San Francisco’s recently adopted law which requires landlords in San Francisco who invoke the Ellis Act to pay their evicted tenants an upfront sum equal to the difference between their current rent and a similar market-rate unit over the course of two years has been ruled unconstitutional and struck down by  U.S. District Judge Charles Breyer.

From the ruling, edited for readability with case law removed:

San Francisco’s housing shortage and the high market rates that result are significant problems of public concern, and the City legislature’s attempts to ameliorate them are laudable. “[B]ut there are outer limits to how this may be done. A strong public desire to improve the public condition [will not] warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.”

The Constitution prohibits the City from taking the policy shortcut it has taken here, in which the City seeks to “forc[e] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”

The Ordinance apparently is unprecedented in requiring a massive lump-sum payout from one private party to another in exchange for regaining possession of property.  But that trail had not been blazed before for good reason. In so doing, the City has crossed the constitutional line between permissible government regulation of land and an impermissible monetary exaction that lacks an essential nexus and rough proportionality to the impact of an Ellis Act withdrawal. For these reasons, the Court GRANTS declaratory and injunctive relief from the Ordinance as a taking without just compensation in violation of the Fifth Amendment to the United States Constitution.

With Judge Breyer having stayed his decision until October 24, 2014, City Attorney Dennis Herrera will have until Friday, “the date payment must be made under the Ordinance to Plaintiff Park Lane’s tenants,” to appeal the ruling.

UPDATE: City Attorney Will Appeal Judge’s Ruling Against Eviction Payments.

Comments from Plugged-In Readers

  1. Posted by Fishchum

    Sanity prevails.

    • Posted by SFCitizen

      If this ruling damages Campos’ bid for Assembly it will be a win-win. I just hope that voters realize that the law was a poor way to win votes.

  2. Posted by EcceMorons

    An island of Sanity amidst an ocean of idiocy.

  3. Posted by Hitman

    The communist block of 4 has resorted to violating the constitutional rights of landlords in order to protect their failed system. Thanks to Judge Breyer and the constitution, they are temporarily stopped. I would add that the new tenant buyout legislation does the same thing. It violates my constitutionally guaranteed right to free speech as it regulates my rhetoric to my tenants based on the message I wish to convey. I hope SF will see the evil that has taken over city government.

    • Posted by Tim Bracken

      I’m not seeing how this law would impact your First Amendment rights, though there’s an interesting argument to be made under the Fifth Amendment’s prohibition against seizing private property without just compensation. Landlords have unsuccessfully invoked the Fifth Amendment in challenging rent control laws in the past, but this new legislation is unprecedented in its financial impact.

  4. Posted by gain_gone

    How is this possible? I thought there was no justice in this world and now this happens.
    You mean I have rights and some things are fair? I’m going straight back to bed and hide my head under the pillow until I can by cynical again. No wait, first champagne and then bed.

  5. Posted by Faceword

    Wow, I’m actually (happily) stunned. Takings arguments are really, really difficult to win. Just goes to show how bad this law was.

  6. Posted by BetterSF

    Rent control is unconstitutional, right? Why is there no lawsuit against rent control? Rent control can only be allowed to handle emergency situations such as war etc. SF had the rent control for 35 years. No emergency can last 35 years.

    • Posted by wc1

      “forc[e] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”

      Sounds like that could be applied to rent control as well.

      • Posted by medalist

        I’m happy with the ruling but I would have like to see this get bumped to a higher court perhaps even the Supreme. Tossing this out on the highest level could pave way to tossing out rent control as well.

  7. Posted by jimmy

    Now SFGOV will need to make a hard decisions to spend City resources to try a case that has been ruled unconstitutional. Hopefully sanity prevails.

  8. Posted by Flash

    Excellent news! And thanks, Socketsite, for linking to the ruling. It’s great reading, too! Page 7 notes a couple who purchased a 2-unit home (each were one bedroom) and after 5 years they wanted to occupy the lower unit as well. They did an Ellis Act and paid the tenant $2,605 as required. Then the tenant claimed to be disabled, so they had to consent to a one-year extension of the termination date and pay an additional $3,473. Then this new law passed, which would have required them to pay an additional $117,959! Page 8 notes that, since the payout amount is based on current rent values, rich tenants often make out the best. For example, a rich couple who moved into the luxury Park Lane apartment in Nob Hill in 1997, paying $8,470/month are now entitled to a $223,782 payout!

