Goldwater Hits Flagstaff with $23 Million Bill for Violating Property Rights

July 20, 2021
By Christina Sandefur

Representing the owners of more than 50 properties, the Goldwater Institute has filed over $23 million in claims against the city of Flagstaff, Arizona, over an ordinance that went into effect in March that deprives residents of their property rights. That could be just the tip of the iceberg, as thousands more may have claims under state law.

In March, Flagstaff adopted a High Occupancy Housing Plan supposedly designed to address an increase in student housing. In actuality, the plan imposes sweeping regulations that deprive a wide variety of property owners, including families and small businesses, of their right to decide what to do with their land.

Flagstaff’s ordinance comes nearly two decades after the infamous Kelo v. New London U.S. Supreme Court decision of 2005, in which the Court gave state officials virtually carte blanche to seize private property for whatever reasons politicians consider worthwhile. But Arizona voters rejected the Court’s vast expansion of government power by adopting a ballot measure that creates some of the strongest protections for home and business owners in the country. Under Arizona’s Private Property Rights Protection Act (known as Prop 207), government must pay people whenever it takes away their right to use their property and thereby diminishes its value.

Flagstaff’s ordinance is exactly the kind of government overreach that Arizona voters sought to guard against. The city’s law restricts the way Flagstaff residents can improve and develop residential and mixed-use properties (including single-family residences) by limiting the number of bedrooms and units, imposing automobile and bicycle parking requirements, and limiting density, among other things. It entirely prohibits some improvements; for others, it requires special—and expensive—permits from city bureaucrats. That’s a costly burden on property owners, it’s unconstitutional, and it’s why the Goldwater Institute is seeking relief on their behalf under the Private Property Rights Protection Act.

Under that Act, government can bar owners from polluting the environment, maintaining dangerous conditions on their property, or using their land in ways that violate their neighbors’ rights. But cities cannot prohibit them from renovating, improving, or developing their property, unless it pays them for taking away those rights.

Proponents of Flagstaff’s new regulations say they preserve “neighborhood character” in the face of rising student housing demands. But the city’s sledgehammer approach goes far beyond addressing any reasonable concerns, imposing immense costs on neighborhoods and innocent homeowners who lack the resources or political power to fight back.

Under the Property Rights Protection Act, property owners whose rights are violated by restrictions like the Flagstaff ordinance must first send the city a demand letter asking officials to either pay for the diminishment of property value caused by that violation or wave the restriction entirely. Because this ordinance diminishes property values for thousands of Flagstaff residents, the city could expect an extraordinarily large number of additional claims and thus be on the hook for hundreds of millions of dollars.

But aside from such hefty legal liabilities, the new restriction also harms the local economy by discouraging the development and improvement of key areas of the city, devaluing neighboring properties elsewhere in the city, and exacerbating growing housing demands at a time when Flagstaff residents are already under severe strain. Arizonans who are hoping to emerge from the economic burdens of the pandemic as swiftly as possible don’t need another layer of bureaucratic meddling to make their lives more difficult and to drive away their right to improve their neighborhoods.

We hope the city will take the severe financial and economic consequences of its actions into consideration as it contemplates its response to these demand letters. The city can avoid financial liability, restore property rights, and encourage economic development by rethinking its excessive restrictions and allowing Flagstaff residents to exercise their legally protected right to private property.

Christina Sandefur is the Executive Vice President of the Goldwater Institute.