The United States Supreme Court took action late last month in a case that is an historic landmark in more ways than one.
In a case involving New York City's Grand Central Station, the court ruled 6 to 3 that state and local governments can compel owners of private property to accept less compensation under the laws to preserve historic landmarks than under laws permitting property to be taken for other public purposes.
Although the court's decision in the case was overshadowed by the Bakke discrimination decision that same week, local governments are now mulling over the implications of this important historic preservation issue, which pitted the Penn Central Transportation Co. against the city. The ruling also is attracting attention because it speaks to significant legal issues that more broadly affect zoning, subdivision, and environmental regulations.
Upholding a decision of the New York State Court of Appeals, the Supreme Court said that the city's refusal to allow Penn Central Railroad to build an office tower above the station didn't mean that the railroad had to be compensated, because the development ban was not a "taking" of property under the city's landmark preservation law.
New York, like more than 500 communities around the country, officially recognizes the historic, cultural, architectural, or aesthetic significance of "special" sites within its jurisdiction. Commonly, thses sites are in private ownership and regulation of them stimulates intense interest. As has been seen in Arlington, Montgomery, and Prince George's counties, historic preservation proposals generate a fair amount of public debate and property owner concern.
New York's Landmarks Preservation Law has been in effect for 13 years, and is one of the country's most sophisticated - and restrictive - examples.
In addition to acquiring historic property, there are many options open to local governments. The simplest approach is the preparation of a guide to interesting sites and artifacts. Often accomplished in conjunction with citizen groups, little or no public regulation is involved.
A second method is the listing of properties on official local, state, or national "registers." These listings limit government from taking certain actions relating to the sites, at least temporarily until specific procedures are followed. To a small degree this impacts on private owners' flexibility. Typically however, the owner helps initiate the designation and takes pride in it.
The third major approach involves the seller conveying a property to a buyer, subject to certain deed restrictions or convenants that run with the land to subsequent purchasers. The requirements may be negative (the owner may not change the exterior without permission) or to some degree, positive (maintain in good repair at the owner's expense). This approach is used, for example, by the National Trust for Historic Preservation, when it occasionally disposes of its properties.
Few local governments have experimented with this technique, but the possibilities are numerous long-term leases for office spaces rehabilitated at the tenant's expense, used by theater groups and community interest organizations, parks, etc.
Even more pervasive forms of direct governmental intervention can significantly affect owners' economic expectations. The least problematic are "anti-demolition" ordinances, which only prohibit proposed destruction of buildings for short periods, such as 90 days. The delay offers the government of others an opportunity to negotiate other arrangements. But frequently, time and capital are in too short a supply, and a valuable community resource will be lost.
Other localities have designed more complex mixes of regulations. These generally include both prohibitions and incentives such as special exceptions, tax breaks, zoning variances, and the like.
In the New York case, although the Supreme Court did not predicate its decision on this aspect, "transferrable development rights" were allowed for the designated sites. In effect, the higher densities that were "regulated away" by the preservation law (although allowed by the zoning) could be transferred to nondesignated properties. Penn Central was not satisfied with this method, however.
Not only is there a preservation aspect to all of these efforts, but they can become a nucleus of urban revitalization efforts if used wisely. Certainly, the experiences of Boston, New Orleans, San Autonio, and other cities indicated this to be the case.
At the same time, historic preservation approaches raise hues and cries of anguish among property owners and developers "stuck" with designated sites that are unlikely candidated for more profitable uses. Local actions may well incense these owners.
In New York City, more than 400 sites have been designated as part of a comprehensive plan and regulatory scheme. Grand Central Station, which was opened in 1913, also contains extensive rental space. Five months after the terminal was officially designated a landmark, Penn Central entered into a 50-year lease that would have netted over $2 million a year. The new tenant sought to construct a 55-story building on the site.
Construction approvals were denied, and the legal battle raged through the state courts, reaching the U.S. Supreme Court. Penn Central claimed that the city law constituted a taking of property without just compensation by the government. The court first stated that historic preservation was a perfectly valid subject for government regulation. It then indicated how the constitutional issue of a taking should be analyzed in relation to private property rights.
It is this aspect that may go beyond historic preservation to other types of land use and environmental regulation. The court said that certain aspects of property (here, air rights and higher densities) can not be "separated out" from the property as a whole by plaintiffs who claim there has been a taking of their property.
Randall W. Scott is a Washington attorney involved in housing and land use research.