Contributor, The Volokh Conspiracy
Road Construction Ahead

The North Carolina Supreme Court recently issued an important unanimous decision blocking what would have been a major uncompensated expropriation of property rights by the state. Prominent takings expert Robert Thomas has a summary of the decision at the Inverse Condemnation blog:

[T]he North Carolina Supreme Court has issued an opinion in an important case we’ve been following for a long time, Kirby v. North Carolina Dep’t of Transportation.

This is the case about the “Map Act,” a statute which designates private property for future highway use, and “restricted plaintiffs’ fundamental rights to improve, develop, and subdivide their property for an unlimited period of time….” The court concluded that “[t]hese restraints, coupled with their indefinite nature, constitute a taking of plaintiffs’ elemental property rights by eminent domain….”

The North Carolina Court of Appeals earlier held the Act was a taking, and this resulted in a lot of shouting and gnashing of teeth that making the DOT actually pay just compensation would crash the system and cost the state a lot of money, so we were not terribly surprised when the DOT sought review by the N.C. Supreme Court….

[W]e predicted there was a “good chance” the court would affirm, especially after the DOT’s counsel conceded that one of the express purposes of the Act was to keep the eventual acquisition price of the designated properties low. Undeveloped property, after all, is usually cheaper to take than developed land. But an indefinite development moratorium — especially when its express purpose is to depress the eventual acquisition price — has real takings problems as the North Carolina courts recognized.

The Supreme Court started by noting “[t]he fundamental right to property is as old as our state,” and citing Locke and Madison, “[f]rom the very beginnings of our republic we have jealously guarded against the governmental taking of property….” The Act’s restrictions on the owners’ use and development was a taking:

“Property” clearly includes the rights to improve, develop, and subdivide, which were severely and indefinitely restricted here by the Map Act.

The court is absolutely right to note that property rights protected by the compensation requirements of the state constitution includes the right to use and develop land, as well as mere physical ownership of it. This both fits the original understanding of property going back to the Founding and before, and makes sense from standpoint of modern economic analysis of property rights. The state of North Carolina certainly has the power to use eminent domain to take property to build roads. But it can’t get around the constitutional requirement of just compensation by preemptively banning development on the land, and thereby artificially lowering the price.

The decision has implications that go beyond the Map Act and the taking of property for road-building. Had the ruling gone the other way, it might well have opened the door to uncompensated takings in various other situations, as well. There are many situations where the state might want to lower the value of property by indefinitely banning development, so it can then take the property at a later date in order to use it for a public project, or even to transfer it to influential private interests under the guise of promoting “economic development” or alleviating blight. Such takings were ruled to be permissible “public uses” by the Supreme Court in the controversial Kelo case in 2005, and are still permitted in all too many states even in the aftermath of the massive political backlash against Kelo.