Pennell v. San Jose

485 U. S. 1

February 24, 1988

A rent control ordinance in San Jose laid out several objective tests which limited the rent increases that a landlord could charge. But in addition to these tests, rent increases were also to be limited if a hearings officer concluded that they caused “hardship” to tenants. Landlords objected that this violated the takings clause, the due process clause, and the equal protection clause. The thrust of the protest was that the ordinance asked landlords to outright subsidize poor tenants, rather than to merely charge a fair price.

The Court upheld the ordinance 6-2 (Kennedy did not participate). Chief Justice Rehnquist first turned back a standing challenge. There was no definite instance yet of a landlord being denied a rent increase on the hardship basis, but Rehnquist accepted that it was indeed a very likely possibility in the immediate future. The lack of a developed record was enough of a roadblock though that the Court declined to address the takings clause issue. Moving on to the due process and equal protection clauses, Rehnquist said that protection of the consumer’s welfare and interest was a rational end of legislation, and thus allowing certain tenants to be charged below the objective reasonable price was not Constitutionally troublesome.

Scalia, joined by O’Connor, agreed with the majority on everything except the takings clause. A close reading of recent takings clause decisions showed that an underdeveloped record was no impediment to considering the issue. Moving to the merits, Scalia said that forcing a landlord to charge less than the ‘fair’ price to needy tenants was indeed a regulatory taking. He compared it to forcing grocery stores to sell its food at lower prices to those suffering economic hardship. If San Jose wanted to alleviate hardship to the poor, Scalia said they could do so through welfare or public housing. I think this opinion is right, and the Court should have addressed the takings clause challenge on the merits (of course, I’ve never really been one for abstention based on standing issues).

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