PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 21-1786

_____________

GENNADIY NEKRILOV; EUGENE NEKRILOV; KWAN 

HO TANG; 

JAYU JEN; ALAN SUEN

Appellants

v.

CITY OF JERSEY CITY

_____________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 2-19-cv-22182)

District Judge: Honorable Kevin McNulty

_____________

Argued: November 18, 2021

______________

Before: CHAGARES, Chief Judge, BIBAS and FUENTES, 

Circuit Judges

(Filed: August 16, 2022)
2

_____________

Joseph Tripodi

James M. Van Splinter [ARGUED]

Kranjac Tripodi & Partners

30 Wall Street

12th Floor

New York, NY 10005

Counsel for Appellant

Philip S. Adelman

Stevie D. Chambers [ARGUED]

Jersey City Law Department

280 Grove Street

City Hall

Jersey City, NJ 07302

Counsel for Appellee

_____________

OPINION OF THE COURT

_____________

CHAGARES, Chief Judge.

Gennadiy and Eugene Nekrilov, Kwan Ho Tang, Jayu

Jen, and Alan Suen (together, the “plaintiffs”) filed this lawsuit 

under 42 U.S.C. § 1983 challenging a Jersey City ordinance 

curtailing the ability of property owners and lease holders to 

operate short-term rentals. The plaintiffs alleged that, having 

passed an earlier zoning ordinance legalizing short-term rentals 
3

in Jersey City (the “City”), which enticed them to invest in 

properties and long-term leases, the City violated their 

constitutional rights under the Takings Clause of the Fifth 

Amendment, the Contract Clause of Article I, and the Due 

Process Clauses of the Fifth and Fourteenth Amendments by 

passing the new ordinance. The new ordinance, they allege, 

undermined their legitimate, investment-backed expectations 

and injured their short-term rental businesses. The plaintiffs 

also moved for a preliminary injunction against the 

enforcement of the new ordinance. The City moved to dismiss 

the complaint pursuant to Federal Rule of Civil Procedure 

12(b)(6). The District Court granted the motion, dismissed the 

complaint with prejudice, and denied the preliminary 

injunction motion as moot. For the reasons that follow, we will 

affirm the judgment of the District Court. 

I.

The plaintiffs are individuals who invest in and operate 

short-term rentals in Jersey City using online home-sharing 

platforms. Home-sharing platforms, such as Airbnb, provide a 

residential alternative to traditional hotels for travelers seeking 

to rent a spare room or property on a nightly, weekly, or 

monthly basis. 

Steven Fulop was elected Mayor of Jersey City in 

2013.

1

 One of Mayor Fulop’s priorities was to incentivize 

investment and development in Jersey City. As a part of that 

effort, in 2015, Mayor Fulop supported the passage of a zoning

ordinance, Ordinance 15.137, that affirmatively legalized

1 At all relevant times, Fulop was Mayor of Jersey City. 
4

short-term rentals in Jersey City. Ordinance 15.137 was the 

first of its kind in the state of New Jersey. 

 

Ordinance 15.137 provided, in relevant part:

1. Short Term Rentals are permitted as an 

accessory use to a permitted principal residential 

use in all zoning districts and redevelopment 

plan areas where residential uses are permitted.

a. The person offering a Dwelling Unit 

for Short-Term Rental use must be the owner 

or lessee of the residence in which the ShortTerm Rental activity occurs. Short-Term 

Rental activity may occur in a habitable 

accessory building located on the same 

premises as the residence.

b. No person offering a Dwelling Unit 

for Short-Term Rental use shall be required 

to obtain any license for such use . . . unless 

such person offers more than 5 separate 

Dwelling Units for Short-Term Rental use in 

the City. Any person offering more than 5 

separate Dwelling Units for Short-Term 

Rental use in the City must:

i. obtain a license pursuant to 

Section 254-82 to offer each 

Dwelling Unit for Short-Term 

Rental . . . .

ii. ensure that the ShortTerm Rental use is clearly 
5

incidental to the principal 

residential uses permitted in the 

zone where each such Dwelling 

United is located . . . .

Appendix (“App.”) 161–62. Ordinance 15.137 also mandated 

that short-term uses of residential properties “shall be 

conducted in a manner that does not materially disrupt the 

residential character of the neighborhood.” App. 162.

Jersey City issued a press release outlining the goals of 

the proposed ordinance. The press release explained that 

although the ordinance would “allow[] residents to rent homes 

for less than 30 days,” it also “include[d] several commonsense 

protections” that would prevent short-term rental operators 

from “changing the character of the neighborhood.” App. 167

(quotation marks omitted). To prevent the formation of 

informal “Airbnb hotels,” the ordinance would also limit the 

number of properties one user could rent to five. 

