

 No other civil right ever need be subjected to a direct attack when its protection can be nullified by the simple expedient of regulating an offending or unpopular party’s property.

 This is particularly true where property rights are nominally respected but are subject to only the most cursory of judicial scrutiny in practice, as presently occurs. In such circumstances, which provide a comforting illusion of security, individuals’ other civil rights can be abrogated by basing the regulation of their property on some superficially plausible pretext with the regulators knowing that the court will not meaningfully scrutinize the government’s conduct.

 Property owners who must go before an administrative agency in order to exercise their rights to use their property are acutely aware of these problems. They know the power of the agencies to affect their property and economic well-being and know they must exercise caution to avoid offending any member of that body. That degree of unrestrained power also invites political corruption. Property owners who know that their rights to use their property are subject to the virtually unrestrained whims of a local regulatory body — whose decisions will not be given serious scrutiny by a court — will contribute heavily to campaigns by that body’s members in hopes of obtaining favorable consideration.

 It is equally clear that a virtually unrestrained property regulation system can be directly used as an instrument of discrimination. Land use and planning devises, such as large lot zoning and imposing multiple conditions on use of permits, can be used to increase the cost of housing or doing business so that minorities, people with lower incomes, and other disadvantaged individuals can be virtually excluded from commercial and residential life in desirable areas. Such mechanisms can also serve as anti-competition devices, keeping new and competitive businesses out of an established area — to the detriment of consumers, especially low– and moderate-income consumers, many of whom are from minorities. Such uses of the land-use planning power are all too common and are wholly illegitimate.

 Worse, a failure to fully protect any class of constitutional rights in the name of achieving some social goal, which its proponents see as desirable, erodes respect for the fundamental principles of constitutional government and the rights of individuals. It becomes easier with time to justify ever greater intrusions into other civil rights in the name of attaining desirable social goals based on the same rationale. This erosion of rights is particularly insidious because regulatory intrusions are typically accomplished in piecemeal, cumulative fashion. It is only when individual intrusions are totaled that the magnitude of the erosion becomes apparent. By the time the full extent of the erosion is known, a reversal of the trend may be impossible.

 The Constitution’s property protections, particularly the takings clause, serve even more concrete purposes. The Constitution was created by persons who, despite their adherence to the principle that property rights are inviolate, recognized that there would be circumstances in which any government needs to acquire resources that are in private hands in order to carry out its legitimate functions. The Fifth Amendment’s takings clause, which mandates compensation whenever the government takes private property for public use, is an acknowledgment of that need. At the same time, the clause serves as a brake on hasty or ill-considered actions, encouraging the government to act in a cost effective manner. This function and corollary ones are the clause’s most valuable but least-considered purposes. To more fully understand these functions, though, the reader needs an explanation and examples.

 One precept on which all seem to agree is that resources are not infinite. Private ownership and control of property are preferable to state ownership and control, a view most recently validated by more than 70 years of experience in eastern Europe.

 One reason for this is that costs are associated with acquiring resources. Where sufficient information is available to allow individuals to do so, they will be more likely to correctly weigh costs and benefits in determining how resources will be used. Since individuals are in a much better position to know their particular needs, to weigh costs and benefits, and to respond to changes in their individual circumstances, they can act with a greater certainty of fulfilling those needs than government can.

The net effect is to guarantee the most efficient use of resources overall. While government is generally less economically efficient in most instances, it too responds to costs.

One function of the takings clause is to keep resources in private hands where they will be more efficiently used unless the government genuinely needs the resource. The clause encourages this outcome because government will more carefully consider its need for a particular resource if it knows it must pay for acquiring that resource. Put differently, one is more careful spending one’s own money than spending another’s. It can be argued, of course, that the government never spends its own money, but instead spends taxpayers’ money; therefore, it is not concerned with cost. There is some truth to this observation. However, to the extent that it is valid, the observation applies most to legislatures that have the power to simply acquire more money by raising taxes or, in the current jargon, by "establishing revenue enhancement mechanisms." On the other hand, regulatory bodies tend to view their budgets as their own checkbooks, and are prone to be more careful if takings judgements cut into their operating budgets than they are when a general judgment fund pays. Payments from a general fund have no fiscal impact on the regulatory body and do not encourage responsible behavior.

