Oregon's Measure 37 Property Rights Law
Lessons from the First Eleven Months
December 2005
When Oregon voters overwhelmingly passed Measure 37 in November of 2004, critics predicted that it would have a dramatic and negative impact on Oregon’s communities. Although Judge Mary Mertens James overturned the measure after 11 months (her ruling has been appealed), our study shows that the impact on Oregon’s landscape was limited and was unlikely to have the negative effects critics predicted. In fact, Measure 37 appears to have been doing just what was intended – shifting the burden of new regulation from individual landowners to the community as a whole. There are some important lessons for others looking to bring similar initiatives to their state or other jurisdictions.
In November 2004, Oregon voters overwhelmingly passed a new law, Measure 37, requiring counties and the state of Oregon to pay for the value landowners lose when new zoning restrictions are put in place. The ballot measure was approved by a margin of 60 percent statewide and received a majority of votes in all but one of Oregon’s 36 counties.[1]
Both supporters and opponents of the Measure claimed it would change the landscape of Oregon. The reality, however, is that during the time it was in effect, the impact on the landscape was less than either side expected. Although Judge Mertens James ruled the Measure unconstitutional, its impact during the time it was in effect is instructive for those now looking to bring a version of the law to other states, including Washington.
When Measure 37 passed, some predicted “anarchy,” “chaos” and even a “nightmare.”[2] Critics claimed that it would bankrupt the state and counties by requiring them to pay out millions of dollars in claims.
Our study of dozens of settled claims at the state and county level shows that the impact on Oregon’s landscape was smaller than expected, because even though many Measure 37 claims were filed, they were mostly for small, family owned plots of land. Even when these claims were approved, other land use restrictions prevented new construction that would have impacted public safety or changed the character of rural parts of Oregon.
While it is unclear what Measure 37 would do to future attempts to zone, what is clear is that the “nightmare” predicted by land-rights opponents has not occurred.
This study examines the types of claims made during the eleven months (December 2004 through October 2005) Measure 37 was in effect in Oregon. It examines the number and type of claims as well as the outcome of those claims. As we take a closer look, it becomes clear that what is most important in many cases are not the cases themselves, but what Measure 37 does not cover and the many land use rules and safeguards that remain in place even after successful claims.
Measure 37 is one of the most comprehensive attempts in the country to protect landowners from efforts by state and local governments to put strict limits on the uses allowed on private property. The measure gives landowners the ability to request compensation for any new zoning which has the effect of diminishing the value of their property. If the government decides not to pay compensation to the landowner, Measure 37 allows the government to waive the zoning regulations in question, reverting back to the rules in effect at the time the property was purchased by the current owner.
While in effect, Measure 37 would have given landowners two years to request compensation for any zoning restrictions imposed since the time they purchased their land. If a landowner purchased an investment property in 1950 and finds that since that time the government has strictly limited its use, he could make a claim for the current value of the land as if he were applying under the permitting rules of 1950.
Exceptions under Measure 37
There are, of course, exceptions. As noted on the State of Oregon web page, “The measure does not apply to commonly and historically recognized public nuisances, public health and safety regulations, regulations required to comply with federal law, and regulations restricting or prohibiting the use of a property for the purpose of selling pornography or performing nude dancing.”[3]
Additionally, permits are not automatically granted once a Measure 37 claim is approved. Landowners must still follow the rules in existence at the time they purchased the land. In many cases these zoning rules, while less specific, are still fairly significant. For instance, in some cases zoning regulations did not specify a particular size of parcel allowed, but did require that new land uses be consistent with the “character” of the surrounding area.
Limited change on the landscape
In practice this meant that while the vast majority of Measure 37 claims were approved, the actual change on the landscape was much more limited. Examining the number and type of claims made during the first eleven months, this outcome becomes fairly obvious.
III. Few Claims for Dramatic Change
During the eleven months that Measure 37 was in effect, the number and type of claims were fairly limited. If we look only at the dollar amount claimed by landowners, the amount seems enormous. Through mid-October 2005, Measure 37 claims against the state amounted to nearly $2.5 billion, far more than the state could pay. However, that number is extremely misleading.
