Lead Opinion
Opinion
In this case we consider whether a trial court properly sustained a demurrer to a complaint alleging that a city’s rent control law violates the
I. Statement of Facts
Petitioner Santa Monica Beach, Ltd. (SMB), alleged the following in its complaint for inverse condemnation and petition for writ of mandate, which we accept as true for purposes of assessing the complaint’s sufficiency to withstand a demurrer. (Quelimane Co. v. Stuart Title Guaranty Co. (1998)
In April 1979, the City of Santa Monica (the City) adopted a rent control charter amendment (hereinafter sometimes the Rent Control Law) and created an elected rent control board (Board) to regulate rentals. Among other things, the Rent Control Law requires that owners register each rental unit and pay annual registration fees to the Board, establishes maximum allowable rents, provides for annual general adjustments and individual adjustments of allowable rents, prohibits evictions except for specified reasons, and prescribes remedies for violations of its provisions.
The stated purpose of the Rent Control Law, as expressed in the preamble to the charter amendment, was as follows: “A growing shortage of housing units resulting in a low vacancy rate and rapidly rising rents exploiting this shortage constitute a serious housing problem affecting the lives of a substantial portion of those Santa Monica residents who reside in residential housing. In addition, speculation in the purchase and sale of existing residential housing units results in further rent increases. These conditions endanger the public health and welfare of Santa Monica tenants, especially the poor, minorities, students, young families, and senior citizens. The purpose of this Article, therefore, is to alleviate the hardship caused by this serious housing shortage by establishing a Rent Control Board empowered to regulate rentals in the City of Santa Monica so that rents will not be increased unreasonably and so that landlords will receive no more than a fair return.”
SMB alleges that in practice, however, rent control has been an agent of “gentrification” in Santa Monica. During the rent-controlled decade of the 1980’s, Santa Monica experienced a loss of 775 low-income-renter households, a decrease of nearly 12 percent. The number of low-income-renter
Concurrent with this exodus of economically disadvantaged renters under rent control, Santa Monica experienced a 37 percent increase in the proportion of households with very high incomes between 1980 and 1990. This population shift toward upper-income households occurred during a decade when the proportion of very-high-income households dropped by more than 8 percent in Los Angeles County as a whole.
Under rent control, housing in Santa Monica has become increasingly unavailable to young families. Between 1980 and 1990, the number of family households with children in Santa Monica fell by 1,299, a decline of more than 6 percent. No comparable city in Southern California without rent control lost family households over the decade of the 1980’s.
The impact of rent control has been especially harsh on young families headed by a mother with no spouse. The number of female-headed households with children under the age of 18 in Santa Monica fell by 593 between 1980 and 1990, a decrease of more than 27 percent, despite an increase in such households in Los Angeles County as a whole.
Under rent control, Santa Monica’s elderly population (age 65 or over) declined by 1.7 percent between 1980 and 1990, whereas the elderly population of Los Angeles County rose by more than 15 percent over the same decade. The elderly population increased over this period in every comparable city without rent control in Southern California.
In March 1992 SMB, the owner of a 12-unit residential rental property in the City filed a petition asking the Board for permission to increase its rents. To obtain permission, SMB had to prove that its property was producing less than a “fair return” under “a comparative Net Operating Income (NOI) analysis that compares the NOI of calendar year 1978 to that of calendar year 1991, the most recent year prior to the filing of’ SMB’s 1992 petition. In May, after an administrative hearing, the Board’s hearing examiner found that SMB’s operating expenses for the base year of 1978 were $14,879, but that SMB was not entitled to a rent increase. SMB appealed to the Board, without success.
After various modifications to the Rent Control Law not relevant here, SMB filed on March 30, 1993, a second petition with the Board, this time
SMB filed a combined complaint for inverse condemnation and petition for a writ of administrative mandate, naming the Board as defendant and respondent and contending that, as applied to SMB, the Rent Control Law constitutes a compensable regulatory taking of its property. In its inverse condemnation claim, SMB claims the Board has, by application of the Rent Control Law, violated SMB’s rights under the Fifth Amendment rights to the United States Constitution and its rights under article I, section 19 of the California Constitution.
Specifically, SMB claims the Rent Control Law does not meet the “substantial advancement” test articulated by the United States Supreme Court in takings cases, as discussed below, because the Rent Control Law fails “to substantially mitigate some social harm that would otherwise result from the [property] owner’s unregulated use of [its] property” and by “fail[ing] in practice to advance the specific purpose stated in the regulation. . . .Because [the Board’s] application of the [Rent Control Law] has reduced the availability of private rental housing in Santa Monica and has made it more difficult for low-income renters, young families, and the elderly to find affordable rental housing, the [Rent Control Law] is not substantially advancing its stated purpose of implementing the housing policies of the [C]ity with regard to these population groups. [<[] The . . . Board’s final determination regarding [SMB’s 1993 petition] does not substantially advance a legitimate governmental interest, nor is there any close nexus between the denial of [SMB’s] application for a fair rate of return on capital investments and any public harm that might result from [SMB’s] unregulated operation of [its] property, because unregulated use of [its] property by [SMB] would not have resulted in the problems allegedly addressed by the [Rent Control Law], i.e., a shortage of available housing for low-income renters, young families, and the elderly.”
Additional allegations within the inverse condemnation complaint charge the Board generally with depriving SMB of “essential attributes of ownership of its property, including the right to exclude others and the right to
For each and all of these reasons, SMB alleges, the Board’s application of the Rent Control Law to SMB’s property “comprises a regulatory taking of [SMB’s] property for public use without just compensation . . . . [f] A trial de novo is necessary to examine the constitutional issues in this case. The administrative record compiled by the Rent Board is inadequate for this purpose because the Rent Board does not conduct the kind of judicial proceedings needed to safeguard [SMB’s] fundamental right to due process of law or its right not to be deprived of its property without just compensation. . . .”
SMB’s petition for a writ of administrative mandate alleges that the Board acted without or in excess of its jurisdiction under the Rent Control Law and that the Board’s actions frustrated its ability to obtain a fair return from its rental property.
The Board demurred to the claim for inverse condemnation, contending that, as a matter of law, SMB could not prevail because there was a “rational basis” for the Rent Control Law. The trial court agreed and sustained the demurrer without leave to amend, leaving the administrative mandate petition to be heard at a later date. SMB filed a petition for a writ of mandate with the Court of Appeal, claiming the inverse condemnation action was inextricably related to its administrative mandate, and that the demurrer had been wrongly sustained.
The Court of Appeal issued an order to show cause and subsequently set aside the trial court’s judgment. It agreed with SMB that a heightened standard of scrutiny applied to Rent Control Law under Nollan v. California Coastal Comm’n (1987)
II. Discussion
A. Statute of Limitations
We begin by addressing the Board’s contention that SMB’s challenge to the imposition of the Rent Control Law is actually a facial challenge, and therefore barred by the statute of limitations. (See Sandpiper Mobile Village v. City of Carpinteria (1992)
We recognize that SMB’s unusual claim bears resemblance in a number of respects to a facial challenge—it seeks to invalidate the Rent Control Law, not merely its application against one landlord. Nonetheless, for present purposes, our concern is not to label SMB’s claim but to determine whether it is barred by the statute of limitations. Because SMB contends that its claim is derived from events occurring after the passage of the Rent Control Law,
B. The Inverse Condemnation Claim
We begin by recognizing the well-established case law of the United States Supreme Court and of this court holding that ordinary rent control statutes are generally constitutionally permissible exercises of governmental authority. In Pennell v. City of San Jose (1988)
Many have questioned the wisdom of rent control, and no consensus exists as to whether it is good public policy. (See, e.g., Epstein, Rent Control and the Theory of Efficient Regulation (1989) 54 Brook. L.Rev. 741, and various responses on pp. 1215-1304 of the same journal.) We emphasize that a decision affirming the constitutionality of a particular rent control law is not in any sense an endorsement of its soundness. (See Birkenfeld, supra,
We also emphasize that both the enactment and administration of rent control laws are subject to a number of constitutional constraints. Particular decisions of public agencies charged with administering rent
SMB’s inverse condemnation claim, however, is not based on the ground that the Rent Control Law is confiscatory, either structurally or as administratively applied. Rather, SMB alleges that it can show, through the use of census data, that the demographic groups that the Rent Control Law was allegedly supposed to favor have not in fact benefited from it.
SMB’s claim is based on its reading of relatively recent United States Supreme Court case law in the area of takings jurisprudence. Before examining its claim in more detail, we first state the basic principles to emerge from this body of law. In determining whether a government regulation of property works a taking of property under the Fifth Amendment to the United States Constitution, the United States Supreme Court has generally eschewed any “set formula” for determining whether a taking has occurred, preferring to engage in “ ‘essentially ad hoc, factual inquiries’ ” (Lucas v. South Carolina Coastal Council (1992)
In Nollan, supra,
This standard was further elucidated in Dolan v. City of Tigard (1994)
The Dolan court once again emphasized that conveyances such as were considered in that case were deserving of a greater scrutiny than other land use restrictions. Typical land use regulations such as zoning ordinances “differ in two relevant particulars from the present case. First, they involve essentially legislative determinations classifying entire areas of the city, whereas here the city made an adjudicative decision to condition petitioner’s application for a building permit on an individual parcel. Second, the conditions imposed were not simply a limitation on the use petitioner might make of her own parcel, but a requirement that she deed portions of the property to the city. . . . Under the well-settled doctrine of ‘unconstitutional conditions,’ the government may not require a person to give up a constitutional right—here the right to receive just compensation when property is taken for public use—in exchange for a discretionary benefit conferred by the government where the benefit sought has little or no relationship to the property.” (
We recognized these different levels of takings scrutiny in Ehrlich v. City of Culver City (1996)
Where does rent control fit within this scheme? It could be argued that rent control is essentially a species of price control rather than a land use regulation, and that the constitutional jurisprudence of price control governs ordinary rent control ordinances. (See Hutton Park Gardens v. Town Council (1975)
We need not decide whether the standard of review for rent control legislation is identical to the rational relationship test employed in other price control schemes. In light of the analysis reviewed above, we believe it is clear at least that the heightened intermediate scrutiny standard articulated in Nollan and Dolan does not apply in this case. Rather, the standard of review for generally applicable rent control laws must be at least as deferential as for generally applicable zoning laws and other legislative land use controls. Thus, the party challenging rent control must show “that it constitutes an arbitrary regulation of property rights.” (Dolan, supra,
The court also held that any takings challenge would be premature, because there was no showing of the actual impact of the “tenant hardship” provision of the San Jose ordinance. (Pennell, supra, 485 U.S. at pp. 10-11 [
In Yee v. City of Escondido (1992)
With this background in mind we turn to the present case. SMB’s complaint focuses on certain of the stated goals of rent control found in the preamble to the charter amendment—providing affordable housing for the poor, the elderly, and young families—and has alleged that rent control has failed to achieve these goals. As will appear below, these allegations, even if true, do not adequately state an inverse condemnation claim.
