Opinion
I. Introduction
Proposition G is a San Francisco ordinance that restricts a property owner’s ability to evict a tenant from a residential rental unit so that the unit can be used as a residence by the owner or a close family member. Several property owners and three associations (plaintiffs) sued the City and County of San Francisco (the City) and others alleging, among other things, that Proposition G is unconstitutional on its face and as applied to them.
The superior court sustained a demurrer without leave to amend as to each of the causes of action challenging the constitutionality of Proposition G. We find that plaintiffs have alleged, or may well be able to allege, sufficient facts to support their claim that Proposition G constitutes a taking of their property without just compensation in violation of the state and federal Constitutions. Therefore, we reverse the part of the judgment that is based on the trial court’s ruling sustaining the demurrer without leave to amend.
II. Statement of Facts
A. Proposition G
The grounds pursuant to which a City landlord may recover possession of a residential rental unit from a tenant are set forth in section 37.9 of the San Francisco Residential Rent Stabilization and Arbitration Ordinance. (S.F. Admin. Code, сh. 37, § 37.9 (hereafter section 37.9).) At a November 1998 election, the voters of the City enacted Proposition G, which amended section 37.9 by restricting the ability of an owner of residential rental property to evict tenants to enable the owner or owner’s relatives to move into a rental unit.
Before Proposition G was passed, section 37.9 generally provided that any landlord with a sufficient ownership interest in a building could recover possession of a rental unit for use as a principal residence by the owner or owner’s close relative for a period of at least 12 continuance months. Section 37.9 also contained a “temporary moratorium” precluding evictions of certain categories of elderly, disabled or catastrophically ill tenants so that the owner could use units occupied by those tenants as a principal residence for the owner or owner’s close relative. 1
(1) The one-owner-occupancy-per-building restriction: A landlord may recover possession of a rental unit “[f]or the landlord’s use or occupancy as his or her principal residence for a period of at least 36 continuous months.” (§ 37.9, subd. (a)(8)(i).) “Once a landlord has successfully recovered possession of a rental unit” for use as his or her principal residence, “no other current or future landlords may recover possession of any other unit in the building” for this purpose. (§ 37.9, subd. (a)(8)(vi).) This restriction substantially altered the property owner’s previously unqualified right to recover a unit for purposes of owner occupancy. Indeed, one owner’s exercise of the right to recover possession for owner occupancy can effectively extinguish this right with respect to all other current and future owners of the building. 2
(2) The family occupancy restriction: A landlord may recover possession of a rental unit for use or occupancy as a principal residence of a landlord’s close relative “for a period of at least 36 months, in the same building in which the landlord resides as his or her principal place of residency, or in a building in which the landlord is simultaneously seeking possession of a rental unit.” (§ 37.9, subd. (a)(8)(ii).) This restriction also substantially altered a previously unqualified right. Under this provision, an owner can recover possession of a unit on behalf of a family member only if the owner will also live in the building.
(3) The tenant protection restriction: A landlord may not recover possession of a rental unit for use as a principal residence by the landlord or the landlord’s relative if any tenant in the rental unit is (a) 60 years of age or older and has lived in the unit for 10 or more years, or (b) “disabled” and has been residing in the unit for 10 or more years, or (c) “catastrophically ill” and has been residing in the unit for 5 or more years. (§ 37.9, subd. (i)(l).) This restriction made permanent the temporary moratorium set forth in the prior version of section 31.9. 3
Section 37.9 applies to all landlords and tenants of rental units which are broadly defined as “[a]ll residential dwelling units in the City . . . together with the land and appurtenant buildings thereto, and all housing services,
privileges, furnishings and facilities supplied in connection with the use or occupancy thereof, including garage and parking facilities.” (S.F. Admin. Code,
In its brief to this court, the City stated that Proposition G applies only to residential rental properties with three or more units. The City then filed an “Errata Re Respondent’s Brief’ in which it stated that Proposition G applies to buildings with two or more units. At oral argument, however, the City concurred with plaintiffs’ contention that single-family dwellings are not excluded from the definition of rental units to which section 37.9 applies. (S.F. Admin. Code, § 37.2, subd. (r)(5).)