 Even legislatures are not wholly free to ignore costs, however. Their members must respond to voters. Voters will tolerate a great deal, to be sure, but their patience is not endless. In fact, it is precisely because voters are attuned to cost issues that governmental bodies go to great lengths to suggest that a new regulation has no taxpayer costs. California voter pamphlets from the past several years consistently attempted to minimize the potential cost impact of voter initiatives on the ballot. Furthermore, the proposition that a regulation is costless is never true. At a minimum, such regulations always have administrative costs, which can be considerable and will directly affect taxpayers. Regulations may also have indirect costs that taxpayers would not tolerate if they were aware of those costs. For example, regulations invariably impose additional costs on the consumers of the goods or services regulated. Those costs may be sufficiently large to make the goods or services too expensive for any but the most well-to-do consumers.

 If government decides it needs a resource and spends public funds to acquire it, use of the resource, once acquired, is more likely to be efficient. Further, if and when the resource is no longer needed for the purpose for which it was acquired, government will have more of an incentive to find another useful purpose for it. Government may, on the other hand, decide to sell the property back to the private sector. The government then recoups its monetary investment, which it may use for other public purposes, and the private property is restored to private use, allowing its efficient management. In either case, the useful life of the resource will be enhanced. This is of no small importance when considering the extent of governmental ownership of property in the United States. The federal government presently owns outright approximately one third of all the real property in the United States. This figure does not include property in which it owns some easement, either directly or through regulation. This figure also does not give any clue to the amount of land in the hands of local, county, and state government—entities that are by no means minor landholders.

 A second, related function of the takings clause is to encourage government to more carefully design its regulatory programs to enhance the likelihood that they will achieve their objectives in a more cost-effective manner. The logic is simple and unassailable. If a governmental agency understands that regulations may result in its having to compensate an owner whose resource it controls from its own budget, the agency will work harder to design a program that is more closely tailored to the objective it is trying to achieve in order to minimize potential costs and maximize program benefits. In so doing, the regulatory body will be less likely to act from political expedience or out of bureaucratic inertia and territorial motivation.

 The first result of this attitude is that the resource is undervalued and not enough attention is paid to the question of whether the resource is best used for the proposed purpose. The second result is that this attitude generally deprives the public—who ultimately pays a price for an improperly evaluated regulation—of the information it needs to decide whether a regulation in question is desirable. By requiring compensation for public utilization of private resources, the cost of regulation is brought "on budget" where the public can decide for itself the relative costs and benefits of the regulation.

 For example, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) was enacted hastily after the Love Canal disaster to aid the cleanup of toxic wastes presently in the ground and water. CERCLA retroactively imposed liability on persons whose conduct was not only legal at the time it occurred, but also was completely reasonable. Worse, CERCLA imposed liability on people whose only connection with the waste was that they eventually came to own the land under which the waste was found.

 The additional cancer risks posed by some contamination is frequently rated extremely low (1 in 50,000) and yet the costs of cleanup are extremely high, with individual cleanups and their preceding studies sometimes costing well over $120 million. In one Superfund case in which I represented a client, the initial study and proposal for cleanup (the remedial investigation/feasibility study or RI/FS) cost $60 million. The RI/FS concluded that the cleanup itself would cost another $60 million. The common experience in Superfund cases is that cost estimates are invariably significantly lower than the ultimate costs. The EPA justifies Superfund on the basis, among others, that the polluters pay all and the public pays nothing. This is completely false reasoning. The public ultimately pays in higher prices or a scarcer supply. If voters were asked individually whether they would accept such a price for a minimal benefit, the answer would most likely be "no."

 Given the above, is the resource enhancing value of the takings clause real or of only marginal utility? Experience suggests that this function is of genuine value.

 For example, studies considering various programs whose stated purposes were to remedy the housing crisis demonstrate that these programs not only failed to provide a remedy, but actually exacerbated the problem. Among the various types of regulations that have an adverse impact on housing costs are general zoning and land-use laws (including growth control ordinances), excessive building codes and standards, exclusionary zoning, environmental regulations, and rent control.

