Land Use Update

Takings Litigation and Zoning Reform

Land Use Update Editor: Daniel R. Mandelker, Stamper Professor of Law Emeritus, Washington University School of Law, St. Louis, Missouri.

Takings Litigation

Last spring, the Supreme Court clarified the ripeness rules for bringing takings cases in federal court. For decades, property owners had to sue for compensation in state court to make their takings ripe for federal court. This requirement became a trap. If a property owner sued in state court and lost, she was blocked by issue preclusion if she returned to federal court to relitigate the takings claim.

In Knick v. Township of Scott, 139 S. Ct. 2162 (2019), the Court found problems and mistakes in its earlier ripeness decision that had required the state compensation remedy, saw the inequity of the catch-22 trap, and held that a property owner did not have to sue for compensation in state court before bringing a takings case in federal court. Knick did not overrule the second part of the ripeness rule, which requires a property owner to obtain a final decision before she can bring a takings case in federal court.

The difficulty is that it is not clear how the final decision rule should be applied. A facial takings attack on a land use regulation, which claims it can never be applied so that a taking will not occur, does not have to comply with the finality requirement. An absolute prohibition on hillside development is an example. But what if the takings case is an as-applied takings claim, and the prohibited development could be allowed with an administrative hardship variance or a zoning amendment that changes the zoning map to a new zoning district where the development is permitted? Does the final decision ripeness rule mean that a plaintiff must exhaust these remedies?

Pakdel v. City and County of San Francisco, 141 S.Ct. 2226 (2021), a per curiam opinion, provided a partial answer to these questions. A married couple owned a unit as tenants in common in a multi-unit residential building that they rented out. They decided to convert their property interest to condominium ownership, and the city‘s conversion program allowed unit owners to seek conversion to condominium ownership after paying a filing fee and meeting several conditions. One condition required nonoccupant owners like this couple, who rented their unit, to offer their tenants a lifetime lease.

The owners of the unit offered a lifetime lease to the tenant, and the city approved the condominium conversion, but the owners backed out and asked the city either to excuse them from executing the lifetime lease or to pay them compensation for the lease requirement. The city refused both requests, and the owners sued in federal court under Section 1983 of the federal Civil Rights Act, 42 U.S.C. § 1983, claiming that the lifetime lease requirement was an unconstitutional regulatory taking. Although the city denied their requests twice and could no longer grant relief, a panel of the Ninth Circuit held its decision was not truly “final” because the request for an exemption came at the end of the administrative process, and the property owners had not made a timely request for an exemption through “prescribed procedures.”

The Court reversed and held that the city had made a final decision. This requirement is “relatively modest,” it said, and “nothing more than de facto finality is necessary” to show that a final decision has been made. In this case, the decision was final because there was no question about the city’s position, and it inflicted an actual concrete injury because the property owners had to choose “between surrendering possession of their property or facing the wrath of the government.”

The Supreme Court also held the Ninth Circuit was wrong when it required exhaustion of administrative remedies. Some background is necessary here. Exhaustion of remedies is required in state court before a suit can be brought to challenge a land use regulation with a taking or any other claim. Exhaustion of remedies is not required as a condition in an action brought under Section 1983. Takings claims under the federal constitution are self-executing and do not have to be brought under Section 1983, but attorneys usually bring them under Section 1983 because they can collect attorney’s fees if they prevail in the litigation.

The property owners in Pakdel sued under Section 1983, and the Court held that Section 1983 “guarantees ‘a federal forum for claims of unconstitutional treatment at the hands of state officials.’” That guarantee includes “the settled rule” that “exhaustion of state remedies is not a prerequisite to an action” under Section 1983. The Ninth Circuit’s holding that the plaintiffs must seek “an exemption through the prescribed [state] procedures … plainly requires exhaustion” of remedies, and is “inconsistent with the ordinary operation of civil-rights suits.”

