Regulation Always Comes at a Cost to Someone

It’s a simple concept: Broadly speaking, the government should not be in the business of telling landowners what they can and can’t do with their own property.

Unfortunately, state and local governments around the country do just that, often without compensating them. Reform is needed, Goldwater Institute Executive Director Christina Sandefur told members of the Colorado Senate’s State, Veterans, and Military Affairs Committee on Tuesday.

Enter Goldwater’s Property Ownership Fairness Act. This bill, a version of which Arizona voters already adopted to great success more than 15 years ago, ensures property owners are fairly compensated when government regulations forbid them from using their land as they best see fit.

While in eminent domain cases, property owners are at least entitled to “just compensation,” government frequently enacts rules forbidding owners from using their property, without compensating them at all. Because the government doesn’t take all the land in these cases, it can typically get away with these “regulatory takings”—often wiping out an owner’s property value—without having to pay. The property owner is left with virtually worthless land—and no way to get justice.

Moreover, Colorado lawmakers should “fix existing law, because existing law makes it impossible for local government to understand the true costs of regulation,” Sandefur said Tuesday, pointing out that “regulation always comes at a cost to someone.” People buy property with rules and expectations in place. When government changes those rules, it imposes costs on individual owners who can no longer improve, fix, or sell their property. Regulations also impose costs on communities, in terms of higher cost of living, decreased job opportunities, etc.

“Existing law just doesn’t require balance,” she told Colorado lawmakers, “and it also just doesn’t protect due process.”

The Property Ownership Fairness Act, SB063, would solve that by requiring government to pay owners when its regulations take away their property rights and reduce their property values without actually ensuring public health and safety.

“Nothing in the Property Ownership Fairness Act prevents cities from regulating to protect public health,” Sandefur said Tuesday. All this Act requires is fairness and balance. If government regulates beyond what is necessary to protect health and safety, it either must restore those property rights or pay for the rights it has taken away.

This common-sense reform has been a smashing success since Arizona voters overwhelmingly approved it in their state in 2006, ensuring Arizonans enjoy the strongest protections for property rights in the nation.

For example, Maricopa County issued a moratorium on building permits for properties near Luke Air Force Base, which had a devastating effect on property values. Property owners suddenly found themselves barred from renovating their properties, forbidden to install pools in their yards, mount solar panels on their roofs, or undertake urgent electrical and plumbing repairs. Building new homes was out of the question. Air Force veteran Robert Landers was told he could not install the therapeutic spa his doctor had prescribed to him to help recover from surgery. As a result of the moratorium, more than 175 property owners filed nearly $20 million in claims for compensation. The county, faced with the true costs that its regulation had imposed, rescinded its freeze on permits and adopted more targeted regulations.

Years of success in Arizona have illustrated the key feature of the Property Ownership Fairness Act: if there is sufficient interest in regulation, then government should pay the property owner for the costs of imposing those preferences. If the price is too high for the government, then it certainly shouldn’t be borne by the property owner alone.

Now, Colorado lawmakers should act swiftly to protect the property rights of their own citizens.

Read more about the Property Ownership Fairness Act here