Penn Central Transportation Co. v. City of New York
Citation: 438 U.S. 104 (U.S. 1978)
Facts
New York City’s Landmarks Preservation Law designated Grand Central Terminal a landmark, preventing Penn Central from constructing a 50-story office tower above it. Penn Central had been operating the terminal at a loss and needed the development revenue. Penn Central argued the law effected a taking requiring just compensation.
Issue
Does a landmark preservation law that prevents a property owner from developing airspace above its terminal constitute a regulatory taking requiring just compensation under the Fifth Amendment?
Holding
The Supreme Court (Brennan, J.) held that no regulatory taking had occurred. Applying an ad hoc balancing test, the Court found that the denial of development rights did not constitute a taking because Penn Central retained a reasonable return on its investment in the terminal and could transfer unused development rights to other properties.
Rule
The Penn Central balancing test: courts consider (1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation interferes with distinct investment-backed expectations, and (3) the character of the government action (whether it is an acquisition of a resource or instead a general regulatory adjustment). No single factor is determinative.
Significance
Penn Central establishes the standard multi-factor test for regulatory takings, which governs the vast middle ground of regulations that neither physically invade property nor deprive the owner of all economic value (governed by Loretto and Lucas respectively). The balancing approach is criticized for its unpredictability but remains the primary analytical framework for most regulatory takings claims.