February 20, 2012
The Value of Habitat
If the government condemns land that is a habitat for an endangered or threatened species, should the land be valued differently than a developable piece of property in an active real estate market?
According to the Supreme Court, the default rule is that “just compensation” for condemned is the “fair market value” of the property. United States v. 50 Acres of Land, 469 U.S. 24, 25 (1984). With regard to habitat land, however, “fair market value” may be very difficult, if not impossible, to ascertain as habitat land, by definition, has been essentially taken off the market. Despite this diffuculty, there are valuation techniques available that can be used to value habitat land based on market principles. For example, as suggested by the Uniform Appraisal Standards for Federal Land Acquisitions, one could (1) determine the theoretical best economic use of the habitat land; and (2) then determine how much land used for that purpose would go on the open market.
But it is hard to see how compensation based on a hypothetical use of the land truly constitutes “just compensation.’’ The purpose of using land for habitat conservation is not to make money, but to protect endangered or threatened species. If this purpose is taken into account, then it could be argued that the only “just compensation” is to replace the habitat. Under this replacement theory, if the government takes habitat land, the government would have to provide enough money to purchase replacement habitat property. This is similar to the statutory remedy provided by CERCLA or Superfund, which allows the government to recover natural resource damages including the cost of replacement. 42 U.S.C. § 9607(f)(1) (2006).
One can certainly imagine scenarios where replacement costs of habitat land could get very expensive. For example, the government condemns habitat land located in a desolate area Mohave Desert, market value $100,000, and the only available replacement habitat land is a commercially developable parcel land located adjacent to the Las Vegas Strip that is worth $5,000,000. Would paying for the replacement land in this instance be “just compensation” or merely a windfall for the property owner? And what if there is no other adequate replacement habitat land? Would the government be prohibited from taking the property at all?
In the end, how to best value condemned habitat land will vary dependingon the facts of the situation. One would hope, however, that the government and the courts do not overlook the unique qualities of habitat land when deciding what comprises “just compensation.”
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Fascinating post -- not that I am advocating this but what about trying calculate the ecosystem services provided by the habitat. Or maybe delving into other valuation concepts like willingness to pay/accept for example?
Posted by: Jessie Owley | Feb 20, 2012 2:28:08 PM