Mayor Fulop was quoted in the press release and made 

other public statements in support of the ordinance, describing 

companies that participate in the “sharing economy” as the 

“future.” App. 102. He also authored an article in the 

Huffington Post explaining the purposes and benefits of the 

ordinance. Mayor Fulop noted that home-sharing platforms 

allow “middle-class folks [to] earn a bit of extra income by 

renting out their apartments.” Id. The ordinance had the 

support of other Jersey City public officials, several of whom 

made statements in support of the ordinance. The Jersey City 

Council unanimously approved the ordinance, and on October 

30, 2015, Mayor Fulop signed the ordinance into law. 
6

Following the passage of Ordinance 15.137, Mayor 

Fulop’s relationship with Airbnb purportedly began to 

deteriorate. In 2016, Mayor Fulop allegedly sought a donation 

from Airbnb to his reelection campaign. Mayor Fulop attended 

a fundraiser at Airbnb’s San Francisco headquarters in 2017 

but still did not receive a donation. In May 2017, Mayor Fulop 

allegedly sent a number of emails to Airbnb expressing his 

frustration, and, in response, Airbnb sent a $10,172 

contribution to his reelection campaign. Airbnb represented 

that, following the delay in the donation, the relationship 

“fractured,” and Mayor Fulop began receiving donations from 

the hotel industry. App. 231.

Two years later, Mayor Fulop’s office introduced 

Ordinance 19-077. Ordinance 19-077 was a significant policy 

change from Ordinance 15.137. Although it did not ban shortterm rentals entirely, it imposed a number of new restrictions. 

First, short-term rentals in non-owner-occupied rentals were 

limited to sixty nights per year. If, as of the date the ordinance

was adopted, an owner operated two properties, the owner 

could appoint an agent to reside at the second property without 

being subject to the sixty-day limit on that property. Second, 

Ordinance 19-077 banned the subleasing of properties by 

tenants on a short-term basis. As a result, only those who 

owned properties could rent on a short-term basis in Jersey 

City. To facilitate a transition period of approximately 

eighteen months, Ordinance 19-077 included certain 

exceptions. It exempted through January 1, 2021, for instance, 

any short-term rental reservations or bookings that were made 

before June 25, 2019, the date the ordinance was adopted. In 

addition, tenants who were subleasing their properties on a 

short-term basis as of the date of adoption could continue to do 
7

so through January 1, 2021, or through the end of the lease, 

whichever came first. 

On June 25, 2019, the Jersey City Council held a special 

meeting to vote on Ordinance 19-077. Operators of short-term 

rentals spoke against the ordinance, and Councilman James 

Solomon and Councilman Jermaine Robinson spoke in favor 

of the ordinance. Councilman Solomon acknowledged that the 

ordinance may have a negative financial impact on short-term 

rental operators but also explained that short-term rentals had 

a negative impact on union workers in Jersey City. 

Councilman Robinson expressed hope that investors could 

recoup some of the money they would lose as a result of the 

ordinance. The City Council voted 7–2 in favor of adopting 

the ordinance. On June 28, 2019, Mayor Fulop signed 

Ordinance 19-077 into law. 

Between the passage of Ordinance 15.137 and 

Ordinance 19-077, the plaintiffs invested in properties in 

Jersey City to conduct short-term rental businesses. The 

Nekrilovs purchased two properties, which have monthly 

mortgage payments of $2,500 and $1,725. The Nekrilovs 

earned $9,500 and $5,183 per month, respectively, in shortterm rental revenue, and allege that they would earn only 

$3,800 and $1,800 per month in long-term rental revenue. 

They also invested a total of $100,000 in renovating these 

properties. The Nekrilovs also entered into seventeen longterm leases with the intention of subleasing on a short-term 

basis. Tang and Jen purchased one property, which has a 

monthly mortgage payment of $3,300, and which Tang and Jen 

spent $40,000 to renovate and furnish. The property earned 

$4,500 per month in short-term rental revenue and would earn 

$2,600 in long-term rental revenue. Tang and Jen also entered 
8

into two long-term leases and spent $6,600 and $8,900 to 

furnish the properties. Suen purchased two properties, which 

have monthly mortgage payments of $2,500 and $3,500. Suen 

and his mother invested approximately $383,000 into 

renovating the properties, $40,000 into furnishing the 

properties, and $130,000 in other costs for the properties. Suen 

and his mother earned approximately $30,000 in monthly 

short-term rental revenues from the two properties. At the time 

of filing the complaint, Suen and his mother had not turned a 

profit, but they estimated that they would become profitable in 

the near future. 