As the United States Supreme Court affirmed in Nollan, “a broad range of governmental purposes and regulations” are constitutionally valid under the takings clause. (Nollan, supra, 483 U.S. at pp. 834-835 [
SMB contends essentially that in considering the legitimate purposes of the Rent Control Law, we must confine ourselves to the stated purposes of that law. But even if that were true, there is no justification for SMB’s truncated reading of the law’s purposes. The charter amendment spoke of a housing shortage “resulting in a low vacancy rate and rapidly rising rents . . . affecting the lives of a substantial portion of those Santa Monica residents residing in residential housing. In addition, speculation in the purchase and sale of existing residential housing units results in further rent increases. These conditions endanger the public health and welfare of Santa Monica tenants, especially the poor, minorities, students, young families, and senior citizens. The purpose of this Article, therefore, is to alleviate the
Moreover, there is no constitutional requirement that the inquiry into whether the legislation substantially serves legitimate goals must be limited to stated goals, much less to only some of the stated goals. “Legislative bodies have broad scope to experiment with economic problems . . . .” (Ferguson v. Skrupa (1962)
Accordingly, the prevention of “ ‘excessive and unreasonable rent increases’ caused by the ‘growing shortage of and increasing demand for housing’ ” in the City (Pennell, supra,
Moreover, a rent control law, even if imperfect, may protect existing tenants, including the poor and elderly, from being displaced due to rising rents in a tight rental market. As the Supreme Court stated in upholding article XIII A of the California Constitution (Proposition 13) against an equal protection challenge brought by property owners who objected to the greatly disparate property tax burdens that provision had created: “[T]he State has a legitimate interest in local neighborhood preservation, continuity, and stability. [Citation.] The State therefore legitimately can decide to structure its tax system to discourage rapid turnover in ownership of homes and businesses, for example, in order to inhibit displacement of lower income families by the forces of gentrification . . . .” (Nordlinger v. Hahn (1992)
SMB purports to find support for its position that the legislation must be measured against stated purposes from the statement in Nollan, supra,
Furthermore, Nollan implies, and Dolan more explicitly states, that the standard of review for land use legislation is different from the standard of
SMB cites Chastleton Corporation v. Sinclair (1924)
That is not to say that a change in conditions may never justify the constitutional invalidation of a once valid law. But the circumstances for such invalidation are quite narrow. A quintessential example is presented by Skalko v. City of Sunnyvale (1939)
Thus, in Skalko, the court found changing conditions rendered the application of a zoning ordinance to a particular piece of property arbitrary and irrational. There is no comparable allegation in SMB’s complaint. Rather, SMB seeks to engage courts in the task of evaluating whether a piece of complex legislation has sufficiently measured up to its objectives to preserve its constitutional validity. Nothing in the United States Supreme Court’s recent jurisprudence indicates that it envisions such an activist role for the courts.
In reversing the Court of Appeal, we again emphasize that we are not considering the question whether rent control is good policy but rather
In sum, with rent control, as with most other such social and economic legislation, we leave to legislative bodies rather than the courts to evaluate whether the legislation has fallen so far short of its goals as to warrant repeal or amendment. Courts, on the other hand, retain the constitutional role of invalidating certain features and applications of rent control law that have or will produce confiscatory results. (See Kavanau, supra,
For all of the foregoing, we reverse the judgment of the Court of Appeal and remand with directions to reinstate the judgment of the trial court.
George, C. J., Kennard, J., and Werdegar, J., concurred.
Notes
The Board requests that we take judicial notice of the administrative record in this case, primarily to establish that the present action was brought 12 years after the enactment of the Rent Control Law. Because the timing of the suit is not directly relevant to the issues presented in this case, we decline to grant the request.
SMB in its briefing to this court argues for the first time that the broad constitutional issue of the validity of the Rent Control Law itself is not before us and that the inverse condemnation claim cannot be decided without a detailed case-specific factual inquiry. Yet the very nature of SMB’s inverse condemnation claim, and the manner in which SMB chose to litigate it in the superior court and the Court of Appeal, raises the broader constitutional issue. SMB does not allege with any particularity in its inverse condemnation claim that the Board’s decisions denied it a fair return, reserving such allegation for the administrative mandamus action, which is not before us. It is the larger constitutional issue of the role of the judiciary in determining whether a rent control law sufficiently advances a government interest to maintain its constitutional validity that is the crux of SMB’s inverse condemnation claim, and resolution of this issue was the basis of the Court of Appeal’s holding and our grant of review. It is this claim that we now address.
The reference is to Lochner v. New York (1905)
To be sure, there are circumstances in which some greater degree of judicial scrutiny of legislative factfinding is appropriate. This has been the case, for example, when there are fundamental constitutional rights at stake that can be curtailed only when the state demonstrates a compelling interest under the strictest judicial scrutiny. (See American Academy of Pediatrics v. Lungren (1997)
The present case, regarding as it does the extent to which the government can regulate rent increases, does not involve the sort of fundamental right that is subject to the highest judicial scrutiny. (See Pennell, supra,
Moreover, as previously discussed, courts will scrutinize the adjudicative decisions of local legislative bodies on statutory and constitutional grounds to determine if their findings are supported by substantial evidence (Topanga Assn. for a Scenic Community v. County of Los Angeles, supra, 11 Cal.3d at pp. 515-516) or, in the case of certain development permit decisions, whether the exactions required are roughly proportional to a legitimate governmental interest. (Dolan, supra,
Concurrence Opinion
The United States Constitution requires the government to pay just compensation when private property is taken for public use. (U.S. Const., 5th Amend.) One test for determining whether a property regulation effects a taking, which the United States Supreme Court first articulated about twenty years ago, is the following: Government action affecting the use of private property is a taking requiring just compensation if the action does not “substantially advance” a legitimate government purpose. (Agins v. City of Tiburon (1980)
The “substantially advance” test is a means-end test: It requires that the property regulation in question—the means by which the government is acting—advance the end or purpose the government is seeking to achieve through the regulation. The question here is: How “substantially” must rent control, the regulation at issue here, “advance” the governmental purpose that justifies it? To answer this question, the majority opinion, in which I concur, uses what might be termed a “functional” approach, looking for guidance to cases judging the constitutionality of two functionally similar categories of regulation: price controls and general land use regulations. It concludes that rent control is valid unless it is an arbitrary regulation of property rights. (Maj. opn., ante, at p. 967.) I write separately to explain an additional basis for reaching this conclusion. An examination of the historical origins and development of the high court’s “substantially advance” test shows that it originated outside of just compensation law in the realm of substantive due process and that, outside the narrow circumstances in which government exacts property as a condition of a development permit, the test is best understood as a rational relationship test.
I
As I have noted elsewhere, courts have long struggled with the difficult question of how to determine whether a particular government action is a taking requiring compensation under the just compensation clause. (Customer Co. v. City of Sacramento (1995)
The “substantially advance” test first entered just compensation law in 1980 in Agins v. City of Tiburon, supra,
More recently, in Nollan v. California Coastal Comm’n (1987)
Nollan and Dolan were cases in which property owners seeking development permits were adjudicatively required by the permitting authority to dedicate property easements to the government as a condition of a development permit. (Dolan, supra, 512 U.S. at pp. 379-380 [
The exchange of development permission for exaction avoids being a per se taking only because technically it is voluntary. Some limit, however, is needed to ensure that the exchange is a fair one; otherwise, these exchanges would become a mechanism for the government to obtain property without paying for it—“ ‘an out-and-out plan of extortion.’ ” (Nollan, supra,
Outside the Nollan/Dolan context, the United States Supreme Court has not yet had occasion to define how closely ends and means must be related for a government action to avoid being a taking. The rent control at issue here is outside the Nollan/Dolan context because it is a restriction on property use that is not imposed adjudicatively on only certain rental housing but instead is imposed legislatively on all rental housing in the municipality. Plaintiff landlord nonetheless seeks to have us extend the Nollan/ Dolan test to rent control. In their dissents, Justices Chin and Baxter criticize the majority for rejecting that view, and they assert that the majority has inappropriately conflated due process analysis with takings analysis by adopting instead a “rational relationship” means-end test, a test commonly used in substantive due process analysis. Although the dissents’ position is a plausible one if the words “substantially advance” are viewed in isolation, it collapses once the history of the “substantially advance” test is examined, for that test originated as a due process rational relationship test.
Before the United States Supreme Court’s decisions in Agins and Penn Central, there had been no means-end test in just compensation law. As authority for applying a means-end test to determine whether there has been a taking, both cases cited Nectow v. Cambridge (1928)
II
The United States Supreme Court in the late 19th and early 20th century was developing as one aspect of substantive due process its view—applicable to all exercises of state power depriving someone of life, liberty, or property—that due process required some reasonable relationship between the means chosen by government and the ends it seeks to achieve. As I noted earlier, the high court’s 1928 decision in Nectow, supra,
The United States Supreme Court used this substantive due process means-ends test, and the “substantial relation” language, to determine the validity of zoning regulations in due process cases, including Nectow, in which a property owner contended that the regulations were unreasonable and therefore invalid but made no claim that the regulations were a taking requiring just compensation. (Cusack Co. v. City of Chicago, (1917)
Ill
Means-end testing has remained a cornerstone of substantive due process since the high court’s 1928 decision in Nectow. In cases after Nectow, the court continued to use Nectow’s formulation as a general test of substantive due process review. In Nebbia v. New York (1934)
Nectow, and its predecessor Euclid, have continued to be understood as due process means-end relationship cases; more specifically, they have been consistently viewed as cases applying a rational relationship standard of due process review. (Nashville, C. & St. L. Ry. v. Walters (1935)
In 1980, the high court in Agins imported the substantive due process means-end test of Nectow into just compensation law. Citing Nectow, the Agins court stated that a zoning law that did not “substantially advance legitimate state interests” was a taking requiring just compensation. (Agins, supra,
Agins applied as a rational relationship test the “substantially advance” test it derived from Nectow. In Agins, the State of California had a policy requiring cities to develop open space plans; in response, a city enacted an ordinance limiting use of the five-acre property in question to residential housing at a density of one house per acre. Agins concluded with little difficulty and without a searching examination that the ordinance substantially advanced the legitimate government goal of reducing the “ill effects of urbanization” (Agins, supra,
In Schad v. Mount Ephraim (1981)
Even apart from this historical understanding of the “substantially advance” test as a rational relationship test, plaintiff here has failed to give persuasive reasons for extending the heightened scrutiny of Nollan and Dolan to other forms of land use regulation, like the rent control at issue here, in which the government does not make an adjudicative decision to exact property as a condition of a development permit. There is good reason for using heightened means-end scrutiny in the Nollan/Dolan context because of the danger of government engaging in extortion by permit. But outside of that context, there is no clear justification for it as a general requirement of just compensation law. (See Ehrlich v. City of Culver City (1996)
IV
As I have explained, outside the Nollan/Dolan context, I would adhere to the historical understanding of the “substantially advance” test as a rational relationship test. Nonetheless, as the differing positions held by members of this court in this case show, there are grounds for reasonable debate as to the meaning of that test in just compensation law outside the Nollan/Dolan context. Does it require only a rational relationship between the regulation and its purpose? Or a closer connection between means and ends, adapted from the Nollan/Dolan test? Or some other degree of connection between means and ends? I urge the high court to resolve this uncertainty.
