State’s High Court Upholds Cities’ Rent Control Laws

The California Supreme Court, by a one-vote margin, Monday upheld the right of cities to impose rent controls--ending a lengthy campaign by landlords to have the restrictions declared unconstitutional.

The 4-3 decision, which came in a case from Santa Monica, was handed down even as a new state law goes into effect that scales back rent controls in some communities.

But beyond the immediate rent control issue, the ruling was a broad victory for California city governments and a major defeat for conservative legal activists.

Sixty-five cities sided with Santa Monica at the court. They feared a decision against rent control could endanger all sorts of economic regulations by subjecting them to judicial second-guessing about whether they were effective in serving the public good.

“You probably heard a collective sigh of relief in city halls all across the state today,” said Loyola Law School professor Karl M. Manheim, who represented Santa Monica. “Rent control was the point issue, but there have been similar cases filed around the country against permitting, zoning and other land use regulations.”

In the case of rent control, opponents argued that the law should be thrown out because it had failed to achieve its professed purpose--preserving low-income rental housing. Opponents of the law cited statistics that they claimed showed that Santa Monica has lost low-income rental property since rent controls were imposed in April 1979.

But the state high court rejected that argument, saying that a law’s alleged shortcomings do not make it unconstitutional.

“The notion that a court may invalidate legislation that it finds, after a trial, to have failed to live up to expectations, is indeed novel,” Justice Stanley Mosk wrote. “In our constitutional system, it is generally assumed that only the legislative body that enacted the statute may exercise a power of repeal if that statute fails to meet legislative expectations.”

“How long would a court, or a litigant, have to wait to give the law a ‘fair chance’ to work before declaring it is a failure and therefore unconstitutional?” Mosk asked.

Conservative legal activists have had a long-standing campaign to strike down economic regulations. They have argued that regulations restricting what a person can do with his or her property should be reviewed by courts with the same level of scrutiny used when governments flatly require a person to give up the property.

“It’s been a big campaign,” said John Echeverria, a professor at Georgetown University Law Center who specializes in property rights law. “In the past decade or so, they have been mounting challenges to rent control in California based on this expansive theory.”

“This opinion appears to signal that that campaign has been defeated, at least in California.”

The Pacific Legal Foundation, a conservative public interest law firm that represented a Santa Monica landlord in the case, said it will ask the U.S. Supreme Court to review the case. The foundation argued that rent control laws are unconstitutional “‘takings” of private property if they fail to achieve public good.

“If we ultimately prevail,” said Pacific lawyer R.S. Radford, “it would mean that rent control would have to be held to a tougher standard and would be found unconstitutional unless it advanced a legitimate interest.”

Under a state law that took effect Jan. 1, cities must end rent controls on vacant apartments. The law affects Santa Monica and a small number of other cities that did not already allow so-called vacancy decontrol.

Citing that modification, the court said the legislative process already “has worked in a way that the blunt instrument of constitutional law generally cannot.”

The Pacific Legal Foundation brought the case on behalf of Santa Monica Beach Limited, a partnership that owns 12 residential units in Santa Monica. The landlord asked the city’s rent board for permission to raise rents in March 1992. The board initially refused and then granted a hike smaller than the owners wanted.

The owners claimed that the rent law violated their property rights under the 5th Amendment to the U.S. Constitution and also under the California Constitution.

They cited census data that they said showed Santa Monica experienced a loss of 775 low-income renter households, a decrease of nearly 12%, in the 1980s. The number of such households grew in every comparable Southern California city without rent control, the landlords said.

Between 1980 and 1990, Santa Monica households with high incomes grew 37% even though they dropped 8% countywide, the property owners contended.

In rejecting their arguments, Mosk stressed that the court is not endorsing rent control.

“Many have questioned the wisdom of rent control, and no consensus exists as to whether it is good public policy,” he wrote. “We emphasize that a decision affirming the constitutionality of a particular rent control law is not in any sense an endorsement of its soundness.”

Justices Marvin R. Baxter, Ming W. Chin and Janice R. Brown dissented. Those justices have generally ruled for property owners in similar disputes.

“The majority is wrong,” Brown wrote. “The framers of the takings clause sought to protect private property without regard to the decency of the government’s intentions.”

Baxter said that rent control, unlike other forms of price controls, can be an unconstitutional confiscation of private property.

“The Santa Monica rent control ordinance takes from the property owner the right to charge market rent for the owner’s property and by so doing compels the owner to subsidize the tenant,” Baxter wrote.

* NEW LAW’S EFFECTS: Rates and availability rise in Santa Monica and West Hollywood as ordinances are defanged by state law. B1