A tenant or the City rent board may bring a civil action for damages and other relief against a landlord who allegedly violates section 37.9. A violation of section 37.9 can also constitute a misdemeanor. (§ 37.9, subds. (e) & (f)0
B. The Complaint
On April 27, 1999, plaintiffs filed a first amended petition for writ of mandate and other relief and complaint for injunctive and declaratory relief and for damages for inverse condemnation (the complaint). In addition to challenging Proposition G, plaintiffs also alleged that section 209.10 of the San Francisco Planning Code (hereafter section 209.10) was invalid for several reasons. Section 209.10, an ordinance which the lower court ultimately found to be invalid, imposed restrictions on a landlord’s right to remove his or her property from the rental market by, among other things, requiring certain owners to obtain conditional use permits before converting their property to residential nonrental housing. 4
1. The plaintiffs
Plaintiff Keli Cwynar (Cwynar) owns part of a three-unit building in San Francisco as a tenant in common with a married couple, Sam and Susan Blum. Cwynar and the Blums purchased the property on October 21, 1998, at which time all three units were occupied by tenants. The Blums currently reside in one of the units. Cwynar would like to occupy one of the other two units as her principal residence, but she is prohibited by Proposition G from evicting the tenants from either of the other two units. Cwynar is also prohibited from recovering possession of one of the units for her sister to live in, as she had intended to do.
Plaintiff Cliff Cox (Cox) owns part of a six-unit building in San Francisco as a tenant in common with his close friends Bobby and Louise Crotwell. Cox is a retired disabled schoolteacher who suffers from AIDS. Louise Crotwell is a nurse and Bobby Crotwell is a schoolteacher. The Crotwells have two children. Cox and the Crotwells purchased the property in September
Plaintiffs Scott and Caroline Brooks (the Brookses), T-Nga Tran (Tran), Christopher Rankin (Rankin), and Simon Berry (Berry), along with Craig Greenfield, purchased a three-unit building in San Francisco on February 17, 1999, with the intent that all would reside there. Before purchasing the building, each of these plaintiffs was a tenant living in San Francisco. The Brookses moved into a vacant unit. However, since two of the units were occupied at the time the property was purchased, Proposition G precluded these plaintiffs from recovering possession of those two units. Therefore, these plaintiffs exercised their rights under the Ellis Act 5 and initiated proceedings to remove their property from the rental market. However, Tran and Greenfield, and Rankin and Berry could not move into the two units without first complying with section 209.10, which required them to obtain a conditional use permit. Thus, these plaintiffs could not live in their property or rent the units to tenants.
Plaintiff Mike Howard (Howard) owns a six-unit building in San Francisco. Howard would like to move his 85-year-old mother-in-law into the ground floor unit of that building which is located approximately one-half block away from his home. However, Howard is precluded by Proposition G from evicting tenants from any of the units in the building he owns so his mother-in-law can move in.
Plaintiff Ed Corvi (Corvi), a San Francisco resident, owns a six-unit building in San Francisco. One of the units is occupied by two of Corn’s sons. One of these sons is engaged to be married and wishes to live in another unit with his new wife. However, Proposition G prohibits Corvi from evicting tenants from any of the other units for this purpose.
Plaintiff Richard Womer (Womer) owns a three-unit building in San Francisco. Worner, a San Francisco resident, purchased the building in 1974 and has lived there in the past but does not reside in the building at this time. Womer would like his adult son to move into the basement unit of this building but is prohibited by Proposition G from evicting the tenant in that unit.
Plaintiff Yasin Salma (Salma), a San Francisco resident for 37 years, purchased a six-unit building in San Francisco in June 1998 with the intention that his four children could each move into their own units. For example, one of Salma’s daughters who just graduated from college would like to move into a unit that is occupied by a tenant who Salma believes is 60 years of age or older and is the beneficiary of multiple tmsts including one worth hundreds of thousands of dollars. Proposition G prohibits Salma from evicting any tenant so that any of his children can move into the building.
2. Claims pertaining to Proposition G
The first four causes of action in the complaint pertain to Proposition G. Plaintiffs allege that Proposition G is unconstitutional both on its face and as applied to them. They seek a writ of mandate, prohibition, certiorari or other appropriate relief (first cause of action), declaratory relief (second cause of action), injunctive relief (third cause of action), and damages for inverse condemnation (fourth cause of action).
In their complaint, plaintiffs allege that Proposition G violates numerous distinct provisions of the federal and state Constitutions. They allege that the Proposition constitutes a taking of their private property for public use without just compensation, that it violates their fundamental right to live in property they own, that it violates equal protection, substantive and procedural due process, the right to travel and the right to structure and determine one’s family living arrangement. They also allege that Proposition G illegally subjects them to civil and criminal liability for exercising their constitutional rights and that it is unconstitutionally vague. Plaintiffs further allege that Proposition G unconstitutionally impairs the obligations of contracts and violates their right to privacy.
