District Intown Properties Ltd. Partnership v. District of Columbia

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 14, 1999 Decided December 17, 1999

No. 98-7209

District Intown Properties Limited Partnership, et al.,
Appellants

v.

District of Columbia, et al.,
Appellees

Appeal from the United States District Court
for the District of Columbia
(No. 96cv00569)

Wallace A. Christensen argued the cause for appellants.
With him on the briefs was Stacey L. McGraw.

Lutz Alexander Prager, Assistant Deputy Corporation
Counsel, argued the cause for appellees. With him on the
brief were Jo Anne Robinson, Interim Corporation Counsel,
Charles L. Reischel, Deputy Corporation Counsel, and Melvin
W. Bolden, Jr., Counsel.

 John D. Echeverria, Paul W. Edmondson, Elizabeth S.
Merritt, and Laura S. Nelson were on the brief for amicus
curiae The National Trust for Historic Preservation and D.C.
Preservation League.

Before: Edwards, Chief Judge, Williams and Rogers,
Circuit Judges.

Opinion for the Court filed by Chief Judge Edwards.

Separate opinion filed by Circuit Judge Williams concur-
ring in the judgment.

Edwards, Chief Judge: In 1961, District Intown Limited
Properties Partnership ("District Intown") purchased Cathe-
dral Mansions South, an apartment building and landscaped
lawn on Connecticut Avenue across from the National Zoo.
District Intown subdivided this property into nine contiguous
lots in 1988. In March 1989, all nine lots were declared
historic landmarks. In July 1992, the Mayor of the District
of Columbia denied District Intown's request for construction
permits to build eight townhouses on eight of the nine lots,
finding that the construction was incompatible with the prop-
erty's landmark status. Alleging that the District of Colum-
bia's denial constituted a taking, District Intown and its
general partners sued under 42 U.S.C. s 1983 (1994) for just
compensation under the Takings Clause of the Fifth Amend-
ment.

Upon cross motions for summary judgment, the District
Court granted summary judgment for the District of Colum-
bia. See District Intown Properties Ltd. Partnership v.
District of Columbia, 23 F. Supp. 2d 30 (D.D.C. 1998). The
District Court held that the relevant parcel for the purposes
of determining whether a taking had occurred consisted of
the entire property, including the apartment building, not the
eight individual lots that District Intown sought to develop.
See id. at 35-36. The court then analyzed the alleged taking
under the Supreme Court's holdings in Lucas v. South Car-
olina Coastal Council, 505 U.S. 1003 (1992), and Penn Cen-
tral Transportation Co. v. City of New York, 438 U.S. 104
(1978). The District Court found that there was no categori-

cal taking under Lucas, because District Intown had not been
deprived of all economic value in the relevant parcel. The
trial court further held that District Intown could not make
out a claim under Penn Central, because its reasonable
investment-backed expectations had not been disappointed
and it continued to receive economic benefits from the prop-
erty.

We hold that the District Court correctly found that the
relevant parcel for the takings analysis consisted of the entire
property held by District Intown, i.e., the property as it was
originally purchased in 1961 and as it was held for 27 years
prior to the 1988 subdivision. All relevant objective and
subjective factors support this conclusion. When the proper-
ty is viewed as a single parcel, there is no doubt that it has
not been rendered valueless. Indeed, even if each subdivided
parcel is considered separately, District Intown has not
shown a "total taking" under Lucas. In addition, the record
here does not show that District Intown's investment-backed
expectations were disappointed. This is not surprising, be-
cause District Intown could not have had any reasonable
investment-backed expectations of development given the
background regulatory structure at the time of subdivision.
Accordingly, we hold that District Intown did not present any
genuine issue of material fact in support of a takings claim
under Penn Central or Lucas. We therefore affirm the
District Court's judgment.

I. Background

In 1961, District Intown purchased in fee simple Lot 1 of
Subdivision Square 2106 on Connecticut Avenue, across from
the National Zoo. The property was known as Cathedral
Mansions South and consisted of an apartment building and
adjacent landscaped lawns. District Intown made no signifi-
cant changes to the property until 1988, when it subdivided
Cathedral Mansions South into nine lots, designated as Lots
106 through 114. The subdivisions were recorded on June 30,
1988. Lot 106 contains the apartment building, and Lots 107
through 114 are each portions of the landscaped lawn. The

record indicates that District Intown spent $2,819 to survey
the parcel and to record the subdivision. The record does not
reflect any other expenses.

On December 30, 1988, District Intown applied for permits
to build one townhouse on each of the eight landscaped lots.
The zoning and structural engineering divisions of the De-
partment of Consumer and Regulatory Affairs approved the
permits on March 7, 1989. However, because the property is
located across from the National Zoo, the permits were
referred to the Commission on Fine Arts. See D.C. Code
Ann. s 5-410 (1994) ("Shipstead-Luce Act"). The Shipstead-
Luce Act, in effect since the 1930s, empowers the Commission
on Fine Arts to communicate to the Mayor "recommenda-
tions, including such changes, if any, as in its judgment are
necessary to prevent reasonably avoidable impairment of the
public values belonging" to various buildings and parks. Id.
On March 31, 1989, the Commission on Fine Arts recom-
mended against construction.

Beginning in 1987, before the property was subdivided, a
movement developed in the Woodley Park community in
support of designating the property a historic landmark.
This culminated on March 2, 1989, when the group filed a
landmark designation petition. This was five days before
District Intown received zoning approval for the construction.
The Historic Preservation Review Board ("Review Board")
approved the landmark designation on May 17, 1989. Be-
cause the landmark designation petition was pending when
District Intown's permits were approved for zoning, the per-
mits were referred to the Review Board pursuant to the
District of Columbia's landmark laws, see D.C. Code Ann.
s 5-1001 et seq. (1994 & Supp. 1999), effective since 1979. On
July 19, 1989, the Review Board recommended that the
construction permits be denied. The permit applications
were dismissed without prejudice on December 20, 1991.

