--- title: "Penn Central Transportation Co. v. New York City" type: Landmark Case source: https://casebriefly.com/landmark-cases/penn-central-v-new-york-city --- # Penn Central Transportation Co. v. New York City Penn Central established the multi-factor balancing test that remains the primary framework for analyzing regulatory takings claims under the Fifth Amendment. The three Penn Central factors — economic impact on the claimant, interference with investment-backed expectations, and the character of the government action — continue to be the default test for determining when a government regulation 'goes too far' and constitutes a taking requiring just compensation. ## Citation 438 U.S. 104 (1978) ## Year 1978 ## Court Supreme Court of the United States ## Facts New York City's Landmarks Preservation Law designated Grand Central Terminal as a historic landmark. Penn Central Transportation Co. entered into a lucrative agreement to build a 55-story office tower above the terminal. The Landmarks Preservation Commission denied Penn Central's application to construct the tower, finding the proposed addition would destroy the aesthetic quality of the terminal. The city's law provided transferable development rights (TDRs) that could be used on nearby parcels Penn Central owned. ## Procedural History The New York trial court granted Penn Central injunctive relief. The Appellate Division reversed. The New York Court of Appeals affirmed the Appellate Division. The U.S. Supreme Court affirmed, holding there was no taking. ## Issue Whether New York City's application of its Landmarks Preservation Law to prevent construction of an office building above Grand Central Terminal constituted a 'taking' of Penn Central's property requiring just compensation under the Fifth and Fourteenth Amendments. ## Holding The Supreme Court held 6-3 that the landmarks law did not effect a taking. The Court established a multi-factor balancing test for regulatory takings that considers the economic impact on the claimant, the extent to which the regulation interferes with distinct investment-backed expectations, and the character of the government action. Applying these factors, the Court found that Penn Central could still earn a reasonable return on the terminal and that the TDRs provided additional compensation. ## Reasoning Justice Brennan's majority opinion acknowledged that there was no set formula for determining when regulation becomes a taking and that the inquiry is essentially ad hoc and factual. The Court rejected Penn Central's argument that the airspace above the terminal should be treated as a separate property interest, holding instead that takings analysis must consider the parcel as a whole. Brennan emphasized that the landmarks law substantially related to the promotion of the general welfare, similar to zoning, and that Penn Central had not been denied all beneficial use of the property. The availability of TDRs, while not full compensation, mitigated the economic impact. The Court distinguished this case from physical invasions, which are more readily found to be takings. ## Dissent Justice Rehnquist dissented, joined by Chief Justice Burger and Justice Stevens, arguing that the landmarks law imposed a disproportionate burden on Penn Central by singling out the terminal for special restrictions that benefited the public. Rehnquist contended that the cost of preserving a landmark should be spread across the community through eminent domain and compensation rather than borne by individual property owners. He argued the TDRs were an inadequate substitute for just compensation. ## Impact The Penn Central balancing test has become the default framework for regulatory takings analysis, applied in thousands of federal and state court decisions. The case's ad hoc, multi-factor approach has been both praised for its flexibility and criticized for its unpredictability. The concept of TDRs received judicial recognition as a potential mitigation tool, influencing land use planning nationwide. ## Key Quotes - The question of what constitutes a 'taking' for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty... this Court, quite simply, has been unable to develop any 'set formula' for determining when 'justice and fairness' require that economic injuries caused by public action be compensated. - In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole. - '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. ## Related Cases - lucas-v-south-carolina-coastal-council - kelo-v-city-of-new-london - village-of-euclid-v-ambler-realty - shelley-v-kraemer ## Exam Relevance Penn Central is one of the most frequently tested cases in Property law. Exam questions typically present a regulatory scheme and ask students to apply the three-factor balancing test. Students must be prepared to analyze economic impact, investment-backed expectations, and the character of the government action in a variety of factual settings, and to distinguish Penn Central from the categorical taking rule of Lucas. ## Study Tips - Memorize the three Penn Central factors: (1) economic impact, (2) interference with investment-backed expectations, (3) character of the government action. - Understand the 'parcel as a whole' concept and why the Court rejected segmenting the airspace from the terminal below. - Be prepared to contrast the ad hoc Penn Central balancing test with the categorical approach in Lucas. - Know the role of transferable development rights (TDRs) as a potential mitigation factor in takings analysis. ## Doctrine Established Penn Central Regulatory Takings Balancing Test --- Source: [Penn Central Transportation Co. v. New York City — CaseBriefly](https://casebriefly.com/landmark-cases/penn-central-v-new-york-city)