Pay or Waive: An Economic Assessment of Property Owner Compensation Laws in the United States

Cyrus Grout, Andrew J. Plantinga and William K. Jaeger

Review of Environmental Economics and Policy, 2014, vol. 8, issue 1, 103-119

Abstract: Land-use regulations are contentious everywhere because of their potential negative effects on private property values. In recent years, so-called pay or waive compensation legislation was passed in a number of US states, requiring governments to compensate property owners for losses due to land-use regulations or grant exemptions from the regulations in lieu of compensation. We provide an overview of the compensation statutes in six US states, discuss the economic issues raised by the statutes, and examine the effects of the statutes in practice. Although these laws require that "just compensation" be estimated accurately and consistently, measuring the effects of land-use regulations on property values is extremely challenging in practice. We find that rather than providing relief to property owners unfairly burdened by land-use regulations, the compensation statutes appear primarily to discourage local governments from developing and implementing land-use regulations. (JEL: Q24, R52) Copyright 2014, Oxford University Press.

Date: 2014
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