A decision from the U.S. Supreme Court in April upholding the constitutionality of a development moratorium by the Lake Tahoe Regional Planning Agency garnered some banner headlines in the national press. But local governments and others who read this ruling as a high court endorsement of using moratoriums as a planning tool weren’t reading with their eyes open.

By a 6-3 margin, the court ruled that the mere enactment of a moratorium is not unconstitutional under the takings clause of the U.S. Constitution’s Fifth Amendment. That doesn’t mean that towns and cities can now use moratoriums to run roughshod over property rights and do so with impunity. In other cases and under different circumstances, the moratorium approach just might not survive legal scrutiny.

And as home builders know all too well, regulators can attempt all sorts of mischief, and even get away with it, but this doesn’t necessarily represent good public policy. Moratoriums, in fact, fly in the fact of good planning.

In the National Association of Home Builders’ (NAHB) “Builders’ Guide to the APA Growing Smart Legislative Guidebook,” land use attorney Gus Bauman characterizes moratoriums as “admissions of planning failure.”

He adds that in most states moratoriums on development are sanctioned only if they are directed at “curing a clear and present public health or safety problem” over a short period of time. “For example, if a sewage treatment plant is at capacity and expansion of the public facility has not yet occurred, a moratorium on development approvals may be needed until the expansion is under-way. Government must act in good faith to cure its public facility emergency as quickly as possible so as not to interfere unduly with property rights. This is the core principle of many American court decisions.”

The two moratoriums considered by the court in the Lake Tahoe case lasted 32 months. Due to a sequence of events, property owners affected by the moratoriums actually have not been able to develop their properties for more than 20 years. The property owners brought their suit on the grounds that the moratoriums constituted a taking under the Fifth Amendment.

While the Supreme Court rejected the argument that moratoriums constitute unconstitutional takings per se, they added that moratoriums must be considered on a case-by case basis, and they cited one of their earlier decisions, Penn Central Transp. Co. v. New York, as the test case for takings. The test here is complicated and it requires a review of what the property owner hoped to gain from developing the land, the interests of the government and the benefits and the burdens of the economic life of the property.

The media may have overlooked this in its coverage, but the Supreme Court left open the possibility for property owners to convince courts that a moratorium-based takings claim is valid. There still will be cases where freezing development could require the payment of compensation, if the facts are right. The court also sent a clear signal that a particular moratorium might be unconstitutional and might require the payment of just compensation to a property owner, if the facts confirm the landowner’s argument.

NAHB members or home building associations who are facing moratoriums should ask the following questions to determine if it’s worth going to court.

How long is the moratorium? In its recent decision, the Supreme Court noted that “any moratorium that is enacted for more than one year should be viewed with skepticism.”

Is the local government using rolling moratoriums to avoid addressing complicated issues in the planning process?

Does the moratorium address a specific, time-sensitive concern such as, for example, a sewer line hookup moratorium. If so, it is more likely to survive legal scrutiny.

Is a property owner being singled out for an unpopular project such as proposed multi-family development in the midst of one-acre lots. In that case, the moratorium may be legally weak.

Planning for growth requires making tough decisions ahead of time. When localities use moratoriums, that’s a sign they have not done so. When public officials use moratoriums to solve problems unconnected to public emergencies, they are on shaky legal ground.