One peculiarity of Penn Central is that the air rights to be granted Penn Central were over eight properties, including the Biltmore Hotel, the Waldorf-Astoria, and the Yale Club, that Penn Central already owned. How, it must be asked, is the city in a position to grant these rights to Penn Central as compensation for its landmark preservation statute? To do this, the city must first own the rights, which it acquired not by purchase from Penn Central, but by zoning. The city’s compensation for the loss of air rights thus came from its prior uncompensated takings. It is as though A uses money stolen from B to pay B for property purchased from him thereafter.
This difficulty could be avoided by granting Penn Central air rights over structures it did not own, but only by substituting one embarrassment for another. The city would still have to acquire air rights over these properties, which it would do not by payment of compensation to their present owners, but by zoning. Note the irony. If zoning is mere regulation, then how can the state then convey air rights as compensation to Penn Central? To make TDRs work, we need a theory by which the air rights taken by the state through zoning become property only when they are conveyed by the state. The original confiscation is transparent if the air rights zoned away are then resold for cash, and the matter is not any better when these same air rights are used to acquire other property.
Prof. Epstein is one of the most prominent scholars on the law of Takings. His book, called simply Takings, is a classic.
Do you agree with his analysis? Why or why not?
