The California Legislature passed and Gov. Gavin Newsom recently signed into law Assembly Bill 1482 to impose statewide rent control by capping rent increases. Assembly Bill 1482 by Assemblyman David Chiu (D-San Francisco), prohibits California landlords from raising rent by more than 7 percent plus inflation over the course of a year.
Almost simultaneously in July, the City Council of Long Beach passed the “Tenant Relocation Assistance Ordinance,” which requires a property owner to pay to a tenant the equivalent of two months’ rent for a unit of similar size in the City (up to $4,500) for any reason the owner needs to repossess the rental property.
AB 1482 also requires (among other things) that an Owner pay a tenant one month’s rent – characterized by the law as “relocation assistance,” the lawsuit says.
Named as defendants in the federal lawsuit filed in U.S. District Court, are California Governor Gavin Newsom, and the City of Long Beach. The lawsuit, filed by attorney Paul Beard of Alston & Bird, names Better Housing for Long Beach and Joani Weir as plaintiffs.
Rent Control in California
California voters soundly defeated a ballot measure less than one year ago in November 2018 that would have allowed for rent control in every city across the vast state. Proposition 10 would have repealed the Costa-Hawkins Rental Housing Act, which limits the use of rent control in California, but voters defeated it.
However, rent control advocates vowed to soldier forward, and Gov. Gavin Newsom announced that he had plans to make a deal on new rent control policies when he took office, the Globe reported. “We need new rules to stabilize neighborhoods and prevent evictions, without putting small landlords out of business,” Newsom said during his State of the State address. “I want the best ideas from everyone in this chamber. Here is my promise to you, get me a good package on rent stability this year and I will sign it.”
And he did sign it.
In a Globe interview, Attorney Beard said the new Long Beach ordinance mostly harms “mom and pop” landlords who may own one or a few small rental units. Plaintiff Joani Weir is the founder and President of Better Housing, and said she owns two four-plexes.
Beard said the payout to renters is not tied to relocation costs, and puts no requirements that the money be used for rent. “The Long Beach ordinance was enacted to placate powerful interest groups,” Beard said. “This is a naked ‘taking’ of property from one person to the other.”
The Long Beach payment standards are as follows: studio—$2,706; one bedroom—$3,325; two bedrooms—$4,185; three or more bedrooms—$4,500.
Beard said the Long Beach ordinance is a violation of (a) the Fourth and Fifth Amendments to the United States Constitution, as incorporated against state and local governments by the Fourteenth Amendment, and (b) the Due Process Clause of the Fourteenth Amendment.
The state law, AB 1482, “imposes requirements on Owners intended to make it more difficult for them to exercise their right to repossess their properties, and to penalize them when they do,” the lawsuit says. AB 1482 imposes a cap on rent increases, but there is nothing in the bill to prevent the 7 percent rent cap from being lowered in the future to 5 percent, then 3 percent.
Beard noted that New York City, San Francisco, and Santa Monica – all cities with rent control ordinances – also have the highest rents in the nation. “This has displaced much of the minority community,” Beard said. “Rent control pushes them out much quicker.”
Rent Control Lawsuit
Attorney Beard said under the U.S. Supreme Court, these cases apply here. “The Court has consistently said the Constitution does not allow the government to take from one individual and give to the other.”
Beard said the payment mandated by AB 1482 must be made regardless of the fact that an existing lease or rental agreement may not contemplate or allow it. It must be made “regardless of the tenant’s income” or ability to afford relocation costs. “Further, the relocation-payment amount set by AB 1482 is arbitrary, as it is not tied to the costs of relocation. Finally, the tenant need not use the payment for relocation expenses. The tenant may use the payment for any purpose whatsoever.”
An Owner’s “failure to strictly comply” with the relocation-payment mandate “render[s] the notice of termination void.” In other words, an Owner may not repossess his/her property unless and until the Owner fully complies with the relocation-payment mandate.
Joani Weir said that in Long Beach, the goal is to take control of personal private properties where the government will treat it like a utility and control your assets. The owner may still technically “own” it, but it will be so heavily regulated, the owner can do nothing to it without permission from the government.
Beard said “Unconstitutional takings” commonly arise in the context of the government attempting to take land or other real-property interests. But that is not the extent of the Takings Clause’s reach. When “the demand for money . . . operate[s] upon . . . an identified property interest by directing the owner of a particular piece of property to make a monetary payment,” the Takings Clause applies.
“This clearly is an unlawful transfer of money from the landlord to tenants,” Beard said.
He said the U.S. Supreme Court has been consistent in their rulings upholding the takings clause. “AB 1482 also violates the Just Compensation Clause of the Takings Clause, because it contains no provision for compensating or otherwise mitigating the impacts to Owners of the forced relocation payments.”
“The relocation-payment condition under AB 1482 is unconstitutional under the unconstitutional-conditions doctrine, as applied in Nollan, Dolan, and Koontz in the context of the Takings Clause,” and with no conceivable legitimate state purpose.
The Globe will follow this case closely and report any updates.
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