A regulatory taking is where the state effects a taking of land by restricting its use so that the owner is unable to develop a significant portion of it.
The standard for what constitutes a regulatory taking was established in Penn Central, which said that "economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations" must be balanced against "the character of the governmental action."
- The economic impact of the regulation on the claimant is determined by comparing the fair market value before and after the regulation.
- A buyer who purchases land already devoted to a legally permitted use usually has a reasonable investment-backed expectation that the use will continue.
- Again, when there is a physical invasion of the property, the Supreme Court has consistently held that a taking has occurred, regardless of how small a diminishment in value may result.
- A regulation is not a taking if it is reasonably related to the public health, safety, or welfare—even if it substantially diminishes the value of the affected land.
- The impairment must be truly significant to give rise to a taking.