Limited number of landowners can make claims
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First, there are a limited number of landowners who are eligible to make significant claims against the state. Landowners can only make claims going back to the date they purchased the land. Thus far, the vast majority of claimants are families with ownership dating back, in a few cases, to the 1940s. Many of Oregon’s most significant zoning changes are 30 years old, and very few individuals or companies have held land long enough to make significant claims.
For instance, Washington County includes a “Summary of Key Land Use Regulations” outlining regulation changes since 1959, when the county began issuing permits and creating the first zoning rules.[4] The first subdivision ordinance was adopted in 1964. In 1973 a comprehensive plan was adopted that established a 38-acre minimum lot size for one district. The summary counts 13 new significant changes to zoning codes since 1982, or more than one every other year. Under these circumstances, a landowner would have had to own his land for nearly 25 years to avoid most of the current regulations or else to claim significant compensation from the county for the diminished value of his property.
Very few corporations made claims
One outcome of Measure 37 is that very few corporations applied for compensation.[5] Corporations typically do not hold unproductive land indefinitely. The vast majority of claims, therefore, were made by families who purchased their land as an investment or for agricultural or other uses. As a result, the actual number of acres involved is relatively small. Many Measure 37 claims are for parcels of fewer than 100 acres; many are for parcels of only five to ten acres.
This mitigates the concern that Measure 37 would have significantly contributed to sprawl where growth has moved out to meet rural communities. One county experiencing significant growth is Clackamas County, just southeast of Portland. Not surprisingly, it has the largest number of Measure 37 claims, with more than twice the number of the next county. Again, this tells only part of the story.
The total number of claims in Clackamas is 275. There are a total of approximately 1.2 million acres in Clackamas County. If we assume that the average size of the claim is 50 acres, as is typical, these claims would amount to about 13,750 acres, or just over one percent of the total land in the county, spread across the county.
Measure 37 affects a small land area
In reality, however, most of the claims in Clackamas County, and across Oregon, are much smaller. Many of the claims, as mentioned, are for parcels of between five and ten acres. Some landowners ask only to build a single structure on the existing parcel without any subdivision. Thus, the land area impacted by Measure 37 would likely have been something on the order of one-fifth of one percent of the total area of the county.
It bears repeating that Clackamas had more than twice the number of claims of any other county. Thus, although it is larger than some counties, the total impact of Measure 37 in other counties would likely have been much less.
In short, the number of people who have the ability to make significant claims is fairly limited. Further, landowners who can make claims that avoid the bulk of zoning regulations (i.e. those who have owned their land for decades), do not typically own large parcels of land. As a result, there are fewer claims than one might expect and many of the claims are for small parcels.
Finally, since the claims are mostly being made by families, the changes they can make appear to be limited. Based on the data, it appears that very few families have the resources to build large subdivisions. In Clackamas County there are a number of claims that read “Requesting modification and/or removal of the regulations so that land can be divided into three building lots of approximately 2 acres each,” and “Requesting to divide the 5 acre property into four 1 to 1 1/2 acre lots,” and “Divide parcel into twelve 1 acre lots.”[6] There are also other claims to divide for maximum density, but these are less frequent.
Since Measure 37 restricts claims to the rules in place when current owners purchased the land, the ability of owners to make dramatic land use changes is, quite simply, limited.
As noted above, even owners who have their claim approved are not able to develop the land as they may have hoped. Obtaining the required building permits, even under older rules, can be difficult and there are always limits.
No free-for-all in land development
The sense that successful Measure 37 claims would lead to a free-for-all on the land has been seized on by property rights opponents. They argued that environmental regulations would be weakened, the character of communities threatened and public safety ignored. A University of Washington professor even warned, “Farmlands would have greater market value as subdivisions…flood plains are attractive locations for car dealerships and truck stops.”[7]
Our research shows, however, that these predictions are contradicted by actual practice.