In the fourth cause of action for inverse condemnation, plaintiffs allege two distinct theories in support of their takings claim. First, they allege that “Proposition G forces plaintiffs to suffer a physical invasion and occupation of their unique real property against their wishes and therefore constitutes a taking of plaintiffs’ private property for public use without just compensation.” Second, plaintiffs allege they have suffered a “regulatory taking of their private property” because they have been deprived “of essential attributes of ownership of their private property including the right to possess and occupy it and to exclude others from it.” The complaint alleges that Proposition G compels the plaintiffs “to rent their property to others when they desire for themselves or their family to principally reside in it.”
C. Proceedings in the Lower Court
On May 28, 1999, the City filed a notice of demurrer and demurrer to the complaint. The City argued that each cause of action failed to state facts sufficient to constitute a cause of action. In an order filed July 27, 1999, the lower court sustained the City’s demurrer to the first four causes of action without leave to amend. The court’s order states: “the Court finds that on all bases alleged, Plaintiffs cannot state causes of action attacking the constitutional validity of . . . Proposition G . . . .”
The court also rejected plaintiffs’ contention that section 209.10 was unconstitutional. However, the court ultimately prohibited the City from enforcing section 209.10 based on its findings that the provision was preempted by the Ellis Act and that it was an illegal amendment to Proposition G.
On January 6, 2000, the court entered judgment granting a peremptory writ of mandate prohibiting the City from enforcing section 209.10 and dismissing plaintiffs’ remaining causes of action. Plaintiffs appealed from the portion of the judgment
III. Discussion
A. Standard of Review and Issue on Appeal
When a judgment is based on an order sustaining a demurrer without leave to amend, the appellant can establish error by showing either that the demurrer was erroneously sustained or that sustaining the demurrer without leave to amend was an abuse of discretion.
(Smith
v.
County of Kern
(1993)
In reviewing an order sustаining a demurrer we “ ‘assume the truth of all properly pleaded material allegations of the complaint [citations] and give it a reasonable interpretation by reading it as a whole and its parts in their context. [Citation.]’ ”
(Careau & Co. v. Security Pacific Business Credit, Inc.
(1990)
In the present case, plaintiffs contend that Proposition G violates numerous provisions of the state and federal Constitutions. However, they have not set forth their distinct constitutional claims in separate causes of action; instead, each cause of action seeks different forms of relief. Furthermore, the only legal theories articulated in plaintiffs’ pleadings pertain to their takings claim. 6 Perhaps for this reason, the parties have focused primarily on that claim.
In ruling on the City’s demurrer, the trial court did not address any specific constitutional provision. Rather, the court simply held, without offering any analysis, that plaintiffs cannot prove that Proposition G is unconstitutional under any theory.
Under these circumstances, we will limit our analysis of this case to the question of whether plaintiffs have аlleged or can allege a violation of the takings clauses. Because we answer this question in the affirmative,
B. Taking of Property Without Just Compensation
“[Our] state and federal Constitutions guarantee property owners ‘just compensation’ when their property is ‘taken for public use.’ (Cal. Const., art. I, § 19; U.S. Const., 5th Amend.)”
(Kavanau
v.
Santa Monica Rent Control Bd.
(1997)
There is no “set formula” applicable to all cases for determining when a regulation goes too far and effects a taking.
(Loretto v. Teleprompter Manhattan CATV Corp.
(1982)
A per se rule can be applied to “two discrete categories of regulatory action” which constitute takings as a matter of law.
(Lucas v. South Carolina Coastal Council
(1992)
Government conduct that does not fall into a per se category may, nevertheless, constitute a “regulatory taking.” Such regulations must be evaluated under the ad hoc analysis courts have traditionally employed.
(Kavanau, supra,
As the United States Supreme Court has recently confirmed, when evaluating a regulatory takings claim, these factors should be considered and applied in light of “the purpose of the Takings Clause, which is to prevent the government from ‘forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’ [Citation.]”
(Palazzolo
v.
Rhode Island
(2001)
In the present case, plaintiffs allege that Proposition G constitutes both a per se physical taking and a regulatory taking. These are not separate
claims.
(Yee, supra,
503 U.S. at pp. 534-535 [112 S.Ct. at pp. 1532-1533].) “They are, rather, separate arguments in support of a single claim—that the ordinance effects an unconstitutional taking.”
(Id.
at p. 535 [
C. Plaintiffs’ Per Se Physical Taking Theory
Plaintiffs contend that Proposition G constitutes a per se physical taking because it effectively grants tenants lifetime tenancies in plaintiffs’ buildings by depriving plaintiffs of their rights to both oсcupy their own property and to exclude others from their property so close family members may occupy it.