The Court then held “that a plaintiff’s failure to properly pursue administrative procedures may render a claim unripe if avenues still remain for the government to clarify or change its decision.” Earlier cases had held that a property owner must make an application for a variance to make her takings case ripe. But that requirement did not apply in this case. “[A]dministrative missteps,” as occurred in this case because the property owners delayed their exemption request, did not defeat ripeness. Why were “missteps” an issue if an exemption was not required?

There is another problem. An “avenue” to clarify or change a decision, like a variance, can be an administrative remedy, but the Court said that exhaustion of administrative remedies is not required in Section 1983 cases, including takings claims. An application for a variance is necessary to exhaust remedies in state courts, but the Court’s rejection of the exhaustion of remedies requirement in Section 1983 cases should mean that an application for a variance is not required in federal courts.

Neither did the Court clarify what other “avenues” are necessary to provide a government an opportunity to “clarify or change” its position. Must a property owner apply for a legislative map amendment that could “clarify and change” the government’s position by moving the property to a zoning district where the owner’s desired use is permitted? Does it make a difference that a legislative map amendment is not administrative relief? Must a property owner apply for a conditional use permit, which would “clarify and change” the government’s position by providing permission to develop the land? Isn’t this prohibited administrative exhaustion?

Pakdel has important consequences for takings litigation in federal courts. It explained that a formal denial is not required to satisfy the ripeness requirement. By rejecting the exhaustion of remedies requirement, it relieved takings plaintiffs from the burden of seeking administrative relief before suing in federal court. The problem is that the holding that a takings claim is not ripe until the government has been given an “avenue” to “clarify or change” its position is inconsistent with the Court’s rejection of an exhaustion of remedies requirement.

Zoning Reform

Zoning reform has taken center stage in recent years. I have reviewed several recent zoning reform proposals and recently found an article that provides a comprehensive look at a zoning reform strategy. Lee D. Einsweiler, Practice Simplified Zoning, Zoning Practice (American Planning Association Jan. 2018). Lee is a principal and founder of Code Studio, a planning firm in Austin, Texas, and has extensive experience across the country with zoning.

Lee’s article covers a wide range of issues, including a discussion of different zoning alternatives. What follows is a summary of Lee’s ideas about the problems that have complicated zoning. He begins by explaining that zoning originally had two key purposes: Making sure that nearby uses did not harm each other, and improving public health by managing building bulk. These purposes are the basis for the traditional and widely adopted zoning format, with its concentration on the separation of uses.

Zoning based on this format requires use separation through the division of a community into zoning districts, but Lee says that over time this simple system has splintered. Cities have created more and more districts to distinguish different areas across communities. Residential and commercial districts have been split up, and the number of districts has multiplied. Management of the zoning system has become difficult. Zoning also is no longer restricted to the designation of districts with permitted uses. Design review based on aesthetic standards is common, and the review process has grown more varied by district and building type, creating a patchwork of complications.

The article concludes with a discussion of strategies for simplifying zoning: “Rethink your uses. Gather them into broad categories whenever possible. Make a place for every use somewhere in your community.” Add only objective use-specific standards to manage any remaining impacts created by a use.

Improve process. Streamline development review to allow development by right to the maximum extent possible. “This is a key opportunity for simplification.” Development by right occurs when the zoning ordinance designates permitted uses and does not require additional review.

Avoid overcontrolling for detail. Focus on the “minimal elements necessary to achieve good, developed form.” Manage “more often with form controls and less through use restrictions” so that disparate elements can fit nicely together and uses and housing types can be mixed.

Lee also believes we should do away with cumulative zoning, which is the usual zoning format. Under cumulative zoning, every zoning district consolidates all of the less-intense uses with some new, more intense uses; for example, a commercial district allows residential uses in addition to commercial uses. He believes that we should eliminate excessive parking requirements, consistent with studies showing that cities take too much land from development by insisting on excessive parking for commercial, retail, office, and other uses. Finally, he believes in enhancing the zoning ordinance by using “plain English” and including tables and graphics that make the ordinance easier to use.

Lee’s article can be purchased on the American Planning Association’s website, planning.org. Interested in land use? Try my website at landuselaw. wustl.edu.

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Published in Probate & Property, Volume 36, No 4 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.