Correcting Yee v. Escondido by asking the right question: Part 1, the question not asked

April 3, 2012 | Constitution, Due process, Harmon, Law, Litigation, New York City, Regulation, Rent control, Supreme Court, Takings, Theory, US News, Yee v Escondido

By:David A. Smith

 

I’m sorry. My responses are limited. You must ask the right questions.

 

For more than a quarter of a century, I’ve been baffled as to why rent control hasn’t been declared Unconstitutional, but it took until just recently, with James Harmon’s lawsuit against New York City, for me to read the critical Supreme Court decision, Yee v. Escondido, both the decision itself (blue Georgia) and its syllabus (black Georgia), to understand why:

 

Nobody has asked the Supreme Court the right question.

 

New York City’s rent control could be Unconstitutional on any of three grounds:

 

  1. Rent control could be a physical taking, an invasion.  Yee asked the court that.
  2. Rent control could be a regulatory taking – an economic deprivation.  Nobody’s asked the court that.
  3. Rent control could be a violation of substantive due process.  Nobody’s asked the court that.

Why did you call me?
I trust your judgment.

 

In the case rent control’s defenders cite selectively, Yee v. Escondido, the Supreme Court considered only the first question: Was Escondido’s mobile home park law a physical taking of property?  And that question the court answer, properly, No:

 

The rent control ordinance does not authorize an unwanted physical occupation of petitioners’ property and thus does not amount to a per se taking.    The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land

 

So clear are the court’s words they’re worth stepping through carefully, because a lot of people (like me) failed to do so at the time and need to have their views adjusted.

 

A perplexing and influential record on property and eminent domain: Justice O’Connor

 

Justice O’Connor delivered the opinion of the Court.

The Takings Clause of the Fifth Amendment provides:  “[N]or shall private property be taken for public use, without just compensation.”  Most of our cases interpreting the Clause fall within two distinct classes.

[1] Where the govern­ment authorizes a physical occupation of property (or actually takes title), the Takings Clause generally requires compensa­tion.  See, e. g., Loretto v. Teleprompter Manhat­tan CATV Corp., 458 U. S. 419, 426 (1982).

 

 

That’s physical possession of property


When, right after Hurricane Katrina, FEMA and the State of Louisiana housed thousands of people in the Louisiana Superdome, that was physical possession – direct and unmistakable.  Regulatory takings are less intrusive, because they dispossess only money:


[2] But where the government merely regulates the use of property, compen­sation is required only if considerations such as the purpose of the regulation or the extent to which it deprives the owner of the economic use of the property suggest that the regulation has unfairly singled out the property owner to bear a burden that should be borne by the public as a whole.  See, e. g., Penn Central Transp. Co. v. New York City, 438 U. S. 104, 123–125 (1978). 


Key to understanding regulatory takings is that last phrase, ‘a burden that should be borne by the public as a whole.’  When government uses its regulatory power to foist onto someone else a duty government should bear, then it’s acting less in the public interest than its own selfish interest – it’s just being cheap.

 

 
Do these look mobile to you?  Escondido mobile home park residents


The first category of cases requires courts to apply a clear rule; the second necessarily entails complex factual assess­ments of the purposes and economic effects of government actions.


A great many people have misread Yee into thinking that its crucial distinction is in type of real estate (mobile homes versus apartments).  Actually, that’s a sideshow:



It may be entertaining but is it relevant?


Petitioners John and Irene Yee own the Friendly Hills and Sunset Terrace Mobile Home Parks, both of which are located in the city of Escondido.  A few months after the adoption of Escondido’s rent control ordinance, they filed suit in San Diego County Superior Court.  According to the complaint, “[t]he rent control law has had the effect of depriving the plaintiffs of all use and occupancy of [their] real property and granting to the tenants of mobilehomes presently in The Park, as well as the successors in interest of such tenants, the right to physically permanently occupy and use the real property of Plaintiff.”  Id., at 3, ¶
6. 

 

The mobile home distinction mattered only to the plaintiffs, who fell into a basic trap of grasping for the immediate precedent rather than submitting the whole kitchen sink of arguments:

 

Must be a good argument in there somewhere?

 

Petitioners do not claim that the ordinary rent control statutes regulating housing throughout the country violate the Takings Clause.  Brief for Petitioners 7, 10.  Cf. Pennell v. San Jose, 485 U. S. 1, 12, n. 6 (1988); Loretto supra, at 440.

 

I can appreciate the Yees’ reluctance to fight a broad fight, but all of us would have been spared a great deal of trouble if they had.

 

No use crying about past decisions

 

In their opposition to the city’s demurrer, the Yees relied almost entirely on Hall v. City of Santa Barbara, 833 F. 2d 1270 (CA9 1987), cert. denied, 485 U. S. 940 (1988), which had held that a similar mobile home rent control ordinance effected a physical taking under Loretto v. Teleprompter Manhattan CATV Corp., 458 U. S. 419 (1982). 

 

In Loretto, a cable TV operator sought to compel a landlord to allow a cable to be run into a resident’s apartment.  The landlord said that was a physical invasion, and the court agreed.

 

The Court of Appeal affirmed, in an opinion primarily devoted to expressing the court’s disagreement with the reasoning of Hall.  The court concluded:  Loretto in no way suggests that the Escondido ordinance authorizes a perma­nent physical occupation of the landlord’s property and therefore constitutes a per se taking.”  224 Cal. App. 3d 1349, 1358 (1990).  The California Supreme Court denied review.  App. to Pet. for Cert. B–41.