The United States Supreme Court first applied a per se rule to find a physical taking in
Loretto, supra,
In the course of its discussion, the
Loretto
court identified two questions that must be answered in the affirmative in order to find a physical taking. First, is the occupation of the property
directi
Government-authorized conduct outside the property itself may affect its use but does not amount to a physical invasion.
(Loretto, supra,
458 U.S. at pp. 426-439 [102 S.Ct. at pp. 3170-3178].) Second, is the occupation
permanentl
A law which effects a transitory invasion rather than a permanent one may be a taking but it does not amount to a per se physical taking.
(Ibid.)
As the
Loretto
court explained, “[t]he permanence and absolute exclusivity of a physical occupation distinguish it from temporary limitations on the right to exclude.”
(Id.
at p. 435, fn. 12 [
In the present case, plaintiffs have alleged that Proposition G’s one-owner-occupancy-per-building restriction and family occupancy restriction effectuate government-authorized
direct
physical occupations of property that plaintiffs own and wish to use as a family residence. For example, the one-owner-occupancy-per-building restriction forces plaintiff Cwynar
The complaint does not expressly state that the government-authorized physical occupation about which plaintiffs complain is permanent, although clearly that is plaintiffs’ claim. They argue that Proposition G has the effect of granting tenants lifetime tenancies while, at the same time, permanently depriving plaintiffs of their right to occupy substantial portions of their property.
There is authority that an eviction control regulation can satisfy the permanency requirement of a per se physical taking if the regulatоry scheme gives the tenant a potentially endless leasehold and also denies the landlord the right to recover possession for personal use.
(Ross v. City of Berkeley
(N.D.Cal. 1987)
We have found no California case which squarely holds that an eviction protection statute which nullifies an owner’s right to occupy his own property can constitute a per se physical taking. However,
Bakanauskas
v.
Urdan
(1988)
The City cites two cases in which courts in other jurisdictions rejected claims that eviction control provisions constituted per se physical takings. (See
Troy Ltd. v. Renna
(3d Cir. 1984)
As noted above, the complaint does not presently contain allegations that the physical occupation of plaintiffs’ property authorized by Proposition G is permanent. However, the Ross and Seawall decisions lead us to conclude that plaintiffs may be able to satisfy the permanency requirement of a per se physical taking if they can show that Proposition G effectuates coerced lifetime tenancies which effectively extinguish plaintiffs’ right to occupy substantial portions of their property.
The City maintains that plaintiffs cannot make such a showing because the occupation of plaintiffs’ property by tenants is not coerced as a matter of law. We do not share the City’s certainty that no such showing can be made.
According to the City, Proposition G does not authorize coerced tenancies because (1) plaintiffs or their predecessors in interest “voluntarily rented their property to the tenants protected by Proposition G,” and (2) plaintiffs are free to exercise their rights under the Ellis Act to evict all of their tenants and to move into their own property. However, this argument overlooks the fact that at least some plaintiffs have alleged that they never voluntarily rented the property they now wish to possess. For example, when Cwynar purchased her property she allegedly had both the intent and the right to evict the tenant in the unit she wished to occupy. Proposition G now precludes her from exercising her ownership right to live in that unit. In addition, the City’s assumption that the right to withdraw from the rental market precludes plaintiffs from alleging coercion misses the mark. These plaintiffs have alleged that they wish to live in part of the property they own and to rent out another part and that such an arrangement was possible prior to Proposition G. Plaintiffs are now forced to permit someone else to live in a unit they wish to occupy. Since plaintiffs do not have the option to cease renting only the units that were allegedly taken from them, the Ellis Act does not prevent them from alleging a forced occupation of their private property.
The City contends that
Yee, supra,
The
Yee
plaintiffs’ complaint about the 1988 rent control law was that the government had deprived them of the ability to determine who would be their tenants. Existing law effectively precluded the
Yee
plaintiffs from terminating the tenancy of a mobilehome owner when the owner sold his home. According to the
Yee
plaintiffs, the new rent control law was unconstitutional because it deprived them of the only mechanism they had to control the sale of a home located in their park, the ability to threaten to increase the rent for the mobilehome pad. The
Yee
court held that the plaintiffs did not have a “per se right
The
Yee
court rejected the contention that the challenged law authorized a physical taking of the plaintiffs’ property. A per se physical taking results only from government authorizаtion of a “compelled physical invasion of property.”
