High Court to Rule on Rent Control

The Supreme Court Tuesday entered the controversy over rent control in California, agreeing to decide whether the City of Berkeley’s strict rent limits violate federal antitrust laws against price-fixing.

The court’s decision, to be issued in the term that begins in October, could have broad impact in California and set new guidelines for cities across the nation. Fourteen municipalities in California--including Los Angeles--fix rents on some or all residential units within their borders. Another 38 cities and counties in the state fix rents for space in mobile home parks.

The justices, in a brief order, said they would review a ruling made last December by the California Supreme Court that upheld a 1980 Berkeley ordinance regarded as one of the toughest in the nation.

The U.S. high court’s action represented at least a temporary victory in a largely unsuccessful campaign by landlords, builders and business groups to stem the spread of rent control within the state. Jon D. Smock of Sacramento, attorney for the California Apartment Assn., a group of apartment owners, said he was “absolutely delighted” with the court’s action Tuesday.

Rents Held at 1980 Level

The Berkeley ordinance at issue effectively froze rents at their 1980 level, allowing general increases only to offset higher taxes and utility costs. It requires owners of the 23,000 rental units in the city to apply individually for any other increases.

The state court, in a 6-1 decision written by Justice Stanley Mosk, said that municipalities should be entitled to greater latitude than profit-seeking private businesses under the price-fixing provisions of the Sherman Antitrust Act. While no state law expressly authorizes local rent controls, they are permissible under “home rule” police powers given to communities, the California court said.

If a rent control ordinance is fairly administered and “rationally related” to the legitimate exercise of police powers, it must be upheld against antitrust challenges as a valid way of protecting the local “health, safety and welfare,” the state court said.

The court majority noted that Berkeley’s ordinance had been designed to deal with a housing crisis, in which the vacancy rate was below 5%, and to help low-income, minority, student and handicapped residents.

Landlords Urged Review

A group of Berkeley landlords--supported by the California Assn. of Realtors, the California Chamber of Commerce and other groups--urged the U.S. Supreme Court to review the ruling, saying that it is so broadly worded that it could open the way for cities to impose price controls on other services or commodities within their borders.

The groups also blamed the expansion of rent control in California for discouraging investment in rental dwellings, limiting the state’s supply of adequate housing.

Attorneys for the City of Berkeley asked the court to dismiss the landlords’ appeal, saying that the state Supreme Court’s decision represents a “fair accommodation” between federal antitrust law and state-authorized police powers.

The ordinance is a valid way of preventing “unwarranted rent increases and arbitrary evictions” by landlords, the city argued.

Antitrust Actions

Cities, unlike the states themselves, may be subjected to federal antitrust actions. The justices have held that cities are protected from such actions when they are carrying out “state action”--that is, implementing a clearly expressed state policy. Several states--including New York, New Jersey and Massachusetts--specifically authorize local rent control.

Attorney Smock said that the primary aim of the landlords and their supporters in the case is to ensure that local rent control--or other similar economic regulations--can be imposed only where it is clearly authorized by state law.

“The California decision has no boundaries, in our view,” he said. “A local community, for whatever reasons it desires, can impose any kind of economic sanctions or limitations or any area of economic endeavor.”