The Bottini Saga
The stated purpose of this volume is to explain why housing is so difficult to build in the United States. The reasons for asking this question are quite simple. Throughout the United States the housing market is a “complete mess.” Yet in an important sense that generalization is suspect, because the situation is, for example, a lot worse in California than in Texas, as burdensome regulation and slow permitting processes dog California but not Texas, which along with high taxes, explain the population decline in California and population growth in Texas, and reflects a nationwide blue/red divide. Blue states tend to use public subsidies to offset the cost of regulation, creating two market distortions, not one. Red states tend to downplay both subsidies and regulation which accounts for their higher growth rate. More specifically, public subsidies in rent control states are used to offset landlord losses in the rental markets, and under affordable housing programs, the price controls on the affordable units are usually not offset by the market rate rentals on the remaining units.
Here, however, I look past these grand trends to talk instead about one case in detail, whose history sadly shows how a combination of historical preservation and environmental controls, weirdly applied, can lead to incoherent results in the easiest of housing markets—that for single-family homes in affluent neighborhoods. I do not approach this case, Bottini v. City of San Diego, as a disinterested observer, as I was counsel of record in ill-fated outcomes both in the California Court of Appeal and California Supreme Court. Philosophically, the root blunder stems from the central takeaway in Penn Central v. City of New York that only ad hoc rules can decide takings cases notwithstanding the Court’s earlier 1960 decision in Armstrong v. United States where the Court rightly refused to allow the United States to invalidate the plaintiff’s materialman’s lien placed on the boat when the general contractor did not pay off the debt first. It did so under the strength of this clear categorical rule: “The Fifth Amendment's guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” The Court finessed Armstrong with these words:
[T]his Court, quite simply, has been unable to develop any “set formula” for determining when “justice and fairness” require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons….
In engaging in these essentially ad hoc, factual inquiries, the Court's decisions have identified several factors that have particular significance. The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations... So, too, is the character of the governmental action. A “taking” may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.
The upshot was that no compensation was awarded when New York’s landmark designation law stripped air rights from Penn Central that were fully vested and protected under New York law.