In December 2019, the plaintiffs filed a complaint 

seeking a declaratory judgment providing that Ordinance 19-

077 is unconstitutional, injunctive relief against enforcement 

of the ordinance, monetary damages, and attorneys’ fees. The 

complaint asserted four claims: (1) violations of the Takings 

Clause of the Fifth Amendment; (2) violations of the Contract 

Clause of Article I; (3) Fifth and Fourteenth Amendments

substantive due process claims; and (4) Fifth and Fourteenth 

Amendments procedural due process claims. The plaintiffs 

simultaneously filed a motion for a temporary restraining order 

(“TRO”) and preliminary injunction. The City moved to 

dismiss the complaint for failure to state a claim under Rule 

12(b)(6). The District Court dismissed the complaint and 

denied as moot the motion for a TRO and preliminary 

injunction. The plaintiffs timely appealed.

II.

The District Court had subject matter jurisdiction 

pursuant to 28 U.S.C. § 1331. This Court has jurisdiction over 

the District Court’s final order dismissing the complaint under 
9

28 U.S.C. § 1291. We exercise plenary review over the District 

Court’s dismissal of the complaint, accepting all well-pled 

factual allegations as true and drawing all reasonable 

inferences in the plaintiffs’ favor. See Phila. Taxi Ass’n v. 

Uber Techs., Inc., 886 F.3d 332, 338 (3d Cir. 2018). “To 

survive a motion to dismiss, a complaint must contain 

sufficient factual allegations, taken as true, to ‘state a claim to 

relief that is plausible on its face.’” Fleisher v. Standard Ins. 

Co., 679 F.3d 116, 120 (3d Cir. 2012) (quoting Bell Atl. Corp. 

v. Twombly, 550 U.S. 544, 570 (2007)).

III.

The plaintiffs argue that the District Court erred in 

holding that the plaintiffs had not stated a regulatory takings

claim. Relatedly, the plaintiffs argue that the court erroneously 

failed to recognize the plaintiffs’ forward-looking rights to 

conduct their short-term rental businesses as cognizable

property interests for purposes of their takings claim. The 

plaintiffs next argue that the District Court erred in dismissing 

their Contract Clause claim, which they allege impaired both 

short- and long-term rental contracts. Finally, the plaintiffs 

argue that the District Court erred in concluding that the 

plaintiffs failed to state a claim for a substantive due process 

violation.

2

 

A.

The Takings Clause of the Fifth Amendment of the 

United States Constitution prohibits the taking of private 

2 The plaintiffs did not appeal the dismissal of the procedural 

due process claim. 
10

property “for public use, without just compensation.” U.S. 

Const. amend. V. The Takings Clause applies to state and local 

governments through the Fourteenth Amendment. Newark 

Cab Ass’n v. City of Newark, 901 F.3d 146, 151 (3d Cir. 2018). 

A threshold determination in any takings case is whether the 

plaintiff has asserted a legally cognizable property interest. 

See In re Trustees of Conneaut Lake Park, Inc., 855 F.3d 519, 

526 (3d Cir. 2017). “Without a legally cognizable property 

interest, [the plaintiff] has no cognizable takings claim.” Id. 

Once a legally cognizable property interest has been identified, 

we examine whether there has been a taking of that property 

interest for public use without just compensation. Id. at 525.

Because there has been no physical taking of the 

plaintiffs’ property, this case concerns an alleged regulatory 

taking. There are two types of regulatory takings: (1) takings 

per se or total takings, where the regulation denies all 

economically beneficial productive use of the property, see

Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992); 

and (2) partial takings that, though not rendering the property 

idle, require compensation under the test set forth in Penn 

Central Transportation Co. v. City of New York, 438 U.S. 104 

(1978). 

1.

We must first determine what, if any, legally cognizable 

interests are at issue. As the District Court observed, plaintiffs 

assert three “uncontroversial” property rights: (1) plaintiffs’ 

use and enjoyment of their purchased properties; (2) the longterm leases; and (3) the plaintiffs’ short-term rental contracts. 

But the plaintiffs also assert another property interest: their 

forward-looking right to pursue their short-term rental 
11

businesses. Framed this way, the plaintiffs allege that they 

have lost “the entire businesses they were expressly invited by 

Jersey City to open and operate.” Nekrilov Br. 40 (emphasis 

in original). The District Court rejected the argument that this 

constituted a legally cognizable property interest for the 

purposes of a takings claim. 