This also raises a more fundamental question: Outside the Nollan/Dolan context, is a means-end test an appropriate measure of whether a regulatory taking has occurred? Means-end tests measure the degree to which the property regulation in question advances the purpose the government is seeking to achieve through the regulation. It may be questioned whether the
I note that recently Justice Kennedy of the United States Supreme Court has questioned the appropriateness of using a means-end test as the measure of whether a taking has occurred. (Eastern Enterprises v. Apfel (1998)
Commentators have likewise questioned the high court’s incorporation of due process means-end testing in just compensation law. (Echeverria & Dennis, The Takings Issue and the Due Process Clause: A Way Out of a Doctrinal Confusion (1993) 17 Vt. L.Rev. 695.) Outside the Nollan/Dolan context, should a means-end test be used to determine whether a taking has occurred, or instead should means-end testing remain within due process jurisprudence? Only the high court can resolve this question and, given the
Justice Chin’s dissent perceives a conflict in meaning between the “substantially advance” test that Agins adopted from Nectow and the rational relationship test of Nebbia v. New York, supra,
Dissenting Opinion
I respectfully dissent.
The majority err in holding that the complaint in this case does not state a cause of action for inverse condemnation. The error results in part from the mistaken notion that the separation of powers doctriné somehow precludes the plaintiff from introducing evidence in support of its takings clause claim that the stated purpose of the Santa Monica, rent control ordinance
In so doing, the majority address the wrong question, arrive at the wrong answer, and fail to differentiate between the distinct judicial roles of assessing the validity of the ordinance against a claim that it violates substantive due process and in determining whether the impact of the ordinance constitutes a taking of private property for which just compensation must be paid. In short, I agree wholeheartedly with Justice Chin’s conclusion that the majority “inappropriately conflates takings jurisprudence with due process jurisprudence.” (Dis. opn. of Chin, J., post, at p. 1018.) As a result they not only deny plaintiff the opportunity to present evidence necessary to support its inverse condemnation claim, but also leave California takings jurisprudence in a state of confusion.
A statute may be a proper exercise of the police power and yet create a taking for which just compensation must be paid under the takings clause of the Fifth Amendment to the United States Constitution.
The Supreme Court has consistently recognized the distinct nature of the due process and takings clause inquiries. “[H]owever ‘rational’ the exercise of the [police] power may be, that inquiry is quite separate from the question [of] whether the enactment takes property within the prohibition of the Fifth Amendment.” (United States v. Security Industrial Bank (1982)
Failure to recognize this distinction fuels the majority’s effort to ascertain what deference to accord to, or the level of judicial scrutiny to apply to, the Santa Monica rent control ordinance. That effort is misguided, for, as I explain below, the question of deference and/or level of judicial scrutiny simply does not arise in this takings clause claim.
As also will be discussed at greater length below, the majority’s reasoning rests on a series of faulty premises:
(1) That plaintiff seeks to invalidate the Santa Monica rent control ordinance. It does not. The complaint seeks a declaration that the ordinance effects an uncompensated taking of plaintiff’s property rights and seeks monetary compensation for the taking. If a taking is found, compensation is due even if the ordinance is valid.
(2) That recognizing a right to just compensation because the ordinance does not substantially advance its stated purpose would constitute a judicial repeal of the ordinance. Recognition that the imposition of rent controls on plaintiff’s property is a taking and awarding compensation therefor would not repeal the ordinance. It would instead constitute a proper exercise of a judicial power recognized since the decision of Marbury v. Madison (1803) 5 U.S. (1 Crunch) 137 [2 L.Ed. 15 ]—the power to construe, apply, and enforce rights guaranteed to all citizens by the United States Constitution.
*985 (3) That a takings clause claim for inverse condemnation may be rejected because the rent control ordinance has a rational basis and is not arbitrary and discriminatory. As Justice Chin observes, a takings clause claim for just compensation may not be rejected on that ground, which is an aspect of due process, not takings, analysis. Here, too, the majority address the wrong question and give the wrong answer. The takings clause has different and more stringent criteria than those applied under the majority’s attempt to morph the deferential due process rational basis test into a takings clause test.
Moreover, whether at the time the Santa Monica rent control ordinance was enacted in April 1979 it was reasonable for the enacting body to believe that the ordinance would substantially advance the legislative purpose is not the question posed by this 1995 complaint. The question is whether at the time the complaint was filed in 1995, after 16 years of implementation, the ordinance had, in fact, substantially advanced its stated purpose.
(4) That the “substantially advance” test enunciated by the United States Supreme Court need not be applied to the stated legislative purpose underlying the ordinance if the ordinance may advance some other, unstated, purpose. Again, the majority err in suggesting that the court may sanction the uncompensated taking brought about by the imposition of rent control if the Santa Monica ordinance substantially advances any government purpose the court imagines may have justified the regulation if the legislative body had thought of that purpose.
Once the faulty assumptions underlying the majority’s reasoning are eliminated and the issues actually raised in this case identified, it is apparent that the holding of the majority lacks a foundation in takings clause jurisprudence. The complaint does state a cause of action for inverse condemnation on plaintiff’s theory that the ordinance has not substantially advanced and does not presently substantially advance the purpose offered in justification for abridgment of the rights of the owners of rental properties.
The complaint also states facts sufficient to demonstrate plaintiff’s entitlement to compensation on a second theory—the ordinance goes “too far” both on its face and as applied to plaintiff’s property. In order to provide a stock of rental housing affordable to persons with low incomes, young families, minorities, and the elderly, as well as other Santa Monica renters, plaintiff and all owners of Santa Monica rental property are compelled to bear a burden—subsidizing rentals—that in fairness and justice should be borne by the general public. That being so, just compensation must be paid to the owners of rental properties to which the ordinance is applied.
No one can reasonably dispute that ensuring the availability of affordable housing for persons unable to pay market rate rents for clean, safe, and suitable housing is not only a proper, but also a laudable governmental purpose. However, the means by which a governmental entity achieves that purpose is circumscribed by not only the due process clause of the Fifth and Fourteenth Amendments to the United States Constitution, but also the takings clause of the Fifth Amendment which mandates that just compensation be paid when the government takes a private property right. My reasons for concluding that the complaint states a cause of action and that the judgment of the Court of Appeal should be affirmed follow in greater detail below.
The Inverse Condemnation Complaint
This mandamus action arises out of a ruling by the Los Angeles County Superior Court sustaining the demurrer of the Santa Monica Rent Control Board to a complaint in inverse condemnation seeking to recover “just compensation” from the board for a “taking” of plaintiffs property through application of the city’s rent control ordinance.
In ruling on the sufficiency of a complaint to withstand a demurrer, i.e., to state a cause of action, the court assumes the truth of all well-pleaded allegations. (Lazar v. Superior Court (1996)
Santa Monica Beach, Ltd., owns a 12-unit apartment building on Sixth Street in Santa Monica. Rental of those units is subject to the provisions of a rent control ordinance that has been in effect since 1979 when it was adopted as part of article XVIII, in an amendment to the Santa Monica City Charter. Pursuant to the rent control ordinance a rent board establishes maximum allowable rents, provides for annual general adjustments, and may permit individual adjustments of allowable rents. Leave of the board, which may only be granted if a property subject to the ordinance does not produce a fair rate of return, is necessary before a controlled property may be removed from the rental market by demolition, conversion, or any other means. Eviction of a tenant is permissible only if the tenant fails to pay rent, violates a covenant of tenancy other than one requiring surrender of the property, causes a nuisance or substantial damage, uses or permits use of the unit for unlawful purposes, has refused at the termination of a tenancy to execute a written extension, denies reasonable access to the landlord, at the end of a tenancy the person in possession is a subtenant not approved by the landlord, or the unit is to be occupied by a close relative of the landlord.
Article XVIII, section 1800, constitutes the “Statement of Purpose” of the rent control ordinance, stating in pertinent part, and as amended in 1984:
“A growing shortage of housing units resulting in a low vacancy rate and rapidly rising rents exploiting this shortage constitute a serious housing problem affecting the lives of a substantial portion of those Santa Monica residents who reside in residential housing. In addition, speculation in the*988 purchase and sale of existing residential housing units results in further rent increases. These conditions endanger the public health and welfare of Santa Monica tenants, especially the poor, minorities, students, young families, and senior citizens. The purpose of this Article, therefore, is to alleviate the hardship caused by this serious housing shortage by establishing a Rent Control Board empowered to regulate rentals in the City of Santa Monica so that rents will not be increased unreasonably and so that landlords will receive no more than a fair return.
“Through this Article, the city exercises its police power in order to address the serious housing problem recognized in the original enactment of this Rent Control Law in 1979 and still existing in 1984. The 1984 Amendment to the Rent Control Law is . . . intended to enable the Board to provide relief to persons facing particular hardship and to protect and increase the supply of affordable housing in the city. Termination or erosion of the protections of this Article would have serious disruptive consequences for persons in need of protection and the supply of affordable housing in the city.”
The rent board denied plaintiff’s March 27, 1992, application for a rent adjustment and on a subsequent March 30, 1993, application granted an increase of $3 per unit and temporary rent increases averaging $58 per month.
A fair reading of those allegations of the complaint and the rent control ordinance is that, but for the limits imposed under the rent control ordinance, plaintiff could receive higher, market rate, rents for its apartments.
The complaint next contends that the rent control ordinance violates plaintiff’s rights under the takings clause of the Fifth and Fourteenth Amendments to the United States Constitution and article I, section 19 of the California Constitution
From 1980 to the end of the decade, under rent control, the number of low-income-renter households decreased by 775, or 12 percent, while the number increased in every comparable city in Southern California that did not have rent control. The number of very-low-income households decreased by 285 during the decade. At the same time very-high-income households increased by 37 percent, although their number dropped in Los Angeles County as a whole.
