The Federal Government provides disaster insurance that helps people to build va

Question

The Federal Government provides disaster insurance that helps people to build vacation homes in places subject to flooding, such as sand dunes. Assume the government wants to protect the environment by preventing construction of homes on a specific sand dune near the ocean. If the government takes private property on the sand dune, either by condemning it or by imposing regulations that forbid any construction, should compensation include ort exclude the increase in the value of land cause by government flood insurance?

Explanation / Answer

According to me, the compensation paid by the government for taking private rights on the sand dunes should include the increase in the value of land caused by government flood insurance.

It is because if the actual owners of the particular land had sold it in the open market for building the vacation homes, they would have received a higher price for it. However, as the government is taking the land from them, they would not be able to avail the high price for it. Thus, the government should include that excess in the compensation it pays to them.

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