Amicus Curiae Brief — Yee v. Escondido

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(9) Bupreme Gourt, U.S

FILED

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\ OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

JOHN K. YEE, et al.,

Petitioners,

THE CITY OF ESCONDIDO,

Respondent,

On a Writ of Certiorari to the Fourth Appellate

District, Division One, Court of Appeal

for the State of California

BRIEF AMICI CURIAE FOR RENT STABILIZATION

ASSOCIATION OF NEW YORK CITY, INC., NATIONAL

ASSOCIATION OF HOME BUILDERS, NATIONAL

MULTI HOUSING COUNCIL, AND

CALIFORNIA HOUSING COUNCIL

IN SUPPORT OF PETITIONERS

ERWIN N. GRISWOLD

Counsel of Record

STEPHEN J. GOODMAN

JONES, DAY, REAVIS & POGUE

1450 G Street, N.W.

Washington, D.C. 20005-2088

(202) 879-3939

Counsel for Amici

SS a A a SE PE EES 8

WILSON - Eres PRINTING Co.. INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Does a municipal rent control ordinance that pre-

vents mobile home park owners from raising rents with-

out governmental approval, in conjunction with state

statutes that severely restrict the rights of such owners

to evict current tenants or refuse to accept new ones,

effect a “permanent physical occupation” of those owners’

property within the meaning of Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419 (1982)?

2. If such an ordinance, in conjunction with the ap-

plicable state statutes, takes property from the landlord,

and, at the same time, fails to protect the interests of the

tenants that it was designed to serve, does the ordinance

violate the Due Process Clause?

(i)

TABLE OF CONTENTS

QUESTIONS PRESENTED _.

TABLE OF AUTHORITIES ........ | NE

INTERESTS OF THE AMICI ............. 20...

Nee rseecssseseecnsnsennee jabba

SUMMARY OF ARGUMENT ........00.........

a canes bia eines

I. THE ORDINANCE, IN CONJUNCTION

Il.

WITH THE MOBILEHOME RESIDENCY

LAW, AUTHORIZES A PERMANENT PHY-

SICAL OCCUPATION OF PETITIONERS’

PROPERTY AND IS THEREFORE A “TAK-

ING” FOR WHICH THEY MUST BE COM-

PETITIONERS THE OPPORTUNITY TO

PROVE THAT THE ORDINANCE IS “DE-

MONSTRABLY IRRELEVANT” TO THE

PURPOSES THAT IT WAS DESIGNED TO

SERVE AND THEREFORE VIOLATES THE

DUE PROCESS CLAUSE ...............

CONCLUSION ......

(iii)

TABLE OF AUTHORITIES

Cases Page

Azul Pacifico, Inc. v. City of Los Angeles, 1991

U.S. App. LEXIS 26335 (9th Cir. 1991) —.......... 9

F.C.C. v. Florida Power, 480 U.S. 245 (1987)... 8,9, 10

Fisher v. City of Berkeley, 37 Cal. 3d 644, 693

P.2d 261 (1984), appeal dismissed, 471 U.S.

1124 (1985) ...... a eae teagan ee 9

Hall v. City of Santa Barbara, 833 F.2d 1270 (9th

Cir. 1986), cert. denied, 485 U.S. 940 (1988). _ 7, 8, 9,

12, 13

Hutton Park Gardens v. Town Council, 68 N.J.

& F * & oUt aan eden oP 9

Loretto v. Teleprompter Manhattan CATV Corp.,

a ee Se I bo vcivccceresinerercinncesidtitectaceencanniel 5, 6, 7,8

Pennell v. City of San Jose, 485 U. S. 1 (1988) ....... 6, 9, 10,

11, 12

Permian Basin Area Rate Cases, 390 U.S. 747

PIII sscctcessowes Ee Ae RRM BE OM AOE SN 11

Pinewood Estates v. Barnegat Township Leveling

Bd., 898 F.2d 347 (3d Cir. 1990)... S09, 12

Constitutional Provisions

ee cssuukeensbeuusesoniceaniennettliae 4

ib By SS Ronan Sele eee 4

es I TT canidnettctectnmsenuissnapnanannacitions 4

Statutes and Municipal Codes

California’s Mobilehome Residency Law, Cal. Civ.