During the decade of the 1980’s, the number of family households with children in Santa Monica fell by 1,299, a 6 percent decline, while there was no loss in comparable cities in Southern California without rent control. Female-headed households with children under 18 fell by 593, a 27 percent decrease, while the number increased in Los Angeles County as a whole.
The population of elderly in Santa Monica declined by 1.7 percent during the decade, while during the same period it increased in Los Angeles County by more than 15 percent, and it increased in comparable cities without rent control in Southern California.
Plaintiff asserted, on this basis, that denial of its application for a rent adjustment did not substantially advance a legitimate governmental interest and there was not a close nexus between the denial of the application for a fair rate of return on its capital investment and any public harm that might result from unregulated operation of the property. Unregulated use of the property would not have resulted in the problems Santa Monica sought to address through adoption of the rent control ordinance.
Plaintiff also alleged that even if the ordinance does substantially advance a proper governmental purpose, denial of its application seeking a fair rate of return had the effect of making application of the ordinance to its property “confiscatory.” Moreover, the ordinance has denied petitioner essential attributes of ownership of the property, including the right to exclude others and the right to determine the terms on which leasehold interests in plaintiff’s property will be alienated.
Arguing that for all of the above reasons the rent control board’s application of the ordinance to its property comprises a regulatory taking for public
Plaintiff’s inverse condemnation claim thus rested on three different theories under any of which it was entitled to just compensation for the regulatory taking of its right to unregulated use of its rental units:
1. After a decade of implementation the Santa Monica rent control ordinance not only failed to substantially advance the stated governmental purpose, it made the problem it sought to address worse. Under this theory, application of the ordinance to any property for which higher rent could be obtained absent regulation would constitute a taking for a public purpose for which just compensation must be paid.
2. Application of the ordinance to plaintiff’s property did not substantially advance the stated governmental purpose because there was no basis for concluding that unregulated rental of plaintiff’s apartments would contribute to the shortage of affordable rental units in Santa Monica. Therefore, plaintiff’s property has been taken for a public purpose and plaintiff is entitled to just compensation for the taking.
3. Because the rent adjustments allowed plaintiff by the board did not ensure a fair rate of return on investment, application of the ordinance to plaintiff’s property was confiscatory. This claim is not presently before the court. It should be resolved in the pending administrative mandamus action.
The superior court did not consider whether the ordinance on its face created a constitutionally impermissible taking without just compensation, but ruled that the complaint failed to state a cause of action for inverse condemnation on plaintiff’s theories. The superior court rejected plaintiff’s argument that Nollan v. California Coastal Comm’n (1987)
The Court of Appeal, reviewing the superior court order on petition for writ of mandate, disagreed with that reasoning and ordered that a peremptory writ of mandate issue commanding the superior court to set aside its order
Although whether on its face this ordinance exceeds the permissible scope of the police power could be resolved by the court without taking evidence, the question posed by plaintiff in the complaint is whether over time the ordinance has substantially advanced the legislative purpose. This question cannot be decided on demurrer. If plaintiff can prove that the rent control ordinance has not substantially advanced its purpose, or that application of the ordinance to its property does not substantially advance the purpose, the “compensable taking” element of a cause of action for inverse condemnation would be established. This is true notwithstanding that the city may be able to show that there was a rational basis for the law when it was adopted.
II
Price Control and Zoning
In their misguided attempt to identify a level of judicial scrutiny that will satisfy the takings clause, the majority suggest that price controls and zoning legislation are sufficiently analogous to rent control to warrant placement of these types of government action in a continuum of levels of judicial scrutiny. Again, they err. The price control and zoning standards to which they look are those developed in due process challenges to the validity of legislation, not takings clause claims for just compensation because property has been subjected to those laws. The level of judicial scrutiny accorded legislation subjected to due process challenges is irrelevant in a takings clause claim.
That regulation of prices other than rents is a proper exercise of the police . power is well established. This was recognized by the Supreme Court more
“When one becomes a member of society, he necessarily parts with some rights or privileges which, as an individual not affected by his relations to others, he might retain. ‘A body politic,’ as aptly defined in the preamble of the Constitution of Massachusetts, ‘is a social compact by which the whole people covenants with each citizen, and each citizen with the whole people, that all shall be governed by certain laws for the common good.’ This does not confer power on the whole people to control rights which are purely and exclusively private, [citation]; but it does authorize the establishment of laws requiring each citizen to so conduct himself, and so use his own property, as not unnecessarily to injure another. This is the very essence of government, and has found expression in the maxim sic utere tuo ut alienum non laedas. From this source comes the police powers, which, as was said by Mr. Chief Justice Taney in the License Cases,5 How. 583 , ‘are nothing more or less than the powers of government inherent in every sovereignty, . . . that is to say, . . . the power to govern men and things.’ Under these powers the government regulates the conduct of its citizens one towards another, and the manner in which each shall use his own property, when such regulation becomes necessary for the public good. In their exercise it has been customary in England from time immemorial, and in this country from its first colonization, to regulate ferries, common carriers, hackmen, bakers, millers, wharfingers, innkeepers, &c., and in so doing to fix a maximum of charge to be made for services rendered, accommodations furnished, and articles sold. To this day, statutes are to be found in many of the States upon some or all of these subjects; and we think it has never yet been successfully contended that such legislation came within any of the constitutional prohibitions against interference with private property. With the Fifth Amendment in force, Congress, in 1820 conferred power upon the city of Washington ‘to regulate ... the rates of wharfage at private wharves, ... the sweeping of chimneys, and to fix the rates of fees therefor, . . . and the weight and quality of bread,’ [citation]; and, in 1848, ‘to make all necessary regulations respecting hackney carriages and the rates of fare of the same, and the rates of hauling by cartmen, wagoners, carmen, and draymen, and the rates of commission of auctioneers,’ [citation].
“From this it is apparent that, down to the time of the adoption of the Fourteenth Amendment, it was not supposed that statutes regulating the use,*993 or even the price of the use, of private property necessarily deprived an owner of his property without due process of law. Under some circumstances they may, but not under all. The amendment does not change the law in this particular: it simply prevents the States from doing that which will operate as such a deprivation.” (94 U.S. at pp. 124-125.)
The court recognized in Munn v. Illinois, supra,
The court addressed exercise of the police power to regulate prices again in Nebbia v. New York (1934)
After an exhaustive survey of the areas of private rights theretofore held to be subject to regulation under the police power, the court turned to the New York statute before it, a law which fixed minimum prices for milk. The court found a proper governmental purpose—preventing demoralizing competitive conditions and unfair trade practices which reduced the income of producers below the cost of production. It then rejected an argument that price control was per se unreasonable and unconstitutional except as to business affected with a public interest, i.e., one in which the property is devoted to a purpose which the public as such might undertake, or one dependent on a public grant or franchise, or is bound to serve all comers—public utilities and/or
Retreating from the language in Munn which suggested that regulation of prices was justified only when the property had been devoted to a public use, the court held: “The statement that one has dedicated his property to a public use is . . . merely another way of saying that if one embarks in a business which public interest demands shall be regulated, he must know regulation will ensue.” (Nebbia v. New York, supra, 291 U.S. at p. 534 [
This continues to be the rule insofar as price controls in general are concerned. As the court acknowledged in Nebbia v. New York, supra,
Zoning laws, too, have long been upheld under the deferential, rational basis, level of judicial scrutiny applied in due process based challenges to economic and social legislation. Before a general zoning ordinance will be declared unconstitutional the court must conclude that the law is “ ‘clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.’ ” (Eastlake v. Forest City Enterprises, Inc. (1976)
There is no comparable level of judicial scrutiny when it is claimed that a zoning law takes property for which compensation must be paid, however. This is so because determining whether a zoning law brings about a compensable taking can be determined only after considering a variety of evidentiary factors. (Lucas v. South Carolina Coastal Council (1992)
Ill
Rent Control and the Takings Clause
The majority proceed on an assumption that it has also been settled that rent control does not bring about a compensable taking. Again they err. Neither the United States Supreme Court nor this court has held in a takings clause challenge that a rent control law like the Santa Monica ordinance is constitutionally permissible absent payment of just compensation. The United States Supreme Court has upheld rent control as an exercise of Congress’s war powers or to confront an emergency arising during or out of a world war. Neither the Supreme Court nor this court has ever applied contemporary takings clause jurisprudence to a peacetime rent control law of indefinite duration enacted simply to address a problem created by rising rents.
The Supreme Court first addressed takings clause challenges to the validity of rent control laws enacted as federal wartime emergency legislation. (See Block v. Hirsh (1921)
Block, the first of the decisions which are sometimes relied on in support of the proposition that rent control is constitutionally permissible, addressed the claim of a Washington, D.C., property owner that the Act of October 22, 1919 (41 Stat. 297, 301) was a constitutionally invalid attempt to authorize the taking of property not for public use and without due process of law insofar as it permitted a lessee to refuse to surrender the premises on expiration of the lease. The law, which was to expire in two years unless sooner repealed, gave the owner the right to retake the property for his own occupancy on thirty days’ notice, but the owner had not given that notice before seeking to recover possession. The statute included a declaration that the restrictions were made necessary “by emergencies growing out of the war, resulting in rental conditions in the District dangerous to the public health and burdensome to public officers, employees and accessories, and thereby embarrassing the Federal Government in the transaction of the public business.” (
The Supreme Court concluded that the circumstances were such as to clothe the rental of buildings in the District of Columbia with a public interest great enough to justify regulation, noting, however, that what may create that interest at one time may at others be purely a matter of private concern. At the time of this legislation, a “public exigency” justified “restricting property rights ... to a certain extent without compensation.” (Block, supra,
The court then considered whether the statute went “too far,” recognizing that “just as there comes a point at which the police power ceases and leaves only that of eminent domain, it may be conceded that regulations of the present sort pressed to a certain height might amount to a taking without due process of law. Martin v. District of Columbia [(1907)]
The high court next considered a challenge to rent control in the District of Columbia in Chastleton Corp. v. Sinclair (1924)
Subsequently, in New State Ice Co. v. Liebmann (1932)
During the Second World War, in Bowles, the Emergency Price Control Act of 1942 (56 Stat. 23, 50 U.S.C. Appen. (Former supp. II) § 901) was challenged as a constitutionally impermissible delegation of legislative authority and as a deprivation of property without due process. Congress had expressly invoked its war powers as authority for the legislation and that power was not challenged. The court concluded that the standards for fixing rents were sufficiently definite and accorded property owners due process, relying in part on Block. The court also stated: “Moreover, there would be no constitutional objection if Congress as a war emergency measure had itself fixed the maximum rents in these areas. We are not dealing here with a situation which involves a ‘taking’ of property. Wilson v. Brown, [
This broad language in Bowles was immediately qualified, however, by the court’s further observation: “We need not determine what constitutional limits there are to price-fixing legislation. Congress was dealing here with conditions created by activities resulting from a great war effort. [Citation.] A nation which can demand the lives of its men and women in the waging of that war is under no constitutional necessity of providing a system of price control on the domestic front which will assure each landlord a ‘fair return’ on his property.” (Bowles, supra,
In Woods the district court had enjoined enforcement of title II of the Housing and Rent Act of 1947 (61 Stat. 193, 196) on the ground that Congress’s power to regulate rent ended with a presidential proclamation terminating hostilities. The high court reversed, holding that the 1947 legislation was a valid exercise of the war power of Congress and rejected a claim that exemption of some classes of housing violated the Fifth Amendment.