On January 31, 1992, District Intown filed new permit
applications identical in all respects to those previously dis-
missed. The permits were again referred to the Review
Board, which recommended denial because construction on
the lawn would be incompatible with its historic landmark

status. Pursuant to D.C. Code Ann. s 5-1007(e), District
Intown requested a hearing before an agent designated by
the Mayor. The hearing was held on July 22 and 24, 1992.
The Mayor's agent agreed with the Review Board, stating
that "any construction destroying the lawn" would be incom-
patible with its landmark status. Decision and Order of
Mayor's Agent p 61 n.1, reprinted in Joint Appendix ("J.A.")
368. In addition, the agent purported to hold that the denial
of the construction permits did not work an economic hard-
ship or constitute a taking, but the District of Columbia Court
of Appeals has since declared that the agent's holding was
outside his jurisdiction. See District Intown Properties, Ltd.
v. Department of Consumer and Regulatory Affairs, 680 A.2d
1373, 1379 (D.C. 1996) (decision of the Mayor's agent regard-
ing alleged economic hardship would have no preclusive effect
in any future proceeding in which District Intown might claim
an uncompensated taking).

Thereafter, on March 22, 1996, District Intown filed this
s 1983 action. On cross motions for summary judgment, the
District Court entered summary judgment for the District of
Columbia on September 25, 1998. See District Intown Prop-
erties Ltd. Partnership, 23 F. Supp. 2d at 39. The court
found that the property (i.e., the "relevant parcel") for the
purposes of assessing whether a taking had occurred consist-
ed of the original Lot 1 prior to its subdivision into nine lots.
See id. at 35-36. Because District Intown continued to
receive significant economic benefits from use of the relevant
parcel, the court found that appellants failed to demonstrate
that their property had been rendered "valueless," and their
claim to a taking under Lucas failed. See id. at 36-37. The
court then turned to the ad hoc analysis elucidated by Penn
Central and found that none of the ad hoc factors support
District Intown's takings claim. See id. at 37-39. This
appeal followed.

II. Analysis

A. Standard of Review

This court reviews a grant of summary judgment de novo.
See Aka v. Washington Hosp. Ctr., 156 F.3d 1284, 1288 (D.C.

Cir. 1998) (en banc). A party is entitled to summary judg-
ment if the record reveals that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law. See Fed R. Civ. P. 56(c). In
deciding whether there is a genuine issue of material fact, the
court must assume the truth of all statements proffered by
the non-movant except for conclusory allegations lacking any
factual basis in the record. See Greene v. Dalton, 164 F.3d
671, 675 (D.C. Cir. 1999). Summary judgment may be grant-
ed even if the movant has proffered no evidence, so long as
the non-movant "fails to make a showing sufficient to estab-
lish the existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). As
the "party challenging governmental action as an unconstitu-
tional taking," District Intown bears a "substantial burden."
Eastern Enterprises v. Apfel, 524 U.S. 498, 523 (1998).

B. The Takings Analysis

The Takings Clause of the Fifth Amendment prohibits the
government from taking "private property ... for public use,
without just compensation." U.S. Const. amend. V. In a
regulatory takings case, the principal focus of inquiry is
whether a regulation "reaches a certain magnitude" in depriv-
ing an owner of the use of property. Pennsylvania Coal Co.
v. Mahon, 260 U.S. 393, 413 (1922); see also id. at 415 (asking
whether the regulation "goes too far"). The Supreme Court
has indicated that most regulatory takings cases should be
considered on an ad hoc basis, with three primary factors
weighing in the balance: the regulation's economic impact on
the claimant, the regulation's interference with the claimant's
reasonable investment-backed expectations, and the character
of the government action. See Penn Central Transp. Co., 438
U.S. at 124.

The meaning of the three factors identified in Penn Central
has been amplified by the Court, both in Penn Central and in
later cases. The regulation's economic effect upon the claim-
ant may be measured in several different ways. See Hodel v.
Irving, 481 U.S. 704, 714 (1987) (looking to the market value

of a property); Keystone Bituminous Coal Ass'n v. DeBened-
ictis, 480 U.S. 470, 495-96 (1987) (looking to whether the
regulation makes property owner's coal operation "commer-
cially impracticable"); Andrus v. Allard, 444 U.S. 51, 66
(1979) (looking to the possibility of other economic use be-
sides sale, which was prohibited by the challenged regula-
tion); Penn Central Transp. Co., 438 U.S. at 136 (focusing on
the ability to earn a reasonable rate of return). A reasonable
investment-backed expectation "must be more than a 'unilat-
eral expectation or an abstract need.' " Ruckelshaus v. Mon-
santo Co., 467 U.S. 986, 1005-06 (1984) (quoting Webb's
Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161
(1980)). Claimants cannot establish a takings claim "simply
by showing that they have been denied the ability to exploit a
property interest that they heretofore had believed was avail-
able for development." Penn Central Transp. Co., 438 U.S.
at 130. And the character of the governmental action de-
pends both on whether the government has legitimized a
physical occupation of the property, see Loretto v. Tele-
prompter Manhattan CATV Corp., 458 U.S. 419, 434-35
(1982), and whether the regulation has a legitimate public
purpose, see Keystone Bituminous Coal Ass'n, 480 U.S. at
485. Finally, under all three of these factors, the effect of the
regulation must be measured on the "parcel as a whole." See
Penn Central Transp. Co., 438 U.S. at 130-31.

The Supreme Court has indicated that it will find a "cate-
gorical" or per se taking in two circumstances. The first
circumstance includes regulations that result in "permanent
physical occupation of property." Loretto, 458 U.S. at 434-35.
This circumstance is not at issue in this case. The second
circumstance includes regulations pursuant to which the gov-
ernment denies all economically beneficial or productive use
of property. See Lucas, 505 U.S. at 1015. This so-called
"total taking" claim is at the heart of District Intown's
complaint here. Unfortunately, the facial simplicity of the
"total taking" standard belies the difficulty in its application.
As the Court acknowledged in Lucas, its "rhetorical force ...
is greater than its precision, since the rule does not make

clear the 'property interest' against which the loss of value is
to be measured." 505 U.S. at 1016 n.7.