Land zoned for “Exclusive Farm Use”
Many of the claims made across Oregon involve land zoned for “exclusive farm use” (EFU), a restriction created in 1982 that prevents land from being subdivided below 80-acre parcels. A 1994 law placed further restrictions on land not producing $80,000 a year from farming. For rural landowners who purchased land after 1982 this means that they cannot subdivide their land into parcels smaller than 80 acres.
A typical example of a Measure 37 claim against EFU zoning occurred in Hood River County, in northern Oregon along the Columbia River. The landowners asked to be allowed to convert 53 acres of farmland to a subdivision of quarter-acre lots or to receive more than $11 million in compensation from the state. On June 8, 2005 the State of Oregon approved the claim. There is a catch, however. The state has not allocated any money to pay the compensation, so Oregon waived the EFU zoning rules instead, allowing the current owners to build based on the rules that applied when they purchased the land in 1977.
Having won their claim, the owners could metaphorically go back in a time machine and apply for a building permit following the rules in place in 1977. They would likely have been disappointed.
The rules at that time, while theoretically allowing quarter-acre lots, require any construction to be “appropriate for the continuation of the existing commercial agricultural enterprise in the area.” Therefore, the Hood River County staff noted in their report on this and similar claims, that the owners were unlikely to receive the go-ahead to build a housing subdivision. If the state had chosen to pay compensation, the actual monetary value of the claim would have been much less than $11 million. As it is, even under the 1977 zoning rules, any new building in the area is unlikely to change the rural character of the surrounding community.
The circumstances are similar in Columbia County where a landowner filed a claim for $84,792. Ultimately his building plans will probably be stymied by laws that require any new use to “conserve forestlands for forest uses,” and limit construction to that which is “necessary and accessory” to forest use.
The restrictions that remain even after Measure 37 was enacted not only limit what can be done, but can also add significantly to the cost of developing land.
Rules protecting public health and safety remain in place
In Portland, Multnomah County, a claim made on December 2, 2004 (undoubtedly one of the first claims in the state), asks for compensation of $1.15 million in lieu of subdividing 19.74 acres into eight buildable parcels. Again, the request is not to build 79 quarter-acre lots, but eight lots, each averaging more than two acres in size. This is despite being in the most urbanized county in Oregon.
The claim was approved, and since the county did not budget money to pay claims, the applicable zoning rules were waived instead. Even though the landowner acquired the property in 1953, there are still a number of rules that apply to any future development. Multnomah County found that a number of restrictions would not be waived because they were “necessary to protect public health and safety, are necessary to comply with federal law or were enacted prior to acquisition date of the owner.”[8]
Additionally, county officials said they could not determine if several other regulations would impact the landowner’s ability to subdivide the land. County officials required the landowner to re-apply when building plans were more complete to see if those restrictions would be removed. It is possible, therefore, that the county might have decided to compensate the landowner for this limited set of restrictions the second time around, thus keeping the rules in place and making development more difficult.
Local government flexibility
This approach might allow a local government to retain those land use restrictions it could afford and were most difficult to overcome without having to compensate the landowner for the full amount.
This is not the only example of a claim being limited by issues of public safety. Despite the claim that “flood plains are attractive locations for car dealerships and truck stops,”[9] an example in Linn County shows that counties used the public safety restriction to limit construction even when the outcome might be socially desirable. Habitat for Humanity, hoping to build new housing for low-income families, joined a $230,000 claim to waive EFU zoning rules in support of a landowner who wanted to donate land to the charity.
The claim was approved. Construction, however, was denied on public safety grounds because the land was located in a flood plain. The recommendation to the Linn County Board of Commissioners found that “staff believe the claimant is not entitled to compensation under Measure 37 because the property is within the Calapoola River floodway and development of property in a floodway is a public safety issue that is exempt under Measure 37.”[10]
Thus, even when the outcome might be a desirable public good (i.e. the creation of low income housing), Measure 37’s exemptions still allowed a county or the state to prevent development in sensitive areas.
One claim made by opponents is that Measure 37 is undemocratic because it allows individual landowners to avoid building requirements the rest of the community must follow. Further, they say, it hurts the value of the homes and land in the community by allowing construction that could negatively impact other landowners.