 Studies done to measure the impact of regulatory programs that were undertaken for other stated purposes also show an adverse impact on housing costs. Research on the effect of residential growth control regulations on housing prices in the South Coast Region of California, for instance, demonstrated that these measures alone contributed significantly to the increase in housing prices that occurred during the study period of 1974 and 1979. Studies that evaluated the impact of California Coastal Commission activities on housing prices yielded similar results. One such study by Kneisel, which examined the impact of Coastal Commission regulatory activities on Los Angeles housing prices, adjusted for inflation, demonstrated that the Coastal Commission’s activities alone accounted for a housing cost increase of approximately 21 percent of the Coastal zone. Nor did the Commission’s activities have an impact only on the zone it managed. Its actions also forced home prices up in the area directly bordering the zone by approximately 16 percent, while in the inland areas of Los Angeles, their activities precipitated a 7 percent housing cost increase.

 Regulatorily imposed housing costs are not a purely California phenomenon. In his first term, President Reagan formed a commission to examine the housing problem. That commission reported that regulations had a major impact on the cost of housing, a significant factor in the housing crisis. The commission’s report estimated that as much as 25 percent of home cost in some areas of the U. S. could be attributed to duplicated or sometimes just plain unnecessary regulation. Among the imposed costs were those related to dedications and exactions, carrying costs, and taxes which accumulated during the time it took to process an application, plus its related costs. That estimate was probably low in light of contemporary and subsequent studies. Even if it were accurate, the cost attributable to regulation is even higher today, particularly where the pressure for increased housing is highest.

 It is not hard to understand how regulations can adversely affect social goals. If the goal is providing adequate and affordable housing, environmental and land-use regulations can result in taking suitable land off the housing market, thereby increasing the cost of remaining land. Similarly, conditions imposed on granting a development permit will invariably increase housing costs. These conditions frequently include requiring payment of a fee, or dedication of some of the owner’s land for public use. While the cost of each individual exaction may be relatively small, a typical single condition might increase costs by $1,500 to $2,000 per unit, that cost will be only one of many imposed in the same process. The fee is not merely $1,500 to $2,000 per unit, but that much per unit for one purpose, another amount per unit for another purpose, and still another amount for yet another purpose. If each fee is considered in isolation, a policy maker and certainly the public get a distorted view of the costs heaped on individuals seeking housing.

 One of the most significant costs imposed by regulations is the cost of pursuing the regulatory process itself. Regardless of the extent of use of the land ultimately allowed, applying for that use is horrendously expensive. Those costs include application fees plus those for various consultants and attorneys whose services would not otherwise be required. The applicant will also incur extra taxes and carrying costs accruing from the lengthy delays involved in the permitting process, delays that can take as long as two to three years. During that time, of course, the property cannot be used for its intended purpose—even if the necessary permits are ultimately granted. These process costs will be built into the price of the home, or of the goods or services that will be provided if the developer is commercial.

 In many instances, the applicant may be required to complete an environmental review. These documents are extremely expensive to prepare. They require a complicated set of hearings and proceedings as well as the services of environmental consultants. Each challenge eats up resources at an enormous rate and increases the cost of doing business proportionately. The administrative agency’s costs are passed to the applicant and, along with the applicant’s other costs, are ultimately passed on to the consumer. Since homes and other structures are usually financed over a period of years, the actual additional costs are still higher because interest must be paid on regulatorily imposed costs. A prospective buyer who might be able to pay those additional costs if imposed as property taxes over a period of years cannot afford to pay a lump sum up front or to pay the interest on that additional cost over the period of a loan, which could be as long as 15 or 30 years.

 As a further example of how regulations can adversely affect stated social goals, regulations aimed at remedying environmental or other problems in practice often provide little or no benefit while costing enormous sums that could be more effectively used. Regulations of this type take a toll in economic competitiveness, increase the cost of goods and services, and impose other social costs without offering genuine solutions to the actual problem they purport to solve. Meaningful enforcement of property rights would have the salutary effect of encouraging more careful consideration of such programs and would, at the very least, ensure that the public will have a chance to make meaningful choices on public policy, an opportunity not available to it so long as vital information is withheld.

 Obviously, a book of the size of Grand Theft cannot answer all questions or explore every aspect of the property rights debate in minute detail. It is intended to be the opening phrase in what I hope will be a long and fruitful discussion that will lead to a recognition that all rights, including economic and property rights, must be respected if any rights are to survive.

This article is an excerpt from Grand Theft & Petit Larceny, by Mark L. Pollot, published by the Pacific Research Institute for Public Policy (PRI), copyright 1992. Permission to print this excerpt from PRI, all rights reserved.