Code §§ 798-798.87 (West Supp. 1991) 2

aad Of adameeanrenaitian . 3,7,9

| |). Secsiadiglacoanineesaedadeneladmtantinieiaaiall . 3,7,9

Escondido, Cal., Municipal Code ust. V, §§ 29-101

— y * ER EACRERP Reais taecv ale) Paes We 3

ERASER RAS SL se

I anna ndesaianedseanieeiaaane Laren 4,7,9

TABLE OF AUTHORITIES—Continued

Miscellaneous Page

Hirsch & Hirsch, Legal-Economic Analysis of Rent

Controls in a Mobile Home Context: Placement

Values and Vacancy Decontrol, 35 UCLA L.

Rev. 399 (1988) 11, 12, 13

Jurisdictional Statement, Fisher v. City of Berke-

ley (O.T. 1984, No. 1538) 00. Se 9

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 90-1947

JOHN K. YER, et al.,

‘ Petitioners,

THE CITY OF ESCONDIDO,

Respondent.

On a Writ of Certiorari to the Fourth Appellate

District, Division One, Court of Appeal

for the State of California

BRIEF AMICI CURIAE FOR RENT STABILIZATION

ASSOCIATION OF NEW YORK CITY, INC., NATIONAL

ASSOCIATION OF HOME BUILDERS, NATIONAL

MULTI HOUSING COUNCIL, AND

CALIFORNIA HOUSING COUNCIL

IN SUPPORT OF PETITIONERS

. This brief is filed on behalf of the Rent Stabilization

Association of New York City, Inc., the National Asso-

ciation of Home Builders, the National Multi Housing

Council, and the California Housing Council.*

INTERESTS OF THE AMICI

The Rent Stabilization Association of New York City,

Inc. is an association of landlords and real estate opera-

tors in the Greater New York area, with 20,000 members

who own approximately 650,000 units of housing.

*Consent from counsel for all parties has been filed with the

Clerk of this Court.

The National Association of Home Builders represents

153,000 builder and associate members organized into

approximately 850 affiliated state and local associations

in all fifty states, the District of Columbia, and Puerto

Rico, Its members include not only people and firms that

construct and supply single-family homes but also apart-

ment, condominium, commercial and industrial builders,

as well as land developers and remodelers.

The National Multi Housing Council, based in Wash-_

ington, D.C., represents the interests of the larger and

most respected firms in the country participating in the

multifamily rental housing industry. Its members are

engaged in all aspects of the development and operation

of rental housing, including the ownership, building, fi-

nancing, management and conversion to condominium of

such properties.

The California Housing Council (“CHC”) is a non-

profit association whose members are the larger owners,

managers and developers of residential rental property

in California. Since its formation in 1975, CHC has been

actively involved in rent control issues at the local, state,

and federal levels.

These organizations, and their members, have a clear

and definite interest in the questions raised in this case,

namely (1) whether rent control ordinances such as those

involved in this case authorize “permanent physical occu-

pation” of a landlord’s property and (2) whether such

ordinances violate the Due Process Clause.

STATEMENT

California’s Mobilehome Residency Law, Cal.Civ.Code

$$ 798-798.87 (West Supp. 1991) (‘the Mobilehome Res-

idency Law”), which was enacted in 1978, regulates many

aspects of the relationship between the owners of mobile

home parks and the owners of mobile homes (tenants)

who rent spaces in the parks upon which to place their

mobile homes.' Among other things, the Mobilehome Resi-

dency Law provides tenants (in the language used by the

legislature) with unique “protection from actual or con-

structive eviction... .” § 798.55. Park owners may ter-

minate a tenancy only for certain reasons specified in the

Mobilehome Residency Law. These include, among others,

failure to pay the rent. * 798.56(e)(1).* It is further

provided that if a tenant seiis his mobile home to a third

party, the park owner must accept the purchaser as a

tenant “if the purchaser has the financial ability to pay

the rent and charges of the park,” unless the park owner

“reasonably determines that, based on the purchaser’s

prior tenancies, he or she will not comply with the rules

and regulations of the park.” § 798.74(a).