While the Constitution protects property interests, it 

does not create property interests. See Phillips v. Wash. Legal 

Found., 524 U.S. 156, 164 (1998). Whether a plaintiff has a 

property interest is “determined by reference to ‘existing rules 

or understandings that stem from an independent source such 

as state law.’” Id. (quoting Bd. of Regents of State Colls. v. 

Roth, 408 U.S. 564, 577 (1972)). 

That does not mean that every municipal act legalizing 

a business activity vests the business owner with a cognizable 

property right. The Supreme Court has explained that 

“business in the sense of the activity of doing business, or the 

activity of making a profit is not property in the ordinary 

sense.” Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. 

Expense Bd., 527 U.S. 666, 675 (1999) (emphasis in original). 

Consistent with this principle, we decline to recognize a 

general right to do business as a property interest cognizable 

under the Takings Clause. As the District Court recognized, to 

hold otherwise would broaden the scope of the Takings Clause 

such that any business regulation could constitute a taking.

 

The plaintiffs point to several decisions in which, in the 

context of New Jersey tort law, courts recognized that the 

“[i]nvasion of ‘the right to pursue one’s business, calling or 

occupation free from undue interference or molestation’ is an 

‘actionable infringement of a property right.’” Longo v. 
12

Reilly, 114 A.2d 302, 305 (N.J. App. Div. 1955) (quoting

Louis Kamm, Inc., v. Flink, 175 A. 62, 66 (N.J. 1934)); see 

also Di Cristofaro v. Laurel Grove Mem’l Park, 128 A.2d 281, 

285 (N.J. App. Div. 1957) (same); Zenith Lab’ys, Inc. v. 

Abbott Lab’ys, No. Civ. A. 96-1661, 1996 WL 33344963, at 

*5 (D.N.J. Aug. 7, 1996) (same). These are tort decisions. 

These decisions recognize a property right to pursue one’s 

business in the context of unfair competition or tortious 

interference claims. As such, they are not applicable to the 

plaintiffs’ takings claim. The plaintiffs do not cite any takings 

or due process decisions in which a federal court has 

recognized a cognizable property interest in the right to pursue 

one’s business.

This does not mean that we disregard the impact that 

Ordinance 19-077 has had on the plaintiffs’ businesses. To the 

extent that the ordinance has affected the economic value or 

use of the properties, we address that issue in the takings 

analysis. Moreover, we will consider the impact of the change 

in policy on the plaintiffs’ reasonable, investment-backed 

expectations. We need not recognize a free-standing property 

right to pursue one’s business in order to account for the effect 

that Ordinance 19-077 has had on the plaintiffs’ short-term 

rental businesses.

The plaintiffs’ forward-looking right to pursue their 

short-term rental businesses is not cognizable under the 

Takings Clause, but the plaintiffs have articulated three 

cognizable property rights: (1) use and enjoyment of their 

purchased properties; (2) long-term leases, see U.S. Tr. Co. of 

N.Y. v. New Jersey, 431 U.S. 1, 19 n.16 (1977) (“Contract 

rights are a form of property and as such may be taken for a 

public purpose provided that just compensation is paid.”); and 
13

(3) short-term rental contracts, see id. We next examine 

whether the passage of Ordinance 19-077 constitutes a taking 

of any of those property rights.

2.

Total takings or takings per se are those that deny the 

property owner all economically beneficial use of the property. 

See Murr v. Wisconsin, 137 S. Ct. 1942, 1942–43 (2017); 

Lucas, 505 U.S. at 1030. A taking has not occurred simply 

because a plaintiff has been denied the most profitable use of 

the property. See Andrus v. Allard, 444 U.S. 51, 66 (1979). 

Rather, a total taking is one that renders the property essentially 

idle. See Lucas, 505 U.S. at 1030.

The plaintiffs first allege that, as a result of Ordinance 

19-077, they have lost all beneficial use of their purchased 

properties. The District Court held that because the properties 

retain numerous beneficial uses, they have not been rendered 

economically idle. We agree. The plaintiffs can lease the 

properties on a long-term basis, live at the properties, or sell 

the properties. 3 There is no total taking where the government 

3 The plaintiffs argue that because they will be forced to sell 

the properties to avoid foreclosure, selling the properties 

should not count as a beneficial use. The plaintiffs are correct 

that the ability to sell a property does not always constitute an 

economically beneficial use. See Lost Tree Vill. Corp. v. 

