Property Rights Protection and Spatial Planning in European Countries

Confiscation of an owner’s property is not the only form of taking. If government regulations limit all viable uses of a property and cause a substantial decrease in its value, this in most cases is considered a taking, and the owner will need to be compensated for the financial loss. This is a controversial issue that strikes at the core of the debate over planning versus private property protection. Vincent Renard describes the diversity in the ways Western European countries deal with this matter. Legislation in both Denmark and The Netherlands entitles property owners to be compensated for regulatory takings. There are no such legal provisions in France and Italy. Yet Renard cautions that practices do not always follow the legislation. For instance, French and Italian officials may negotiate with property owners about some form of compensation even though they are not legally required to do so. Although Denmark has explicit rules for compensation, they apply to very restrictive cases only. In general, compensation for economic damages caused by land use planning is rarely paid.

In extreme cases in which the burden of planning falls disproportionately on selected property owners or when land use planning eliminates all reasonable uses of an asset, compensation is required under the jurisprudence of the first protocol of the European Treaty on Human Rights. Renard proposes compensating affected owners with transferable development rights (TDRs). This approach requires redefining property rights and dividing the right to develop land into two types. One type is the development right that an owner paid at the time of purchase. The contents of this right are specified in the zoning law. The other type is the development right that goes beyond what the land use regulation allows. Because the original purchase price of the property did not reflect the owner’s expectation of obtaining this extra development right, the owner needs to buy it from the government or from other owners who have surplus development rights for sale. The government will provide owners whose property is restricted by regulation with transferable rights as compensation for their loss of the first type of development right. The owners can then sell the development rights to another entity that needs them for high-density development.

Although this approach seems tenable in theory, Renard identifies several obstacles to its implementation. These include political and social resistance to redefining property rights, the complexity of valuing TDRs, and the possibility of disputes arising from identification of the “sending” and “receiving” zones of development rights across jurisdictions.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2008 and is Chapter 9 of the book Property Rights and Land Policies.