Under both Lucas and Penn Central, then, we must first
define what constitutes the relevant parcel before we can
evaluate the regulation's effect on that parcel. In the instant
case the question is: Does the relevant parcel consist of the
property as a whole or do the eight lots for which construc-
tion permits were denied constitute the relevant parcels?
This has been referred to as the "denominator problem."
E.g., Loveladies Harbor, Inc. v. United States, 28 F.3d 1171,
1179 (Fed. Cir. 1994). State law may offer some guidance on
how to define the relevant parcel, but, as the Court has noted,
state law is not always determinative. Compare Lucas, 505
U.S. at 1017 n.7 (suggesting that one may look to the influ-
ence of the State's property law--whether and to what extent
the State has recognized and extended legal recognition to
the particular interest alleged to have been deprived of all
economic value--on the claimant's reasonable expectations),
with Keystone Bituminous Coal Ass'n, 480 U.S. at 500 (refus-
ing to treat the support estate as a separate parcel of
property simply because Pennsylvania law recognizes it as
such and noting that "our takings jurisprudence forecloses
reliance on such legalistic distinctions within a bundle of
property rights").

C. The Relevant Parcel

The definition of the relevant parcel profoundly influences
the outcome of a takings analysis. Above all, the parcel
should be functionally coherent. In other words, more should
unite the property than common ownership by the claimant.
Thus, a court must also consider how both the property-
owner and the government treat (and have treated) the
property.

The District Court used several factors to determine the
relevant parcel: the degree of contiguity, the dates of acquisi-
tion, the extent to which the parcel has been treated as a
single unit, and the extent to which the restricted lots benefit
the unregulated lot. See District Intown, 23 F. Supp. 2d at
35 (citing Ciampitti v. United States, 22 Cl. Ct. 310, 318

(1991)). An analysis focused on these factors is eminently
sound and it mirrors the approach taken by other courts in
regulatory takings cases. See Forest Properties, Inc. v.
United States, 177 F.3d 1360, 1365 (Fed. Cir.) (stressing the
owner's treatment of property as a unit from the time of
purchase), cert. denied sub nom. RCK Properties v. United
States, 120 S. Ct. 373 (1999); K & K Constr. Co. v. Depart-
ment of Natural Resources, 575 N.W.2d 531, 537 (Mich.)
(stressing contiguity, unity of ownership, and a common
development plan), cert. denied, 119 S. Ct. 60 (1998).

Applying these factors, the District Court correctly deter-
mined that all nine lots should be treated as one parcel for
the purpose of the court's takings analysis. The lots are
spatially and functionally contiguous. District Intown pur-
chased the property as a whole in 1961 and treated it as a
single indivisible property for more than 25 years. District
Intown presented no evidence that, even after subdivision, it
treated the lawn lots separately from Lot 106, the lot that
contains the apartment building, for the purposes of account-
ing or management. The intentional act of subdivision is the
only evidence produced by District Intown that it has treated
the lots as distinct units. In fact, before the Mayor's agent,
District Intown did not come forward with evidence showing
that it had, for accounting purposes, treated the lawn mainte-
nance fees separately from expenses associated with main-
taining the apartment building. See Decision & Order of
Mayor's Agent p 40, reprinted in J.A. 364. While there is a
dispute as to whether the adjacent landscaped lawn increases
the apartment building's value, this is immaterial. Even if
Lot 106 were deemed to have the same value with or without
Lots 107 through 114, the application of the other three
factors strongly suggests that Lots 106 through 114 are
functionally part of the same property.

Appellants argue that the District Court was wrong to
treat all the lots as a single parcel because it contradicts
Lucas and two Federal Circuit cases. This argument falls
flat. District Intown first argues that the Lucas Court
termed "extreme" and "unsupportable" a similar decision by
the state court in Penn Central to treat multiple holdings as a

single parcel for takings analysis. See Brief for Appellants at
15-16. This dictum, see Lucas, 505 U.S. at 1017 n.7, referred,
however, only to the state court's decision to treat all of Penn
Central's holdings in the vicinity of Grand Central Station as
part of the denominator for the purposes of deciding whether
plaintiffs could receive a reasonable return on their invest-
ment in Grand Central. See Penn Central Transp. Co. v.
New York, 366 N.E.2d 1271, 1278 (N.Y. 1977). The Penn
Central Court had no need to address this holding. The
Lucas dictum casts aspersions on the state court's elevation
of one factor, unity of ownership, over other factors in
determining the relevant parcel. The District Court engaged
in no such "extreme" conduct here; it did not look to all of
District Intown's holdings in the vicinity of Cathedral Man-
sions South to evaluate the economic effect of the regulation
at issue here; it looked to contiguous property that was
purchased and treated as a single unit by appellants.

Similarly, the two Federal Circuit cases cited by District
Intown do not undermine the District Court's definition of the
relevant parcel. See Brief for Appellants at 16 (citing Lovela-
dies Harbor, 28 F.3d at 1171 and Florida Rock Indus., Inc. v.
United States, 791 F.2d 893 (Fed. Cir. 1986)). Neither of
these cases support appellants' position and, in fact, Lovela-
dies Harbor supports the District Court's decision. In Flori-
da Rock Industries, the court reviewed the Army Corps of
Engineers' uncompensated rejection of the plaintiff's applica-
tion to mine limestone on 98 acres of the plaintiff's wetland
property. See Florida Rock Indus., 791 F.2d at 896. The
Federal Circuit affirmed the trial court's decision to consider
the 98 acres as the relevant parcel separate from the adjacent
1,462 acres of wetland. See id. at 904. The Federal Circuit's
justification for this decision, however, was that all the evi-
dence and the findings indicated that the Army Corps of
Engineers would have rejected mining on all of the property,
so there was no point to including all 1,560 acres in the
relevant parcel. See id. at 904-05. Thus, Florida Rock
Industries is not analogous to the instant case; there is no
indication that the District of Columbia will prevent District

Intown from continuing to use its property to obtain income
from its apartment building.