United States, 787 F.3d 1111, 1117 (Fed. Cir. 2015). 

Specifically, “[w]hen there are no underlying economic uses, 

it is unreasonable to define land use as including the sale of the 

land.” Id. (emphasis in original). Such was the case in Lost 

Tree, where the regulated parcel had essentially no uses other 
14

seizes only one strand in the “bundle” of property rights. 

Andrus, 444 U.S. at 66. Here, that single strand is use of the 

properties for short-term rentals. 

The plaintiffs argue that they cannot afford to keep the 

purchased properties without short-term rental income because 

“it is impossible to sustainably lease them under long-term 

leases.” Nekrilov Br. 39 n.12. The plaintiffs cannot 

sustainably lease them on a long-term basis because “longterm rental income is much lower than short-term rental 

income, and thus would render [the plaintiffs’] investments 

unaffordable,” App. 95, a fact that the plaintiffs considered in 

deciding not to enter the long-term rental market. If forced to 

rent the properties on a long-term basis, the plaintiffs claim that 

they would barely make enough to cover their mortgages and 

other costs, and in some cases, not enough to cover “related 

debt and expenses.” App. 138. 

The comparative disadvantage of long-term rentals does 

not amount to an allegation that long-term rentals are not an 

economically beneficial use of the property. The plaintiffs are, 

as the District Court recognized, attempting to argue that 

without the benefit of short-term rentals, they have been denied 

all profitable use of their properties. But the central question

for a total taking is not “whether the regulation allows 

operation of the property as ‘a profitable enterprise’ for the 

than speculative land sale based on the trivial value that the 

parcel retained. But here, there are other underlying economic 

uses — the plaintiffs (or anyone else) could live in or rent the 

properties on a long-term basis. We may therefore consider 

the plaintiffs’ ability to sell the properties in determining 

whether there has been a total taking. 
15

owners, but whether others ‘might be interested in purchasing 

all or part of the land’ for permitted uses.” Park Ave. Tower 

Assocs. v. City of New York, 746 F.2d 135, 139 (2d Cir. 1984)

(quoting Pompa Const. Corp. v. City of Saratoga Springs, 706 

F.2d 418, 424 (2d Cir. 1983)). The plaintiffs do not allege that, 

across all potential purchasers, long-term leases are not an 

economically viable use of these properties. As the District 

Court observed, the extent to which Ordinance 19-077 has 

impacted the plaintiffs’ anticipated return on their investments

may be relevant to the partial takings analysis under Penn 

Central, but it has no relevance here. Because the purchased 

properties may still be put to multiple economically viable 

uses, there has been no total taking of the purchased properties. 

The plaintiffs further argue that they have lost all 

economically beneficial use of the long-term leases. The 

District Court similarly rejected this argument, explaining that 

although the plaintiffs may no longer expect the same profits 

from short-term rentals, they may still make economically 

viable use of the properties by occupying the properties or subleasing the properties on a long-term basis. We agree. Because 

these leases may be put to other uses, there has not been a total 

taking of any long-term lease.4 

4

In any event, the complaint alleges that only four of the longterm leases extended past January 1, 2021. Any lease that 

ended prior to that date was unaffected by Ordinance 19-077, 

which provides that tenants may continue to host unlimited 

short-term subleases until January 1, 2021 or the end of the 

lease, whichever came first. Although the complaint does not 

specify the exact terms for each affected lease, in each case, 

the plaintiffs were paying rent and subleasing the affected 

properties at the time they filed the complaint in December 
16

Finally, the District Court concluded that there had been 

no total taking of any of the preexisting short-term rental 

reservations. The District Court reasoned that Ordinance 19-

077 did not entirely ban short-term rentals; it provided for a 

transition period for tenants and a limit of sixty nights per year 

for owners. The ordinance also provided an exception for 

short-term rental contracts that existed at the time the 

ordinance passed and that concluded before January 1, 2021. 

The complaint did not plead that these preexisting reservations 

did not qualify for any exception, and so the District Court 

concluded that there had been no total takings of the short-term 

reservations. Following oral argument on appeal, the plaintiffs 

submitted a letter to this Court indicating that “no formal shortterm bookings through AirBnB or similar service were 

cancelled solely as a result of Ord. 19-077.” Doc. 43. 

Accordingly, there has been no total taking of any of the 

plaintiffs’ short-term rental contracts.

Because neither the purchased properties nor the longterm leases have been deprived of all economically viable use, 

the District Court properly concluded that the plaintiffs had not 

stated a claim for a total taking or taking per se.

3.