The Yees trapped themselves legally because they thought, incorrectly as it turned out, that they could make the California Mobilehome Residency Law (CMRL) be seen as a physical invasion:

 


You know, you did this to yourself


Because under the California Mobilehome Residency Law the park owner cannot evict a mobile home owner or easily convert the property to other uses, the argument goes, the mobile home owner is effectively a perpetual tenant of the park….  As a result, petitioners conclude, the rent control ordi­nance has trans­ferred a discrete interest in land—the right to occupy the land indefinitely at a sub-market rent—from the park owner to the mobile home owner.  Peti­tioners contend that what has been transferred from park owner to mobile home owner is no less than a right of physical occupation of the park owner’s land.



Typical California mobile home park: Parkview, Palm Springs


In seeking to fit within the ‘physical taking’ criterion – which, to be far, was the easy path in 1988 – the petitioners tried to stretch an economic condition into a physical one, which is a bit much: in fact, they could at any time evict all the residents by ceasing to operate the property as a mobile home park. 

 
This argument, while perhaps within the scope of our regulatory taking cases, cannot be squared easily with our cases on physical takings.


So the physical intrusion is achieved not through judicial force but by economics, and in fact the Yees’ better argument was the economic one, lost value.


The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land.  “This element of required acquiescence is at the heart of the concept of occupation.”  FCC v. Florida Power Corp., 480 U. S. 245, 252 (1987).  Thus whether the government floods a landowner’s property, Pumpelly v. Green Bay Co., 13 Wall. 166 (1872), or does no more than require the land­owner to suffer the installation of a cable, Loretto, supra, the Takings Clause requires compensation if the govern­ment authorizes a compelled physical invasion of property.

 

Hence, the court concluded, correctly as the case was presented, that Yee was not a physical invasion:

 

That’s a physical invasion, lad

 

The Escondido rent control ordinance, even when considered in conjunction with the California Mobilehome Residency Law, authorizes no such thing.  Petitioners voluntarily rented their land to mobile home owners.  At least on the face of the regulatory scheme, neither the City nor the State compels petitioners, once they have rented their property to tenants, to continue doing so. 

 

And that, as far as the U. S. Supreme Court was concerned, was that.

 

Put bluntly, no govern­ment has required any physical invasion of petitioners’ property.  Petitioners’ tenants were invited by petitioners, not forced upon them by the government.

 

Then the court said something that, more than two decades later, Mr. Harmon has picked up as creating another route to the physical taking argument:

 

A different case would be presented were the statute, on its face or as applied, to compel a landowner over objection to rent his property or to refrain in perpetuity from terminating a tenancy.  See Florida Power, supra, at 251–252, n. 6; see also Nollan v. California Coastal Comm’n, 483 U. S. 825, 831–832 (1987); Fresh Pond Shopping Center, Inc. v. Callahan, 464 U. S. 875, 877 (1983) (Rehnquist, J., dissenting).    

 

The Harmons and their property

 

In Mr. Harmon’s petitions and arguments, we’ve already seen him make this case, what with New York’s tenancy inheritance right and a sixty-year ‘temporary’ emergency that is routinely and perfunctorily extended at suitable political intervals.  Then the court offered a sop to the rent-control advocates, one that is weaker than it looks:

 

When a landowner decides to rent his land to tenants, the govern­ment may place ceilings on the rents the landowner can charge, see, e. g., Pennell, supra, at 12, n. 6, or require the landowner to accept tenants he does not like, see, e. g., Heart of Atlanta Motel, Inc. v. United States, 379 U. S. 241, 261 (1964), without automatically having to pay compensa­tion.  See also Pruneyard Shopping Center v. Robins, 447 U. S. 74, 82–84 (1980). 

 

Key word, ‘automatically’ – the Court was not giving carte blanche to rent control regulators, it was just allowing them to do something without immediately being Unconstitutional.

 

When are the times no longer hard?

 

Such forms of regulation are analyzed by engaging in the “essentially ad hoc, factual inquiries” necessary to determine whether a regulatory taking has occurred.  Kaiser Aetna, supra, at 175.  In the words of Justice Holmes, “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”  Pennsylvania Coal Co. v. Mahon, 260 U. S. 393, 415 (1922).

 

Get ready for brief after brief debating the meaning of Justice Holmes’s magisterially vague ‘too far.’

 

Has your mustache gone too far, Justice Holmes?

 

[By the way, if the New York City rent control hasn't gone 'too far,' then it's hard to envision how any regulatory restriction could ever be considered going too far. – Ed.]

 

What is ‘too far’?

 

A typical rent control statute will transfer wealth from the landlord to the incumbent tenant and all future tenants.  By contrast, petitioners contend that the Escondido ordinance transfers wealth only to the incumbent mobile home owner.  This effect might have some bearing on whether the ordinance causes a regulatory taking, as it may shed some light on whether there is a sufficient nexus between the effect of the ordinance and the objectives it is supposed to advance.  See Nollan v. Califor­nia Coastal Comm’n, supra, at 834–835.  But it has nothing to do with whether the ordinance causes a physical taking. 

 

‘Nexus’ is often used as Supreme Court code for due process considerations, which I’ll leave out of this post so we can concentrate on the regulatory takings issues.

 

The same may be said of petitioners’ contention that the ordinance amounts to compelled physical occupation because it deprives petitioners of the ability to choose their incoming tenants.  Again, this effect may be relevant to a regulatory taking argument … but it does not convert regulation into the unwanted physical occupation of land. 

 

‘Nexus’ is often used as Supreme Court code for due process considerations, which I’ll leave out of this post so we can concentrate on the regulatory takings issues.

 

Taken economically if not physically?

 

[Continued tomorrow in Part 2.]

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