Loveladies Harbor lends support to the District Court's
decision to treat Lots 106-114 as one parcel. The plaintiff in
Loveladies Harbor sought to develop a total of 12.5 acres of
land, consisting of 11.5 acres of wetlands and one acre of filled
upland. See Loveladies Harbor, 28 F.3d at 1180. The Army
Corps of Engineers refused to grant the permit required to
fill the wetlands acreage. See id. at 1174. In reviewing
whether this denial constituted a taking the Federal Circuit
found that the trial court correctly concluded that the rele-
vant parcel was the entire 12.5 acres, not just the 11.5 acres
to which the permit denial applied. See id. at 1181. Thus,
Loveladies Harbor argues against treating the property bur-
dened by the regulation separately from contiguous property.

Moreover, the Loveladies Harbor Court emphasized that a
"flexible approach, designed to account for factual nuances,"
guides its analysis of the denominator problem. Id. These
factual nuances include "whether there remained substantial
economically viable uses for plaintiff's property after the
regulatory imposition," id. (citing Deltona Corp. v. United
States, 657 F.2d 1184 (Ct. Cl. 1981)), and "the timing of
transfers in light of the developing regulatory environment."
Id. Both of these factors support our conclusion in the
instant case that Cathedral Mansions South as a whole consti-
tutes the relevant parcel.

Finally, Penn Central is instructive where, as here, appel-
lants own a single piece of property that is divisible into
several legally recognized entities. Indeed, the Court was
rather blunt in saying that

"[t]aking" jurisprudence does not divide a single parcel
into discrete segments and attempt to determine whether
rights in a particular segment have been entirely abro-
gated.

Penn Central Transp. Co., 438 U.S. at 130. The Court also
made it clear that a party may not "establish a 'taking' simply
by showing that they have been denied the ability to exploit a

property interest they heretofore had believed was available
for development." Id. The Court found this suggestion to be
"simply untenable." Id.

On the basis of the foregoing authority, it seems clear here
that we must analyze District Intown's property not as sepa-
rate, potentially divisible and transferable parcels, but as one
contiguous parcel. Appellants note that the District of Co-
lumbia has taxed Lots 107 through 114 at a higher rate since
subdivision, reflecting the District of Columbia's assessment
that these lots are vacant developable land. They contend
that it is inconsistent for the District of Columbia to speak
from both sides of its mouth in this regard, claiming for tax
purposes that the lots are developable, but refusing to permit
development on the lots. We simply note that appellants
retain the right to recombine the parcels and treat them as
one property for the purposes of taxation, so no further
disadvantage will befall them on this score.

We are perplexed by our concurring colleague's criticism of
our approach to evaluating a takings claim. As the concur-
ring opinion correctly notes, at bottom, the approach that we
follow and the result that we reach are in accord with
Supreme Court case law. Unless and until the Court in-
structs otherwise, we are obliged to judge within the bounds
of established precedent.

D. Analysis Under Lucas

Given that Lots 106 through 114 should be treated as a
single parcel, the District Court's denial of summary judg-
ment on District Intown's Lucas claim is unremarkable. To
come within Lucas, a claimant must show that its property is
rendered "valueless" by a regulation. Lucas, 505 U.S. at
1009. District Intown presented no evidence to show that the
regulation deprived the property as a whole of all economical-
ly beneficial use.

Even were we to view Lot 106 as distinct from Lots 107
through 114, it seems plain that the District Court should
have granted appellees' motion for summary judgment.
Drawing all inferences in favor of District Intown, the record

does not support the conclusion that Lots 107 through 114 are
rendered "valueless" by the regulation at issue. The record
contains a finding by the Mayor's agent that any construction
that destroyed the lawn would be incompatible with the
lawn's status as a historic landmark. See Decision & Order
of Mayor's Agent p 61 n.1, reprinted in J.A. 368. District
Intown argues from this that its case fell on all fours within
Lucas. District Intown seeks to extend Lucas beyond its
reach. The Lucas Court consciously recognized that it was
drawing an arbitrary line between total destruction of eco-
nomic value and something marginally less than total destruc-
tion. See 505 U.S. at 1019 n.8 (pointing out that while the
line establishing a categorical deprivation as requiring a
complete diminution in value is arbitrary as it relates to
someone who only suffers a 95% deprivation in value, the
person whose deprivation is "one step short of complete" may
still seek compensation under the Penn Central balancing
test). District Intown propounded no evidence that the
lawns' economic value was totally destroyed as is required by
Lucas, nor did District Intown offer evidence of the plots' fair
market value after its construction permits were denied. Cf.
Florida Rock Indus., 791 F.2d at 905 (reversing the trial
court's finding that denial of permit constituted an uncompen-
sated taking because the court failed to consider the proper-
ty's fair market value after regulation).

The concurring opinion misconstrues the opinion for the
court when it suggests that, pursuant to our analysis, no
compensable taking could ever be found. As noted in the
foregoing discussion, we simply intend to highlight the limited
nature of the Lucas inquiry, and note that there would be no
"categorical" taking even were we to view the parcels as
separate under Lucas. We do not pass on how the parcels
would fare separately under Penn Central's ad hoc analysis.

E. Analysis under Penn Central

There are three main factors to be considered in Penn
Central's ad hoc inquiry: the character of the government
action, the regulation's economic effect on the claimant, and
the effect on investment-backed expectations. District In-

town does not appear to argue that the character of the
governmental action counsels finding a taking; this is not a
permanent invasion, but rather a general regulation with a
legitimate public purpose. As to the economic effects, Dis-
trict Intown offered no evidence that this regulation rendered
Lots 106-114 unprofitable to maintain; there is nothing in the
record to suggest that the apartment building does not bring
in a sufficient return for District Intown, and a claimant must
put forth striking evidence of economic effects to prevail even
under the ad hoc inquiry. See Penn Central Transp. Co., 438
U.S. at 131 (reviewing the Court's decisions upholding regula-
tions despite diminution in a property's value of more than
75%).

