Does a city's application of a landmark preservation law to restrict development above a designated historic landmark, in addition to existing zoning restrictions, constitute a taking of private property requiring just compensation under the Fifth and Fourteenth Amendments?

New York City enacted its Landmarks Preservation Law in 1965 to protect structures of historic or aesthetic significance. The law created a Landmarks Preservation Commission with authority to designate landmarks and to approve or deny alterations to them. Owners were required to keep exteriors in good repair and obtain Commission approval for exterior changes. The city also allowed owners of landmark sites to transfer unused development rights to nearby parcels.

Penn Central Transportation Co. owned Grand Central Terminal, a 1913 beaux-arts railroad station in midtown Manhattan. In 1967 the Commission designated the Terminal a landmark and the city tax block it occupies a landmark site; Penn Central did not seek judicial review. In 1968 Penn Central entered a 50-year lease with UGP Properties, Inc. to build an office tower above the Terminal, with guaranteed rent of at least $3 million annually. Architect Marcel Breuer prepared two plans (a 55-story cantilevered tower and a 53-story tower requiring demolition of part of the facade), both compliant with zoning. After hearings, the Commission denied certificates of appropriateness for both, finding the towers would overwhelm the Terminal. Appellants sought no judicial review of the denials and submitted no alternative plans. The Terminal continued operating as a railroad station with commercial tenants.

Penn Central and UGP sued in New York Supreme Court, Trial Term, claiming the Landmarks Law took their property without just compensation and deprived them of property without due process. The trial court granted injunctive and declaratory relief but severed the question of damages for a temporary taking. The New York Supreme Court, Appellate Division, reversed, holding that appellants had failed to prove the regulation deprived them of all reasonable beneficial use of the property. The New York Court of Appeals affirmed, rejecting the takings claim because the city had not taken control of the property and analyzing the claim under due process, finding no denial of a reasonable return. That court invited further submissions, which appellants declined to make. Appellants appealed to the United States Supreme Court, which noted probable jurisdiction.

(Brennan, J.)

No. The application of New York City's Landmarks Law to Grand Central Terminal did not effect a taking of appellants' property.

There is no set formula for determining when justice and fairness require compensation for economic injuries caused by public action. Armstrong v. United States, 364 U.S. 40 (1960). The inquiry is an ad hoc, factual one guided by several factors: the economic impact of the regulation on the claimant, the extent to which it interferes with distinct investment-backed expectations, and the character of the governmental action. A taking is more readily found when government physically invades property than when it adjusts the benefits and burdens of economic life to promote the common good. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).

Takings jurisprudence does not divide a single parcel into discrete segments. The focus is on the nature and extent of interference with rights in the parcel as a whole, here the entire city tax block. Appellants' argument that the denied air rights were taken fails, because laws restricting airspace, subjacent, and lateral development have been upheld. Welch v. Swasey, 214 U.S. 91 (1909); Goldblatt v. Hempstead, 369 U.S. 590 (1962); Gorieb v. Fox, 274 U.S. 603 (1927). Diminution in value alone does not establish a taking. Euclid v. Ambler Realty Co., 272 U.S. 365 (1926); Hadacheck v. Sebastian, 239 U.S. 394 (1915).

Landmark laws are not discriminatory spot zoning. The New York law is a comprehensive plan covering over 400 landmarks and 31 historic districts, subject to judicial review. That the law burdens some owners more than others does not make it a taking, as in Miller v. Schoene, Hadacheck, and Goldblatt. The law is not a governmental appropriation like United States v. Causby, 328 U.S. 256 (1946), because the city does not use the property.

The severity of impact is limited. The law does not interfere with the Terminal's present use as a railroad station with offices and concessions, which is Penn Central's primary expectation, and the record shows Penn Central can earn a reasonable return. Appellants have not been denied all use of the airspace, since smaller structures were never proposed, and their development rights are transferable to at least eight nearby parcels, mitigating any burden. The restrictions substantially advance the general welfare. Judgment affirmed.

Dissent (Rehnquist, J.) Joined by the Chief Justice and Justice Stevens, the dissent argues that the Landmarks Law took Penn Central's property. This is not a zoning case, because zoning burdens are shared with an "average reciprocity of advantage," Pennsylvania Coal Co. v. Mahon, whereas landmark designation singles out a few buildings and imposes multimillion-dollar costs with no offsetting benefits. The majority answered that appellants are not solely burdened and unbenefited, because the law applies to vast numbers of structures, and that landmark laws are not reverse spot zoning because they implement a comprehensive plan. The owner also bears an affirmative duty to preserve the building at its own expense. The air rights are property, and their destruction is a taking in the literal sense. Neither exception applies: the city is not prohibiting a nuisance, since the proposed building complied with all health and safety laws (the majority answered that Hadacheck, Miller and Goldblatt do not rest on any noxious use but on restrictions reasonably related to a policy producing a widespread public benefit), and no reciprocal benefit accrues to the owner. The Fifth Amendment bars forcing some people alone to bear public burdens that should be borne by the public as a whole. Armstrong v. United States. That the owner retains some reasonable use does not eliminate the taking, because the character of the invasion, not the amount of damage, controls. Whether transferable development rights constitute just compensation, a full and perfect equivalent, is a judicial question the lower courts did not reach, so the dissent would remand for that determination.