Cities May Impose Rent Controls, Justices Rule

The Supreme Court, in a major victory for tenants and possibly other consumers, ruled today that cities may impose rent controls even without authorization by state legislatures.

By an 8-1 vote, the justices said a Berkeley, Calif., rent control law does not violate federal antitrust law. The court rejected arguments by landlords that the local ordinance is a form of price-fixing conspiracy forbidden by the Sherman Antitrust Act.

Justice Thurgood Marshall, writing for the court, said the ordinance is valid because it was imposed by the city government and did not involve any concerted action by owners of rental property banding together to fix prices.

“A restraint imposed unilaterally by government does not become concerted action . . . simply because it has a coercive effect upon parties who must obey the law,” Marshall said.

“The mere fact that all competing property owners must comply with the same provisions of the ordinance is not enough to establish a conspiracy among landlords,” he said.

Other Places Involved

Unlike such ordinances in California, most municipal rent control regulations are authorized by state law, and previous court rulings have insulated state activities from antitrust attack.

Today’s ruling affects several other California cities besides Berkeley, several New Jersey cities and the District of Columbia. The decision also gives other communities a green light to enact rent controls on their own.

The Berkeley ordinance, the outgrowth of a voter initiative, covers about 23,000 rental units that were placed under controls, establishing 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 that the increase is inadequate may apply for additional rent hikes.

Landlords argued that the rent increases do not cover the cost of inflation and, in effect, freeze rents at 1980 levels.

Rulings Since 1943

The Sherman Antitrust Act, written by Congress in 1890, prohibits “contracts, combinations or conspiracies” in restraint of trade and also forbids any attempt to monopolize markets.

Since 1943, the Supreme Court has held that acts of state governments--and local government laws specifically authorized by their states--are immune to antitrust attack.

Proponents of Berkeley’s ordinance said that if the high court sustained the landlords’ challenge, it could jeopardize numerous other local regulatory activities, including setting maximum fares for taxi rides, minimum prices charged by parking garages or maximum prices for private ambulance services.

Justice William J. Brennan was the lone dissenter today.