In 1988, voters in the City of Escondido (“the City”)

passed an initiative measure which enacted a mobile

home rent control ordinance (“the Ordinance”). Escon-

dido, Cal., Municipal Code art. V, §§ 29-101 to 29-108

(1988).° The Ordinance provides, in pertinent part, that

mobile home park owners shall not charge “rent for a

mobile home space exceeding the rent for said space on

January 1, 1986.” § 29-103.4 If the park owner wishes

1 The pertinent sections of the Mobilehome Residency Law have

been reproduced in Appendix D to the Petition for Certiorari.

“Other reasons for termination inclule failure to comply with

state and local laws relating to mobile homes, conduct by the tenant

which constitutes a “substantial annoyance” to others, conviction

for certain crimes committed within the mobile home park, failure

to comply with “reasonable” rules of the park that are contained in

the rental agreement, condemnation of the park, and a change in

the use of the park, § 798.56(a)-(d), (f)-(g@).

3 See opinion of the court below, attached as Appendix A to the

Petition for Certiorari, at 4.

‘The Ordinance further provides that “[i]f a mobile home space

is rented for the first time after January 1, 1986, the | park! owner

shall not... [charge| rent for said space exceeding the rent first

charged for the space.” Section 3 of the uncodified ordinance, as

reproduced in an attachment to Defendant City of Escondido’s

to increase the rent, he must obtain approval from the

City’s Mobilehome Park Renta] Review Board (“the

Board”), which will hear evidence from both the park

owner and the affected tenants and then “approve such

rent increases as it determiaes to be just, fair, and rea-

sonable.” § 29-104. The Ordinance lists a number of

factors which the Board shall consider in making its

determination. /d.

Following passage of the Ordinance, petitioners John

and Irene Yee (“petitioners”) the owners of a mobile

home park in Escondido, filed a Complaint in the Superior

Court of the State of California for the County of San

Diego (“the trial court”). Petition for Certiorari 10-

11. In the Complaint, they challenged the constitutional-

ity of the Ordinance under the Fifth and Fourteenth

Amendments to the United States Constitution, as well

as Article I, § 19 of the California Constitution, alleging,

among other things, “a taking of plaintiff’s property for

public use and benefit without payment of just compen-

sation. . . .” Complaint, para. 10.

The City filed a Demurrer (motion to dismiss) and

Motion to Strike. Petition for Certiorari 12. After a

hearing, the trial court granted both motions, while deny-

ing leave to the petitioners to amend the Complaint.

Order of Dismissal, attached as Appendix C to the Peti-

tion for Certiorari.

Petitioners then appealed to the Court of Appeal for

the Fourth District, Division One (“the Court of Ap-

peal”), which affirmed the order of the trial court. Peti-

tion for Certiorari 16: Appendix A to the Petition for

Certiorari (“App. A”). In its opinion, the Court of

Appeal acknowledged that “Escondido’s rent control ordi-

nance does not exist in a vacuum,” but rejected peti-

tioners’ argument that the combined effect of the Ordi-

nance and the Mobilehome Residency Law effected a “tak-

Memorandum of Points and Authorities in Support of Demurrer to

Plaintiffs’ Complaint.

ing” of petitioners’ property within the meaning of the

Fifth Amendment. App. A, at 5, 6. While conceding that

the Ordinance “effects a transfer of value from landlords

to tenants,” the Court of Appeal stated that as long as

the controlled rents were “fair and reasonable,” the trans-

fer of value in question was “Justified by a rational gov-

ernmental purpose” and “|t]he fact that used mobile

homes in Escondido are selling for more than they have

in the past is irrelevant.” App. A, at 13-14,

After the California Supreme Court denied petitioners’

Petition for Review (see Appendix B to the Petition for

Certiorari), petitioners then sought review in this Court.®

Certiorari was granted on October 15, 1991.

