Breaking: Texas Takings Law Enters The 20th Century!

By noemailnoemail-org-robert-thomas-inversecondemn on March 24, 2025

Here’s the latest in a case we’ve been following closely (and disclosure: our firm filed an amicus brief in the Texas Supreme Court).

First, the bottom line: in The Commons at Lake Houston, Ltd. v. City of Houston, No. 23-0474 (Mar. 21, 2025), the Texas Supreme Court held that merely because a regulation is a justified exercise of police power does not insulate it from a claim that it goes too far and is also a taking requiring compensation.

The Texas Court of Appeals held that the city could not be liable for a taking for an ordinance that limited development and use within the city’s 100-and-500-year floodplains because the ordinance was a valid exercise of police power and otherwise survived the rational basis test.

As we wrote here, that seems like utter nonsense to say that a valid police power reason categorically insulates a government action from a takings challenge. After all, the entire regulatory takings doctrine is built on the notion that an otherwise-valid exercise of government power (here, the police power, delegated from the State to the city) can so impact an owner’s property rights that the law will treat it as a de facto exercise of eminent domain, and require just compensation. The doctrine pretty much presumes that the governmental action is valid, and challenges to what are claimed to be invalid government actions fall under the due process label.

The reason for our snarky headline is that we thought this issue was settled in the “original” regulatory takings case in the early 20th Century, Pennsylvania Coal Co. v. Mahon. Way back in 1922, the Supreme Court held 8-1 that if regulation “goes too far” into an owner’s rights, it is a taking. And this was despite the fact that there, it seemed like Pennsylvania’s police power justifications for the Kohler Act were very police powery. Preventing surface subsidence seems pretty solidly health, safety, and welfare justified. The Mahon majority rejected the arguments of the City of Scranton and Justice Brandeis’ solo dissent that the doubleplusgood police power reasons were enough to say no taking.

Well, for whatever reason, Texas had not entirely caught the vibe. Or at least there was some lingering uncertainty about the century-plus reasoning that takings doesn’t turn on the government’s reasons, but focuses on the effects of what might be valid regulations have on the property owner. You know, the Armstrong thing: is it fair to put the entire burden of a public good on a property owner. The same question we ask in straight eminent domain.

So we are grateful to our friend and colleague Charles McFarland for representing the property owner. Check out the oral arguments here.

We urge you to check out the opinion. Well worth reading. Here’s what we think is the money quote:

But we have long rejected “the notion that the government’s duty to pay for taking property rights is excused by labeling the taking as an exercise of police powers.” Steele, 603 S.W.2d at 789.38 Indeed, whether a regulation constitutes a valid exercise of the police power—or promotes any other important public policy, purpose, or interest—is simply irrelevant to whether the regulation causes a compensable taking. Lingle, 544 U.S. at 543.39 If a regulation does not promote a valid public purpose, the taking is simply impermissible because it is not a taking for a “public use,” and “[n]o amount of compensation can authorize such action.” Id. So whether a regulation constitutes a valid exercise of the police power “is a separate question” than whether it results in a compensable taking. Loretto, 458 U.S. at 425. We do not even attempt to “compartmentalize” a government regulation as being either a taking or an exercise of the police power because of “the manifest illusoriness of the distinctions” between the two. DuPuy, 396 S.W.2d at 107.41 Simply put, any attempt to create a dichotomy between takings and police-power regulations “has not proved helpful in determining when private citizens affected by governmental actions must be compensated.”

Slip op. at 14 (footnote and some citations omitted).

The court also held that the takings claim is ripe under Pakdel‘s “relatively modest” requirement for a final decision because, despite a number of applications that went nowhere (but haven’t been out-and-out denied), the city has said that the owner “has not right to obtain the permit.” See slip op. at 25-27.

The opinion’s reasoning on this issue is instructive, and well-worth keeping in your hip pocket, because it accurately captures what owners often face when dealing with a regulatory scheme, a topic we’ve thought about a lot:

Perhaps if the City had ever told The Commons that it was requesting the wrong permit or applying in the wrong manner, the City could have an argument that it was never given the opportunity to grant or deny The Commons relief. See Mayhew, 964 S.W.2d at 929. What the City has instead is a paper trail down which it dragged The Commons for months, if not years, with no suggestion of compromise or a final determination. See Palazzolo, 533 U.S. at 620 (“[A] landowner may not establish a taking before a land-use authority has the opportunity, using its own reasonable procedures, to decide and explain the reach of a challenged regulation.” (emphasis added)). Nevertheless, the City’s assertions that The Commons simply has “no right” to obtain a floodplain-development permit and that its claim “cannot ever ripen” clearly indicates absolute finality. Although the City has not yet formally denied a permit, it “may not burden property by imposition of repetitive or unfair land-use procedures in order to avoid a final decision.” Id. Under these facts, we conclude that The Commons’s inverse-condemnation claim is ripe for adjudication.