Unjust Takings: The State Of Regulatory Takings In Montana
"The government’s power to regulate must be limited to actions of genuine public concern, not the whims of NIMBYs or special interest groups seeking to use regulations to destroy whole industries."
Both the Federal and Montana Constitutions recognize that you are entitled to just compensation if the government ‘takes’ your property. The government can take your property either through eminent domain or regulation that diminishes the value of your property. James Madison was one of the greatest champions of property rights and its protection from government takings. During Madison’s legislative career in Virginia, he opposed state seizure of loyalist property and fought to include property owners’ compensation for new road projects. The US Constitution’s Takings Clause, Madison believed, ensured the federal government’s commitment to personal freedom by providing compensation for property taken.
Unfortunately, a 2008 Montana Supreme Court ruling determined that Montanans hardly have any protections from regulatory takings. The ruling held that state government in Montana can use regulation to diminish property value without just compensation, as long as there is “some other use” for the property. Under this framework, only when the government’s regulation effectively eliminates 100% of the property’s value, can a property owner receive compensation.
States can strengthen property rights through fair compensation for any regulatory takings. Since the ‘90s, state legislatures have adopted “partial regulatory takings” laws. State laws vary on how much the regulation must reduce the property’s value before one is entitled to compensation. In Arizona, a property owner is entitled to compensation for any reduction in property value. Louisiana and Texas require compensation if the loss exceeds a certain percentage. These laws do have exceptions to compensation for partial takings for cases such as public health and safety, criminal activity and public nuisance.
Arizona’s partial regulatory takings law in particular, Prop 207, has had a massive impact on protecting property rights of Arizonans. Prop 207 allows Arizonans to challenge land use regulations and encourages local governments to limit excessive land use regulations. For example, when neighbors in Glendale complained about people renting their homes for the 2008 Super Bowl, the city did not act. Instead, the city’s lawyers noted that neighbors could sign land use covenants to prevent future short-term renting, but government infringement on property rights was not the answer.
In yet another example of the success of stronger property rights protections in Arizona, NIMBY attempts to stop the construction of student housing near the University of Arizona fell short when the city council backed away from passing ordinances against this student housing because Prop 207 protection could be invoked, requiring the city of Tucson to compensate.
More recently, Arizonans challenged an ordinance banning short-term rentals in Sedona. The City of Sedona argued that the ordinance was legal under the public health and safety exception. However, the court found that the city cannot merely say the ordinance is for public health without more evidence. The city ordinance was declared unconstitutional because the city was unable to show the connection between short-term rentals and public health.
Ultimately, it should be on the government, not the citizen, to prove the need for land use regulations. That’s the principle behind partial regulatory takings laws like Prop 207 in Arizona. The government’s power to regulate must be limited to actions of genuine public concern, not the whims of NIMBYs or special interest groups seeking to use regulations to destroy whole industries.
Unsuccessful attempts to pass partial regulatory takings bills were made throughout last decade in the 2013, 2017, and 2021 Montana legislative sessions. Whether it’s a law like Arizona’s Prop 207 or another mechanism, Montana leaders would be wise to continue to consider further protections for Montanans’ fundamental property rights from unjust takings.