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Gov. Newsom Named in Federal Lawsuit Targeting New Statewide Rent Control Law

City Council of Long Beach also named in lawsuit

By Katy Grimes, October 18, 2019 9:05 am

Gov. Gavin Newsom. (Kevin Sanders for California Globe)

 

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.

Assemblyman David Chiu. (Kevin Sanders for California Globe)

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  Proposition 10 would have repealed the Costa-Hawkins Rental Housing Act, which limits the use of rent control in California, but voters defeated it.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.

‘Takings Clause’

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.

Long Beach Mayor Robert Garcia. (City of Long Beach)

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.

BHLB Complaint

Katy Grimes

Katy Grimes, the Editor of the California Globe, is a long-time Investigative Journalist covering the California State Capitol, and the co-author of California's War Against Donald Trump: Who Wins? Who Loses?
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15 thoughts on “Gov. Newsom Named in Federal Lawsuit Targeting New Statewide Rent Control Law

    1. Is there a drop off location in south bay? If not, can we mail in our PETITION FOR RECALL? What is the mail in
      address? Thanks!

    2. @Rob Frankel,
      Is there a drop off location in south bay? If not, can we mail in our PETITION FOR RECALL? What is the mail in
      address? Thanks!

  1. Great article! I’m happy someone is challenging the state on this law on the grounds of unconstitutionality. Applying the Takings Clause is brilliant and should succeed in court. Well, maybe not CA courts but certainly in the appeals courts.
    The only correction I’d like to mention is that Assembly Bill 1482 limits rent increases to 5 percent plus CPI, not 7 percent plus CPI.
    “This bill would, until January 1, 2030, prohibit an owner of residential real property from, over the course of any 12-month period, increasing the gross rental rate for a dwelling or unit more than 5% plus the percentage change in the cost of living, as defined, or 10%, whichever is lower, of the lowest gross rental rate charged for the immediately preceding 12 months, subject to specified conditions.”

  2. What’s better than rent control? A tax on vacant lots and unoccupied buildings. While rent control makes it less attractive to supply accommodation, a vacant-property tax makes it less attractive NOT to!  A vacant-property tax of $X/week makes it $X/week more expensive to fail to get a tenant, and thereby REDUCES, by $X/week, the minimum rent that will persuade the owner to accept a tenant.

    Such a tax, although sometimes called a “vacancy tax”, is not limited to what real-estate agents call “vacancies” — that is, properties available for rent. It also applies to vacant lots and other properties that are not on the rental market, and is designed to push them onto the market and get them tenanted.

    A vacant-property tax is intended to be avoided; if it’s properly designed, nobody actually has to pay it. And the *avoidance* of it would initiate economic activity, which would expand the bases of other taxes, allowing their rates to be reduced, so that the rest of us would pay LESS tax!

    1. JS, I second your comment.

      Gavin. Obviously you dont own or rent property. I sincerely hope you get the chance to own. Then we’ll see how solid your principles are.

  3. I sincerely want to thank Paul J. Beard II and Joani Weir for filing this Federal Lawsuit to speak for property owners.

    Long before the housing issue starts to deteriorate, every inch of land is used to build houses and sold at a very HIGH price to buyers while accelerating property tax. Now, when little land is left, the government starts to squeeze out blood from property owners.

    Here is what I want to say to the government:

    Stand on your own feet to clean up your own mess! Don’t ever eye on the property owners who have already paid a LOT for the properties, taxes, utility and maintenance. Focus on the main problem, housing shortage, and build more apartments. There is plenty of land out there in Riverside. So, create some job opportunities there and build more houses there. I’m sure tenants would be happily move there to settle down. If you are unable to, then allocate some fund from the tax we paid for those in need. If you want to be communists, get your own land to shelter them or your own money to pay their rent, but don’t sacrifice property owners for your own failures! If you are still unable to, too bad. Then tenants have to pay for the price to move there and commute to where
    need, but definitely not the property owners!

    Thanks!

  4. The ‘Takings Clause’ is so UNCONSTITUTIONAL and UNFAIR! What? We don’t even have our OWN right to determine how we want to use our OWN property??? Fingers crossed to take this absurd clause out of the chapter!

  5. Let’s all support this unconstitutional bill. Where did they help us when vacancy rate wEre high. They handcuff developers with red tape and now want to dictate the market and relocation regardless of tenants income?

  6. Let me see if I have this right….let’s NOT attack the California Auto Insurance Corporation for gouging Californians on the outrages prices. Let’s NOT attack BIG OIL Corps for overcharging for gas..really gas at $4.50 a gallon? Milk industry for the high price of milk? Of course, do not attack them, they are big corporations with tons of lawyers. This new bill excludes big-time corporate investors with new build apartments. This bill attack the small business property owners. This bill will now cause blight to happen and it will happen. Look at Los Angeles in areas where many apartments are, kinda run down exteriors, no lawns, dead bushes, needs paint. So, we will now be running slums to the bare minimum to pass an inspection. Don’t expect a new faucet, expect a band-aid, don’t expect your apartment to be painted ever, expect marked up walls. Rental prices are driven by supply and demand, if a tenant does not want to pay that rent in that neighborhood, then rent elsewhere. BUT HERE IS THE CRUX OF MY QUESTION….THIS IS FORCED GOVERNMENT TENANT WELFARE TO BE PAID OUT OF THE POCKETS OF SMALL MOM AND POP INVESTORS, SO DO I 1099 THE TENANT EACH YEAR FOR THE SAVINGS I PAY FOR THE TENANT? THAT IS INCOME FOR THE TENANT. IF I HAVE TO GIVE A TENANT ONE MONTH OF FREE RENT THAT IS CONSIDERED INCOME TO THE TENANT, DO I 1099 THE TENANT FOR THAT? I KNOW THEY WILL SAY NO, DO NOT 1099 BUT GUESS WHAT, I WILL BE, YES WILL BE SENDING 1099 TO EACH TENANT FOR THE AMOUNT OF WELFARE THEY RECEIVE FROM ME, TO INCLUDE THE FREE RENT THAT THE GOVERNMENT IS FORCING UPON ME TO HAND OVER TO THE TENANT. ALSO, EXPECT MY PROPERTIES TO NEVER BE REPAINTED, I CANCELLED THE LAWN SERVICES AND TURNED OFF THE LANDSCAPE WATERING. I WILL BE CANCELLING ALL THE PERK SERVICES TOO, NO MORE MONTHLY PEST SPRAY, TRASH REDUCED TO ONCE A WEEK. NOW A TENANT CAN LIVE IN NOT SO GREAT PLACE, BUT THEIR HABITIABLITY WILL BE FUNCTIONAL…SORRY NO NEW REFRIGERATOR, YOU GET A USED ONE. SO, EXPECT BLIGHT TO SHOW UP PRETTY FAST. THIS WAS A VERY POOR DECISOIN WHICH WILL MAKE RENTS MUCH MUCH HIGHER. IT DID NOT WORK IN SAN FRANCISCO BECAUSE RENT WENT THOUGH THE ROOF… HOWEVER, I SUGGEST EACH LANDLORD 1099 EVERY TENANT FOR THE INCOME BENEFIT THEY RECEIVE.

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