Impact on neighboring properties
To illustrate this point, 1000 Friends of Oregon published a guide to Measure 37 which states, “If your neighbor purchased her property before the enactment of a land use regulation governing the approval and siting of cell phone towers, and the local government waives that land use regulation, Measure 37 does not allow you to recover for the reduction in your property value.”[11]
There are three additional shortcomings of the argument that a Measure 37 claim lowers the value of neighboring properties.
First, what opponents of Measure 37 see as a “reduction” in value may actually be a reduction from a price that was overvalued compared to the natural market price. For instance, if ten landowners had equal land development rights in 1980 and eight of them choose to exercise their right to build, it does not make sense that they can years later “democratically” vote to limit the rights of the other two landowners simply because these two did not act immediately.
The eight owners who developed their property may argue that new construction by the two remaining landowners would negatively impact the value of their land by eliminating open space. The reality is, however, that their property values were artificially overvalued while the other two landowners waited to build. While there may be a reduction in the property value, it is a reduction to the normal market level – rather than a falsely high level that the other eight landowners enjoyed for years.
Options for preserving open space
Second, the above scenario does not leave the eight landowners without options. They can gather together and purchase the land of the two other owners. Alternatively, they can ask the government to prevent new building by retaining the latest land use restrictions and paying compensation to the two landowners for their loss of property value. This is the truly democratic response, with the public bearing the cost of restricting private property for public benefit (maintaining open space in a built-up area).
Ironically, the 1000 Friends of Oregon use this same logic to argue against Measure 37. They say that Measure 37 claims filed by property owners would lower their neighbor’s property value without the neighbors being able to “recover for the reduction in your property value.”[12] They imply that this is unfair. They apparently do not think it is unfair, however, when the entity that is reducing people’s property value is the government.
Public comment on Measure 37 claims
The public is allowed to comment on Measure 37 claims. There are very few instances, however, in which the public provided input. In the few cases where input is provided, people submitting comments tended to emphasize the potential impact changes in zoning would have on their property. These arguments, however, are not germane to the ultimate decision. If a landowner believes his property value will be lowered by a neighbor’s Measure 37 claim, that does not invalidate the right to compensation of the neighbor whose property value has been diminished by an act of the government.
Finally, as noted above, landowners cannot receive waivers if the result of that waiver would harm public safety. Thus, when 1000 Friends of Oregon creates hypothetical examples where such threats would occur, they are stretching the ambiguity of the phrase “commonly and historically recognized public nuisances, public health and safety regulations” to an extreme and in a way that has never applied before.
That, ultimately, is the problem with many of the critiques of Measure 37 – they are hypothetical. Had it continued, there would undoubtedly have been examples of Measure 37 claims that stretched the law, but there were no egregious examples that stand out in the first eleven months.
Given the years of pent up demand created by ever-expanding land use regulation, it is surprising that there were not notable exceptions like those predicted by 1000 Friends of Oregon and other opponents. As the law actually played out on the ground, it seemed to reach the intended target – families whose long-term property investments had been harmed by government restrictions.
The first eleven months of Measure 37 provide us with a good indication of how similar laws would play out, but there are still many questions to be answered.
Judge Mary Mertens James overturned the Oregon law on October 14, 2005. Her ruling has been appealed, so it is unclear whether Measure 37 will be tested with regard to these other issues. Land rights proponents in other states, like Washington, who are seeking to craft similar measures need to consider these lingering questions.
Future land use changes
First, what will happen when governments change zoning laws in the future? Oregon has a solid foundation of zoning that dates back more than 30 years. The chance that there would have been significant land use changes in the future is probably offset by the amount of regulation that already exists. In fact, it is not unlikely that there would be a reduction in restrictions in some areas as the demand for increased development and affordable housing grows.
One possibility is that governments under similar laws would look for areas of flexibility to protect some land restrictions while waiving others. A lawyer involved in a number of the claims told the author that he felt that Measure 37 did not provide enough flexibility to settle claims.[13] He complained that claims were all or nothing and encouraged landowners to put everything together in one claim. As noted, some governments are already looking for ways to separate out those rules which they would like to preserve and for which they are willing to pay compensation to affected property owners.
