Minnesota Case Examines Impact of Land Zoning on Property Values

The U.S. Constitution and many state constitutions guarantee that the government will not take private property for public use without paying "just compensation." The Minnesota Supreme Court recently addressed the issue of when the government needs to compensate a landowner for decreased land value due to zoning restrictions and whether that decrease in land value constitutes a "taking." The case was DeCook v. Rochester International Airport Joint Zoning Board.

Zoning and Land Value

Zoning has a long history in the U.S. New York City developed the first zoning ordinance in 1916 to prevent industrial operations from spilling over into the part of the city with offices and department stores. Zoning ordinances have become pervasive and complex since then.

City governments generally zone land according to one of three uses: residential, commercial or industrial. How the city zones land governs the uses to which the owner may put the land. Thus, zoning land in a certain way may increase or decrease the value of land.

For example, a piece of land might have been zoned commercial at one point and if the city re-zones the land to industrial, the owner can no longer have a store on the land and it will be worth less. Conversely, by zoning an area residential, the city seeks to prevent industrial plants from locating next to people's homes. This enables the housing values to remain more stable than they would otherwise.

DeCook v. Rochester International Airport Joint Zoning Board

The Minnesota Supreme Court addressed the question of whether rezoning land so that it decreases the property's value constitutes a "taking" of land under the state's constitution. The plaintiffs in the case had purchased 240 acres of land near the Rochester International Airport in 1989 for $159,600 and built a golf course on it. At the time, 19 acres of the land was inside the airport's Safety Zone A and subject to that zone's use restrictions.

In 2002, the Airport Zoning Board increased the size of Safety Zone A and tightened the restrictions about how the plaintiffs could use the land in Safety Zone A. The plaintiffs claimed that the zoning decreased the value of the land by $170,000, or between 3.5 and six percent of the land's value, and so constituted a 'taking" under the Minnesota constitution. They claimed the government should compensate them for the loss.

The plaintiffs argued that the holding from McShane v. City of Faribault should be controlling because it was an airport takings case. The McShane court held that whenever there was a "substantial and measurable decline in market value" of a piece of land due to a land use regulation for "a specific public or governmental purpose" such as airport uses, the government must compensate the owner.

The Airport Zoning Board tried to argue that the court should apply the three-prong test that the U.S. Supreme Court applies in regulatory takings cases. The court disagreed, reasoning that the Minnesota constitution offers broader protections against governmental takings than the federal constitution does. The court also found as a matter of law that $170,000 is a "substantial decline in market value," as it was more than the land cost originally. The court ordered the Airport Board to compensate the plaintiffs.

What the DeCook Case Means

Land is one of the biggest investments that most people make in their lives. In DeCook, the Minnesota Supreme Court held that the state or local governments cannot substantially decrease property value through airport zoning restrictions without compensating the owner. If your property value has decreased because of zoning restrictions, contact an attorney who can discuss your situation with you and advise you of your options.