(Yee, supra,
Contrary to the City’s contention, Yee does not preclude the plaintiffs in the present case from pleading and attempting to prove that Proposition G authorizes a physical taking of their property. Yee addressed a narrow issue —a facial challenge to a purely economic rent control law. In contrast to Yee, the present case involves an as applied challenge to a statute that expressly restricts a property owner’s right to exclude others and to live in property that he or she owns. Plaintiffs’ theory in this case is not that they have a constitutional right to choose their tenants but rather that they have a constitutional right to live in their own property. Their claim is that they have suffered a physical taking with respect to the part of their property that Proposition G precludes them from occupying.
The
Yee
court did not expressly or implicitly overrule the line of authority we have already discussed recognizing that an eviction control ordinance may, under certain circumstances constitute a physical taking. To the contrary, the court acknowledged that a physical taking might be caused by a statute that, on its face or as applied, “compel[s] a landowner over objection to rent his property or to refrain in perpetuity from terminating a tenancy.”
(Yee, supra,
The City focuses on the language in
Yee
underscoring the requirement of a government “compelled physical invasion of property.”
(Yee, supra,
The City contends that the Ellis Act necessarily counteracts the allegedly coercive aspects of Proposition G. We disagree; this contention is premised on a basic misunderstanding of the government coercion element of a physical takings claim. If a statute authorizes a compelled physical invasion of a landlord’s property, it is no answer to say that the landlord cаn avoid the invasion by ceasing to be a landlord. In this regard, the
Yee
court expressly affirmed the rule first announced in
Loretto
that “ ‘a landlord’s ability to rent his property may not be conditioned on his forfeiting the right to compensation for a physical occupation.’ ”
(Yee, supra,
According to the City, “the
Yee
Court rejected petitioners’ argument because, unlike
Loretto,
where the Court found a physical taking, the initial occupancy in
Yee
had been at the invitation of the property owner.” But the
Yee
court
did not
hold or intimate that government coercion is relevant only if it corresponds to the initial physical occupation of the premises. In fact, as noted above, the court acknowledged that a statute compelling a landlord to refrain in perpetuity from terminating a tenancy might constitute a physical taking.
(Yee, supra,
Nor does
Loretto
support the City’s contention that the coercion must correspond to the initial occupation. In that case, the court struck down a statute requiring landlords to permit installation of cable equipment on their
property.
(Loretto, supra,
Thus, contrary to the City’s contention, plaintiffs’ status as voluntary landlords does not preclude them from establishing that Proposition G, as applied to them,
We, of course, are not ruling that Proposition G in fact constitutes a physical taking, but only that, at this stage of the proceedings, such a possibility cannot be ruled out. Put another way, we conclude that the plaintiffs may be able to allege that Proposition G, ■ as applied to them, effects a per se physical taking of their property. To do so, they must allege facts establishing not only government-authorized coercion, but also permanent occupation of their rental property. Though alleging such a claim will be difficult, it is not—as the City contends and the trial court ruled—an impossible task.
D. Regulatory Takings Theories
As we have explained, regulatory takings cases consist of ad hoc inquiries. The two general tests we have extracted from this body of case law are interrelated, and are sometimes combined into one two-part test. (See, e.g.,
Kavanau, supra,
1. The governmental purpose
A property owner can prove that a regulation of his or her private property constitutes a taking by showing that the regulation does not
substantially advance
a legitimate state interest.
(Agins, supra,
The City contends that this “substantially advance” requirement is equivalent to the rational basis standard of review. We disagree. The United States Supreme Court has expressly stated that this standard is not the same as that “applied to due process or equal protection claims. . . . We have required that the regulation ‘substantially advance’ the ‘legitimate state interest’ sought to be achieved, [citation] not that ‘the State
“could rationally have
decided"’ that the measure adopted might achieve the State’s objective.’ ”
(Nollan, supra,
There is confusion among the courts as to how to apply the “substantially advance” requirement. Different levels of scrutiny may be appropriate depending on the type of regulation at issue.
(Santa Monica Beach, supra,
The City contends it is entitled to deferential review because Proposition G is a generally applicable rent control law. We disagree on both counts. First, Proposition G clearly is not a typical rent control law. It does not regulate rents or any other economic aspect of the landlord-tenant relationship. Rather, Proposition G precludes evictions from property the owner wishes to reclaim for personal use. As such, Proposition G directly implicates property owners’ possessory rights. Second, Proposition G is not “generally applicable,” as the City contends. For example, it does not apply to rental units in buildings constructed after June 1979, although it apparently does apply to single-family homes built before that date. Furthermore, owners who must comply with the Proposition G restrictions are not subject to identical treatment. For example, a landlord who owns a building by him or herself is assured of a place to live in his or her property. Co-owners do not enjoy that same right. Further, an owner who resides in his or her building сan evict a tenant from another unit in order to provide a home for a close family member. Nonresident owners do not enjoy that same right.