Although the Supreme Court subsequently stated in Pennell v. San Jose (1988)
More recently the Supreme Court has abandoned the concept of property clothed with a public interest the use of which could be restricted through exercise of the police power without compensation, turning instead in Fifth Amendment cases to an ad hoc determination of whether, because a particular regulation goes too far, a compensable taking has occurred. Penn Central, supra,
The concept of compensable regulatory taking, hinted at in the early rent control cases, had been expressly recognized' earlier in Penna. Coal v. Mahon (1922)
This limitation on uncompensated taking was echoed in Armstrong v. United States (1960)
The court’s first attempt to establish guidelines for determining whether a land use regulation goes too far and thus becomes a compensable taking came in Penn Central, supra,
In Penn Central the court then made it clear that the ultimate purpose of balancing the factors it has identified as relevant in deciding if a land use regulation goes too far is to ensure that land use regulations are not used to compel individuals to assume burdens that should be borne by the public as a whole. “While this Court has recognized that the ‘Fifth Amendment’s guarantee . . . [is] designed to bar 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,
In Penn Central, the court identified two factors whose relevance had been recognized in earlier cases as important in determining whether application of a land use regulation constitutes a taking:
1. The economic impact of the regulation on the property owner, particularly the extent to which the regulation interferes with distinct investment-backed expectations.
2. The character of the governmental action—physical invasion is more readily found to be a taking than interference caused by a public program which adjusts the benefits and burdens of economic life to promote the common good. Restrictions designed to enhance the quality of life by preserving desirable aesthetic features and zoning laws were given as examples of laws which prohibit beneficial uses and may cause substantial individual harm, but nonetheless have been upheld as permissible because they promote the health, safety, morals, or general welfare of the public. (Penn Central, supra, 438 U.S. at pp. 125-129 [98 S.Ct. at pp. 2659-2661].)
Application of a landmarks preservation law to the Grand Central Terminal property in New York City was upheld because the law was substantially related to promotion of the general welfare, it permitted beneficial use of the property as it did not interfere with the existing use, it was not shown that all use of the air space above the terminal was prohibited, and the owner was granted transferable development rights which could be used to develop other properties.
The economic impact of the regulation, its interference with investment-backed expectations and the character of the governmental action are factors
Finally, regardless of the relative weight of these factors, a land use restriction will constitute a taking for which just compensation must be paid if it does not “ ‘substantially advance legitimate state interests.’ ” (Lucas v. South Carolina Coastal Council, supra,
This court has upheld local rent control, but only against due process based challenges. (See Fisher v. City of Berkeley (1984)
The assumption of the majority that just compensation need not be paid for the application of rent control to private property thus finds no support in the authorities on which they rely.
IV
Does This Complaint State Facts to Show That the Santa Monica Ordinance Has Not Substantially Advanced Legislative Goals?
The majority make no effort to address this crucial question, digressing instead into the effort to determine whether Nollan, supra,
The complaint in this action alleges facts which, if proven, will establish that the uncompensated taking of plaintiff’s property rights brought about by the Santa Monica rent control ordinance cannot be justified under the takings clause because, after a reasonable period of implementation, the ordinance has not substantially advanced the goals which justified the restrictions on plaintiff’s rights. Instead of preserving affordable housing for tenants unable to pay market rents, the ordinance has created a haven for tenants regardless of their ability to pay while decreasing the number of rental units occupied by tenants intended to be benefited.
The Santa Monica rent control ordinance has now been in effect for 20 years, a long enough period to evaluate whether it does, in fact, substantially advance its purpose. The majority nonetheless hold that the complaint does not state a cause of action and deny plaintiff the right to attempt to prove that the Santa Monica rent control ordinance has not preserved the supply of affordable rental housing for low-income tenants, families with children, the elderly, or other tenants in need of “affordable” rental housing.
The majority do so on the basis of their erroneous conclusion that a deferential standard of review is permissible, and in the erroneous belief that the complaint fails to state facts sufficient to support the claim that the ordinance has not substantially advanced a legitimate goal.
A. Deference.
Plaintiff’s claim that the Santa Monica ordinance has not substantially advanced the legislative purpose is not a facial attack on the Santa Monica ordinance. Nor is it a traditional “as applied” attack claiming that a newly enacted ordinance may not be applied to plaintiff’s property without compensation. Instead plaintiff assumes the initial validity of the law on its face and as applied, and claims that the ordinance has not substantially advanced the purpose the enacting body believed would justify restricting the rights of rental property owners. For purposes of analyzing the merits of this claim it is not necessary to pigeonhole this plaintiff’s claim as a “facial challenge” or an “as applied challenge” because, as I have suggested above, deference to the legislative judgment that the means selected in a land use regulation to achieve a public welfare goal will achieve that goal is not warranted in any takings clause claim.
Deference to the legislative body’s choice of means by which to achieve a public welfare goal is generally required not only to maintain proper balance under the- separation of powers doctrine, but also in recognition that a legislative body seeking a solution to problems affecting the public welfare must be afforded a reasonable opportunity to experiment with possible solutions. The reasons for and importance of judicial deference for this purpose are perhaps best expressed by Justice Brandeis, albeit in dissent, in New State Ice Co. v. Liebmann, supra,
When a claim for just compensation is made under the takings clause, however, deference is neither appropriate nor permitted. Under our system of government, the court, not the legislative body or the electorate, must determine whether governmental action impermissibly invades rights protected by the constitution. “As stated by this Court in West Virginia State Bd. of Educ. v. Barnette,
A claim based on the theory that just compensation is due because a rent control ordinance has not substantially advanced the legislative purpose advanced in justification of the resulting restriction of property owner’s rights is one of first impression in this court. It is not novel, however. The Supreme Court recognized that an owner of rent-controlled property may offer evidence to demonstrate that the circumstances which once justified imposition of rent control no longer do so in Chastleton Corp. v. Sinclair, supra,
It seems clear, therefore, that plaintiff may pursue its claim that the Santa Monica ordinance has not substantially advanced the legislative purpose and must be allowed to introduce evidence to support its claim. When plaintiff does so the evidence must be weighed by the trier of fact. There is no room for deference in this factual determination.
Nollan and Dolan confirm that the “substantially advance” test is not a standard of review, but a fact-based inquiry.
The “substantially advance” test thus establishes an evidentiary burden the government must carry in the trial court or administrative proceeding to justify application of a land use regulation to an individual parcel of property, not a standard of judicial review or level of judicial scrutiny. To the extent that a standard of review by an appellate court is implicated the law is settled. Because the claim involves taking a vested right in property the court must exercise its independent judgment on the evidence. (Halaco Engineering Co. v. South Central Coast Regional Com. (1986)
The takings clause permits no less as demonstrated by Nollan and Dolan where the court did not defer to legislative judgment in an “as applied” challenge and Agins in which it did not do so in a facial challenge to restrictions on property rights. Instead in Nollan, supra,
The majority are correct in holding that generally when a facial challenge to the validity of a statute is made on the ground that a legislative body has exceeded the proper scope of the police power, the role of the court is simply to determine whether (1) the. legislative body has identified the existence of a problem affecting the health, safety, or general welfare of the public, thus justifying exercise of the police power to regulate individual conduct, and (2) has selected means reasonably related to achieving the legislative goal. In those inquiries deference to the legislative body’s findings and judgment is proper. Deference is not appropriate or permitted when the statute is challenged as violative of the takings clause, however. As I have shown, Nollan, supra,
Moreover, the nature of the inquiry mandated by the takings clause precludes another aspect of the analysis by which the majority rejects plaintiff’s claim. When determining if the restriction on the property owner’s rights substantially advances the legislative goal, the inquiry of necessity requires that the stated goal of the legislative body be the object of the inquiry. The court may not, as the majority do, follow due process jurisprudence to uphold uncompensated application of a land use regulation on the ground that the regulation serves another purpose. When a law restricting property rights without affording compensation has a stated goal, the judiciary is under no compulsion and has no authority to uphold the continued denial of compensation on the basis that the law might serve another unstated legislative goal. Were that the rule, it would be an open invitation to judicial legislation, and the “substantially advance” test enunciated in Agins would be meaningless. Agins assumes that the legislative purpose to be advanced by a land use regulation is that contemplated by the body which enacted the regulation.
Additionally, even when a property regulation passes the “substantially advance” test, compensation may be required. In a challenge based on the takings clause the court must also independently determine whether the law goes too far. “The determination that governmental action constitutes a taking is, in essence, a determination that the public at large, rather than a single owner, must bear the burden of an exercise of state power in the public interest.” (Agins, supra,
Nowhere in the majority opinion is there a critical examination of whether, in light of the facts alleged, the Santa Monica rent control ordinance has substantially advanced the purpose offered by the legislative body in .justification of the restrictions the ordinance places on owners of rental property.
I conclude that the facts alleged in the complaint are sufficient to state a cause of action on the theory that the Santa Monica rent control ordinance has not substantially advanced its purpose, and, as discussed below, on the theory that it imposes on owners of rental property a burden that should be borne by the general public. The complaint does state á cause of action in inverse condemnation.
The majority’s conclusion that the complaint fails to state a cause of action because plaintiff does not allege that that the Santa Monica ordinance has failed to substantially advance the broad legislative purpose of protecting all tenants of rental property also lacks merit. If plaintiff can show that the principal goal of the legislation—preserving affordable housing for low-income tenants, minorities, families with children, and the elderly—has not been met, it cannot be said that the law has substantially advanced the legislative purpose simply because some tenants now benefit.
As noted above, the plaintiff here does not seek to invalidate the Santa Monica ordinance. It seeks only just compensation for application of the ordinance to its property. A holding that compensation must be paid would not repeal the ordinance.
