In the context of riverbank regulation, the Court reinforced the principles that it articulated for historic preservation in the landmark case of Penn Central Transp. Co. v. New York City, 438 U. S. 104 (1978)). In Murr, the property owners owned two adjoining lots, one of which was vacant and the other improved with a residence. The State of Wisconsin rejected the application to construct a new residence on a vacant parcel, citing St. Croix River riverbank protection regulations. Relying on the Fifth Amendment’s guarantee that property may not be taken without just compensation, the Murrs alleged that the regulation caused the total loss of economic value for the vacant lot. They stated that without a residence, the lot had no economically beneficial use, resulting in a regulatory taking.
The State countered that no economic loss occurred. Considering the two lots as a whole, the riverbank regulation did not affect the existing residential use, which extended over both lots. The two lots together had sufficient economic value so that a Fifth Amendment taking did not result.
The Court sided with Wisconsin. In regulatory takings cases, two legally distinct but commonly owned contiguous parcels may be combined for takings analysis purposes. The Court affirmed that, while generally governmental regulation of property does not result in a taking, regulation could be so burdensome to become a taking by eliminating all economically beneficial use.
On June 23, 2017, in a 5-3 decision (Justice Gorsuch not participating), the Court held that, as in Penn Central, the Court should consider the owners’ remaining property, not what was taken. Factors such as the treatment of land under state and local law, the physical characteristics of the land, and the prospective value of the regulated land should be considered. This inquiry should examine, as Penn Central teaches, the landowner’s reasonable expectation about whether the property at issue would be treated as a single parcel or separate ones. In this case, the proper application of these factors meant that the parcels in question should be evaluated as a single unit for takings analysis.
This case may be considered a horizontal Penn Central case. In Penn Central, the railroad argued that its air rights had been made valueless by the Landmark Commission’s rejection of its application to build a modern office building in the vertical space above the landmark beaux arts Grand Central Terminal. The Court held that despite the loss of the right to construct a new building in the air rights above the terminal, the railroad station house could continue to be used as before and it continued to have economic value. The property, the air rights parcel and the terminal parcel as a whole, had not lost economic value as a result the landmark restrictions.
Although Penn Central has received criticism since it was handed down almost forty years ago, the Court has now strongly reaffirmed its standards for determining when a land use or landmark restrict results in a Fifth Amendment taking.
The Murr decision is here: Murr v. Wisconsin