    • Posted by Flash

      Also, I like this smack down of the city case: “the City argues that Plaintiffs’ takings challenge is unripe because Plaintiffs have not attempted to seek compensation in state courts. The issue of ripeness presents a prudential concern, not a jurisdictional bar…. But here, it is not even that.”

  9. Posted by oscar

    Booyah!!!!! Next up in the sights, striking down prop G if it eventually passes.

  10. Posted by BetterSF

    Does the following argument applies to rent control as well?

    The Constitution prohibits the City from taking the policy shortcut it has taken here, in which
    the City seeks to “forc[e] some people alone to bear public burdens which, in all fairness and
    justice, should be borne by the public as a whole.” Id. at 384 (quoting Armstrong v. United
    States, 364 U.S. 40, 49 (1960)).

    • Posted by oscar

      doesn’t look like it. the opinion says that it’s “black letter law” that rent control is constitutional… “The Supreme Court has affirmed that States have broad
      power to regulate housing conditions in general and “place ceilings on the rents the
      landowner can charge . . . without automatically having to pay compensation.” Yee, 503
      U.S. at 529.”

      • Posted by BetterSF

        So only California State have the power to decide on rent control or not? San Francisco as a city should not impose rent control only if California state allows it.

        • Posted by Mr. Me Too

          Perhaps it’s time to put it to a test at a State level.

        • Posted by Rillion

          For Constitutional purposes there is no real difference between a city and a state. The power cities exercise is state power.

  11. Posted by parklife

    Wow, just wow!

    There appeared to be many sections in the ruling that could also be relevant to striking down Prop G, should it pass.

  12. Posted by BetterSF

    Attorney David Breemer at PLF is SUPER!

    “This is a great victory for every San Franciscan who owns any kind of home or property, small or large, and for everyone who values property rights as a fundamental freedom,” said PLF Principal Attorney J. David Breemer, the lead attorney in PLF’s challenge to the relocation-payment mandate. “By striking down this confiscatory law, Judge Breyer’s ruling makes it clear that government can’t force people to stay in the rental-property business against their will. And government can’t force owners to pay a massive ransom in order to make use their own property. The Constitution protects property rights for everyone, including rental property owners. Today’s ruling should remind city leaders that the Constitution protects property owners in San Francisco, like everywhere else.”

  13. Posted by sassyboyfrisco

    Common sense prevails…thankfully!
    Hopefully, next steps = SUING City of SF for breach of constitutional rights where payouts already occurred.
    Supervisors passing such idiotic laws should be at least worth millions of dollars in fines and restitution.

  14. Posted by BetterSF

    Campos and other silly supervisors should pay for all the legal fees. Their only intention was to gain votes by risking the city in the lawsuit.

  15. Posted by derrysf

    That is one elegant and well-written common sense decision by Judge Levin. Some salient bits:

    ‘The market effect of an Ellis Act withdrawal–indeed, of all Ellis Act withdrawals, which number on the order of a few dozen every year among a housing stock of hundreds of thousands of units–is infinitesimally small. The record shows that in 2013, for example, less than five one-hundredths of one percent of the City’s rental housing stock was affected by an Ellis Act withdrawal. On this record, it is indisputable that Ellis Act withdrawals do not cause high market prices.’

    ‘But independently, and more fundamentally, the Ordinance fails on its face because it requires a monetary exaction that is not roughly proportional to–indeed, does not even share an essential nexus with–the impact of the property owner’s proposed change in use. That is to say, it seeks to force the property owner to pay for a broad public problem not of the owner’s making. A property owner did not cause the high market rent to which a tenant who chooses to stay in San Francisco might be exposed, nor cause the lower rent-controlled
    rate the tenant previously enjoyed.’

