The California Property Owners and Farmland Protection Act (CPOFPA): Should California Voters Approve This Initiative?

This week marks the official beginning of the 2008 election cycle, so the time is ripe to begin considering important decisions voters will face this year. Here in California, in addition to the presidential election, voters will confront a myriad of significant initiative measures.

In today's column, I analyze one measure that voters will likely consider - the so-called California Property Owners and Farmland Protection Act (CPOFPA).

Right now, the CPOFPA is awaiting signature verification in the California Secretary of State's office. But if the signatures that have been gathered are valid, then the measure will appear on the ballot either this summer or fall.

The CPOFPA's fate may well be of interest not only to California voters, but to voters nationwide, since it is part of a wave of state-level responses to a recent Supreme Court decision involving property rights and the Constitution's Takings Clause. However, as I will explain, the California proposal turns out to be much more than that, as well.

What the CPOFPA Purports To Be Mostly About

Like many other state property rights initiative measures over the past half decade, the CPOFPA styles itself largely (in its "findings" section) as a response to the U.S. Supreme Court's 2004 ruling in Kelo v. New London.

In that ruling, the Court rejected homeowners' arguments that a city had violated the Fifth Amendment's requirement, in the Takings Clause, that government takings of private property be for "public use." The homeowners had contended that a "public" use does not exist when a city condemns private residences in order to convey the property to another private owner for purposes of economic redevelopment. However, the "public use" idea, the Court said, is broad enough to allow state and local government to transfer private property from one private hand to another as long as public goods - such as jobs and tax revenue - are plausibly created by the transfer.

Although, as I have written in an earlier column, the Kelo decision was by no means a radical ruling, given prior takings cases, it provoked a large, and largely negative, national reaction. Since 2004, many states have considered measures that proponents say are necessary to enhance the legal protection of private property rights. In particular, many of the measures define "public use" under state constitutions narrowly so as to exclude the use of eminent domain for economic redevelopment. Since a state's taking of property must comply with both the federal and state constitutions, these modifications would effectively stop this kind of use of the eminent domain power exercised in Kelo.

Some state propositions have also tried to mandate government compensation in cases where private property is not seized, but where government regulation reduces, even if it does not destroy, the value of the private property. Prior Supreme Court cases have held that this kind of reduction of value is not necessarily a taking in the federal constitutional sense.

Many of these measures have failed, but the legislative property rights movement that inspired them is far from dead, as the CPOFPA illustrates.

The CPOFPA, if enacted, would prohibit the use of eminent domain for economic redevelopment in California by narrowing the definition of "public use" under California law. Under the CPOFPA, public use requires that public - not private - entities own and (for the most part) occupy any land taken through eminent domain. Land cannot be taken by government - even where government compensates the landowner - and given to another private landowner, period.

How the CPOFPA Goes Much Further Than Providing a Simple Response to Kelo

If that were all the CPOFPA did, then Californians could have a spirited debate on whether Kelo was the evil decision that its critics portray it to be, or instead simply a recognition of necessary local flexibility in dealing with complicated land use matters.

But the CPOFPA does much more than respond to Kelo. Like some other state proposals (many of which have failed), the CPOFPA is quite broad, and somewhat vague. This breadth and vagueness combine to make the measure potentially revolutionary. There are at least three ways in which the CPOPFA might make substantial changes that go beyond placing limits on economic redevelopment.

First, and most important, the proposal's definitions section says a government effects a "taking" not just by transferring the ownership of property from a private owner to a public agency or to any person, but also by "limiting the price a private owner may charge another person to purchase, occupy or use his or her real property." (emphasis added.) It is this latter part of the initiative that is unprecedented in its reach and that poses many important legal questions.

For starters, the measure would nullify all traditional rent control, including laws regulating mobile home space rental rates. Because such rent control laws "limit[] the price a private property owner may charge another person to . . . occupy or use his or her real property," they constitute "takings" which can only be made for "public use" and for which a landlord would be owed just compensation from the state.

