Rent control’s prescient dissent: Part 2, impossible release
[Continued from yesterday's Part 1.]
By: David A. Smith
The country falls in love with the rhetoric, and in the end we are stuck with tyrants.
Yesterday’s case-study exploration of the William Rehnquist Supreme Court dissent in Fresh Pond Shopping Center v. Callahan et al. acquainted us with a six-apartment building in Cambridge, only one unit of which was occupied, and the corporate owner’s attempts to exit the remaining resident so it could demolish the building and add parking to its expanding (and job-creating) mall. The law seemingly provided the owner with a way to do this, but the path was illusory:
Step right through here, sir
The Board may consider:
The benefits of denying removal to the tenants protected by rent control
The hardship upon existing tenants of the units sought to be removed
The effect of removal on the proclaimed housing shortage in Cambridge.
Given this latitude, the Board was always be able to find grounds for denying a removal permit.
We never needed to create a stamp for ‘approved’
For property captured by it, rent control is thus like debtor’s prison: once thrown into it on however minor a charge, the accused had no means of escaping, and gradually rotted to death, out of site out of mind.
Prisoners working the treadmill in York debtor’s prison
Nowhere does the ordinance suggest that these considerations be balanced against the landlord’s right to put his property to other uses. In short, Ordinance 926 permits denying a removal permit in any situation.
Thus Justice Rehnquist found his way to the crux of the whole ecosystem: it takes property rights without being held accountable for that taking.
The combined effect of the limitations imposed by the state enabling statute and Ordinance 926 is to deny appellant use of his property.
Appellant, as a corporate entity, simply cannot occupy the remaining apartment for personal use.
While corporations do have legal existence equivalent to people’s – they can sue and be sued – they cannot be people.
Only one of us can move in
In effect, then, the Rent Control Board has determined that until the remaining tenant decides to leave, appellant will be unable to vacate and demolish the building.
Thus the building was in permanent limbo, a situation that we’ve subsequently seen can arise and does arise in Bombay, Cairo, San Francisco, and New York.
[Side note: In 1990, MIT sought to remove two buildings from property it owned, so that it could redevelop a massive, and ultimately successful, complex known as University Park. In fact, it offered to relocate the houses 1,000 feet, and even that was opposed. – Ed.]
A decade in the making, led by Bob Kuehn
In my view this deprives appellant of the use of its property in a manner closely analogous to a permanent physical invasion, like that involved in Loretto v. Teleprompter Manhattan CATV Corp., — U.S. —-, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982).
Once again, Justice Rehnquist sees where the takings argument should be heading – that property can be taken even if it is not physically invaded, if the effect of regulation is to confiscate the economic value that would otherwise have inured to the owner – that is, when the economic confiscation is equivalent to a physical invasion.
Invasion of the economics snatchers?
In Teleprompter we … called a permanent physical occupation of another’s property “the most serious form of invasion of an owner’s property interest.” Id., 102 S.Ct., at 3176.
As the Cambridge ordinance operates in this case, I fail to see how it works anything but a physical occupation of appellant’s property.
It took nine years for the issue to reach the Supreme Court in Yee, and when it did the wrong question had been asked. But Justice Rehnquist was inviting anyone who could read to submit the right question:
[As a corporation, not a person, appellant cannot evict the tenant. And] it is clear that until the tenant decides to leave of his own volition, appellant is unable to possess the property.
Now, the Cambridge statute was even more onerous than the New York statute under which Jim Harmon labors … but not much more onerous.
It might also be argued that the rent control provisions are justified by the emergency housing shortage in Cambridge, but the very fact that there is no foreseeable end to the emergency takes this case outside the Court’s holding in Block v. Hirsh, 256 U.S. 135, 41 S.Ct. 458, 65 L.Ed. 865 (1921).
We held the [Washington DC] rent control statute constitutional because it was enacted to deal with a wartime emergency housing shortage. We noted that “a limit in time, to tide over a passing trouble, may well justify a law that could not be upheld as a permanent change.” Id., at 157, 41 S.Ct., at 460.
Justice Rehnquist put his finger on the key distinction: the extension of a ‘temporary’ condition to one with no fixed end date transforms a permissible interruption of economic bargaining into a permanent adverse physical possession:
You won’t like what we change into
As in Teleprompter, [a] the power to end or terminate the physical invasion is under the control of a private party, and [b] the legislature can alter the rent control statute to provide appellant with some other means of restoring control of his property.
But neither of these factors moved the Court away from its holding in Teleprompter that the physical invasion amounted to a taking. I must conclude, as the Court did in Teleprompter, that Ordinance 926 has effected a permanent physical invasion of appellant’s property.
In fact, the ‘emergency’ ended only with rent control’s statewide repeal, against which Cambridge, Brookline, and Boston vociferously fought.
The provision in the Massachusetts statute ensuring a fair net operating income to the landlord does not change the result that should attend this case…. Though no issue is raised here that the rent paid by the tenant is insufficient, nothing in the rent control provisions requires the Board to compensate appellant for the loss of control over the use of its property.
This power to exclude is “one of the most treasured strands in an owner’s bundle of property rights, . . . because even though the owner may retain the bare legal right to dispose of the occupied space by transfer or sale, the permanent occupation of that space by a stranger would ordinarily empty the right of any value, since the purchaser will also be unable to make any use of the property.” Teleprompter, supra, 102 S.Ct., at 3176. Cf. Bowles v. Willingham, 321 U.S. 503, 517, 64 S.Ct. 641, 648, 88 L.Ed. 892 (1944) (constitutional wartime rent control did not require owner to offer accommodations for rent).
What has taken place is a transfer of control over the reversionary interest retained by appellant.
Exactly so.
As Heinlein wrote, There’s nothing so permanent as a temporary emergency. Egypt, for example, has had a state of emergency since 1967.
Dissent is not always powerful but it can often be prescient. Twenty-nine years after his Supreme Court colleagues disagreed with Justice Rehnquist’s vote to allow Fresh Pond’s the appeal, seven years after his death, the issues he spotted are likely to be taken up before the Supreme Court.
He who laughs last lives on?
Comment from David Smith
Date: April 24, 2012, 9:50 am
On Monday, April 23, the Supreme Court denied certiorari, and I received the following press statement from Jim Harmon:
“The Harmon family is disappointed in the Supreme Court’s decision. We still believe that the Constitution does not allow the government to force us to take strangers into our home at our expense for life. Even our grandchildren have been barred from living with us. That is not our America.
Right now, there are 68,000 vacant apartments in the City. That is not an emergency by any definition. Because of rent stabilization, it will now continue to be difficult for us to keep our home of five generations. We will not demolish our home as the federal courts suggested that we should do if we did not like the law.
If there is a problem, all New Yorkers should share in the cost of solving it, as we have done for over forty years. The Harmon family and other small property owners have carried the burden alone for too long.”
Perhaps this was brought on by the court’s busy schedule? Or the absence of contrary decisions in the trial/ appeal record, as not giving the Court raw material for a certiorari review? (Mr. Harmon had lost at all previous levels.)
Whatever the reason, it’s a shame. Now we need a case to arise up through (say) San Francisco, Berkeley, Santa Monica or even Ann Arbor.