A Subject Matter Summary for "Economic Feasibility"

The Historic Landmark and Historic District Protection Act of 1978 ("the Act") provides that no demolition "…permit shall be issued unless the Mayor finds that issuance of the permit is necessary in the public interest, or that failure to issue a permit will result in an unreasonable economic hardship to the owner." {1} However, the Mayor’s Agent may permit a demolition or alteration when it is "necessary in the public interest" which means either consistent with the purposes of the Act or "necessary to allow the construction of a project of special merit." {2}

In deciding whether demolition is "necessary" for a project of special merit, the Mayor’s Agent must consider feasible alternatives, but courts impose a "reasonableness limitation on the consideration of alternatives to demolition." {3} Thus, at a special merit hearing, the Mayor’s Agent should consider "factors including but not limited to cost, delay, and technical feasibility" when determining whether demolition is "necessary." {4} In the Rhodes Tavern case, which first clarified this concept of economic feasibility, the D.C. Court of Appeals found that the developer and Mayor’s Agent had considered a number of alternative developments to the demolition of historic Rhodes Tavern, but that preserving the tavern would have imposed a great cost on the developer. The developer had tried but was unable to secure additional funding from public or private sources for the preservation of the tavern. {5} The court held that under the Act, "demolition is necessary in order to construct a project of special merit whenever retention of the landmark on its original site becomes economically oppressive." {6} Under this rubric, a developer must demonstrate to the Mayor’s Agent that he or she considered all reasonable alternatives, although the developer cannot simply "select the least expensive alternative and summarily reject those which are more costly." {7}

This "economic feasibility" standard applies only in the context of a special merit decision and differs from unreasonable economic hardship. Section 6-1102 of the D.C. Code defines "unreasonable economic hardship" as meaning that "failure to issue a permit would amount to a taking of the owner’s property without just compensation." {8} By incorporating the Constitutional regulatory takings standard as set forth by the Supreme Court in the landmark case Penn Central {9} and subsequent decisions, the D.C. Council has avoided successful constitutional takings challenges against its demolition provision. See the subject matter summary on Unreasonable Economic Hardship for more information.

Also see the subject matter summaries on Special Merit to learn more about those provisions.

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{1} D.C. Code §6-1104.

{2} D.C. Code § 6-1102(10).

{3} Citizens’ Committee to Save Historic Rhodes Tavern v. D.C. Dep’t of Housing and Community Development , 432 A.2d 710, 718 (D.C. App. 1981).

{4} Id.

{5} Id.

{6} Id.

{7} Id.

{8} §6-1102(14).

{9} Penn Central Transp. Co. v. City of New York , 438 U.S. 104 (1978). If a property retains any value, the court engages in "essentially ad hoc, factual inquiries" that examine the economic impact of the regulation, the regulation’s interference with distinct, investment-backed expectations; and the nature of the governmental action. Id. at 124.

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