In our view, the governmental justification for enacting Proposition G should be closely scrutinized. It is not a straightforward, evenly applied regulation. It directly affects the possessory property rights of an apparently arbitrary category of property owners. The United States Supreme Court has cautioned that a regulation which affects a physical invasion of any degree merits “special” scrutiny.
(Loretto, supra,
In any event, regardless of the degree of deference to which the measure is entitled, this record does not establish that, as a matter of law, Proposition G substantially advances a legitimate government interest. Plaintiffs have not conceded that any such interest is served, and the City submitted no evidence in the lower court to show that the “substantially advance” requirement is satisfied. Indeed, in its memorandum in support of its demurrer, the City took the position that Proposition G “substantially advances a legitimate gоvernment interest on its face . . . .” But the City’s position was and is based on the mischaracterization of this regulation as rent control. In our view, Proposition G is not an ordinary rent control law; it is not a price or rate regulation. Proposition G restricts an owner’s right to use his or her property as a family home.
In its appellate brief, the City identifies three governmental interests: (1) maintaining a “reasonable balance” of owner-occupied and rental housing; (2) preserving “affordable” housing; and (3) avoiding displacement of low-income, elderly and disabled tenants from their homes. We agree that these goals are certainly legitimate. Courts have consistently recognized the state’s legitimate interest in providing and preserving affordable housing. (See, e.g.,
Leavenworth Properties
v.
City and County of San Francisco
(1987)
“The question here, however, concerns the means established by the local law purportedly to achieve th[ese] end[s]. In other words, can it be said that imposing the burdens of the [regulation] on the [property owners]
substantially
advances” one of the aims articulated by the City.
(Seawall, supra,
The City has not identified any evidence to support its claim that Proposition G achieves a “reasonable balance” between owner-occupied and rental housing. And plaintiffs argue no such balance is achieved because the regulation does not adequately take into account the property owner’s individual need or special circumstance. Plaintiffs allegations (which, of course, we must accept for purposes of this postdemurrer review) also suggest that the one-owner-occupancy-per-building restriction favors wealthier individuals who can afford to purchase a building on their own. Those individuals will always have access to a residential unit of some kind in their building.
As to its second goal, the City argues that, “[b]y preventing landlords from evicting their tenants for owner move-in, Proposition G ensures that the apartments of such tenants will remain part of the City’s affordable rental housing stock.” (Italics added.) But, as the City has acknowledged, one consequence of Proposition G is that, in order for more than one owner to live in the residential rental property, the entire property will have to be withdrawn from the rental market. This consequencе of Proposition G, which is demonstrated by the pleadings in this case, could conceivably result in a reduction of the City’s “rental housing stock.”
Nor does this record support the conclusion that, as a matter of law, Proposition G ensures that rental housing will be “affordable.” As we have already explained, Proposition G is not a price or rate regulation and thus cannot be routinely approved as “rent control.” The complaint’s allegations indicate that Proposition G may actually reduce the amount of affordable housing in San Francisco by, among other things, (1) preventing residents with moderate incomes from ever buying rental property in this City because of the financial consequences of the one-owner-occupancy-per-building restriction; (2) precluding property owners from providing housing to their children and other close relatives; and (3) unduly benefiting some high income tenants by granting them perpetual rights to occupy units that owners want to recover for personal use.
The City’s third goal offers only a partial justification for Proposition G. On its face, the tenant-protection restriction substantially advances the City’s goal of avoiding displacement of elderly and disabled tenants many of whom may have low incomes. However, this and other provisions of Proposition G may also have the effect of displacing elderly, ill, or disabled property owners and/or relatives of property owners who are desperately in need of a home. Furthermore, there is no evidence, nor even an argument advanced by the City, that this goal is advanced by the one-owner-occupancy-per-building restriction or the family occupancy restriction, which plaintiffs also challenge.
At this pleadings stage in the litigation, whether the restrictions imposed by Proposition G substantially advance legitimate state interests is still an open question.
Furthermore, even if the City does ultimately establish that Proposition G substantially advances legitimate state interests, plaintiffs could still show that this regulation constitutes a regulatory taking. In other words, government is not automatically excused from liability under takings clauses simply because it acts in “pursuit of an important public purpose.”