Moreover, a land use regulation which has a legitimate governmental purpose may be valid notwithstanding a conclusion that compensation must be paid because the regulation goes too far. The property may be taken or the property right restricted under the regulation, but just compensation must be paid when the regulation is applied.
This is so because the takings clause does not bar a governmental taking of private property. (First Lutheran Church v. Los Angeles County, supra,
Assuming arguendo that the complaint does seek invalidation of the ordinance or that invalidation would be the inevitable result of finding that it has not substantially advanced its purpose, there would be no basis for the majority’s concern that judicial recognition that the rent control ordinance takes property without just compensation would be an impermissible or unprecendented judicial repeal of the ordinance.
The majority position reflects an erroneous view of the proper role of the judiciary. Reviewing legislation to ensure that the law does not offend the Constitution has been recognized as a proper exercise of the judicial role for almost 200 years, since Marbury v. Madison, supra,
This duty is not confined to assessing the constitutional validity of legislation or its application at the time of its enactment. The United States Supreme Court has rejected the majority’s restrictive view of the judicial role, one which fails to acknowledge the power and duty of the court to reconsider the validity of a law in light of actual experience with its operation. The high court did so in Chastleton Corp. v. Sinclair, supra,
The majority dismiss Chastleton, supra,
The Chastleton rule is neither suspect or circumscribed in the manner suggested by the majority. Abie State Bank v. Bryan (1931)
This court, too, has recognized that the initial validity of a statute does not preclude a subsequent challenge to its continued validity. “[/]« the absence of a constitutional objection . . . the courts have no right to declare a statute obsolete by reason of a supervening change in the conditions under which it was enacted.” (Palermo v. Stockton Theatres, Inc. (1948)
Skalko v. City of Sunnyvale (1939)
Contrary to the majority, I conclude that the same rule must apply when a statute that was a valid exercise of the police power when enacted, because it was reasonably designed to achieve a proper governmental purpose, but would otherwise impermissibly infringe on private property rights, is shown after a reasonable period of implementation to fail to achieve that purpose. Although Skalko was an “as applied” challenge to the continued validity of the zoning ordinance, there is no reason that the rule should not be equally applicable to a challenge like this to the continued application, without just compensation, of a rent control ordinance that does not achieve the legislative purpose that justified it.
Plaintiff has brought such a challenge. It has alleged facts to support its claim that the Santa Monica rent control ordinance has not achieved the legislative purpose that justified it. If so, just compensation must be paid if the law is to continue to be applied. I find it remarkable that the majority justify their refusal to follow Chastleton and Skalko to enforce the takings clause on the ground that carrying out the court’s constitutional duty would force the court into an activist role. Two centuries of jurisprudence since Marbury v. Madison, supra, 5 U.S. (1 Crunch) 137, have escaped notice. Apparently questions of first impression will no longer be entertained lest their resolution propel the court into an activist role.
The Complaint Also States Facts to Show That the Santa Monica Rent Control Ordinance Goes “Too Far”
Rent control is not simply a species of price control subject to a due process-type analysis like that undertaken by the majority. The analytical focus in assessing whether rent control constitutes a taking for which the takings clause of the Fifth Amendment mandates just compensation must be directed to the means by which rent control accomplishes its purpose. 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. It depresses the value of the rent-controlled property. Under a scheme like that before the court the tenant is given the right to occupy the owner’s property for an indefinite period. Finally, except to the extent it has been superseded by state law (see Gov. Code, § 7060 et seq.), the Santa Monica ordinance restricts the ability of the owner to turn the property to other uses.
Even when the public purpose of rent control, that of ensuring a supply of affordable housing, is achieved, the property owner does not receive a reciprocal benefit corresponding to or justifying the restriction on the owner’s property rights. Thus, the property owner is forced to bear the burden of providing affordable rental housing to those tenants unable to pay market rents, a burden that in justice should be borne by the community as a whole. This burden is not imposed on the property owner because rent control is the only or even the best means of ensuring affordable housing. Governmental rent subsidies and/or government assistance in creating affordable housing through new construction or rehabilitation of existing, underutilized structures can achieve the same end while better ensuring that the low-cost housing thereby created is occupied by persons who most need assistance with rent. When a city resorts to those alternatives, the public bears the burden as the cost is shared by all through taxes. A city which opts instead for rent control to achieve its purpose puts what should be recognized and assumed as a public burden on the owner of rental property.
None of this is true of other forms of price control. While they, too, restrict an investor’s right to maximize the return on the investment, they do not control the use or disposition of the property in which the investment is made. No individual is given the right to use property owned by another. Under price control the owner may destroy and/or turn the property that generates the controlled item to other uses. No individual is directly subsidized by the price restriction and the public as a whole, not solely the
The majority not only abdicate the judicial role by refusing to assess whether the Santa Monica ordinance has substantially advanced its declared purpose, they also fail to recognize the court’s duty to assess whether the various restrictions the Santa Monica ordinance has imposed on the owners of rental property in using that property go too far by imposing on owners of rental property the burden of subsidizing tenants.
The complaint in this action states facts to establish a taking without payment of just compensation to owners of rental property in violation of the takings clause on this ground. The Santa Monica rent control ordinance causes a taking for which compensation must be paid because it imposes on owners of rental property a burden that in fairness and justice should be borne by the public as a whole. The ordinance compels the owners of rental property to subsidize the housing costs of their tenants, denies owners the option of turning the property to other uses, and invests the tenants with lifetime occupancy rights—all for the purpose of providing a supply of “affordable” rental housing for tenants.
For those reasons the Santa Monica ordinance does not withstand scrutiny under the standards by which a court determines whether a land use regulation goes too far. Regardless of how the factors the Supreme Court has indicated are relevant to that determination are weighed, the law cannot satisfy the ultimate test—does it impose on owners of rental property a burden that in justice and fairness should be borne by the public as a whole. Santa Monica may not compel the owners of grocery stores to subsidize their needy customers. Subsidizing rent or other necessities of life for persons in need of financial assistance is a public responsibility to be financed through general tax revenues. It is not an obligation of owners of rental property. The city has no right to shift the burden of subsidizing housing to the owners of rental property.
Application of the Penn Central and “reciprocity of advantage” factors leads to the same conclusion—the Santa Monica rent control ordinance goes too far. The ordinance has a significant economic impact on a property owner, not only through devaluation of the controlled property, but also in compelling the owner to forego market rate rental income. In addition to taking from the owner the right to have rents determined by market forces,
The character of the governmental action—controlling rent in order to forestall excessive and exorbitant rent increases—may have a proper governmental purpose insofar as it assists persons unable to afford safe and decent housing, but to achieve that purpose the law requires private property owners to subsidize their tenants. That is a burden that in fairness and justice should be borne by the community as a whole. “[Rjent control obviates the need to put public money behind public measures.” (Jones, Confiscation: A Rationale of the Law of Takings (1995) 24 Hofstra L.Rev. 1, 84.) And, as noted above, the Santa Monica ordinance compels owners of rental property to subsidize even the wealthy.
Finally, there is no “reciprocity of advantage” whatsoever in being subject to the Santa Monica rent control ordinance. The community benefits because Santa Monica is able to provide “affordable” housing without using general tax revenues to do so. This is not comparable to the community benefit generated by zoning laws and similar land use restrictions which enhance the value of many, if not most, properties and protect the quality of life for all residents, however. Under the Santa Monica ordinance the benefits all flow one way, to the tenant who is subsidized and the taxpayers who are relieved of the burden of providing affordable housing through general tax revenues. The owner of rental property, on the other hand, receives no benefit from the rent control ordinance and the value of the rent-controlled property declines.
“The traditional manner in which American government has met the problem of those who cannot pay reasonable prices for privately sold necessities—a problem caused by the society at large—has been the distribution to such persons of funds raised from the public at large through taxes, either in cash (welfare payments) or in goods (public housing, publicly subsidized housing, and food stamps). Unless we are to abandon the guiding principle of the Takings Clause that ‘public burdens . . . should be borne by the public as a whole,’ Armstrong,
I would affirm the judgment of the Court of Appeal.
Rent control in Santa Monica is imposed under article XVIII, an amendment to the Santa Monica City Charter. Because article XVIII has the effect of a city ordinance, that term is used here for convenience.
As relevant here, the Fifth Amendment provides that no person shall “be deprived of. . . property, without due process of law; nor shall private property be taken for public use without just compensation.” The latter provision is commonly referred to as the “takings clause.”
The complaint states a cause of action on a third ground—the Santa Monica rent control ordinance is not a valid exercise of the police power. There is no legitimate governmental interest in granting rent subsidies, through rent control, to tenants able to afford market rate rentals.
Although this is not a theory of relief identified by plaintiff in its complaint, the law is well settled that a complaint must be upheld against a demurrer if it states a cause of action on any theory. (American Airlines, Inc. v. County of San Mateo (1996)
Nonetheless, since plaintiff has limited its challenge to one under the takings clause, I shall not pursue this theory further than to comment that the demographics of Santa Monica suggest that the benefits of rent control flow directly to persons who are able to afford market rate rents. Presently the median family income in Santa Monica is $51,085, and the per capita income of its residents is $29,134. More than 19 percent of households have income of $75,000 or more and over 15 percent of households have income between $50,000 to $74,999. Forty-three percent of residents over 25 years of age have bachelor’s degrees or higher. In 1989 only 5.7 percent of families and 9.1 percent of persons over 65 years of age had incomes below the poverty level. Only 4.8 percent of households received public assistance. (U.S. Bureau of the Census, County and City Data Book: 1994, pp. 690-691.)
Plaintiff has challenged that action in a petition for writ of (administrative) mandamus joined with the instant complaint for inverse condemnation that is still pending in the superior court.
California Constitution, article I, section 19, provides in pertinent part: “Private property may be taken or damaged for public use only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner.”
The Fifth Amendment is applicable to the states through incorporation into the Fourteenth Amendment. (Webb’s Fabulous Pharmacies, Inc. v. Beckwith (1980)
Wilson v. Brown (Emer.Ct.App. 1943)
I am not alone in this conclusion. (See Radford, Why Rent Control Is a Regulatory Taking (1995) 6 Fordham Envtl. L.J. 755. (Radford); Stout, Making Room at the Inn: Rent Control as a Regulatory Taking (1990) 38 Wash. U. J. Urb. & Contemp. L. 305.)