One whose property has not been deprived of all 

economically beneficial use may still be entitled to 

compensation if the government action constitutes a partial 

taking under the Penn Central factors. The factors are: “(1) the 

2019. The plaintiffs were able to continue using these leases 

for short-term rentals between, at a minimum, December 2019 

and January 1, 2021.
17

economic impact of the regulation on the claimant; (2) the 

extent to which the regulation has interfered with distinct 

investment-backed expectations; and (3) the character of the 

governmental action.” Murr, 137 S. Ct. at 1943. Although the 

test is flexible, the Penn Central “inquiry turns in large part, 

albeit not exclusively, upon the magnitude of a regulation’s 

economic impact and the degree to which it interferes with 

legitimate property interests.” Lingle v. Chevron U.S.A. Inc., 

544 U.S. 528, 540 (2005). 

The District Court held that all three Penn Central

factors weighed against a taking and dismissed the plaintiffs’ 

partial takings claim. For the reasons that follow, we agree.

a.

We first consider the economic impact of Ordinance 19-

077 on the plaintiffs. It is undisputed that Ordinance 19-077 

has impacted the plaintiffs’ short-term rental businesses. In 

Appendix A of its opinion, the District Court summarized the 

effects, as alleged in the complaint. The court roughly 

estimated that plaintiffs may have lost between 50% and 66% 

of their potential revenue from short-term rentals. The court 

concluded that, even treating this loss of potential revenue as a 

loss in the “value” of the property, this factor weighed against

the plaintiffs because they did not account for alternative ways 

to exploit the properties. The District Court also declined to 

adopt lost profits as a measure of economic impact because the 

plaintiffs’ projected lost profits were speculative. The 

plaintiffs allege that the District Court engaged in improper 

factfinding in holding that their lost profits were too 

speculative. 
18

When evaluating a takings claim under the Penn Central

factors, the economic impact of a regulation is usually 

measured in terms of its effect on the value of the property. 

See Rose Acre Farms, Inc. v. United States, 559 F.3d 1260, 

1268–69 (Fed. Cir. 2009) (collecting cases); see also United 

States v. 68.94 Acres of Land, 918 F.2d 389, 393 n.3 (3d Cir. 

1990). Here, the plaintiffs do not argue that the values of the 

underlying properties or leases have decreased; they instead 

argue that they have been denied the opportunity to profit from 

and to obtain a “reasonable return” on their investments. 

Nekrilov Br. 42 (quoting Penn Cent., 438 U.S. at 136). The 

loss of profitable uses of property is occasionally considered in 

takings cases as a measure of economic impact, see, e.g., Pace 

Res., Inc. v. Shrewsbury Twp., 808 F.2d 1023, 1031 (3d Cir. 

1987), but as the Supreme Court explained:

[L]oss of future profits-unaccompanied by any 

physical property restriction—provides a slender 

reed upon which to rest a takings claim. 

Prediction of profitability is essentially a matter 

of reasoned speculation that courts are not 

especially competent to perform. Further, 

perhaps because of its very uncertainty, the 

interest in anticipated gains has traditionally 

been viewed as less compelling than other 

property-related interests.

Andrus, 444 U.S. at 66. 

As to the purchased properties, we agree with the 

District Court that lost profits are not an appropriate a measure 

of economic impact. First, not all of the plaintiffs were 

profitable as of the filing of the complaint. Suen, who 
19

purchased two properties, had not turned a profit on either 

property, although he considered himself “at a point where [the 

investments] will become profitable in the near future,” based 

on his assumption that he would be able to continue operating 

his short-term rental business “indefinitely.” App. 137. His 

alleged lost profits are entirely speculative. Second, the 

Nekrilovs, Tang, and Jen, who have profited from their shortterm rental businesses, do not allege that they could not 

profitably sell their purchased properties. As the District Court 

explained, their lost-profit claims fail to account for other 

potentially profitable uses of the properties, the most obvious 

of which is to sell the properties. Suen alone alleges that he 

would be forced to sell his two purchased properties at a net 

loss, accounting for “two down payments, the two mortgage 

payments, and the costs of renovations, etc.” App. 138–39. 

But the complaint does not quantify that estimated loss, and it 

bases this claim at least in part on a prediction that Ordinance 

19-077 “will likely deflate prices” of residences in Jersey City. 

App. 139. There is nothing in the complaint to suggest that the 

value of the plaintiffs’ purchased properties have declined as a 

result of Ordinance 19-077 or otherwise. See Fowler v. UPMC 

Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (“[C]onclusory or 

‘bare-bones’ allegations will [not] survive a motion to 

dismiss . . . .”).

