Supreme Court Punts Floodplain Regulation Case Back to Trial Court

3/24/25 – On March 21, 2025, the Supreme Court of Texas ruled on a long-running lawsuit between a developer and the City of Houston over floodplain regulation. The Supreme Court reversed an Appeals Court judgement, which had dismissed the developer’s claims against the City, thus keeping the case alive.

The developer argued that the City’s changes to floodplain regulation after Hurricane Harvey made their river-front property “undevelopable” and therefore were an unconstitutional taking of their property.

The case could have far-reaching implications for property rights advocates, developers, the enforcement of floodplain regulations, building codes, public safety, availability of flood insurance, and more.

However, the case also involves many specific issues, not yet decided, that could limit those ramifications. The Supreme Court acknowledged validity to the claims of both parties.

After ruling on a few, pivotal underlying issues, they found the case should not have been dismissed. And they simply remanded the case back to the trial court for “additional proceedings.”

Background: Developer Claims “Inverse Condemnation”

After Hurricane Harvey struck Texas in 2017, the City of Houston amended its floodplain regulation to increase the elevation requirements for construction in a floodplain. A developer (The Commons of Lake Houston) sued the City for “inverse condemnation,” alleging that the amendments caused a regulatory taking of the developer’s property under the Texas Constitution.

The trial court agreed with the developer. But the City appealed. And the court of appeals reversed that earlier decision. It agreed with the City and dismissed the case.

The appeals court said that the developer could not establish a valid takings claim because the City amended the ordinance as a valid exercise of its police power and to comply with the federal flood-insurance program. The developer then appealed to the Supreme Court.

What is Inverse Condemnation?

Inverse condemnation refers to a situation where the government takes or damages private property for public use without formally using its power of eminent domain—and without providing just compensation to the property owner.

In simpler terms, the government does something that effectively takes away or reduces the value of your property, but doesn’t officially “take” it through normal legal channels, i.e., condemnation.

So the property owner must sue the government to get compensated, which is why it’s called inverse condemnation. It’s the opposite of the usual process used by government to take someone’s property.

Floodplain Regulation Changed Before Development Completed

The Commons of Lake Houston first began developing a 3,300-acre residential community near Lake Houston in 1993.

The Supreme Court opinion says that, “Focusing on one phase at a time, it subdivided, platted, and cleared the raw land in sections, adding streets and utilities and then selling empty lots to buyers and builders who design and construct the homes.”

“This case involves a section called The Crossing, a 300-plus-acre area that includes many of the project’s most valuable lots. The Commons’ business plan relied on revenue from the earlier phases to finance the subsequent phases and ultimately produce profits from the last phases, including The Crossing,” said the Supreme Court.

“The Crossing’s lakefront and lakeview lots are more valuable than most, but they also lie in areas colloquially referred to as the 100- and 500-year floodplains,” continued the Supreme Court.

After the City approved the developer’s initial plans, Hurricane Harvey struck in 2017. The City of Houston changed its floodplain regulation in anticipation of changes from FEMA concerning the depth and width of floodplains.

Before Harvey, the City had initially approved the developer’s plans based on slabs being one foot above the 100-year floodplain. But in 2018, the City amended its code to require foundations at least two feet above the 500-year floodplain.

How Regulation Changes Impacted Developer

Justice Jeffrey Boyd, speaking for the Supreme Court, wrote, “Commons asserted that the amendment increased the required slab elevations in The Crossing by an average of 5.5 feet and, as a result, rendered 557 of the 669 total lots (and over seventy-five percent of the total acreage) undevelopable.”

“Because of the new elevation requirement, The Commons alleges it had to cancel development and sales contracts, lost $4.4 million in revenue and $1.8 million in bond reimbursements, and had to borrow over $1 million to cover cash flow. Ultimately, The Commons asserts, the amendment destroyed its expected profits from the entire 3,300-acre project.”

“The Commons filed this suit against the City in 2020, asserting that the amended ordinance caused a regulatory taking for which the Texas Constitution requires reasonable compensation,” said Boyd.

Underlying Issues

Like many legal cases, this one involved arguments over procedural elements and precedents:

• Did the City actually deny a permit or did it just not approve one?
• Does the City have the right to insist on approving plans for specific buildings when the developer does not actually build buildings? (The developer sells lots, not buildings.)
• Does the City’s governmental immunity apply to this case?
• Does a change in a regulation for the public good constitute a taking?
• Did the City actually damage the Commons’ property?
• Does the City have the right to promote public safety and minimize flood losses?
• Is the City’s exercise of its powers in this case compensable?
• Did the City justifiably deny the Commons’ anticipated profits?
• Had the City not increased elevation requirements, would anyone have been able to obtain flood insurance from the Federal government?

Boyd’s references all these issues. But his 30-page opinion doesn’t hinge on all of them. He focuses primarily on those that support the decision that the Appeals Court committed reversible error. The 30-page opinion will make fascinating reading for anyone:

• Who owns property in or near a floodplain
• Seeking to develop property in a floodplain
• Affected by others developing property in floodplains.

What Court Did and Didn’t Conclude

In the end, the Court concluded the Commons:

• Can assert a valid regulatory-takings claim even though the City amended the ordinance as “a valid exercise of its police power and to ensure compliance with the National Flood Insurance Program.”
• Had a claim that is “ripe for adjudication.”
• Has standing to assert its claim.

The Court did not address whether the Commons has, in fact, asserted a valid regulatory-takings claim under several different precedents or the Texas Constitution’s “damaged” provision.

In the end, the Supreme Court simply reversed the Appeals Court judgment that summarily dismissed the Commons’ claim. Then, the Court sent the case back to the trial court “for further proceedings.”

Resident Reaction

I called a Commons resident to discuss the community’s reaction to the Supreme Court decision. She summed it up in two words: “It’s tragic.”

She said that when she and her husband bought their property, the developer gave them assurances that the land in question would be used only for parks. She also said. “We were told by salesmen that there would never be anything down there. Now they’re taking away the nature.”

“In my opinion, there’s not one person out here that’s happy to know it would be built up like that,” she added.

We haven’t heard the last of this yet.

For More Information

Read the actual court documents and more:

• Appeals Court Ruling
• Supreme Court Reversal
• All Other Court Documents
• City of Houston Floodplain Ordinances, Chapter 19
• Article in the Texan by Holly Hansen on the Decision
• August 2020 Post on Developer’s Plans and Permit Application
• MAAPnext site: Background on Harris County’s attempt to update floodplain maps, which are still being reviewed by FEMA
• How East Fork rose 15 feet in one day in vicinity of Commons, producing a 500-year flood on a 10-year rain.
• HCFCD’s report on May 2024 floods on the East Fork (where the Commons is located). It was the second highest flooding in recorded history on the East Fork, almost reaching Harvey’s level.

Posted by Bob Rehak on 3/24/25

2764 Days since Hurricane Harvey

The thoughts expressed in this post represent opinions on matters of public concern and safety. They are protected by the First Amendment of the US Constitution and the Anti-SLAPP Statute of the Great State of Texas.

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