Impact is less than critics predicted
Second, while landowners in Oregon would have had an additional year since the passage of Measure 37 to make claims against past zoning changes, it is reasonable to expect that most claims were filed during the first year, essentially relieving pent-up demand. Thus, the small total area of land affected by Measure 37 indicates that the overall impact on the character of Oregon communities would be significantly less than critics predicted.
These research results do not imply that land reforms like Measure 37 are not needed. While the impact on the community might be small, the impact on individuals who had long-term investments is, in some cases, very large. After all, protecting individual property rights and investments is the primary goal of Measure 37.
It is unclear what permits would have been granted for valid Measure 37 claims had the law remained in force. Many landowners might have been disappointed when actual permits failed to allow the amount of new construction they had hoped for.
As the battle over bringing Measure 37 to Washington and other states heats up, it is useful to take a close look at what actually happened in Oregon. A close examination of the first eleven months shows that there is more fiction than fact in the attacks on that law.
Text of Measure 37
The following provisions are added to and made a part of ORS chapter 197:
(1) If a public entity enacts or enforces a new land use regulation or enforces a land use regulation enacted prior to the effective date of this amendment that restricts the use of private real property or any interest therein and has the effect of reducing the fair market value of the property, or any interest therein, then the owner of the property shall be paid just compensation.
(2) Just compensation shall be equal to the reduction in the fair market value of the affected property interest resulting from enactment or enforcement of the land use regulation as of the date the owner makes written demand for compensation under this act.
(3) Subsection (1) of this act shall not apply to land use regulations:
(A) Restricting or prohibiting activities commonly and historically recognized as public nuisances under common law. This subsection shall be construed narrowly in favor of a finding of compensation under this act;
(B) Restricting or prohibiting activities for the protection of public health and safety, such as fire and building codes, health and sanitation regulations, solid or hazardous waste regulations, and pollution control regulations;
(C) To the extent the land use regulation is required to comply with federal law;
(D) Restricting or prohibiting the use of a property for the purpose of selling pornography or performing nude dancing. Nothing in this subsection, however, is intended to affect or alter rights provided by the Oregon or United States Constitutions; or
(E) Enacted prior to the date of acquisition of the property by the owner or a family member of the owner who owned the subject property prior to acquisition or inheritance by the owner, whichever occurred first.
(4) Just compensation under subsection (1) of this act shall be due the owner of the property if the land use regulation continues to be enforced against the property 180 days after the owner of the property makes written demand for compensation under this section to the public entity enacting or enforcing the land use regulation.
(5) For claims arising from land use regulations enacted prior to the effective date of this act, written demand for compensation under subsection (4) shall be made within two years of the effective date of this act, or the date the public entity applies the land use regulation as an approval criteria to an application submitted by the owner of the property, whichever is later. For claims arising from land use regulations enacted after the effective date of this act, written demand for compensation under subsection (4) shall be made within two years of the enactment of the land use regulation, or the date the owner of the property submits a land use application in which the land use regulation is an approval criteria, whichever is later.
(6) If a land use regulation continues to apply to the subject property more than 180 days after the present owner of the property has made written demand for compensation under this act, the present owner of the property, or any interest therein, shall have a cause of action for compensation under this act in the circuit court in which the real property is located, and the present owner of the real property shall be entitled to reasonable attorney fees, expenses, costs, and other disbursements reason-ably incurred to collect the compensation.
(7) A metropolitan service district, city, or county, or state agency may adopt or apply procedures for the processing of claims under this act, but in no event shall these procedures act as a prerequisite to the filing of a compensation claim under subsection (6) of this act, nor shall the failure of an owner of property to file an application for a land use permit with the local government serve as grounds for dismissal, abatement, or delay of a compensation claim under subsection (6) of this act.
(8) Notwithstanding any other state statute or the availability of funds under subsection (10) of this act, in lieu of payment of just compensation under this act, the governing
body responsible for enacting the land use regulation may modify, remove, or not to apply the land use regulation or land use regulations to allow the owner to use the property for a use permitted at the time the owner acquired the property.