SUMMARY OF ARGUMENT

1. The rent control provisions of the Ordinance, in con-

junction with the restrictions that the Mobilehome Resi-

dency Law places upon park owners’ right to evict cur-

rent tenants (or refuse new ones!, give tenants the right

to occupy petitioners’ property in perpetuity as long as

they pay the controlled rent and refrain from violating

applicable laws and regulations. Consequently, the Ordi-

nance, together with the Mobilehome Residency Law, au-

thorizes the “permanent physical occupation” of peti-

tioners’ property and effects a “taking” within the

meaning of Loretto vy. Teleprompter Manhattan CATV

Corp., 458 U.S. 419 (1982). The Court of Appeal, in

the decision under review, failed to appreciate that it was

the combination of the Ordinance and the Mobilehome

Residency Law which effects a “taking” within the mean-

ing of Loretto. The Court of Appeal also erred in con-

cluding that petitioners, by renting their property to

tenants before the Ordinance was enacted, had consented

5 Amici do not deal with the questions raised by petitioners’

parallel action in the United States District Court for the Southern

District of California, which is discussed in the Petition for Cer-

tiorari at 25-30.

to the permanent occupation of that property which the

Ordinance now authorizes.

2. Under Pennell v. City of San Jose, 485 U.S. 1

(1988), a rent control ordinance violates the Due Process

Clause if it is “demonstrably irrelevant” to its purpose of

protecting tenants. Petitioners have stated a claim under

the Due Process Clause by alleging that the effect of the

Ordinance (in conjunction with the Mobilehome Residency

Law) was to increase the price of used mobile homes, so

that tenants purchasing used mobile homes after the

enactment ef the Ordinance may be financially no better

off (or even worse off) than they would have been with-

out the Ordinance. In addition, there is good reason to

believe (and petitioners should have been allowed to

prove) that the Ordinance will actually injure tenants’

interests by aggravating housing shortages and creating

financial impediments to the acquisition of used mobile

homes. Petitioners’ Due Process claim should not have

been dismissed on the pleadings.

ARGUMENT

I. THE ORDINANCE, IN CONJUNCTION WITH THE

MOBILEHOME RESIDENCY LAW, AUTHORIZES

A PERMANENT PHYSICAL OCCUPATION OF

PETITIONERS’ PROPERTY AND IS THEREFORE

A “TAKING” FOR WHICH THEY MUST BE COM-

PENSATED :

As this Court held in Loretto v. Teleprompter Man-

hattan CATV Corp., 458 U.S. 419, 426 (1982), “a per-

manent physical occupation authorized by government is

a taking without regard to the public interests that it

may serve.” Because the Ordinance and the Mobilehome

Residency Law, operating together, grant tenants a

perpetual right to occupy land owned by the petitioners—

an interest which can actually be sold—the effect of those

enactments is to give tenants a “complementary estate| ]”

in petitioners’ land—analogous to an easement—and thus

to “take” petitioners’ property within the meaning of

Loretto. See Hall v. City of Santa Barbara, 833 F.2d

1270, 1276-1280 (9th Cir. 1986). cert. denied, 485 U.S.

940 (1988).

The Mobilehome Residency Law places stringent limits

upon the rights of park owners to evict current tenants.

$ 798.56. And if current tenants sell their mobile homes

to third parties, the park owner must accept the pur-

chaser as a new tenant unless the purchaser is either

unable to pay the rent or demonstrably unlikely to comply

with the rules and regulations of the park. § 798.74.

Standing alone, those provisions may not authorize a

“permanent physical occupation” of the park owner’s

property, because the park owner may evict current

tenants (or refuse to accept new tenants) who are un-

able to pay the rent fixed by the park owner. §§ 798.56

fe) (1), 798.74(a). However, with the addition of the

Ordinance, which fixes rents at a specified level and pro-

hibits any increase unless authorized by the Board (§§ 29-

103, 29-104), park owners effectively lose the right to

exclude either current or future tenants from the park.

As the Ninth Circuit observed in discussing a similar

ordinance, “tenants are given an indefeasible right to

possession so long as they pay the controlled rent and

behave themselves.” ’/all, 833 F.2d at 1277.

