New Approach to Rent Control

New Approach to Attacking Rent Control

152 Valparaiso Associates v. Cotati

The California Court of Appeal for the First Appellate District, which includes the San Francisco Bay Area, announced a new approach to challenging rent control laws. The City of Cotati rent control ordinance states that its purpose is to preserve the affordable stock of residential rental units for low income renter, renters who are aged or on fixed incomes, and students. The plaintiff alleged in its complaint for an injunction to prevent enforcement of the rent control law that according the United States Census Bureau statistics that since enactment of the rent control law the city has suffered a loss of its stock of rental apartments even though every comparable city in northern California without rent control had experienced an increase in its rental housing supply, the number of low income renters in the city has dropped dramatically even though in cities without rent control the number of such low income renters has increased, and the number of college students living in the city has declined.

The Court relied on the seminal governmental takings case of Agins v. Tiburon (1980) 447 US 255 and the similar California Supreme Court case of Ehrlich v.City of Culver City (1996) 12 Cal.4th 854 that:

“The application of a general law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests, or denies an owner economically viable use of his land.”

The Court of Appeals held that if the apartment house owner could prove that Cotati’s rent control ordinance in fact was not accomplishing any of its three stated purposes, then it would constitute an unlawful taking and could be enjoined.

Although the court did not express any opinion on whether or not the apartment owner would be successful, in response to the city’s attempt to obtain dismissal of the lawsuit on the grounds that the census data quoted in the complaint was out of date, the Court of Appeals specifically held “The most recent U.S. decennial census data is favored by an evidentiary presumption, which requires `clear and convincing’ evidence to rebut it.” McNeil v. Springfield Park District (7th Cir. 1988) 851 F.2d 937, Garza v. City of Los Angeles (9th Cir. 1990) 918 F2d 763. The Court went so far as to state, one assumes facetiously:

“We further observe that respondents are free if they wish, in later trial court proceedings, to attempt to introduce contrary evidence of subsequent census data, if it exists, allegedly showing, inter alia, that despite the documented exodus from Cotati by the poor and other groups reflected in the most recent federal decennial census, poor people have in fact more recently flocked to Cotati to live in an increasing inventory of rental apartments, that respondent’s rent control laws are applied so as to lure private investors and builders; or that the latter will receive a reasonable rate of return on their investment.”

We have been complaining for years that rent control ordinances discourage investment in rental housing and cause a decrease in the available stock of rental housing and especially low income rental housing. The Valparaiso case is an invitation to apartment owners to and apartment owners’ associations to prove it.

If the census data supports such an allegation, then the burden will shift to the city to overcome the census data by clear and convincing evidence, a very difficult standard. You also will be able to obtain through simple discovery all of the statistical data from the city and its rent control board or administration which I have been told most cities are reluctant or have refused to produce voluntarily. If they don’t have statistics to prove that the poor, the elderly and students are flocking to the city to fill an increasing inventory of low income rental apartments, then as soon as you obtain the responses to such discovery, you may be able win the case by summary judgment without the delay and expense of an actual trial.

Census data is available on the internet and there are demographic studies consultants who can assemble the data and qualify as experts to authenticate the data.

Should you have any questions regarding this idea, please call me.

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