Finally, District Intown did not present sufficient evidence
that it had a reasonable investment-backed expectation to
develop the lawns into apartment buildings. Here, as in
Penn Central, the regulation does not interfere with District
Intown's "primary expectation" concerning the use of the
parcel, because it "not only permits but contemplates that
appellants may continue to use the property precisely as it
has been used" for the past 28 years. Penn Central Transp.
Co., 438 U.S. at 136.

District Intown suggested at oral argument that it has
satisfied the requirement of demonstrating reasonable invest-
ment-backed expectations because it purchased property that,
at the time of purchase, was subdividable. This is not
sufficient to establish the existence of reasonable investment-
backed expectations. In this case, where the development
District Intown proposes departs from the property's tradi-
tional use, and the moment of purchase is so attenuated from
the moment of subdivision, the claimant surely must point to
some action beyond mere purchase to establish the reason-
ableness of its expectations.

Appellants also argue that their expectations of the proper-
ty's use between the moment of purchase and the moment of
subdivision could have reasonably changed. This may be, but
when appellants subdivided they surely knew that the legal
regime had changed since they first bought their property.

Moreover, they knew that any subdivided parcel would be
subject to that regime. Lucas teaches that a buyer's reason-
able expectations must be put in the context of the underlying
regulatory regime. See 505 U.S. at 1030 (stating that the
Takings Clause does not require compensation when the
restriction is proscribed by background state law rules or
understandings). District Intown purchased and subdivided
its property subject to an existing regulatory regime that
establishes that District Intown could have had no reasonable
expectations of development at the time it made its invest-
ments.

At the time of purchase, District Intown could have reason-
ably expected the Shipstead-Luce Act to affect its rights of
development. For approximately 60 years, the Shipstead-
Luce Act has restricted development on properties that, like
Cathedral Mansions South, abut or border upon the National
Zoo. See D.C. Code Ann. s 5-410. Were that not sufficient,
after 1979, D.C.'s historic landmark laws additionally limited
expectations of development. See id. s 5-1001 et seq. Thus,
at the time District Intown subdivided the property, it knew,
or should have known, that the property was potentially
subject to regulation under the landmark laws. Cf. Amicus
Curiae Brief at 15 (pointing out that almost the entire length
of Connecticut Avenue from M Street to almost a mile north
of District Intown's property is either landmarked or within a
historic district). Businesses that operate in an industry with
a history of regulation have no reasonable expectation that
regulation will not be strengthened to achieve established
legislative ends. See Concrete Pipe & Prods. v. Construction
Laborers Pension Trust, 508 U.S. 602, 645 (1993). In this
case, District Intown was in the real estate business, with a
history of restriction of development for the purpose of
preserving historic sites. Similarly, the Supreme Court re-
jected a company's claim of reasonable expectations that the
Environmental Protection Agency would maintain trade se-
cret confidentiality where the industry had long "been the
focus of great public concern and significant government
regulation" and the "possibility was substantial that the Fed-
eral Government ... would find disclosure [of trade secrets]

to be in the public interest." Monsanto Co., 467 U.S. at
1008-09. Prior to and after subdivision, this particular prop-
erty was the subject of increasing public activity devoted to
restricting development through landmark designation. See
Good v. United States, 189 F.3d 1355, 1361-63 (Fed. Cir.
1999) (finding the claimant had no reasonable expectations
where he purchased the land subject to environmental regula-
tion and watched as public concern for the environment
increased and the applicable regulations became more strin-
gent before seeking approval for development).

District Intown also argues that the District Court's finding
that the regulation did not have a significant economic impact
was erroneous. District Intown bases this argument on the
assertion that they presented undisputed evidence that the
lawns, absent development, add nothing to the value of the
apartment building. See Brief for Appellants at 24-25. This
argument misunderstands the substantial burden District In-
town faced in District Court. District Intown had to produce
evidence showing that its entire property, including Lot 106,
no longer provided a reasonable rate of return given the D.C.
regulation. Whether the lawns add value to the apartment
building is irrelevant to whether the property as a whole can
be operated at a sufficient profit even with the regulation. In
short, none of the Penn Central factors support District
Intown's claim of a compensable deprivation of property.

III. Conclusion

For the reasons stated above, we affirm the District
Court's grant of summary judgment in favor of the District of
Columbia.

So ordered.

 Williams, Circuit Judge, concurring in the judgment: The
District of Columbia's Historic Preservation Board imposed
historic landmark status not only on an apartment building
named Cathedral Mansions South but also on a substantial
stretch of adjacent lawn bordering the sidewalks of Connecti-
cut Avenue. District Intown, the owner of both, claims that
as applied to the lawn the landmarking effects a taking of its
property in violation of the Takings Clause of the Fifth
Amendment. The majority's disposition is--with one impor-
tant exception--in general accord with the current opinions of
the Supreme Court. Those decisions are of course binding.
At the same time, however, it is not inappropriate to identify
ways in which the prevailing analysis elevates formal concepts
over economic reality and tends to strip the Clause of its
potential for fulfilling the framers' likely purposes.

The economist's justification for the Takings Clause is that
it provides a check on government's likely tendency to waste
resources by treating private property as a free good. See
Richard A. Posner, Economic Analysis of Law 58 (4th ed.
1992) ("The simplest economic explanation for the require-
ment of just compensation is that it prevents the government
from overusing the taking power."). This is just an applica-
tion of the general principle that if a firm can externalize
costs (e.g., the health costs of polluting the air), it will use
more of the unpriced resource (in this example, air as a waste
sink) than it would if required to pay. And it will tend to
overproduce the goods or services whose production uses the
superficially "free" good--i.e., it will produce them at a level
where the true value of the extra inputs exceeds the true
value of the extra output. See generally Robert Cooter &
Thomas Ulen, Law and Economics 45-46 (1988). As applied
to government regulation, similar oversupply can be expect-
ed--here, production of regulations that impose more costs
than they afford benefits, that do more harm than good.