(9) A decision by a governing body under this act shall not be considered a land use decision as defined in ORS 197.015(10).
(10) Claims made under this section shall be paid from funds, if any, specifically allocated by the legislature, city, county, or metropolitan service district for payment of claims under this act. Notwithstanding the availability of funds under this subsection, a metropolitan service district, city, county, or state agency shall have discretion to use available funds to pay claims or to modify, remove, or not apply a land use regulation or land use regulations pursuant to subsection (6) of this act. If a claim has not been paid within two years from the date on which it accrues, the owner shall be allowed to use the property as permitted at the time the owner acquired the property.
(11) Definitions - for purposes of this section:
(A) "Family member" shall include the wife, husband, son, daughter, mother, father, brother, brother-in-law, sister, sister-in-law, son-in-law, daughter-in-law, mother-in-law, father-in-law, aunt, uncle, niece, nephew, stepparent, stepchild, grandparent, or grandchild of the owner of the property, an estate of any of the foregoing family members, or a legal entity owned by any one or combination of these family members or the owner of the property.
(B) "Land use regulation" shall include:
(i) Any statute regulating the use of land or any interest therein;
(ii) Administrative rules and goals of the Land Conservation and Development Commission;
(iii) Local government comprehensive plans, zoning ordinances, land division ordinances, and transportation ordinances;
(iv) Metropolitan service district regional framework plans, functional plans, planning goals and objectives; and
(v) Statutes and administrative rules regulating farming and forest practices.
(C) "Owner" is the present owner of the property, or any interest therein.
(D) "Public entity" shall include the state, a metropolitan service district, a city, or a county.
(12) The remedy created by this act is in addition to any other remedy under the Oregon or United States Constitutions, and is not intended to modify or replace any other remedy.
(13) If any portion or portions of this act are declared invalid by a court of competent jurisdiction, the remaining portions of this act shall remain in full force and effect.
Source: Oregon Secretary of State, “Measure 37 – Text of Measure” at www.sos.state.org.us/elections/nov22004/guide/meas/m37.
[1] Most dramatic was Multnomah County, which includes the city of Portland. The county voted for John Kerry by a margin of 71 to 27 percent, but supported Measure 37 by a margin of 51 to 49 percent.
[2] Joseph W. Tovar, “Oregon’s land-use nightmare: Washington must resist the lure of Measure 37,” The Seattle Times, May 29, 2005, page D-1.
[3] “Risk Management Division Measure 37,” at www.egov.oregon.gov/DAS/Risk/M37.shtml, accessed September 17, 2005.
[4] “Measure 37 Application Packet,” Washington County Department of Land Use and Transportation, at www.co.washington.or.us/deptmts/lut/land_dev/dev_serv/forms/M-37Packet.pdf, accessed September 17, 2005.
[5] In one case a bankrupt corporation made a claim, perhaps in hopes of recovering some value. The claim was denied, however, because the corporation had been dissolved, “M118962 – BLM of Hood River, Inc.,” June 8, 2005.
[6] “Measure 37 Information,” Clackamas County Department of Transportation and Development, Planning Division, at www.co.clackamas.or.us/dtd/zoning/37/, accessed September 17, 2005.
[7] Tovar, page D-6.
[8] Board of Commissioners for Multnomah County, “Order No. 05-041: Order to not apply land use regulations to 13100 N.W. McNamee Road under ballot Measure 37,” March 17, 2005, at www.co.multnomah.or.us/dbcs/LUT/land_use/Measure37/05-041.pdf, accessed September 17, 2005.
[9] Tovar, page D-5.
[10] Board of County Commissioners for Linn County, “Resolution 2005-136 (M37 Denial) (M37-006-04),” May 4, 2005.
[11] 1000 Friends of Oregon, “Measure 37: Summary & Questions,” March 31, 2005, at www.friends.org/issues/documents/M37/QA-about-M37.pdf, accessed September 18, 2005.
[12] Ibid.
[13] Author’s interview with Edward Fitch, June 6, 2005.