As this Court held in Loretto, it is irrelevant that the

enactments in question authorize physical occupation of

petitioners’ property by private tenants, rather than the

City itself. That was the situation in Loretto. As this

Court there said: “A permanent physical occupation

authorized bv state law is a taking without regard to

whether the State, or instead a party authorized by the

State, is the occupant.” 458 U.S. at 432-433, n.9. Nor

is it relevant that park owners may apply to local govern-

mental authorities for a permit to change the use of the

park. See Mobilehome Residency Law, § 798.56/(g). They

may well be unable to obtain such permits, and even if they

can, this Court made it clear, in Loretto, that a landlord’s

ability to end the occupation of his property by ceasing

to rent it does not make that occupation any less a “tak-

ing.” ° Finally, it is also irrelevant, as the Ninth Circuit

pointed out in Hall, that the Ordinance “might someday

be repealed. A governmental taking can always be un-

done if the government so chooses. That has never de-

feated a taking claim.” 833 F.2d at 1277."

The Court of Appeal, in its decision below, held that

there had been no physical taking of petitioners’ property,

within the meaning of Loretto, because (1) it did not

believe that laws which permit a landlord to evict tenants

only for “good cause” can effect a taking (App. A, at 18-

19), and (2) it believed that in light of F.C.C. v. Florida

Power, 480 U.S. 245 (1987), the fact that park owners

originally elected to use their land for rental purposes

meant that they had not been compelled to use it for such

purposes. App. A, at 25-27. These contentions, however,

are not adequate to support the court’s conclusions.

The Court of Appeal held (App. A, at 18-19) that

[i]f mobile home park tenants in Santa Barbara or

Escondido possess any rights to “permanently dc-

cupy” the landlord’s property, those rights derive not

from a rent control ordinance but from the state

Mobilehome Residency Law which limits the circum-

stances under which a landlord may terminate a

tenancy, imposing a “good cause” standard, No

case we are aware of has remotely suggested that -

such a yevrulation of the landlord-tenant relation-

ship eseeiitutes a compensable taking within the

meaning of Loretto.

®*“Tt is true that the landlord could avoid the requirements of

[the statute at issue] by ceasing to rent the building to tenants.

But a landlord’s ability to rent his property may not be conditioned

on his forfeiting the right to compensation for a physical occupa-

tion.” 458 U.S. at 439, n.17.

7For example, in Loretto, the fact that the offending statute

could have been repealed at any time did not prevent this Court

from finding “a permanent physical occupation authorized by gov-

ernment... .” 458 U.S. at 426.

But petitioners here have not argued that requiring them

to have “good cause” for evicting tenants would, in and

of itself, authorize the “permanent physical occupation”

of their property. Clearly, it would not (and there will

be no cases suggesting that it would) because no tenant

remains forever. Rather, as explained above, it is the

combination of restrictions on evicting current tenants

‘$ 798.56 of the Mobilehome Residency Law), restrictions

on refusing to accept new tenants (§ 798.74 of the Mobile-

home Residency Law), and rent control ($$ 29-103 and

29-104 of the Ordinance) which, together, have effected

a “permanent physical occupation” of petitioners’ prop-

erty. Every federal court of appeals which has considered

the issue has held that such restrictions, in combination,

do constitute a physical “taking” of property within

the meaning of Loretto. Hall, supra; Pinewood Estates

v. Barnegat Township Leveling Bd., 898 F.2d 347 (3d

Cir. 1990); Azul Pacifico, Inc. v. City of Los Angeles,

1991 U.S. App. LEXIS 26335 (9th Cir. 1991).*

The Court of Appeal below further held that under

F.C.C. v. Florida Power, supra, “ ‘the element of required

acquiescence is at the heart of the concept of occupation’ ”

* The Court of Appeal below asserted that “[s]imilar ordinances

have repeatedly withstood challenges alleging facial unconstitution-

ality,” citing Fisher v. City of Berkeley, 37 Cal. 3d 644, 693 P.2d

261 (1984), appeal dismissed 471 U.S. 1124 (1985), and Hutton

Park Gardens v. Town Council, 68 N.J. 543, 350 A.2d 1 (1975).

App. A, at 21. However, in Fisher, neither the appellants (in their

Jurisdictional Statement) nor the California Supreme Court ad-

dressed the issue as to whether a “physical taking” had occurred.

