A "regulatory taking" occurs when the government does not formally exercise its power of eminent domain, but enacts a law or undertakes an action that results in a de facto "taking" of property for which compensation is constitutionally mandated.l The United States Supreme Court has struggled for decades to determine when a land use regulation is a valid exercise of the police power (and thus not subject to the compensation requirement of the Fifth Amendment to the United States Constitution) and when such a regulation goes "too far" and becomes a regulatory taking.2
The Supreme Court has developed a number of tools to assist courts and legislatures in determining when a regulation crosses the critical line to become a compensable taking.3 The Court has carved out two categories of per se takings: those involving permanent physical occupation by the government4 and those involving deprivation of "all economically productive or beneficial uses of land," provided the regulated use is not a nuisance-like activity prohibited or constrained at common law.5 Per se takings cases are relatively rare, however, and the Court has relied primarily upon ad hoc determinations,6 guided by notions of "justice and fairness."7 To aid in this complicated task of ad hoc decision making, the Court has created two "tests" or sets of factors to be considered. When considering "as applied" challenges to regulations, courts are to be guided by the threefactor test articulated in Penn Central Transportation Co. v. New York City,8 which examines "[t]he economic impact of the regulation on the claimant ., the extent to which the regulation has interfered with distinct investment-backed expectations, [and] the character of the governmental action."9 Facial challenges, on the other hand, are to be decided under the two-factor analysis laid out in Agins v. Tiburon,lo which maintains that a regulation results in a taking if the regulation fails to advance substantially a legitimate state interest or if it denies a property owner economically viable use of the property.ll
Historically, the Supreme Court has used two additional tools in distinguishing a noncompensable regulation from a compensable taking: the harm/benefit test and the average reciprocity of advantage rule. Simply put, the harm/benefit test states that a regulation intended to prevent a public harm is a valid exercise of the police power (for which no compensation is required), while a regulation intended to confer a public benefit is potentially a regulatory taking (for which compensation is constitutionally mandated). The average reciprocity of advantage rule maintains that there is a subset of benefit-conferring regulations that do not rise to the level of a compensable taking: those that provide reciprocal benefits to the regulated parties. These two once-powerful rules have become less effective in recent years. Courts and commentators have decried the harm/benefit test as being little more than a linguistic sham, while the Supreme Court has read the average reciprocity of advantage rule so broadly that almost any regulation could be validated under its tenets.
In a recent article12 in which I discussed (and dismissed) the role of the economic factors laid out in Penn Central and Agins, I suggested that both the harm/benefit test and the average reciprocity of advantage rule have an important, if limited, role to play in the proper resolution of regulatory takings claims. In this Article, I explore the evolution and development of these two rules as well as their roles as building blocks of a comprehensive takings theory. I conclude that while the two rules as originally articulated were valuable tools for distinguishing between valid and invalid exercises of the police power, the rules have since been corrupted to the point that they are no longer helpful. A return to the original intent of these two rules would enable courts to draw a clearer distinction between regulatory takings and valid police power actions, and would thus provide a critical first step toward resolving the current takings dilemma. …