Issue
Whether Acts of Congress requiring property owners to rent apartments below-market value for longer than the property owner agreed to constitutes a taking under the Fifth Amendment.
Facts
In 1961, Congress amended the National Housing Act in an effort to give reason for private builders to supply housing to less affluent Americans. The deal was pretty simple: property owners were granted below-market, 40-year mortgages that the federal government backed while in return agreeing to some restrictions from the Department of Housing and Urban Development HUD. The most notable restriction was accepting rent control for their property. Property owners were given the right to pre-pay the 40-year mortgages after 20 years, which would free the property owner from HUD restrictions. In 1990, Congress revoked the property owners’ right to pre-pay their mortgages. This right was restored in 1996, meaning that in those interim five years, property owners were forced, against their will, to rent at below-market prices. One of those property owners is CCA Associates, who sued the United States for this two-facedness. They argued that their property had been effectively taken from them for five years, and thus are entitled to just compensation under the Fifth Amendment.
The Court of Federal Claims determined that this caused the owner to lose 81.25 percent over $700,000 of return on its equity over the five-year period that the regulation was in force. The court then reversed that decision on appeal, concluding that no taking had occurred because $700,000 in lost revenues over a five-year period represented only a small fraction of the property's total earning potential over the course of its full life.
CCJ in conjunction with The National Federation of Independent Business Small Business Legal Center, and The Cato Institute filed an amicus curiae brief in support of CCA Associates
Summary:
The Federal Circuit errantly concluded that no taking had occurred because $700,000 in lost revenues over a five-year period represented only a small fraction of the property's total earning potential over the course of its full life. This rationale would effectively bar all temporary regulatory takings claims because temporary lost earnings will inevitably represent only a narrow fraction of the potential economic yield from a property over its long or indefinite lifespan.
The Court needs to clarify and make more predictable the compensability of temporary regulatory takings. The contradictory court opinions in this case demonstrate the need for this Court's guidance. In addition to the importance of establishing consistency in federal and state court decisions, this Court should take this case in order to vindicate the principles of “fairness and justice” that lie at the heart of the Takings Clause.
There is a tremendous need for clarification and predictability because landowners, like the small business in this case, need to be able to accurately assess the likelihood of prevailing in a takings claim. After bearing heavy economic losses from regulatory impositions, few landowners can afford to continue forward with the high costs of litigation if the potential for prevailing in a claim cannot reasonably be assessed. Likewise, without further guidance from this Court, regulators are left with little help in assessing potential takings liability from contemplated governmental actions.
Final Outcome
The Supreme Court declined to take this case. The controlling decision then fell to the United States Court of Federal Claims. That court held that the cost of the taking should be measured not in terms of the five years the property was held hostage by regulators, but rather over the course of its entire projected lifespan. The court further reasoned that this would reduce the lost revenue to an amount too small to reach the threshold of a regulatory taking, thus making the clear regulatory taking acceptable to the court. This is in direct opposition to CCJ’s position.
