In 2002, the U.S. Supreme Court ruled on whether state and local governments must constitutionally provide compensation to landowners for moratoria that impose temporary restrictions on property development. The ruling pulled back from what appeared to have been a significant change in regulatory takings doctrine. Just ten years earlier, in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), a 6–2 Court majority indicated that justices would take a strict stand on local land use regulations that placed restrictions on property development. The question in Tahoe-Sierra was just how wedded the Court was to the recently decided Lucas ruling.

The facts of the Tahoe-Sierra case were similar to those in many regulatory takings cases, including Lucas. The water in Lake Tahoe historically was pure and clear – today, a person can look seventy feet into the water – and the area homeowners wanted to keep it that way. During the 1960s, however, those homeowners observed the water becoming dirty. They attributed the pollution to recent property expansion near the lakeshore. Dirt and other runoff from home building seeped into the water, created algae, and started a process that could have permanently muddied the lake. The homeowners turned to the law to place restrictions on growth and its accompanying pollution.

More specifically, the homeowners empowered the Tahoe Regional Planning Agency to conserve the area's natural resources. The agency imposed two moratoria that halted all property development in the area.