The proposed measure is fairly explicit in its invalidation of rent control laws; the "effective date" section of the measure says that existing tenants who benefit from rent control can continue to enjoy those below-market rents until they leave, but when they do leave, the landlord is free to charge whatever he wants to any new tenant.

A less obvious, but perhaps equally important, implication the measure would have concerns so-called "affordable housing." Currently, many local governments in California (and elsewhere too) require developers of new homes or apartment complexes to dedicate - as a condition for the development project's approval - a certain percentage of units as "affordable housing," that is, priced at a level that "low or moderate income" buyers or renters can afford for many years to come. Because these mandates on developers - often called "inclusionary zoning ordinances" - operate as direct limits on the prices the developer can charge purchasers or renters for the developed property, they fall within the definition of "takings" under the CPOPFA.

There is a provision in the CPOPFA that says the measure does not impair "voluntary agreements" between a property owner and a public agency to develop or rehabilitate affordable housing. But the promises made by developers to build affordable housing under inclusionary zoning mandates would not likely be considered "voluntary" because developers may not develop any residential units on their property if they do not comply with the ordinance. (Of course, a developer could in theory flout the ordinance and suffer the consequences, and in that sense his or her compliance with the ordinance and entering into the regulatory agreements is "voluntary," but under that reasoning all governmentally-imposed restrictions are "voluntarily" accepted by those who are regulated. It is unlikely, thus, that "voluntary" would be read to mean so little.)

Unlike inclusionary zoning, however, agreements between developers and cities to develop affordable housing as part of so-called "density bonus" programs would very likely be considered "voluntary" under the new measure (and thus spared) because the developer in such a program is getting something, in exchange for the agreement to develop the affordable units, to which he or she would not otherwise be entitled. (In the case of density bonuses, for example the developer is getting the right to build more units than the zoning law would otherwise allow). The developer may build the affordable units or not, but is not forced to build them as a condition of developing his or her property. The inclusionary zoning ordinance, by contrast, does not give the developer anything in exchange (there is no "consideration," in legal terms) for the agreement to create affordable units, other than the project approvals, which the developer already had a right to obtain, assuming compliance with all other laws.

Thus, the initiative measure calls into question the inclusionary zoning mandates, but not the housing density restrictions or deals involving such density restrictions. Agreements to create affordable housing under the former, but not the latter, lack consideration because inclusionary zoning mandates, but not zoning density laws, constitute direct governmental limits on "the price a private owner may charge another person to purchase, occupy or use his or her real property."

How CPOFPA Might Affect Takings for Water Projects

A second wrinkle created by CPOPFA's breadth and ambiguity involves a provision of the measure that prohibits transfers of ownership to a public agency "for the consumption of natural resources." The fear here, expressed by the California Governor and others, is that the measure would limit the government's ability to undertake public water projects.

CPOFPA supporters declare that the measure would not limit such public projects, but the carelessness of the term "consumption of natural resources" creates a very serious risk of disastrous public policy.

How CPOFPA Might Affect Open Space

A third, and related, problem arises because the CPOPFA prohibits government from taking private property if government is putting the property to the "same or substantially similar use" that the private owner had been making of the property.

Some environmentalists fear this would prevent government from taking (and paying for, of course) undeveloped property to create parklands or open space or to preserve unique habitats. If the undeveloped property was effectively being used as "open space" by the private owner, then government cannot take that property and maintain that use.

I think these concerns may be overstated. Undeveloped property is not being used as a park or open space; it is being used as a private asset that, as of yet, does not make economic sense to develop. Indeed, the fact that the government wants to take and pay for the undeveloped property for open space or parkland illustrates its belief, at least, that the private owner may very well have other plans for the undeveloped parcels.

For this reason, I am not sure this provision will hamper the use of eminent domain for parks. But I do concede that the ambiguity of the term "substantially similar" leaves a lot of room for interpretation.

This feature of the measure, like many others, is causing understandable discomfort, and may incline voters to reject such broad and vague measures that could fundamentally rework the way government operates, especially where there are other proposals (both legislative and initiative) that may address the same problems in more carefully-crafted ways. There is at least one other eminent domain initiative - much more narrowly drawn - that might also qualify for the ballot, but that is a subject for another day.