But even if we considered the loss of potential shortterm rental revenue as a decrease in the underlying value of the 

properties, that too would be insufficient. The plaintiffs do not 

allege that the market values for any of the purchased 

properties have decreased or that market values for long-term 

rents have decreased as a result of Ordinance 19-077. 

Accordingly, the only alleged loss in “value” is the lost revenue 

from short-term leases that cannot be recouped from long-term 
20

leases or from selling the properties. The complaint does not 

specify the value of this loss, but the District Court estimated 

that, where both long- and short-term market rents are provided

in the complaint, the plaintiffs stand to lose between 

approximately 50% and 66% of their rental revenue, which is 

a fraction of the properties’ value. As this Court has observed, 

the Supreme Court “has required compensation only in cases 

in which the value of the property was reduced drastically.” 

Rogin v. Bensalem Twp., 616 F.2d 680, 692 (3d Cir. 1980). 

The plaintiffs have undeniably lost potential future profits as a 

result of Jersey City’s change in policy. But the plaintiffs’ 

inability to continue to operate their short-term rental 

businesses profitably does not equate to a “drastic[]” reduction 

in the value of the property so as to require compensation, 

especially as the properties retain multiple economically 

beneficial uses. 

As to the long-term leases, the complaint indicates that 

those leases ended in 2020 or 2021. Ordinance 19-077 

permitted tenants to continue to sublease on a short-term basis 

through January 1, 2021. The complaint identifies four leases 

that extended past this transition period: two leases ending on 

June 30, 2021, and two leases ending on August 31, 2021. The 

complaint is not clear as to precisely when the leases started, 

but the plaintiffs were paying rent on the affected leases prior 

to the filing of the complaint in December 2019. Accordingly, 

the Nekrilovs, Tang, and Jen were able to use the leased 

properties for the most profitable use — short term rentals —

for the majority of the lease term. Moreover, as with the 

purchased properties, the leased properties retain multiple 

beneficial uses. The plaintiffs can live in the properties or 

sublet them on a long-term basis. Long-term rental rates are 

indisputably lower than short-term rates, but the plaintiffs
21

acknowledge that they pay “market rent.” App. 116, 119–21, 

126–27. The District Court properly recognized that the 

plaintiffs have not alleged why their losses would be “drastic” 

if they can sublet the properties at market rate on a long-term 

basis. 

“Government hardly could go on if to some extent 

values incident to property could not be diminished without 

paying for every such change in the general law.” Penn. Coal 

Co. v. Mahon, 260 U.S. 393, 413 (1922). To govern 

effectively, governments must be able to “execute laws or 

programs that adversely affect recognized economic values.” 

Penn Cent., 438 U.S. at 124. The plaintiffs have 

unquestionably been negatively affected by the City’s change 

in residential zoning laws, but the plaintiffs’ inability to 

continue to profit at the same levels from their investments is 

insufficient to state a takings claim.

For the foregoing reasons, we conclude that this factor 

weighs against finding a taking of plaintiffs’ purchased 

properties or long-term leases.5

b.

We next turn to the second factor — the extent to which 

Ordinance 19-077 has interfered with the plaintiffs’ distinct, 

investment-backed expectations. “[D]istinct, investmentbacked expectations are reasonable only if they take into 

5 The complaint initially pled that Ordinance 19-077 

constituted a taking of existing reservations, but the plaintiffs 

subsequently informed this Court that no existing short-term 

rentals were cancelled due to the ordinance. 
22

account the power of the state to regulate in the public interest.” 

Pace Res., 808 F.2d at 1033. The plaintiffs do not suffer a 

taking requiring compensation merely because “they have been 

denied the ability to exploit a property interest that they 

heretofore had believed was available for development.” Penn 

Cent., 438 U.S. at 130. Nor does the Takings Clause mean that 

“once a property has been devoted to a particular use, the 

owner has a reasonable expectation of being able to continue 

with that use absent the payment of compensation.” Pace Res., 

808 F.2d at 1032. 

Zoning regulations are the “classic example” of 

permissible regulations that do not require compensation even 

where they “prohibit[] the most beneficial use of the property.” 

Penn Cent., 438 U.S. at 125. And even though zoning laws 

“generally do not affect existing uses of real property,” the 

Supreme Court has rejected takings claims “when the 

challenged governmental actions prohibited a beneficial use to 

which individual parcels had previously been devoted and thus 

caused substantial individualized harm.” Id. at 125–27 

(collecting cases). However, the actions of the state can impact 

the analysis, in particular, where the state invited the activity 

with promises to protect property rights. See, e.g., 

Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1010–11 (1984).