The framers, though not articulating the purpose of the
Clause in economic terms, evidently did view it as aimed at
correcting the incentives of the political branches. There is
evidence, for example, that James Madison saw electoral
power slipping into the hands of a non-landholding majority,
which in a "leveling" mode could be expected to invade

landowners' rights. See William Michael Treanor, The Origi-
nal Understanding of the Takings Clause and the Political
Process, 95 Colum. L. Rev. 782, 849 (1995). Late twentieth
century America, of course, displays a far greater range of
purposes than "leveling" for reallocation of rights. While the
resulting proposals are naturally advanced in the name of the
public good, many are surely driven by interest-group pur-
poses, commonly known as "rent-seeking." Among these
proposals, at least some inflict aggregate costs considerably
outweighing their aggregate benefits, paralleling the wasteful
production associated with private firms' externalization of
costs. The Takings Clause serves to curb such inefficiencies.
See, e.g., Richard A. Epstein, Takings: Private Property and
the Power of Eminent Domain 281 (1985) ("[T]he Takings
Clause is designed to control rent seeking and political fac-
tion. It is those practices, and only those practices, that it
reaches.").

A Takings Clause construction that was dedicated without
qualification to preventing such government externalization
would require compensation whenever regulation reduced the
value of anyone's property, however slightly. Balanced
against that goal is an array of considerations. Most obvious
is the cost of calculating and administering compensation,
which would tend to sink many a beneficent statute. "Gov-
ernment hardly could go on if to some extent values incident
to property could not be diminished without paying for every
such change in the general law." Lucas v. South Carolina
Coastal Council, 505 U.S. 1003, 1018 (1992) (quoting Pennsyl-
vania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922)). (The
compensation cost itself would be only a weak countervailing
factor, for most beneficent regulation would presumably gen-
erate gains large enough to pay the losers if identification and
calculation were costless.) My goal here is not to pinpoint
the appropriate balance between these competing consider-
ations, much less to suggest that the correct reading is one
under which all regulation materially adversely affecting a
property's value would be compensable. Rather, it is simply
to note the ways in which modern interpretation of the

Takings Clause, as exemplified in today's decision, impairs its
role as a disincentive to wasteful government activities.

* * *

The majority applies an apparent presumption that contig-
uous parcels under common ownership should be treated as
one parcel for purposes of the takings analysis. This pre-
sumption tends to reduce the likelihood that courts will order
compensation. The larger the parcel, the greater the chance
that the regulated land will retain an economically viable use.
Where no such use remains, there is a "total taking" and the
government can "resist compensation only if the logically
antecedent inquiry into the nature of the owner's estate
shows that the proscribed use interests were not part of his
title to begin with," Lucas, 505 U.S. at 1027; where an
economically viable use survives regulation, the best the
owner can hope for is "partial" takings analysis. Under the
latter courts will determine whether to award compensation
by looking to "the economic impact of the regulation, its
interference with reasonable investment backed expectations,
and the character of the governmental action," Kaiser Aetna
v. United States, 444 U.S. 164, 175 (1979); see also Eastern
Enters. v. Apfel, 118 S. Ct. 2131, 2146 (1998); Lucas, 505 U.S.
at 1019 n.8, and will generally deny compensation so long as
the restriction "substantially advance[s] legitimate state inter-
ests," Agins v. City of Tiburon, 447 U.S. 255, 260 (1980); see
also Dolan v. City of Tigard, 512 U.S. 374, 385 (1994). Few
regulations will flunk this nearly vacuous test. In fact, the
Supreme Court has only once found a partial taking to be
compensable, and even then only a plurality applied the
partial takings analysis. See Eastern Enters., 118 S. Ct. at
2149; see also id. at 2154-60 (Kennedy, J.) (rejecting the
plurality's takings analysis and finding invalidity on other
grounds).

The Supreme Court has offered several justifications for
this distinction between partial and total takings. See, e.g.,
Lucas, 505 U.S. at 1017-18 (suggesting that "from the landowner's
perspective," a total taking is tantamount to a physical taking,

and that from the government's perspective the concern that
an obligation to compensate for any incidental value diminu-
tion would impede effective functioning cannot apply in the
"relatively rare situations" of total takings). From the per-
spective of ensuring that the government not engage in
wasteful behavior, however, the focus on the uses of the land
that remain is misplaced: "[W]hat is decisive is that which is
taken, not that which is retained." Epstein, Takings, supra,
at 58. Whether the landowner is left with a limited use of the
land or none at all is hardly relevant to that issue. And as
the regulating government delineates the scope of regulation,
the opportunity for strategic behavior is obvious.

The majority's cursory application of the Penn Central
factors further broadens the gap between the two modes of
analysis, reinforcing the seemingly predetermined conclusion:
in partial takings cases, the government wins. The majority
states that District Intown has not shown the land "unprofit-
able to maintain," Maj. Op. at 14; it is unimaginable, howev-
er, absent an extraordinary tax liability, that a parcel could
retain an economically viable use yet have a net negative
value. The majority goes on to say that District Intown has
failed to show that the land does not "bring in a sufficient
return," id., but does not answer the all-important question:
a return on what? on out-of-pocket costs? on initial pur-
chase price? on fair market value? Moreover, the majority
provides no guidance as to how "sufficient" the return must
be, except to cite Penn Central, in which the Court found that
a 75% diminution in value did not constitute a compensable
taking. See id.

Similarly, in its consideration of District Intown's "reason-
able investment-backed expectations," the majority's analysis
begs the question whether any landowner, in a world where
zoning regulations are prevalent, could ever argue that a
particular regulation was "unexpected." The presumption is
insurmountable: "Businesses that operate in an industry with
a history of regulation have no reasonable expectation that
regulation will not be strengthened to achieve established
legislative needs." Maj. Op. at 15. Although the 1931
Shipstead-Luce Act might have put District Intown on notice

that some regulation of architectural design might be expect-
ed, it is farfetched to conclude that District Intown, merely
because of its proximity to the zoo, should reasonably have
anticipated an absolute ban on construction; the city's coun-
sel, under questioning at oral argument, failed to identify any
uses, or even attempted uses, of the Shipstead-Luce Act to
support a complete construction veto. Although the Takings
Clause is meant to curb inefficient takings, such a notion of
"reasonable investment-backed expectations" strips it of any
constraining sense: except for a regulation of almost unimag-
inable abruptness, all regulation will build on prior regulation
and hence be said to defeat any expectations. Thus regula-
tion begets regulation.

