What is it called when an owner's property value decreases due to negative changes made by the government?

The term that describes a situation where an owner's property value decreases as a result of negative actions or changes made by the government is known as inverse condemnation. Inverse condemnation occurs when a property owner believes that a government action, such as zoning changes or the construction of public facilities, has effectively reduced the property’s value, even though the property has not been formally taken by the state through the condemnation process.

This concept is important in real estate because it recognizes that government actions can have significant financial impacts on property owners, leading them to seek compensation for the loss in value. Understanding inverse condemnation can help property owners navigate disputes with governmental entities and advocate for their rights when their property values are diminished due to government policies or actions.

The other terms do not accurately apply to this situation. For instance, property depreciation generally refers to a reduction in property value due to external factors like market conditions or physical deterioration, rather than direct governmental actions. Legal nonconformity involves properties that do not conform to current zoning laws but were compliant when established, while inverse use is not a recognized term in this context.