October 15, 2014

PLF files final brief in San Francisco Tenant Relocation Ordinance challenge – ruling imminent

By PLF files final brief in San Francisco Tenant Relocation Ordinance challenge – ruling imminent

Levins on roof

PLF attorneys filed their final brief in Daniel and Maria Levins’ challenge to the City of San Francisco’s outrageous Tenant Relocation Ordinance. The Ordinance requires landlords who wish to remove their property from the rental market to pay their tenants the difference between the tenant’s existing, rent-controlled rate and the cost of acquiring a comparable unit at open market rates, for two years. That payment obligation comes on top of a pre-existing ordinance that already obligates San Francisco landlords to pay their tenants several thousand dollars to cover moving expenses if a landlord withdraws property from the rental market.

For PLF clients Daniel and Maria Levin, the new Ordinance requires them to pay more than $117,000 just to take back the downstairs, one-bedroom portion of their house so they can use it for family and friends. For PLF’s other client Park Lane Associates, the Ordinance requires it to pay more than a million dollars to tenants of its apartment building in order to exit the rental business. PLF attorneys filed a lawsuit in July seeking injunctive and declaratory relief and challenging the Ordinance as unconstitutional under the Fifth and Fourteenth Amendments of the U.S. Constitution. The lawsuit also alleges the Ordinance violates the state’s Ellis Act, which guarantees to property owners the right to take property off the rental market.

On October 6, Federal District Court Judge Charles Breyer presided over a trial at the Federal District Courthouse in San Francisco. In this phase of the case, the court considered only PLF’s arguments that the Ordinance, as drafted, is unconstitutional and illegal on its face (as opposed to as applied to individual plaintiffs). During the trial, Judge Breyer made clear that he was very concerned about whether the Ordinance causes an unconstitutional taking under the standards of Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994).

Nollan and Dolan hold that when the government requires a property owner to give up a constitutionally protected interest (i.e. land or money), as a condition of property use, it must show a close connection, or an “essential nexus” and “rough proportionality,” between the impacts of the particular property use, and the condition, so that the condition mitigates both in nature and extent for the impacts of the proposed use. For example, if a developer builds a new housing subdivision and government can demonstrate that it will create additional traffic on adjacent roads, it could require the developer to pay for road-widening because doing so would directly mitigate for the subdivision’s impact on the roadways. But where there is no connection—if, for example, the government demanded that the developer build a new city hall instead—the demand would be unconstitutional.

Here, PLF attorneys argued that the Ordinance flunks the Nollan/Dolan test because there is not a sufficiently close connection between a landlord’s decision to exit the rental business, and the requirement to subsidize a tenant’s housing costs at open market rates for two years – especially when the tenant can use the money for any purpose. The City’s main argument, during the trial and in prior briefing, was that the Nollan/Dolan standard should not apply to the Ordinance at all.

During the trial, Judge Breyer described PLF attorneys’ Nollan/Dolan argument as a “serious” challenge, and asked the City whether it wanted another opportunity to respond to that argument, which it accepted. The City filed a supplemental brief addressing the substance of the Nollan/Dolan argument last week. PLF attorneys filed a brief in response yesterday.

The City’s supplemental brief argues that the impact of a landlord’s action in withdrawing property from the rental market is that a tenant suffers the loss of rent control. And that the City of San Francisco may lawfully require landlords to mitigate for that impact by requiring them to subsidize their tenant’s rent for two years, even if there is no constraint on how the tenant uses the money (typically in the tens of thousands of dollars), and even if the City does not ask whether the recipients need the money. PLF’s response brief explains why using “loss of rent control” as the impact for purposes of the Nollan/Dolan test is inappropriate. Rent control is not caused by landlords, it is something that the City itself imposes on landlords in the first place. As the brief explains:

If the City did not force owners like the Levins to submit to rent control, tenants would not experience a loss of rent control when the owners stop renting. They would simply have moving expenses. They would relocate from open market unit to open market unit. Similarly, if City rent control covered all units, rather than just some, tenants would not go from a rent control to open market pricing; they would go from rent control to rent control. Again, it is City regulatory decisions to impose its rent control system, not the use of property, that causes a tenant to experience the loss of rent control as part of displacement.

As a result, to the extent the newly required payment is designed to mitigate for “lost rent control,” it does not mitigate for impacts caused by a landlord’s decision to use property for non-rental purposes. And for that reason, it fails the Nollan/Dolan test.

PLF’s brief also explains that even if a landlords’ use of property could be said to cause the impact of a loss of rent control, the Ordinance still does not satisfy the Nollan/Dolan test because the payment is not sufficiently related to solving the tenant’s housing problem. Under the Ordinance, tenants could use the money to take a vacation, or to move outside of San Francisco. As a result, the Ordinance does not reasonably advance the goal of providing housing in San Francisco. Certainly, the connection is not close enough to warrant imposing such a massive financial burden on the Levins and others who are simply trying to stop being landlords. For that reason, it also flunks the Nollan/Dolan test and is unconstitutional.

PLF attorneys expect the court to issue a ruling in the case any day. More information about the case is available on PLF’s website, on the Liberty Blog, on PLF’s podcast, or at various media outlets that have covered the case, including: ABC7 News, the San Francisco Examiner, and the San Francisco Recorder.

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Levin v. City and County of San Francisco

Dan and Maria Levin live in the upstairs unit of their two-story home in San Francisco, California. They would like to use the lower unit for friends and family, but a city ordinance required them to pay their tenant $118,000 to withdraw the unit from the rental market. This amount represents the difference between the tenant’s existing, rent-controlled rate and the cost of acquiring a comparable unit at open market rates, for two years. Representing the Levins and others, PLF successfully sued to strike down this ordinance as an unconstitutional taking in violation of the Fifth Amendment and violation of California’s Ellis Act, which guarantees to property owners the right to take property off the rental market.

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