The petitioners in Yee v. Escondido (1992)
In Lucas v. South Carolina Coastal Council, supra,
To the extent that this holding is based on a perceived inadequacy of the census data to support the claim, the majority again err. The plaintiff need only allege facts. (Code Civ. Proc., § 425.10, subd. (a).) All that is necessary is that the pleading as a whole apprise the defendant of the factual basis of the claim, (Jackson v. Superior Court (1994)
The majority’s willingness to defer to legislative judgment in this case is curious. In Professional Engineers v. Department of Transportation (1997)
The popular view that property rights receive a lesser degree of constitutional protection because they are not “fundamental” is itself suspect. Protection against taking without due process or just compensation has been accorded to property rights under the United States Constitution since 1791 when the Fifth Amendment was ratified as part of the Bill of Rights. The same protections have existed in California since this state joined the Union in 1850, set out in the Declaration of Rights (art. I) of both the 1849 and the 1879 California Constitutions. Nothing in either the federal or the state Constitution suggests an understanding that property rights are inferior to other rights accorded constitutional protection or that the drafters did not consider property rights as “fundamental” as the other rights sought to be protected. Indeed, the tenor of the time suggests otherwise. (See Calder v. Bull (1798)
Nonetheless, a judicially created hierarchy has relegated property rights to a second class status which, it is claimed, justifies a distinction between property rights and “fundamental” rights when the validity of legislation impinging on constitutional rights is called into question. Although constitutionally unsupportable, this distinction persists in decisions of this court and the United States Supreme Court and underlies much of the reasoning and analysis of the majority.
In my view the right to just compensation for property taken by the government is very fundamental. Be that as it may, however, a claim for jqst compensation made under the takings clause as construed in Agins, and applied in Nollan and Dolan, does require specific
It might not be inappropriate to take judicial notice that tenants well able to afford market rents continue to occupy rent-controlled apartments in Manhattan for their lifetimes, paying only a few hundred dollars for apartments that would rent for thousands in a free market. In some cities, including Santa Monica, would-be tenants pay thousands of dollars in “key money” to landlords for the right to rent desirable units, agreeing also to make all repairs, knowing that once they become tenants they will not have to pay market rent and cannot be evicted. With regard to the impact of rent control in Santa Monica in particular, see
When rent control becomes this perverted, it can hardly be said that it has substantially advanced its purpose.
Moreover, empirical studies of rent control in several United States cities, including Santa Monica, have shown that far from mitigating the shortage of affordable housing, in rent-controlled cities the supply of affordable housing has been reduced, harsh costs have been imposed on the groups the Santa Monica ordinance particularly seeks to protect, and both the quantity and quality of rental housing in those cities has decreased. (See Radford, supra, 6 Fordham Envtl. LJ. at pp. 669-770, and authorities cited.) The author observes: “A sizable body of research suggests that rent control not only reduces the available stock of affordable housing, but also redistributes this dwindling supply regressively within the population of renters, [¶]In California, rent control has tended to be adopted in cities with relatively wealthy electorates. The demographic evidence has never supported the claim that rent control was adopted in these cities to ease the burdens of the poor. Instead . . . ‘the major beneficiary of regulatory controls in each case was (and still is) a population that is firmly entrenched in the middle class.’ ” (Id. at pp. 770-771, fns. omitted.)
The assumption of the majority that the political process is adequate to correct any injustice to owners of rental property subject to rent control reflects a startling naivete for a court that sits in a rent-controlled city in which a substantial majority of voters are renters. It is axiomatic, of course, that the protections embodied in the Bill of Rights exist to ensure that majoritarian preference will not suffice to deny citizens those rights. “The sovereignty of the people is itself subject to those constitutional limitations which have been duly adopted and remain unrepealed.” (Hunter v. Erickson (1969)
Dissenting Opinion
The majority, in analyzing this case, inappropriately conflates takings jurisprudence with due process jurisprudence, thus undoing much of our effort in Kavanau v. Santa Monica Rent Control Bd. (1997)
The due process clauses of the state and federal Constitutions guarantee property owners “due process of law” when the state “deprive[s] [them] of . . . property.” (U.S. Const., 14th Amend., § 1; Cal. Const., art. I, §§ 7, 15.) On the other hand, the takings clauses of the state and federal Constitutions guarantee property owners “just compensation” when their property is “taken for public use.” (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19.) Although these constitutional provisions are facially similar, they limit the legislative power of government in different ways, and they have given rise to two separate, though sometimes overlapping, bodies of law.
Among other things, the due process guaranty prohibits regulations that are “arbitrary” or “discriminatory” or lacking “a reasonable relation to a proper legislative purpose.” (Nebbia v. New York (1934)
The formulations applicable under the takings clause are, by comparison, quite different. Recent United States Supreme Court decisions emphasize a two-part analysis that focuses on the regulation’s economic effect and the government’s purpose. (Yee v. Escondido (1992)
We as judges write judicial opinions and articulate legal standards because we believe that words, though imperfect, have the power to convey objective meaning. And if words have that power, then a requirement that a law
True, the majority does not actually take the final step of expressly equating the “substantially advance” standard with the rational basis test. But it does almost the same thing when it declares that rent control constitutes a taking only if it is “arbitrary.” (Maj. opn., ante, at pp. 967, 972.) I fail to see a practical difference between the majority’s “rent control may not be arbitrary” rule and the rational basis test. If a law is not arbitrary, it is rational; if it is rational, it is not arbitrary. Thus, not surprisingly, due process cases frequently use the term “arbitrary” as a synonym for the lack of a rational basis. (See, e.g., Carolene Products Co. v. U.S. (1944)
In Nollan, however, the high court unambiguously affirmed that the “substantially advance” standard is distinct from the rational basis test. (Nollan, supra,
The majority cites footnote 8 in Dolan, supra,
Justice Stevens argued that the burden of proof ought to rest on the party challenging the regulation, not on the governmental entity defending it.
In sum, the court’s parenthetical discussion in Dolan of the burden of proof in due process cases cannot fairly be read as stating the proper standard applicable in takings cases.
I do not advocate a return to the era of Lochner v. New York (1905)
The majority decries as “novel” (maj. opn., ante, at p. 963) and “activist” (id. at p. 973) “[t]he notion that a court may invalidate legislation that it
As a result of our decisions interpreting the privacy clause of the state Constitution (see, e.g., American Academy of Pediatrics v. Lungren (1997)
The trial plaintiff seeks in this case is no more novel than the trial we approved in American Academy. Indeed, under the takings clause, the state does not face the difficult task that it faced in American Academy of proving that a regulation serves a compelling interest justifying an intrusion on
Far from being “novel” (maj. opn., ante, at p. 963) or “activist” (id. at p. 973), this rule simply represents the unremarkable conclusion that, if a regulation deprives someone of private property without substantially advancing its purpose, the government should pay compensation. In most cases, an economic regulation would quite obviously advance at least one of its purposes. Injunctions prohibiting enforcement of the regulation would not issue, and litigation would come to a quick and inexpensive conclusion by way of a defense motion for summary judgment. If a case did go to trial, then the regulatory body would likely have no difficulty demonstrating the effectiveness of the economic regulation. And, if the regulatory body did have difficulty, it should be wondering about the wisdom of its apparently failed regulatory policy, not wasting its resources on litigation.
Plaintiff argues in its complaint that the Santa Monica rent control law does not substantially advance its stated purpose of helping “tenants, especially the poor, minorities, students, young families, and senior citizens” overcome “the hardship caused by [a] serious housing shortage.” In support of its argument, plaintiff alleges recent demographic changes in Santa Monica that suggest the law may have failed.
If we allow this case to go to trial, plaintiff will have a difficult time proving its claims. Many factors other than rent control may have caused or contributed to the demographic changes in Santa Monica that plaintiff alleges. Rent control may have slowed these changes and advanced its stated purposes in that way. Also, the long-term effects of rent control may not yet have fully manifested. Finally, at the very least, rent control in Santa Monica has presumably benefited tenants who were already in their apartments when it began and who have remained there. The decision to benefit one constituency over another—for example, to benefit existing tenants by preserving their low rents at the expense of prospective tenants who cannot find housing—is a policy decision that a legislative body is generally free to make. (Schnuck v. City of Santa Monica (9th Cir. 1991)
Even if we are skeptical about plaintiff’s ability to prove its case, I believe it should have a chance to try. Moreover, we should not require plaintiff to prove what is tantamount to a due process violation when it has brought a takings case. Accordingly, I dissent.
Dissenting Opinion
J., Dissenting. laintiff seeks an opportunity to prove its claim that Santa Monica’s rent control ordinance violates the Fifth Amendment of the United States Constitution. If the standards enunciated by the Supreme Court in Nollan v. California Coastal Comm’n (1987)
Out of the conviction that more than a decade of reinvigorated takings jurisprudence has changed nothing, the majority concludes the rational basis test is still the takings clause standard. On that basis alone, the majority refuses to grant plaintiff the chance to prove its case. According to its reasoning, not only does the takings clause not require Santa Monica to demonstrate a reasonable “fit” or “proportional relationship” between the ordinance’s restrictions on rental property and the ends it is said to further, it is sufficient to suppose the ordinance “substantially advances” those ends. The Fifth Amendment, the majority decides, requires no more.
The majority is wrong. Arbitrary government actions which infringe property interests cannot be saved from constitutional infirmity by the
And it is this critical assessment of fairness—variously described as “proportionality,” “cost spreading,” “means-ends,” or “reciprocity of advantage”—which die majority declines to undertake when it invokes the rational basis test to insulate Santa Monica’s rent control ordinance from challenge.
I.
The Logical Limits of Judicial Deference
Judicial review is properly conceived in narrow terms. It is not a license to supersede the exercise of power by a coordinate branch which acts well within constitutional boundaries. Thus, I agree with the majority that it is generally improper for us to put legislation on trial. (Maj. opn., ante, at pp. 963, 973.) “[T]he proper course is to recognize that a [legislative body] can do whatever it sees fit to do unless it is restrained by some express prohibition in the Constitution of the United States or of the State, and that Courts should be careful not to extend such prohibitions beyond their obvious meaning by reading into them conceptions of public policy that the particular Court may happen to entertain.”
The majority’s call to deference thus rests on an unspoken and critical assumption: that property merits only an inferior level of protection. That conclusion, a historical artifact of the demise of the Lochner era,
Under the Fifth Amendment of the United States Constitution no person may be “deprived of life, liberty, or property without due process of law” and private property may not be “taken for public use without just compensation.” The Fourteenth Amendment contains a virtually identical clause. (Cf. Cal. Const., art. I, § 7.)
