Rent Control Wins High Court Test : Rehnquist’s Ruling Deals Sharp Setback to Conservatives

The Supreme Court, rejecting a major challenge to rent control, ruled Wednesday that a San Jose law limiting increases charged by landlords is a “legitimate exercise” of local government power.

The 6-2 ruling dealt a sharp setback to conservatives who believed that the court under Chief Justice William H. Rehnquist would frown on such government restrictions on private property owners. Instead, the opinion, written by Rehnquist, at least tentatively opens the door for cities to go further than before in limiting rent increases for poor tenants.

The 1979 San Jose ordinance allowed low-income tenants to contest rent hikes that were greater than 8% by citing their “financial hardship.” Landlords called this provision unconstitutional because it left them with the social burden of supporting the poor.

Rehnquist disagreed, saying that the law “represents a rational attempt to accommodate the conflicting interests of protecting tenants from burdensome rent increases while at the same time ensuring that landlords are guaranteed a fair return on their investment.”

Nearly 50 cities in California, covering half the state’s residents, have rent control ordinances, but only San Jose’s permitted city officials to take into account the income of tenants.

“I think you’ll see more cities now moving in San Jose’s direction, to structure laws based on the needs of particular tenants,” said Karl Manheim, a Loyola Law School professor who filed a court brief on behalf of the League of California Cities urging that the San Jose law be upheld.

The high court’s ruling suggests that special rent limits for groups such as the elderly or the poor would be constitutional, he said. “I know that has been talked about in Santa Monica and elsewhere, but I don’t know how it will come out,” he added.

A lawyer for the landlords said he was disappointed with the ruling but did not consider it conclusive. “They basically put off a decision in this case,” said Gary Rosenberg, a San Francisco attorney.

Since no landlord had yet to lose to “as much as one dollar” because of the law, Rehnquist said, it would be “premature” for the court to rule on whether or not it amounted to an unconstitutional “taking” of private property.

For more than a decade, legal conservatives have contended that strict government regulations, such as zoning or rent control laws, can be attacked as unconstitutional under the so-called “takings” clause of the Fifth Amendment, which states that “private property (shall not) be taken for public use without just compensation.”

Last year, in two major 5-4 rulings, the court invoked this clause on behalf of Southern California property owners. In the first case, the court said Los Angeles County could be forced to pay damages for preventing a church from building on its property. In the second, the California Coastal Commission was told that it could not force a Ventura homeowner to open his beachfront to the public.

Last fall, conservative legal experts said a high court ruling throwing out the San Jose rent control law could trigger a general attack on rent control and zoning.

But on Wednesday, Rehnquist and Justice Byron R. White--leaders of the court’s conservative wing--joined with the court’s liberal bloc to uphold the San Jose ordinance. The opinion supports a 1986 decision by the California Supreme Court under then-Chief Justice Rose Elizabeth Bird.

“The court has clearly sustained rent control as serving an important public purpose. It has also expressly declined to view it as a ‘taking,’ ” said Benna Solomon, counsel for the State and Local Legal Academy in Washington, which represents state and local governments before the high court.

Justice Antonin Scalia, the court’s most fervent advocate of free-market economics, issued a scathing dissent to Rehnquist’s ruling. The San Jose rent control law, he said, is no different from a requirement that a grocer charge poor shoppers less than wealthier ones.

“The traditional manner in which the American government has met the problem of those who cannot pay reasonable prices for privately sold necessities--a problem caused by society at large--has been the distribution to such persons of funds raised from the public at large through taxes,” Scalia wrote.

Rather than putting the social burden on all citizens, he said, the San Jose rent law works “to establish a welfare program privately funded by those landlords who happen to have ‘hardship’ tenants.” He was joined by Justice Sandra Day O’Connor.