(Florida Rock Industries, Inc.
v.
U.S.
(Fed. Cir. 1994)
2. The balancing test
The takings clause is intended to preclude “Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”
(Armstrong v. United States
(1960)
In the present case, the allegations in the complaint implicate several relevant factors which support plaintiffs’ contention that Proposition G imposes a disproportionate burden on them by essentially requiring them to forfeit their own homes in order to create public housing.
When evaluating a regulatory takings claim it is appropriate to consider, among other things, the “character of the governmental
Another factor relevant to this inquiry is whether the regulation provides the property owner any benefits or rights that “ ‘mitigate whatever financial burdens the law has imposed.’ ”
(Kavanau, supra,
Furthermore, the burden imposed on all property owners subject to the Proposition G restrictions is clearly significant. “Under the traditional conception of property, the most important of the various rights of an owner is the right of possession which includes the right to exclude others
from occupying or using the space. [Citation.]”
(Seawall, supra,
The City offers us three grounds upon which, it contends, we can sustain the trial court’s conclusion that plaintiffs cannot establish a regulatory taking as a matter of law. First, the City argues that government conduct resulting in the abridgement of a possessory ownership right does not offend the takings clause unless the abridgment is so complete that it effectuates a per se physical taking. But the governing authority is to the contrary. “ ‘[W]hether the regulation ‘extinguishes] a fundamental attribute of ownership’ ” is clearly a relevant factor in a regulatory takings analysis.
(Kavanau, supra,
Second, the City argues that plaintiffs cannot establish that Proposition G is a regulatory taking because plaintiffs have not been denied all economically viable use of their property. But a regulation may effect a taking even though it
Many of the factors courts have traditionally used to evaluate regulatory takings claims focus on the economic impact of the regulation on the property owner. (See
ante,
fn. 9.) And the complaint in this case contains allegations that Proposition G imposes unfair economic hardships on certain property owners. The fact that Proposition G does not cause a complete economic property loss does not preclude these plaintiffs from establishing a regulatory taking. Indeed, “there are plainly a number of non-economic interests in land whose impairment will invite exceedingly close scrutiny under the Takings Clause.”
(Lucas, supra,
Third, the City contends that Proposition G cannot constitute a regulatory taking because it preserves the historic use of plaintiffs’ properties as
residential rental properties. Whether a regulation “affects the existing or traditional use of the property and thus interferes with the property owner’s ‘primary expectation’ ” is a relevant factor when evaluating a regulatory takings claim.
(Kavanau, supra,
In our view, all three of the City’s arguments are premised on a furida-mental misunderstanding of a regulatory takings analysis. Our state and federal Supreme Courts have both unequivocally advocated the ad hoc, factor-based approach for analyzing regulatory takings claims.
(Yee, supra,
3. The trial court’s role
In sustaining the City’s demurrer without leave to amend, the trial court did not undertake any substantive analysis regarding the unusual regulation at issue in this case and its impact on these plaintiffs. As we have explained, regulatory takings claims are subject to essentially ad hoc, factual inquiries. “But recourse to the facts hardly solves the basic problem at hand—there simply is no bright line dividing compensable from noncompensable exercises of the Government’s power when a regulatory imposition causes a partial loss to the property owner. What is necessary is a classic exercise of judicial balancing of competing values.”
(Florida Rock Industries, Inc. v. U.S., supra,
E. Conclusion
To summarize, the judgment must be reversed to the extent that it disposed of plaintiffs’ causes of action challenging the constitutionality of Proposition G. Plaintiffs’ allegations support their claim that Proposition G constitutes a regulatory taking. Furthermore, plaintiffs are entitled to the opportunity to amend their complaint to attempt to adequately allege that Proposition G effects a per se physical taking. Finally, since our conclusion that plaintiffs have alleged that Proposition G violatеs the takings clauses requires reversal, we need not address plaintiffs’ arguments that Proposition G violates other constitutional provisions as well.
IV. Disposition
The part of the judgment dismissing plaintiffs’ first four causes of action is reversed and this case is remanded to the trial court for further proceedings consistent with this opinion. Plaintiffs are awarded their costs on appeal.
Kline, P. J., and Lambden, J., concurred.
The petition of appellant City and County of San Francisco for review by the Supreme Court was denied September 26, 2001.