Although the presumption in favor of looking at the parcel
as a whole, and in turn the increased reliance on the partial
takings mode of analysis, is at odds with the underlying
principle of the Takings Clause, it is perhaps the best con-
struction of the Supreme Court's limited guidance. The
Court has never squarely addressed the question of how
courts should define the relevant geographic parcel of land,
also known as "horizontal severance." Marc R. Lisker, Regu-
latory Takings and the Denominator Problem, 27 Rutgers
L.J. 663, 705 (1996). In Nectow v. City of Cambridge, 277
U.S. 183 (1928), the Court considered whether the city council
had effectuated a taking of plaintiff's land by zoning as
"residential" a 100-foot strip on plaintiff's 140,000 square foot
parcel. Although the Court appeared to treat the relevant
parcel as encompassing only the fractional strip, this was in
no respect relevant to the Court's decision. In Penn Central
Transportation Co. v. New York City, 438 U.S. 104 (1978), the
Court applied a very weak form of horizontal severance,
focusing exclusively on the landmarked building itself without
treating the owner's neighboring--but not adjacent--proper-
ty as part of the greater parcel, as had the New York Court
of Appeals. See Penn Central Transportation Co. v. New
York City, 366 N.E.2d 1271, 1276-77 (N.Y. 1977). But Penn
Central tells little, as the properties were not all contiguous,
had been put to different uses, and had never been treated as
a unified whole by the owners or the City.

 Penn Central's handling of "vertical severance," however, is
informative, if only by analogy. Using language seemingly
broad enough to encompass horizontal severance, the Court
made clear that it would not consider the air rights above
Grand Central separately from the land rights: " 'Taking'
jurisprudence does not divide a single parcel into discrete
segments and attempt to determine whether rights in a
particular segment have been entirely abrogated." Penn
Central, 438 U.S. at 130; see also Keystone Bituminous Coal
Ass'n v. DeBenedictis, 480 U.S. 470, 496-502 (1987) (refusing
to regard either coal that statute required miners to leave in
place (about 2% of total coal), or the "support estate," as
distinct property for ascertaining whether statute denied
owners all economically viable uses).

The Court has expressed similar reluctance to engage in
"conceptual severance" more generally (i.e., the treatment of
any specific property right as a single unit). In Andrus v.
Allard, 444 U.S. 51 (1979), the Court refused to treat extinc-
tion of the right to sell any part of a lawfully killed bald eagle
as a total taking. See id. at 65-66 ("At least where an owner
possesses a full 'bundle' of property rights, the destruction of
one 'strand' of the bundle is not a taking, because the
aggregate must be viewed in its entirety."). The Court
arguably evidenced a retreat from this strong position in
Hodel v. Irving, 481 U.S. 704, 717-18 (1987), in which it found
a taking in legislation that "completely abolished" certain
landowners' rights to dispose of their property by descent or
devise, even though they retained complete rights to possess
and to make inter vivos transfers. The Court has not,
however, reached agreement on the scope of this retreat.
Compare id. at 719 (Scalia, J., concurring) (saying the deci-
sion "effectively limits Allard to its facts"), with id. at 718
(Brennan, J., concurring) (saying that the case was "unusual"
and thus had no impact on Allard). Overall, I think the
majority is correct in its implicit understanding that the
Supreme Court is reluctant to carve a landowner's parcel into
smaller units for which compensation might be more likely.

But the factors that the majority applies in making the
decision, drawn from decisions of the Federal Circuit and

Claims Court and characterized by the majority as "eminent-
ly sound," Maj. Op. at 9, strike me as uninformative and
largely irrelevant. The factors considered are: (1) whether
the neighboring parcels are contiguous, (2) whether they were
acquired simultaneously, (3) whether they have been treated
as a single unit, and (4) the extent to which the restricted lot
benefits the neighboring lot. Maj. Op. at 8-9.

The first factor, contiguity, is clearly necessary but in no
way sufficient. The next two factors--simultaneity of acquisi-
tion and unity of use--are more troublesome. Both elevate
history--either the historical purchase or the historical use--
over the real-world present relationship between the tracts.
Compare Laura M. Schleich, Takings: The Fifth Amend-
ment, Government Regulation, and the Problem of the Rele-
vant Parcel, 8 J. Land Use & Envtl. L. 381 (1993) (proposing
that courts look to the "moment of regulation" when defining
the relevant parcel). The majority's focus on the property's
use prior to regulation tells us nothing about the value-
producing opportunities foreclosed at the time of regulation.
"It is, of course, irrelevant that [the government] interfered
with or destroyed property rights that [plaintiff] had not yet
physically used. The Fifth Amendment must be applied with
'reference to the uses for which the property is suitable,
having regard to the existing business or wants of the com-
munity, or such as may be reasonably expected in the imme-
diate future.' " Penn Central, 438 U.S. at 143 n.6 (Rehn-
quist, J., dissenting, quoting Boom v. Patterson, 98 U.S. 403,
408 (1879)).

