Penn Central owned Grand Central Terminal, which New York City had designated as a landmark under its Landmarks Preservation Law. The company sought permission to build a multistory office tower above the terminal, but the city's Landmarks Preservation Commission denied the proposal because it would alter the landmark's character. Penn Central argued that the restriction on development rights amounted to a taking of property without just compensation. The terminal could continue to be used profitably as a railroad station and commercial property, and the law also allowed Penn Central to seek transferable development rights.
Did New York City's landmark-preservation law, as applied to prevent Penn Central from constructing an office tower above Grand Central Terminal, effect a taking of private property requiring just compensation under the Fifth and Fourteenth Amendments?
Regulatory action can amount to a taking, but there is no set formula; courts apply an ad hoc, factual inquiry focusing especially on the regulation's economic impact, its interference with distinct investment-backed expectations, and the character of the governmental action. A restriction is less likely to be a taking when it adjusts benefits and burdens for the public welfare and does not compel a physical invasion or deprive the owner of all economically viable use.
No. The application of New York City's Landmarks Preservation Law to Grand Central Terminal did not effect a taking requiring compensation. The law did not interfere with Penn Central's primary use of the property and did not deny it a reasonable return.
The Court emphasized that the terminal parcel had to be viewed as a whole, not as only the air rights above it, and that Penn Central retained economically beneficial use of the property. The landmarks law did not physically appropriate the property but instead was part of a general public program promoting historic preservation. The economic impact, while real, was not severe enough because the terminal remained profitable and Penn Central's expectations were not defeated in a way the Constitution forbids. The availability of transferable development rights further supported the conclusion that the regulation did not go too far.
Chief Justice Burger dissented, joined by Justices Rehnquist and Stevens in relevant part, arguing that the city had singled out Grand Central to bear a burden that should be borne by the public and that the severe restriction on the property's development potential should require compensation.
Penn Central is the leading Supreme Court case on regulatory takings and established the now-dominant ad hoc balancing framework centered on economic impact, investment-backed expectations, and the character of the government action. It is routinely contrasted with categorical takings decisions such as Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), and with physical takings cases like Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982). It also informed later exactions and takings doctrine, including Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), and Murr v. Wisconsin, 582 U.S. 383 (2017).
Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) |
Verified |
Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) |
Abstain |
Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002) |
Abstain |
Murr v. Wisconsin, 582 U.S. 383 (2017) |
Abstain |
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