Through a Glass Darkly: Measuring Loss Under ... - Land Use Law

MEASURING LOSS UNDER MEASURE 37 581
Property
Value ($)
Diagram 2
Value of unregulated property
$700,000
Value of all property
prior to enactment of
land use regulation
Value of individual
exception = $+500,000
$225,000
Value of regulated property
Cost of
regulation
=
$-25,000
$200,000
Regulations
enacted
NB 1: Graph not drawn to scale
NB 2: Graph only takes into account the effects of the land use regulation on property values,
and not other variables (inc. inflation)
Time
In both scenarios the figures ($700,000 − $200,000) employed by the
exemption method would remain the same, and thus the assessment of
the loss would remain at $500,000.
There is also a third possibility: that the regulation in question causes
an increase in value to both the regulated and unregulated properties.
This could potentially occur when the value of the neighborhood or amenity
effects (e.g., extended tree cover, proximity to lakes, and the like),
which was preserved or increased by the regulation, outweighs any loss
incurred by the regulated property (e.g., the prevention of highest and
best use). 74 In such a case, the unregulated property is also likely to benefit
from the regulation (the increase being due to both amenity effects
and the increased scarcity of land). 75 Let us assume in the Calcagnos case
that the price prior to the enactment of the regulation was $175,000. In
this case both the regulated property (at $200,000) and the unregulated
property (at $700,000) have increased in value due to the “enactment and
enforcement” of the land use regulation. One would therefore expect that
an accurate calculation of the “reduction in the fair market value of the
74. See, e.g., Noelwah Netusil, The Effect of Environmental Zoning and Amenities
on Property Values: Portland, Oregon, 81 LAND ECON. 227 (2003).
75. See Jaeger, supra note 68. Indeed, land use regulations have positive economic
effects on land values through the use of amenity and scarcity effects. The difficulty
with the exemption method is that it allows a claimant to point to the negative impacts
of the regulation as if she were the only one affected, but not to look at the valueenhancing
effects of the regulations as a whole.
ABA-TUL-07-0701-Sullivan.indd 581
9/18/07 10:43:40 AM