  16. Posted by MG

    Remember that the City has until October 24, 2014 to appeal the decision and we are in an election year. Every pro-tenant politician will call for an appeal of the decision, regardless of the prudence of it.

  17. Posted by BetterSF

    What’s the penalty to the city? I am sure this policy has caused a lot of financial loss to many citizens. How can the citizens get any compensations from the unconstitutional regulations?

  18. Posted by Pfffttt

    Good! It’s about time the SF commies are put in their place for overreaching in their “power.”

  19. Posted by BetterSF

    I am glad that US has a constitution to prevent SF commies to turn SF into a communist city. Not sure if SF citizens want their city become a Cuba clone.

  20. Posted by San FronziScheme

    Garnish Campesino’s salary for what this idiocy has cost.

  21. Posted by SFrentier

    Campos does not respect the constitution. Take that to your campaign.

    But we have a busy road ahead, with the buyout ordinance and prop G. Hopefully they will meet a similar fate it court.

    These agressive property restrictions and attempted takings have got to stop. Some of these supervisors are totally out of control and need to get [slapped] big time!

  22. Posted by Dennis

    Fantastic!

  23. Posted by BetterSF

    Better to stop buyout ordinance and prop G from passing. It is a huge waste to pass a regulation and then let the court to invalidate. All the wasted effort, expense and undue stress and hardship should not be forced upon citizens.

  24. Posted by zzzzzzzzzzz

    Judge Breyer is on the liberal side of the judicial spectrum, isn’t he? If so, it just goes to show how completely outlandish the buyout requirements really were.

  25. Posted by Serge

    What a stellar way to start a Wednesday.

  26. Posted by SFrentier

    Anyone know if the tenant buyout regulation thing was passed yesterday? I can’t find anything online.

    • Posted by parklife

      If beyondchron can be believed, it did pass. It’s ironic that the passage of this legislation only makes Ellis acting tenants more favorable. If the ability to condo convert is off the table on duplexes, that is one less reason to negotiate a buy-out rather than Ellis Act.

  27. Posted by Futurist

    Good news! let’s stop the illegal extortion by renters.

    • Posted by Orland

      Just for purpose of perspective, it hardly seems fair to use such a pejorative term in reference to someone being ousted from their home which action was initiated by another.

      • Posted by SFCitizen

        I disagree. The tenant doesn’t own their flat or apartment. The Campos law doesn’t require the tenant to rent a comparable unit in the City and use the money received to pay the rent. I think extortion is a fair term for the payout. If the law had been written to send the payout to an escrow account with withdrawals paid directly to the tenant’s new landlord we might not be having this discussion. But, Campos didn’t provide that structure in his law. He should have done better, he did graduate from Harvard Law.

      • Posted by Futurist

        AND for the purpose of perspective hear this: Judge Breyer in his decision made one KEY statement, which I believe sums up a lot about this issue: to paraphrase: “no one has an inherent RIGHT to live in San Francisco…”

        And that’s true. It does take a good income, usually meaning a good job, low debt, etc. And if one cannot afford to live here, you just can’t.

        What’s wrong with Oakland? the East Bay? The Peninsula?

        • Posted by HowToHelpPoor

          “no one has an inherent RIGHT to live in San Francisco…”

          “no one has an inherent RIGHT to live in San Francisco…”

          “no one has an inherent RIGHT to live in San Francisco…”

          Is it a common sense? Is it too hard for some people to understand?

          • Posted by Futurist

            Not sure if you’re mocking this statement or agreeing with it.

  28. Posted by Absolut

    What I found interesting while reading the ruling is that the payout was not based on actual market difference in rents but rather some arbitrary ratio of the rent depending only on the year that the tenant first moved in.

    • Posted by parklife

      That is correct. In fact, in my situation the payout amounts would be substantially greater than the cost differential between current market rent and the rent my tenant is paying. Of course, the ordinance did allow for a petition to the rent board to lower the amount, but the burden was on the landlord to prove that the amount was incorrect.

  29. Posted by R

    Thank god rational heads prevailed. Campos is the worst.

