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Local governments may act to protect sites with historical, cultural, or other significance by designating those places landmarks. In so doing, governments are able to preserve those properties for future generations, but landmark designations restrict the rights of property owners. Owners cannot change landmarks without prior government approval, but they must bear the cost of maintaining the properties up to government standards.
The case of Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), exemplifies this tension.
The owner of Grand Central Terminal, a French Beaux Arts structure in midtown Manhattan, wanted to build a 50-story high rise above the terminal. The New York City Landmarks Preservation Commission rejected the plans, and the owner (Penn Central Transportation Company) stood to lose substantial revenue.
Penn Central sued in state court, and the case was ultimately taken up by the United States Supreme Court. The issue for the Court was whether a Fifth Amendment taking could occur if government restrictions limited a property owner’s ability to profit from the property but left the owner with some beneficial use.
A majority of the court concluded that no taking occurs if the government regulates property for the public welfare, so long as the owner still has some reasonable, beneficial use of the property. Because Penn Central could still get some reasonable use out of the station, the landmark designation was not a taking.
A few years later, Penn Central filed for bankruptcy, and Grand Central Terminal has since changed hands multiple times.