The majority mentions but brushes aside a fourth factor--
the extent to which the regulated parcel benefits the neigh-
boring lot. Maj. Op. at 9. Yet this appears the most
relevant. The more a burdened tract in its regulated use
benefits contiguous property, the less likely that the regula-
tion has a net negative impact. In the extreme case a
property interest may be worthless except in conjunction with
another. Thus in Keystone Bituminous Coal Ass'n, the
Court pointed out that the "support estate" had "value only
insofar as it protects or enhances the value of the estate with
which it is associated [i.e, the mineral estate]," 480 U.S. at

501, and therefore refused to treat the "support estate" as a
separate interest at all. Similarly, small parcels of land,
either in the interior or around the edges of greater parcels,
commonly are valuable only when they combine with the
greater parcel to create a more valuable whole; for regulation
of the exterior (such as setback requirements), then, it makes
sense to measure the impact in conjunction with the "pri-
mary" parcel. Looking to the property owner's benefit from
these internal synergies parallels use of "average reciprocity
of advantage," Pennsylvania Coal Co. v. Mahon, 260 U.S.
393, 415 (1922), which considers the benefit that each bur-
dened owner--as in ordinary zoning or historic districting--
receives from the similar restriction of his neighbors.

Of course there will be some synergy between almost any
two neighboring parcels under common ownership, since uni-
fied ownership creates options for the sole owner that multi-
ple landowners could achieve only by contracting. But syner-
gy is a matter of degree, and mere contiguity should not be
enough. One commentator proposes a rather demanding
synergy test, arguing that the regulated tract should be
considered as its own parcel so long as not all of its value
derives from synergies with neighboring land; in such cases,
the parcel would have an independent economically viable
use, which if destroyed by regulation would be compensable
under Lucas. See John E. Fee, Comment, Unearthing the
Denominator in Regulatory Taking Claims, 61 U. Chi. L.
Rev. 1535, 1557-58 (1994). One need not go so far to see the
skimpiness of the synergy here.

To be sure, Cathedral Mansions is more than several
contiguous parcels. According to the decision of the Historic
Preservation Review Board, "The buildings are sited imagina-
tively to provide the greatest possible integration of living
space with well-landscaped open space." Joint Appendix
("J.A.") 320. (Passersby who observe the rather bare lawn
will have to reach their own judgments on the adjective "well-
landscaped.") Integration there doubtless is--almost any
lawn around a building will manifest a degree of integration.
But there is no explicit showing that these synergies depend
on the entire lawn remaining undeveloped. The proposed

townhouses would cover only the portion of the lawn abutting
Connecticut Avenue, still leaving the interior portion, approxi-
mately half the lawn, undeveloped. Common sense would
suggest that at some distance from the building marginal
synergies created by extra lawn space become slight, and
thus that the part of the lawn beyond that line should be
treated as its own parcel for takings purposes. Further,
although District rent-control law evidently allows the owner
to earn a return on the tax-assessed value of land in a single
tract with a rent-controlled building (here the owner could
apparently recover that status by undoing the formalities of
subdivision), that value is likely to be only a tiny fraction of
the value absent the historic landmarking.

In fact, it may well be completely different synergies--ones
between the lawn and adjacent Connecticut Avenue--that
have driven the landmarking decision. The Board observed
that the lawn "contributes significantly to the unique open
space character of Connecticut Avenue." J.A. 320. A cynic
might suspect that the alleged relationship between the lawn
and the Cathedral Mansions apartments is little more than a
cloak by which the citizens of Upper Northwest Washington
have secured some parkland on the cheap. Parks are good,
but the Fifth Amendment says that taking them is not.

Of course, there is another synergy between the two par-
cels and adjacent Connecticut Avenue, namely the historical
value that inheres in the preservation of a building as it was
initially constructed (i.e., with an expansive lawn beside it).
Uncompensated landmark preservation seems to rest on this
synergy. The Court in Penn Central embraced the view that
"the preservation of landmarks benefits all New York citizens
and all structures, both economically and by improving the
quality of life in the city as a whole." 438 U.S. at 134. This
broad language seems to redefine "reciprocity of advantage"
in such a way that no government act could ever require
compensation, as the afflicted owner would be a member of
the taking polity and thus in receipt of offsetting advantages,
artificially presumed to be adequate.

 Apart from obliterating takings law, such a view has pecu-
liarly perverse effects in the realm of historic preservation.
Although such laws try to preserve for society the positive
externalities created by buildings like Cathedral Mansions,
inflicting the entire cost on the creator of the landmark (or
his successor in interest) is bound to discourage investment in
first-class design. Moreover, while insurance markets can
achieve the risk-spreading (or anti-"demoralization") goals
that some attribute to the Takings Clause, compare Posner,
Economic Analysis of Law, supra, at 58, they cannot offset
non-compensation's disincentive to good design. Historic
landmark preservation, after all, is imposed selectively on
those who went out of their way to secure architectural
distinction. The higher the quality, the higher the premium
for takings insurance; the disincentive is inescapable.

Having found that the lawn and apartment parcels should
be treated as a unit, the majority nevertheless considers
whether compensation would be due even if the lawn were
analyzed separately; in doing so, it gratuitously takes an even
harsher stance against compensation than does present law.
The majority finds that District Intown has failed to offer
evidence that the regulation denies it "economically viable use
of [the] land," Lucas, 505 U.S. at 1016, even though the
Mayor's own agent found that "any construction that de-
stroyed the lawn would be incompatible with the lawn's status
as an historic landmark." Maj. Op. at 13. Thus, so long as
the lawn is untouched, "economically viable" uses are permis-
sible. It is hard to imagine what "economically viable" use
that constraint leaves, unless the majority means that the
very barest thread of value, yielded by some thoroughly
bucolic use, is enough to defeat a total takings claim. By this
standard, no regulation can ever effect a total taking, and at
best will be tested only under the far weaker partial takings
rubric.

* * *

The prevailing Federal Circuit-Claims Court method of
defining the relevant parcel, followed by the panel here,

focuses on marginal issues and largely overlooks the more
critical concern of synergies; the focus on the landowner's
historical, rather than proposed, use further skews the analy-
sis. But the Supreme Court's general approach seems to
militate in favor of looking to the parcel as a whole. Similar-
ly, although resting uncompensated landmark preservation on
the idea of reciprocal advantage stretches the concept into
meaninglessness, and the denial of compensation discourages
ex ante what it hopes to foster ex post, the current cases give
these arguments little purchase. Accordingly, I concur in the
majority's decision to affirm.