  30. Posted by soccermom

    For O’Shea Jackson:

    Just wakin’ up in the mornin’ gotta thank God
    I don’t know but today seems kinda odd
    No steppin’ in the mess from the dog, no fog
    No smoke from the busses of techie cogs
    I got my coffee on, no French press out
    Still can’t explain what slow-drippers talkin’ bout
    Didn’t get caught with my foot in the Muni do’
    Pick pockets eye my iphone 6, Don’t take it though
    I gotta go solve a housing crisis
    People any more crazy ‘bout the rent, they join ISIS
    Had to stop, no red light.
    Car-free commuter endangers hisself airtight.
    And everything is alright
    I got a beef with (Jane) Kim, and she can listen all night.
    Called up the supes and I’m askin’ y’all
    In which venue, yo crazy ideas gonna fall?
    Stayin’ out of court cause it’s trouble
    Occupiers self-righteous victims no housing bubble
    Poster of Breyer on my wall like MJ
    I can’t believe, today was a good day.

  31. Posted by JR "Bob" Dobbs

    Two key take-aways from this decision that I see.

    First, the threshold test: ““[A] taking should be upheld as consistent with the Public Use Clause as long as it is ‘rationally related to a conceivable public purpose.’” MHC Fin. Ltd. P’ship v. City of San Rafael, 714 F.3d 1118, 1129 (9th Cir. 2013). “The concept of the public welfare is broad and inclusive,” in “deference to legislative judgments in this field.” Kelo v. City of New London, 545 U.S. 469, 480-81 (2005)

    Note that the Ellis-payment ordinance PASSED this test. I.e. these forced payments were allowable under this test because they were at least minimally “rationally related” to a public purpose.

    Then there is a second test that is not so easy for the city to surmount:

    there must be a “rough proportionality” “between the exactions imposed by the city and the projected impacts of the proposed development.” Dolan, 512 U.S. at 377, 391. “No precise mathematical calculation
    is required, but the city must make some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.” Id. at 391. The burden is a significant one, in which “the city must make some effort to quantify its findings in support of the dedication . . . beyond the conclusory statement that it could offset some of the” development’s negative impacts. Id. at 395-96.

    Here is where the city (and the ordinance) failed. This is because “the property owner’s decision to repossess a unit did not cause the rent differential gap to which the tenant is now exposed.” While tenants’ expenses directly caused by the eviction are okay to impose — moving costs, a new security deposit — the city cannot force the landlord to pay the rent differential that was caused by forces other than this eviction.

    I had not realized this was a full bench trial — I thought it was just a preliminary injunction hearing. If I were advising landlords, I would advise to ELLIS NOW! It is far from certain that this ruling will be upheld on appeal. Odds are good imho because Judge Breyer’s reasoning appears to be immaculate. But the Ninth Circuit has a few extreme libs that could reverse this. It will take a year or more before the appeal is heard. So act now!

    And by the way, this ruling provides no support for striking rent control. So give up on that pipe dream.

    • Posted by SFrentier

      I don’t see how this even passes threshold test A- related to a conceivable public purpose. The payout is made to a private individual, NOT a public find for low income housing (for example.). Furthermore, the tenant could be wealthy and will use the payout monies to buy a Ferrari. I thought that was pointed out by the lawyer challenging this.

      Also, shouldn’t we know by late Friday if the DA is foolish enough to spend money trying to overturn this?

      [Editor’s Note: City Attorney Will Appeal Judge’s Ruling Against Eviction Payments.]

  32. Posted by Morgan Driver

    It’s not a done deal — Dennis Herrara just announced he is appealing the decision.

  33. Posted by san FronziScheme (formerly known as lol)

    I think Our elected reps should be mandated to spend at least one year outside the city. They’d be exposed to the real world instead of the distorted echo chamber of SF politics.

  34. Posted by Jimmy The House Flipper

    I hope the plaintiffs are also awarded legal fees and costs, which would be just punishment for the City Supervisors for even attempting this. Instead, the city is now digging itself deeper into the hole by appealing. This will go to the Supreme Court if they aren’t reined in.

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