Loretto was not even mentioned. Similarly, in Hutton Park (which

was decided prior to Loretto), the New Jersey Supreme Court did

not discuss the “physical taking” issue. And Pennell v. City of San

Jose, 485 U.S. 1 (1988), which the Court of Appeal relied upon to

demonstrate that this Court has upheld the constitutionality of

similar enactments (App. A, at 10), involved a rent control ordi-

nance which did not restrict the landlord’s right to increase the

rent upon the departure of the current tenant. 485 U.S. at 5, n.2.

and that because petitioners have not been “required to

acquiesce in the occupation of some or all of their prop-

erty by third persons . . . ,” petitioners’ property has not

been taken within the meaning of Loretto. App. A, at

25-27. (Emphasis in original). However, in Florida

Power, the statute in question merely regulated the rent

that utility companies could charge for the use of their

poles and did not require them to let others use those

poles. 480 U.S. at 251. The Court expressly reserved

the issue as to whether Loretto would apply “if the FCC

in a future case required utilities, over objection, to enter

into, renew, or refrain from terminating pole attachment

agreements.” 480 U.S. at 251-252, n.6. In the present

case, while petitioners may originally have elected to use

their property for rental purposes, the passage of the

Ordinance has effectively required them to “renew, or re-

frain from terminating” that arrangement and thus

comes squarely within the ambit of Loretto.

In short, it is clear that the Ordinance, as it operates

in conjunction with the Mobilehome Residency Law, has

authorized a “permanent physical occupation” of peti-

tioners’ property within the meaning of Loretto and is

therefore a “taking” for which the Takings Clause re-

quires “just compensation.”

Il. THE TRIAL COURT ERRED IN DENYING PETI-

TIONERS THE OPPORTUNITY TO PROVE THAT

THE ORDINANCE IS “DEMONSTRABLY IRRELE-

VANT” TO THE PURPOSES THAT IT WAS DE-

SIGNED TO SERVE AND THEREFORE VIOLATES

THE DUE PROCESS CLAUSE

As this Court held in Pennell v. City of San Jose, 485

U.S. 1, 11 (1988), state price-control regulations are

unconstitutional, under the Due Process Clause, “ ‘if

(those regulations are] arbitrary, discriminatory, or

demonstrably irrelevant to the policy the legislature is

free to adopt.’”” In the present case, petitioners have

alleged (but were denied the opportunity to prove) that

the Ordinance, in conjunction with the Mobilehome Resi-

dency Law, not only deprives them of property, but is

“demonstrably irrelevant” to the purposes for which it

was enacted and may actually frustrate those purposes.

See, e.g., Complaint, paras. 7-8 (alleging that the effect

of the Ordinance was to increase the price of used mo-

bile homes); Points & Authorities in Opposition to De-

murrer, at 14-16 (arguing that the Ordinance “is not

reasonably related to the effectuation of a substantial

government purpose”’).

As the Court of Appeal below acknowledged, “[n]o

one can dispute that Escondido’s rent control ordinance

... effects a transfer of value from landlords to tenants.”

App. A, at 13-14. The imposition of rent control reduces

the expected rental income from the property and thus

lowers its resale value.” “The critical question is whether

such a transfer can be justified by a rational govern-

mental purpose ....” App. A, at 14. But while the

purpose of rent control is to protect the interests of

tenants,"' the order of the trial court has prevented pe-

titioners from proving that the Ordinance, in conjunc-

tion with the Mobilehome Residency Law, actually im-

pairs the interests of purchasing tenants by increasing

their costs and transferring the benefit to the sellers of

mobile homes who leave them on the premises.

First, as petitioners have alleged, and are prepared to

show, tenants selling their mobile homes are able to

charge the purchasers for the privilege of secure tenure

* Citing Permian Basin Area Rate Cases, 390 U.S. 747, 769-770

(1968).