Notes
The City asks us to take judicial notice of certain “findings” by the City Board of Supervisors which led to the enactment of this temporary moratorium. The City also asks us to judicially notice the arguments in favor of Proposition G that were included in the City’s voter information pamphlet. This information is of only limited relevance to the issues on appeal. Furthermore, the City did not request the trial court to take judicial notice of this same information. The City’s request for judicial notice is, therefore, denied, as is a similar request by plaintiffs of, also, information not presented to the trial court.
(Vons Companies, Inc. v. Seabest Foods, Inc.
(1996)
An expressed intention of the one-owner-occupancy-per-building restriction is that the first unit recovered from a tenant pursuant to this provision is to be the only unit in the building that may ever be recovered from a tenant for purposes of owner occupancy. However, the regulation provides that if “a disability or other similar hardship” prevents a landlord from occupying the unit previously designated as the landlord unit, he or she may file a petition with the rent board or commence eviction proceedings with respect to a different unit. (§ 37.9, subd. (a)(8)(vi).)
This restriction does not apply (a) to a landlord who owns only one rental unit in a building or (b) when all of the units in the building owned by the landlord (other than the landlord unit) are occupied by tenants who would be protected from eviction by this restriction and the landlord seeks to recover possession of a unit to use as a residence for a qualified family member who is 60 years of age or older. (§ 37.9, subd. (i)(2).)
The lower court ultimately ruled that section 209.10 was invalid. The City appealed that ruling but has since abandoned that appeal. Thus, whether section 209.10 was valid is not an issue on appeal. Nevertheless, our summary of the pleadings and the lоwer court’s rulings necessarily contains some references to that provision because the plaintiffs’ theories challenging the two statutes overlapped.
The Ellis Act provides, among other things, that “[n]o public entity . . . shall. . . compel the owner of any residential real property to offer . . . accommodations in the property for rent or lease.” (Gov. Code, § 7060, subd. (a).) A property owner who exercises his or her Ellis Act right to not rent property must remove his or her entire property from the rental market. (Ibid.)
Even with respect to their takings claim, plaintiffs’ legal theories are not particularly well developed. Indeed, the City argues that plaintiffs did not actually allege that Proposition G effected a taking under the California Constitution and that their federal takings claim is, therefore, premature because plaintiffs did not “exhaust their state compensation remedy under the California Constitution.”
Plaintiffs repeatedly allege in their complaint that Proposition G violates the California Constitution, although they do not specifically reference its takings clause. Furthermore, plaintiffs included in their complaint a state law cause of action for inverse condemnation. To the extent a more precise allegation may have been required, the trial court would certainly have abused its discretion by denying plaintiffs the opportunity to cure what could be no more than a technical flaw in their pleadings.
The
Yee
court found that, since the challenged regulation did not on its face authorize a physical taking, the law should be “analyzed by engaging in the ‘essentially ad hoc factual inquiries’ necessary to determine whether a regulatory taking has occurred. [Citation.]”
(Yee, supra,
The complaint does not currently contain allegations that Proposition G fails to substantially advance a legitimate governmental purpose. To the extent such a theory should have been expressly alleged, plaintiffs should have been afforded the opportunity to amend their complaint.
Courts have identified a variety of potentially relevant factors, including: (1) “ ‘[t]he economic impact of the regulation on the claimant’ ”; (2) “ ‘the extent to which the regulation has interfered with distinct investment-backed expectations’ ”; (3) “ ‘the character of the governmental action’ ”; (4) “whether the regulation ‘interfere^] with interests that [are] sufficiently bound up with the reasonable expectations of the claimant to constitute “property” for Fifth Amendment purposes’ ”; (5) “whether the regulation affects the existing or traditional use of the property and thus interferes with the property owner’s ‘primary expectation’ ”; (6) “ ‘the nature of the State’s interest in the regulation’ [citations] and, particularly, whether the regulation is ‘reasonably necessary to the effectuation of a substantial public purpose’ ”; (7) “whether the property owner’s holding is limited to the specific interest the regulation abrogates or is broader”; (8) “whether the government is acquiring
‘resources to permit or facilitate uniquely public functions,’ such as government’s ‘entrepreneurial operations’ ”; (9) “whether the regulation ‘permit[s the property owner] ... to profit [and]... to obtain a “reasonable return” on . . . investment’ ”; (10) “whether the regulation provides the property owner benefits or rights that ‘mitigate whatever financial burdens the law has imposed’ ”; (11) “whether the regulation ‘prevent[s] the best use of [the] land’ ”; (12) “whether the regulation ‘extinguishes] a fundamental attribute of ownership’ ”; (13) “whether the government is demanding the property as a condition for the granting of a permit.”
(Kavanau, supra,