The Fifth Amendment’s promise is clear: the government can’t take your property without paying for it. We all picture the classic example—the state condemns your farm to build a new interstate. But what if the government doesn’t lay a finger on your property? What if it just passes a rule that makes your land completely, utterly useless?
That’s a “regulatory taking,” and it was the central issue in a recent federal case out of the Fifth Circuit, DM Arbor Court, Ltd. v. The City of Houston, Texas. It’s a case that local governments would be wise to read carefully.
Here’s the backstory. DM Arbor Court owned a 232-unit apartment complex in Houston, providing subsidized housing to low-income residents. Unfortunately, it was located in a 100-year floodplain. When Hurricane Harvey hit in 2017, the complex flooded. When the owners applied for permits to repair the damage, the City of Houston said no.
The City invoked a flood ordinance, claiming all 15 buildings had sustained “substantial damage.” Under the ordinance, this meant the repair costs would equal or exceed 50 percent of the structure’s market value. The City’s solution? The owners would have to elevate the entire complex above the flood line before making any improvements.
There was just one problem: it was impossible. Experts for both the city and the property owner agreed that demolishing and rebuilding the complex in compliance with the elevation ordinance was not economically feasible. The City’s decision effectively condemned the property to sit vacant and rot. Its only remaining “use” was to hold onto it and pray for a future development miracle.
The owners rightly sued, arguing the city had unconstitutionally taken their property without compensation. The Fifth Circuit agreed, reversing a lower court decision. The court’s ruling was decisive: by denying the permit, the City had deprived the owners of all economically viable use of their land, constituting a “categorical taking.” The court dismissed the city’s absurd suggestion that merely “holding for investment” counted as a viable economic use. A property’s value is in its utility, not in the faint hope that it might someday be valuable again.
This ruling is a powerful check on the unfettered power of regulation. For local governments, the message is stark: your ordinances, however well-intentioned, have real-world economic consequences. If a regulation goes so far as to destroy a property’s value, it crosses the line from permissible regulation to an unconstitutional taking. The bill for that action—in the form of just compensation—will come due.
For citizens, the case is a reminder that the Constitution protects the economic use of your property. If you believe a government regulation has effectively rendered your property worthless, you may have a takings claim. These are not simple fights, but they are essential ones. The government cannot be allowed to regulate a citizen’s property into oblivion and simply walk away.