Nothing in the text or structure of either provision suggests an infringement of a property interest ought to be accorded greater deference than a restriction on a liberty interest. Economic freedoms are no different from other freedoms protected by the Constitution. “[I]t would have seemed a strange anomaly to those who penned the words in the Fifth [Amendment] to learn that they constituted severer restrictions as to Liberty than Property .... I can see no more persuasive reason for supposing that a legislature is a priori less qualified to choose between ‘personal’ than between economic values; and there have been strong protests, to me unanswerable, that there is no constitutional basis for asserting a larger measure of judicial supervision over the first than over the second.” (Hand, The Bill of Rights (1960) pp. 50-51; see also Dolan, supra,
Indeed, the ownership of property is itself an aspect of liberty. “Property does not have rights. People have rights. The right to enjoy property without unlawful deprivation, no less than the right to speak or the right to travel, is in truth a ‘personal’ right .... [A] fundamental interdependence exists between the personal right to liberty and the personal right [to] property. Neither could have meaning without the other. That rights in property are basic civil rights has long been recognized. J. Locke, Of Civil Government 82-85 (1924) . . . .” (Lynch v. Household Finance Corp. (1972)
Nevertheless, in the aftermath of Lochner and its progeny, the federal high court articulated such a hierarchy, relegating economic rights to a decidedly inferior status. This has resulted in a judicial review not merely deferential but actually nonexistent. The rational basis test—a standard of review which allows legislative action to stand if the court can hypothesize any perfunctory justification for it—is as bad in its own way as substantive due process. Neither approach finds support in the constitutional text.
n.
The Revival of Meaningful Review
In the takings arena, at least, the high court has moved to reclaim some of the ceded territory by imposing a heightened level of scrutiny. There are traces in Nollan suggesting a renewed appreciation of the connection between liberty and property. The majority insists this is no more than rational basis by another name, requiring the party challenging a rent control ordinance to show “ ‘it constitutes an arbitrary regulation of property rights.’ ” (Maj. opn., ante, at p. 967, quoting Dolan, supra,
The practical meaning of Nollan is the court’s statement that “land-use regulation does not effect a taking if it ‘substantially advance[s] legitimate state interests’ . . . .” (
First, how does a particular limitation advance the ends the government asserts it furthers? Second, is the restraint “tailored” (in the language of equal protection) or “proportional” (in the language of the takings clause) to the end the government asserts is promoted? The inquiry is “equitable” in the chancery’s traditional sense. Regulators whose land use restraints are challenged as takings are required to do more than speculate that a given restraint might conceivably advance a legitimate governmental end. They must substantiate, if only “roughly,” a factually grounded, proportional relationship between property restraints and the goals they purportedly further.
Although the majority argues strenuously that these governing precedents must be narrowly limited to their facts, there is no basis in Nollan for concluding different tests apply to different kinds of regulatory takings, i.e., permit exactions but not legislative enactments. (Manocherian v. Lennox Hill Hosp. (1994)
As Gerald Gunther has pointed out, the legitimacy of means-focused scrutiny is as old as the Constitution itself. It requires courts to “take seriously a constitutional requirement that has never been formally abandoned: that legislative means must substantially further legislative ends. . . . The core of that principle survived the constitutional revolution of 1937.” (Gunther, Foreword: In Search of Evolving Doctrine on a Changing Court: A
Two features of Nollan bear directly on the question of the intensity of means scrutiny as applied to land use regulatory restraints. Unlike the rational basis standard, which forswears genuine evidentiary burdens on the government, Nollan contemplates a factual defense in support of the claim that a given regulatory restraint actually promotes specific ends. Professor Gunther has described the nature of the government’s burden this way: “[Means scrutiny] requires that there be an affirmative relation between means and ends .... The model would have the Court assess the [government’s] justification . . . largely in terms of information presented by the defenders of the law rather than hypothesizing data of its own.” (Evolving Doctrine, supra, 86 Harv. L.Rev. at p. 47.)
What does Nollan’s “means scrutiny” amount to in the larger context of constitutionally permissible property restraints? Most notably, the Nollan standard is nonsubstantive. It has no concern, strict or permissive, with the validity of legislative ends. Nor does it require land use regulators to demonstrate a “compelling interest” (or any interest) to justify them. Those are substantive matters left to political decisionmaking and legislative competence. And because it is means-focused, the Nollan test is instrumental, examining the utility of specific limitations regulators have chosen as furthering articulable ends, rather than the merits of the ends themselves.
HI.
Fairness, Proportion, and the Limits of Democratic Process
Although the constitutional compensation requirement is considered a necessary restraint on the despotic exercise of absolute, arbitrary, and uncontrollable government power (Story, Commentaries on the Constitution of the United States (1987) § 933, pp. 663-664; Chicago, Burlington &c. R’d Co. v. Chicago (1897)
“[Government regulation—by definition—involves the adjustment of rights for the public good. Often this adjustment curtails some potential for
In his concurring and dissenting opinion in Pennell v. San Jose (1988)
No provision of the Santa Monica rent control ordinance resembles the “tenant hardship” feature of the ordinance in Pennell. But Justice Scalia’s point—that the hardship factor violated the takings clause by arbitrarily transferring value from one (landlords) to another (tenants unable to pay rent)—is no different in principle from the effect of any rent control measure. All such redistributive schemes involve an implicit subsidy of tenants
It is not the transfer of value that is constitutionally suspect; it is the distributive inequality of the means by which it is effected. If the core principle underlying the takings clause is that “public burdens . . . should be borne by the public as a whole,” (Armstrong v. United States, supra,
There is a troubling political feature to rent control as well, one also underlined in Justice Scalia’s separate opinion in Pennell. (485 U.S. at pp. 20-23 [108 S.Ct. at pp. 862-863].) “The politically attractive feature of [rent control] is not that it permits wealth transfers to be achieved that could not be achieved otherwise; but rather that it permits them to be achieved ‘off budget,’ with relative invisibility and . . . relative immunity from . . . democratic processes. San Jose might, for example, have accomplished something like the result here by simply raising the real estate tax upon rental properties and using the additional revenues ... to pay part of the rents of ‘hardship’ tenants .... Subsidies for . . . groups [e.g., senior citizens, students, the handicapped, or war veterans] may well be a good idea, but because of the . . . Takings Clause our governmental system has required them to be applied, in general, through the process of taxing and spending, where both economic effects and competing priorities are more evident.” (Id. at pp. 22-23 [
Nor are the social effects of an unprincipled majoritarianism difficult to discern. As Justice Scalia’s dissent in Pennell suggests, it is not likely that a majority of voters would approve publicly financed rent control; if, that is, voters had to pay the cost. Of course, someone must pay the substantial cost of rent ceilings. When those costs are paid by rental property owners through government compulsion, however, it is impossible to measure the intensity of public support for rent subsidies. A majority is thus able to impose ceilings on rents while, at the same time, shifting their cost from the public to a small minority—owners of rental property. Thus, Notion’s proportionate impact requirement “does more than distribute the costs of government programs. It has the desirable allocative consequence of reducing the frequency of undesirable government programs in the first instance. . . .” (Epstein, Rent Control and the Theory of Efficient Regulation (1989) 54 Brook. L.Rev. 741, 755; see also Nozick, Anarchy, State and Utopia (1974) pp. 270-271 [“So why do people find the subletting-allowed scheme [of rent control] unacceptable? It[s] defect is that it makes explicit the partial expropriation of the owner.”].)
The fact that the state has acted through “the landlord-tenant relationship does not magically transform general public welfare, which must be supported by all the public, into mere ‘economic regulation’ which can disproportionately burden particular individuals.” (Pennell v. San Jose, supra,
Instead of attempting to measure the actual fit between the city’s rent ceiling and its fact-based justifications for the ordinance, the majority applies an enfeebled rational basis standard, and contents itself with supposing that some generalized conception of the public good might be promoted by the means chosen. But a laissez-faire attitude toward takings claims is no longer good enough. The United States Supreme Court’s precedents appear to establish a minimal level of protection which this court lacks authority to diminish.
Indeed, even on its own terms, today’s decision is anomalous. In effect, the majority concedes the ordinance does not further its stated goal of “providing affordable housing for the poor, the elderly, and young families” (maj. opn., ante, at pp. 969, 970-971) by quoting approvingly from the due process analysis of Schnuck v. City of Santa Monica (9th Cir. 1991)
The Schnuck court declined to consider the regulatory takings claim because the plaintiff, who objected to the ordinance as applied, had not
Regulatory takings claims implicate both prongs of the Fifth Amendment. To survive a takings challenge, the government’s actions must substantially advance narrowly tailored goals. Conversely, to defend broadly defined exercises of the police power, the government must show that general public burdens are not being imposed arbitrarily or in a discriminatory fashion. The “substantially advance” test thus assumes the legitimacy of the state’s interest. But the legitimacy and validity of that interest is always open to a challenge under the due process clause. In this case, if Santa Monica’s goal under the ordinance may be broadly defined as assisting all tenants, then landlords can be compelled to subsidize those who are better off than they are and to subordinate their priorities to the priorities of all their tenants. The plaintiff in Schnuck, for example, was an elderly widow who owned an eight-unit apartment building subject to the Santa Monica rent control ordinance. She lived in a third floor apartment and rented the other units. After suffering a stroke, she wanted to move to the first floor apartment in order to avoid having to climb the stairs. The first floor tenant refused to move, however, and the rent control board informed Schnuck that the tenant could not be evicted. (Schnuck, supra,
Concurring in Railway Express v. New York (1949)
Conclusion
The majority’s assertion that “the heightened intermediate scrutiny standard articulated in Nollan and Dolan does not apply in this case” (maj. opn., ante, at p. 967) is more wish than fact. Rent control measures have been upheld by the United States Supreme Court under circumstances easily distinguished from those present here. Controls have been sustained as either short-term “emergency” measures (e.g., Block v. Hirsh (1921)
Until that day, I dissent.
I strongly disagree with the aggressive notion of appropriate judicial review espoused by one of my dissenting colleagues. He notes the plurality in American Academy of Pediatrics v. Lungren (1997)
In my view, this “procedure” improperly usurped legislative power and injected the court into an area in which it could claim no competence. A trial may be a crucible for finding truth, i.e., determining what particular facts occurred in a particular case, but it is not a crucible for revealing “The Truth.” “[I]n matters of normative judgment, no court should be in the position to supplant a society’s collective understanding, distilled through experience and expressed in legislative enactments, on the basis of the evidence presented in a single case. . . . [¶] When fundamentally moral and philosophical issues are involved and the questions are fairly debatable, the judgment call belongs to the Legislature.” (American Academy of Pediatrics v. Lungren, supra, 16 Cal.4th at pp. 446-447 (dis. opn. of Brown, J.).)
Lochner (Lochner v. New York (1905)
The author of today’s majority opinion dissented in Pennell v. City of San Jose (1986)