In Euclid v. Ambler, the Supreme Court upheld the right of the Village of Euclid in Ohio, mostly farmland east of Cleveland, to impose zoning restrictions on property owners. Today, zoning is a near-universal practice. While zoning did not originate with the village of Euclid, the Euclid case was the first federal case, and it became a beacon of attraction for zoning upon reaching the Supreme Court. Since Euclid, municipalities in America have had nearly unlimited ability to restrict how landowners can use their property, provided only that they assert that they have a good public purpose in doing so.
Prior to Euclid, landowners were the proper judges of how to use their land. In making such judgments, landowners would be guided by the common law of nuisance, which mostly entails common sense and decent morality applied in situations where conflicts might arise. In subdividing land as well as in assembling land, owners would engage in market-governed zoning in determining how they would use their land.
Municipal zoning replaced the ability of landowners to determine how to use their land with political and bureaucratic determination. Fresh from its enactment of a zoning ordinance in 1922, Euclid restricted the ability of Ambler Reality to develop a 68-acre tract of land that lay between two railroads, and which Ambler had planned for industrial development. Euclid zoned much of Ambler’s property as residential. At that time, residential property in the area was valued at about $2,500 per acre while industrial property was valued at about $10,000. Euclid’s zoning ordinance effectively destroyed about three-quarters of the value of Ambler’s property.
The final clause of the 5th Amendment to the U.S. Constitution enables governments to take private property, but it imposes two significant restrictions on any such taking. First, the taking must serve a genuine public purpose. Second, that taking must be accompanied by payment of just compensation. Euclid offered no compensation. As for public purpose, there was none other than Euclid’s assertion that as a government its sole desire was to pursue the public good.
The very presence of the takings clause reflects clear recognition that governments cannot be trusted to pursue the public good without facing constitutional restrictions to limit misuses of governmental power. In this respect, the Founders recognized that government unavoidably entails a form of Faustian bargain.
Governments have the power to coerce people, which entails the Faustian bargain of embracing an instrument of evil in the hope that more good than evil will result. The two restrictions of the takings clause recognize that holders of government power might be tempted to take property for private use and to do so without providing just compensation. The takings clause makes sense only if it is recognized that its intent is to resist the ordinary use of public power for private purposes. Prior to Euclid, claims on behalf of using governmental power were greeted skeptically, as befits the Faustian character of replacing contract with compulsion that government represents. After Euclid v. Ambler, however, the fundamental default setting with respect to takings of property shifted from skepticism toward the claims of government to full-bore credulity.
In May 1923, Ambler sued Euclid on grounds that the taking was unconstitutional. Ambler won that case in the U.S. District Court [Ambler Realty Co. v. Euclid 297 F. 307 (1924)]. Euclid appealed to the Supreme Court, and won the appeal by a 6:3 verdict, with Justice Sutherland writing the opinion. There, the Court ruled that the zoning ordinance was a reasonable extension of the police power to protect public health and safety. The Court also denied that any compensation for the taking was warranted because the claimed loss of property value was a matter of speculation and not a demonstrable fact.
If there were residents of Euclid who wanted to prevent development of Ambler’s land, they could have offered to buy that land. They would have had to pay something on the order of $10,000 per acre to do so. What zoning does is enable well-placed individuals who wield political power to take property they could alternatively have tried to buy; however, taking that property through zoning is cheaper for them than buying it. To be sure, no political official is going to announce that he or she is imposing a zoning ordinance because this allows the official to gain control over the land more cheaply than a purchase would have cost. But this is exactly what zoning accomplishes once the ideological smokescreen has been blown away.
Such straightforward honesty would surely marshal strong opposition because it would place the venal character of much political action too directly onto center stage of the human drama. Hence, images of public health and welfare are invoked to deflect attention away from the reality of this use of political power. Our Founders recognized this downside of political action, and sought to limit its destructiveness by imposing constitutional limits on governmental action. Euclid is a landmark case in bringing our attention to the significant erosion in constitutional wisdom that has been underway for a good century.
Village of Euclid v. Ambler Realty Co. (1926) Supreme Court decision: https://supreme.justia.com/cases/federal/us/272/365/case.html
Richard E. Wagner is Holbert Harris Professor of Economics at George Mason University.