Rent Control : Foes to Step Up Legal Battle to Weaken Ordinances After Defeat in High Court
Landlords and realtors, still stinging from the U. S. Supreme Court’s rejection of their latest attempt to weaken rent control laws, are pinning much of their remaining hopes to banish such ordinances on a Santa Barbara case involving the owner of a mobile-home park.
They’re also promising to step up their efforts to have lawmakers outlaw or water down rent control measures across the nation.
“We’re going to have to start stepping in the moment these ordinances are proposed on the local level,” said William D. North, chief counsel and executive vice president of the powerful National Assn. of Realtors. “We can no longer sit back and depend on the court system to uphold our rights.”
San Jose Case
Their latest attack on rent control was rejected by the U. S. Supreme Court last month, when the justices upheld the constitutionality of a San Jose rent control ordinance that allows tenants to contest rent hikes greater than 8% by showing “financial hardship.”
Landlords feel the hardship provision makes them unfairly shoulder society’s burden of supporting the poor. The court turned aside that argument. But it would be “premature” to rule on the landlords’ main objection that the ordinance was so strict that it amounts to an unconstitutional “taking” of their property, the court said, because the “hardship” provision had never been applied.
“The basic argument is still alive,” said Judi Herzberg, senior counsel for the California Assn. of Realtors, which filed a friend-of-the-court brief on behalf of San Jose landlord Richard Pennell. “The court has left the door open on the takings issue.”
Landlords and realtors across the nation hope they can walk through that door with a victory in the Santa Barbara case, and then slam it shut on rent control activists.
In the Santa Barbara lawsuit, William and Jean Hall, owners of a mobile-home park, claim a strict rent control ordinance passed in 1984 effectively takes their property and transfers it to their tenants without giving the Halls “just compensation.”
As in most mobile-home parks, tenants in the Hall’s complex own their home but rent the lot it sits on. When a resident leaves, he sells the home to a new buyer, who moves into the home and continues renting the ground underneath.
Under the city ordinance, owners and landlords like the Halls can raise rents for their lots by 3% a year or by three-quarters of the increase in the Consumer Price Index. Landlords must also offer tenants in the parks a lease of unlimited duration; the tenant can break the lease anytime he wants, but the landlord can break it only under certain circumstances.
Tenants can also pass their lot lease on to the next buyer. Prices for homes in the park surged after the ordinance was passed, the Halls claim, in part because rental rates are virtually guaranteed to stay low forever.
Any ordinance that gives a tenant the right to perpetually occupy land they don’t own--and lets them profit from the situation at the expense of the landlord--violates a landlord’s Fifth Amendment guarantee that his property won’t be taken without just compensation, the Halls say.
A District Court judge initially dismissed the Halls’ suit on technical grounds. But the U. S. Court of Appeals later found that the ordinance “may” constitute a taking, and sent the case back to District Court to decide the issue.
The city of Santa Barbara, however, has since asked the U.S. Supreme Court to uphold the original dismissal. The high court has not yet decided whether it will take the case.
A victory for the Halls could cause cities to rewrite their existing rent control laws or water down proposed ordinances, most legal experts said. It might also trigger a flurry of rent control challenges in the estimated 200 U. S. cities that already have rent control measures on their books.
Going to Lawmakers
While landlords and realtors wait for the courts to decide whether the Santa Barbara ordinance is constitutional, they also plan to take their case against rent control to local, state and federal lawmakers.
In California, powerful housing lobbies have already succeeded in their efforts to outlaw rent control at non-residential projects.
A bill that would have put strict limits on residential rent ordinances died in the state Senate earlier this year. However, the California Assn. of Realtors is “considering a legislative approach to provide a disincentive for local jurisdictions that enact or already have rent or growth controls,” said Alex Creel, the CAR’s chief lobbyist.
Some builders and realtors have suggested an appropriate “disincentive” would be to cut off state funds to communities with rentcontrol or growth ordinances.
On the national level, attorney North said, the NAR hopes to “seriously discuss the problems” realtors have with rent control with U. S. Sens. Alan Cranston (D-Calif.) and Alfonse D’Amato (R-N.Y.). The two lawmakers are working on federal legislation to address various housing issues.
North, however, said he didn’t know whether his influential trade group would order its high-powered lobbyists to pressure Congress for legislation concerning rent control. “National legislation doesn’t always adapt itself very well to local circumstances,” he said.
Some observers note that if the realty group decides to press for federal legislation, it runs the risk that Congress might actually strengthen rent control ordinances in certain cities and spur the creation of such laws in others.
Previous court rejections of challenges to rent control ordinances, combined with last month’s decision in the San Jose case, raises the stakes in the Halls’ Santa Barbara lawsuit. But the question remains: Do landlords and realtors have their backs against the wall in their fight against rent control?
“I wouldn’t necessarily say that ,” said attorney North. “But if you’re not getting any victories, you have to admit that you’re not winning.”
