High Court to Rule on City Rent Controls

The Supreme Court, setting the stage for a key ruling on municipal powers, agreed today to decide whether some city rent control ordinances violate federal antitrust laws against price-fixing.

The justices said they will hear a challenge by building owners to strict rent controls enacted in Berkeley, Calif., five years ago.

The California Supreme Court ruled last year that price-fixing by cities is not automatically illegal.

In upholding the Berkeley rent control law, the state high court said communities have a “legitimate interest in enacting economic and social regulations” that conflict with federal antitrust law.

Cities are not like private businesses seeking to skirt antitrust laws for financial gain, the state court said. Berkeley’s rent control ordinance “is designed to deal with (its) housing crisis, preserve the public peace, health and safety” and help provide housing for the poor, minorities, students and the handicapped, the California court added.

Covered 23,000 Units

“Unlike a private business, a municipal government’s decision to displace competition is generally motivated by the purpose of furthering local health, safety or welfare,” the state court said.

The Berkeley law, covering approximately 23,000 rental units, established a base rent ceiling as of May 31, 1980.

The ordinance permits rent increases above the base to cover higher taxes and utility costs. A yearly general adjustment is provided, and owners who contend the increase is inadequate may apply for additional rent hikes.

The property owners who challenged the law said it violates the Sherman Antitrust Act.

They said the law denies them rent increases to cover the cost of inflation and, in effect, froze rents at 1980 levels.

Deterioration Encouraged

The California Building Industry Assn. argued in addition that rent controls are contributing to deterioration in the rental housing market by discouraging investment.

In other rulings today, the Supreme Court:

--Agreed, in a Rhode Island case, to decide whether police officers may be forced to pay monetary damages to people they arrest after obtaining court warrants without “probable cause” to suspect a crime.

--Expanded the right of lawyers to advertise by ruling that attorneys’ ads may encourage potential clients to sue specific companies. By a 5-3 vote, the justices also ruled that lawyer ads may contain illustrations to attract would-be clients, striking down such an Ohio ban.

--Dismissed Indiana’s bid to “sue” the House of Representatives in the high court over a disputed congressional election. The justices, without comment, rejected a request by the state that they decide whether Democrat Frank McCloskey or Republican Richard McIntyre won last November’s election in Indiana’s 8th Congressional District. The Democrat-controlled House seated McCloskey on May 1.