1998 AGN JUN 16 I01 - Laserfiche WebLink

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City Council Meeting of June 16, 1998 Rent Control Ordinance Page 2 In Richardson, the owners of land under condominiums challenged a rent control ordinance enacted in Honolulu, Hawaii. The section of the ordinance at issue states that "the owner -occupant of a condominium is free to convey his or her leasehold interest in the underlying land to a person intending to occupy the condominium and the transferee will receive the benefit of the renegotiated land lease." (Id at 1164). The park owners argued that this constituted a regulatory taking. The Ninth Circuit agreed and found that the ordinance "regulates the use of the lessors' property interests in a manner that does not substantially further the goal of creating affordable housing" because 'T]incumbent owner occupants who sell to those who intend to occupy the apartment will charge a premium for the benefit of living in a rent controlled condominium. The price of housing ultimately will remain the same." (Id at 1165-66). Consequently, the Ninth Circuit found that the ordinance "effects a regulatory taking" and held it violated "the Fifth Amendment to the Constitution of the United States." (Id at 1166). In Casella v. City of Morgan Hill, 230 Cal. App.3d 431 45 (1991), owners of a mobilehome park challenged a City of Morgan Hill mobilehome rent control ordinance, claiming that its lack of a "vacancy decontrol" provision effected a taking. The park owners espoused the same argument as in the Hall case. They contended that the ordinance "effected a transfer of wealth from landlord to tenant, tantamount to a physical taking of property." (Id at 50). The City's demurrer was sustained without leave to amend and the case was dismissed. The Court of Appeal affirmed. The City of Colton's Mobilehome Rent Stabilization Ordinance does not contain a vacancy decontrol provision. Consequently, Lake Cadena makes similar arguments as the plaintiffs in Richardson, Yee, and the state cases: That Chapter 15.48 of Colton's Municipal Code fails to substantially advance a legitimate public interest of creating affordable housing because the former tenants will charge a "premium" in the sale of their mobilehomes in exchange for the lowered rents the new tenants will pay as a result of the rent control laws. According to the Ninth Circuit, this effect can create a regulatory taking in violation of the Fifth Amendment. (Richardson, supra, 124 F.3d at 1166). Moreover, the United States Supreme Court alluded that when an ordinance transfers wealth to the incumbent mobilehome owners from the landowners, such an effect can be a regulatory taking since there may be a question as to "whether there is a sufficient nexus between the effect of the ordinance and the objective it is supposed to advance." (Yee, supra, 503 U.S. at 527).