’ Hirsch & Hirsch, Legal-Economice Analysis of Rent Controls in

a Mobile Home Context: Placement Values and Vacancy De-zontrol,

35 UCLA L. Rev. 399, 423-424 (1988),

1! Pennell, 485 U.S. at 13.

at controlled rents, and are able to collect that charge by

adding it to the price of the mobile home.. As the Third

Cireuit recently explained in discussing a similar ordi-

nance:

a tenant [selling his or her mobile home] . . . may

command a premium for the alienation of the right

to occupy the pad at a controlled rent to the com-

plete exclusion of the | park owners]

+ * * *

The premium can be extracted because of the ab-

sence of vacancy decontrol for if there were no

controls the park owners would, at least in theory,

increase the rents to the level that -would eliminate

the willingness of a new purchaser to pay a premium

to locate the mobile home in the park.

Pinewood Estates, 898 F.2d at 353. See also Hall, 833

F.2d at 1276 (same); Hirsch & Hirsch, Legal-Economic

Analysis of Rent Controls in a Mobile Home Context:

Placement Values and Vacancy Decontrol, 35 UCLA L.,

Rev. 399, 425 (1988) (pointing out that “when rent con-

trols are imposed, the value of |mobile home] coaches

owned by sitting tenants increases” and that “|t]his in-

crease results from the capitalization of the rent control

ordinance which has reduced pad rents for the foreseeable

future”).

Indeed, a recent study of mobile home sales in forty

California cities indicates that any tenant who purchases

a mobile home in a mobile home park after the enactment

12 This case is therefore quite different from Pennell, supra,

which involved rent controls on apartment buildings. With apart-

ment (as opposed to mobile home) rent control, the outgoing tenant

cannot charge the incoming tenant a “premium” for the privilege

of having rent control. Pinewood Estates, 898 F.2d at 355; Hirsch

& Hirsch, 35 UCLA L. Rev. at 425; Hall, 833 F.2d at 1278 (dis-

tinguishing this Court’s prior rent control cases on that basis).

Moreover, in Pennell, there were no restrictions on the rent that

the landlord could charge the incoming tenant. 485 U.S. at 5, n.2.

Thus, the outgoing tenant had nothing to sell.

of a rent control ordinance can expect to pay approxi-

mately 32% more than he or she would have had to pay

prior to the enactment of the ordinance. Hirsch & Hirsch,

35 UCLA L. Rev. at 443. Consequently, “after the in-

stitution of rent control, a resale tenant may have lower

rent payments, but higher mortgage payments for exactly

the same quality and quantity of housing that existed

before rent control.” Jd. at 448. The result may well be

(and petitioners should have been given the chance to

prove) that tenants who purchase mobile homes after the

enactment of the Ordinance are no better off financially—

or even worse off—than they would have been without

rent controls. Moreover, even if incoming tenants do not

actually suffer financial loss as a result of the Ordinance,

a significant increase in the price of used mobile homes

“may well hinder rather than assist lower-income families

seeking . . .” to obtain such homes. Hall, 833 F.2d at

1281.

Second, the history of the impact of mobile home rent

controls in California bears out the prediction of standard

economic theory that rent control ordinances will cause a

reduction in the quality and quantity of available rental

housing.'* As Hirsch and Hirsch have pointed out,

{s]ince the impositiea of mobile home rent controls

in California, virtucily no new parks and pads have

been constructed. Whereas 60% of all mobile home

park spaces in existence today were constructed be-

tween 1960 and 1970, only 4% of total mobile home

park spaces have been constructed since 1980 when

mobile home rent controls began in earnest. The

fact is that very few new mobile home parks are

being developed and a major reason appears to be the

severity of mobile home rent controls.

Hirsch & Hirsch, 35 UCLA L. Rev. at 463. (Emphasis

added: footnote omitted). If the effect of the Ordinance

has indeed been to reduce the amount of mobile home

13 See Hall, 833 F.2d at 1281, n.26.

spaces available, that result will not “benefit” the tenants

that the Ordinance was designed to protect.

In short, petitioners should have been given the oppor-

tunity to prove that the Ordinance, which takes valuable

property interests from them, is “demonstrably irrele-

vant” and even antithetical to the purposes for which it

was enacted. Petitioners have therefore stated a claim

under the Due Process Clause, and the trial court erred

in granting the City’s Demurrer.

CONCLUSION

For the reasons set forth above and for the additional

reasons advanced in the briefs of petitioners and other

amici, the decision of the Court of Appeal should be re-

versed, with appropriate instructions to the trial court.

Respectfully submitted,