Europe beats Canada on private property rights

Many people often look to Europe as an example of what Aristotle called the good life—think of their pleasant cities and obvious regard for art and history. But here’s something else Canadians can learn from Europe: how many governments there are much better at balancing the rights of private property owners with regulations that restrict property and lessen its value.

Some background: when a government (anywhere) uses regulation to partly or wholly freeze property—by requiring a setback or declaring a plot of land ecologically sensitive—some label it a “regulatory taking.” Others call it a “de facto expropriation.” Literally, a government takes or controls your property through regulation (laws and bylaws) but technically, you still own it.

Of course, the effect of such regulation in extreme cases is little different from actual expropriation: you can’t use your property or profit from it. Except that when governments actually expropriate private property, well-established common law principles, sympathetic legislation, and Canada’s courts all combine to usually give property owners at least some compensation in exchange.

But it’s a far different scenario when regulation is in play. When a Canadian government or bureaucracy decides your property must serve some public purpose, and then uses a law or regulation to wholly or partly freeze your property, you’re lucky to get a single dime in compensation.

For example, in Vancouver in 2000, the City told the Canadian Pacific Railway that a 22- kilometre long stretch of CPR land was henceforth to be a public thoroughfare for bikes and pedestrians. The city was clear that no compensation would ever be paid. Neither would the City expropriate it (which would have triggered compensation statutes). Six years later, the Supreme Court of Canada endorsed what was effectively a land grab without compensation.

Here’s another example. In 2005, the Ontario government created a greenbelt around Greater Toronto, freezing 1.8 million acres of land from development, only permitting prior usage to continue. The provincial government made clear that no compensation would be offered for the severe restrictions on use, or the decline in value for individual parcels of private property.

In any country with tens of millions of people, some regulation is a reality. But Sweden, Finland, Germany, Holland and others treat private property owners much more fairly, providing compensation for the effect of regulation on property values.

European governments are keenly aware of the need to plan with the rights of property owners in mind. In Germany, rights of property ownership are guaranteed in the Basic Law (Germanys’ constitution), meaning that financial damages caused by lawful planning decisions will guarantee compensation for the property owner.

Germany’s leading scholar on the subject, Gerd Schmidt-Eisenstaedt, writes that compensation is forthcoming in such cases because In German legal doctrine, it is irrelevant whether liability for damages is caused by an expropriation decision …or by a regulation that restricts property rights. In the end, they are always a form of property restriction…

When new government regulations in Finland prevented owners of a forest from cutting down trees for their forestry business, the forest’s owners were fully compensated for the four per cent decline in the value of their property. Similarly, in the Netherlands, compensation is also owed to the property owner due to restricted use.

And here’s a unique twist: in Sweden and Germany, if government regulations freeze your private property for too long, you can legally demand the government buy it—this as opposed to watching government just regulate your property into disuse. A government’s go-slow approach to ending a regulatory freeze on private property triggers a right to expropriation, and to again quote Schmidt-Eisenstaedt on Germany, the municipality cannot avoid paying compensation.

Does the European approach to private property regulation work? Yes, as Israeli academic Rachelle Alterman writes in her 13-country survey (which includes Canada as an example to avoid), the German planning law provides clear answers to almost every conceivable situation where an injury to property values may arise. As Alterman notes, the balance struck is widely accepted.

Some level of regulation is inevitable and there is nothing wrong or undesirable in wanting pedestrian and bike paths, or in protecting fragile environments. The glaring problem is in how Canadian governments can freeze and devalue private property through regulation—and rarely provide compensation to the property owner. We could learn a lot from Europe.