The District Court held that, although a closer question, 

this factor ultimately weighed against finding a taking because 

the plaintiffs had failed to consider the City’s power to regulate 

residential housing in the public interest. We concur.

The plaintiffs make three arguments that Ordinance 19-

077 undermines their distinct, investment-backed 

expectations. First, the plaintiffs argue that this case differs 
23

from Penn Central and Pace in that the applicable statutes in 

both of those decisions affected prospective uses of the 

properties. Here, Ordinance 19-077 affects an already-existing

use of the purchased properties and long-term leases. But this 

Court has made clear that disruption of a present use is not 

enough. See Pace Res., 808 F.2d at 1032–34.

Second, the plaintiffs emphasize that this case is unique 

because Ordinance 15.137 and the statements made by Jersey 

City officials invited and encouraged them to invest in Jersey 

City real estate for the purpose of exploiting the properties as 

short-term rentals. These actions, the plaintiffs argue, 

established an expectation that they could continue to lease 

their properties indefinitely on a short-term basis. The 

plaintiffs point to various statements made by Mayor Fulop and 

City Council members encouraging investors to come to Jersey 

City.

6

 By affirmatively legalizing short-term rentals — and 

advertising that legalization — the City communicated to the 

plaintiffs that their short-term rental businesses were welcome 

there. That does not mean that the plaintiffs’ expectations that 

they could run those businesses, indefinitely, without 

additional restrictions, were reasonable. As the District Court 

noted, Ordinance 15.137 and the very articles cited by 

plaintiffs also contain statements that qualify the legalization 

of short-term rentals. 7 Mayor Fulop cautioned that lessors 

6 Some of these articles, as the District Court noted, quote city 

officials but were not written or specifically endorsed by 

anyone associated with the City. The complaint does not allege 

that the City approved the broader contents of these articles. 

7 Courts may consider in deciding a motion to dismiss 

documents that are “integral to or explicitly relied upon in the 

complaint” without converting the motion to a motion for 
24

could not “rent out so many rooms as to create an informal 

hotel” or “change the nature of the neighborhood.” App. 223. 

Jersey City did not want to be “in the business of disallowing 

a service like Airbnb . . . that lets middle-class folks earn a bit 

of extra income by renting out their apartments.” Id. And 

Ordinance 15.137 provided that short-term rentals may not 

“materially disrupt the residential character of the 

neighborhood.” App. 162.

Third, plaintiffs argue that “where the government itself 

affirmatively engenders the property owner’s investmentbacked expectation, its subsequent subversion of that 

expectation can be so overwhelming as to dispose of the 

takings question entirely.” Nekrilov Br. 31 (emphasis in 

original). The plaintiffs point to two decisions in which courts 

found takings where the state made explicit promises to 

property owners. See Ruckelshaus, 467 U.S. at 1005, 1010–

11; Kaiser Aetna v. United States, 444 U.S. 164, 179–80

(1979). Both decisions involve explicit promises that are not 

present here. In Ruckelshaus, the plaintiff, Monsanto Co., 

submitted trade secret data to the Environmental Protection 

Agency (“EPA”) based on “explicit assurance[s]” that the data 

would not be publicly disclosed. 467 U.S. at 1011. After the 

EPA later disclosed the data, the Supreme Court held that

Monsanto had a reasonable expectation that its data would not 

be published and that a taking had occurred. See id. at 1011–

13. In Kaiser, the plaintiff owned a private pond and received 

permission from government officials to connect the pond to 

navigable waters, permission that was not conditioned on

summary judgment. Schmidt v. Skolas, 770 F.3d 241, 249 (3d 

Cir. 2014) (quoting In re Burlington Coat Factory Sec. Litig., 

114 F.3d 1410, 1426 (3d Cir. 1997)) (emphasis omitted).
25

public access to the pond. See 444 U.S. at 179. The 

government subsequently attempted to require the pond owner 

to permit public access to the pond on the basis that it was 

connected to navigable waters, imposing a navigable servitude 

on the former pond. See id. at 179–80. Although consent of a

government official cannot estop the government, the Supreme 

Court held that it can “lead to the fruition of a number of 

expectancies embodied in the concept of ‘property’—

expectancies that, if sufficiently important, the Government 

must condemn and pay for before it takes over.” Kaiser, 444 

U.S. at 179. The Court acknowledged that “the ‘right to 

exclude,’ so universally held to be a fundamental element of 

the property right, falls within this category of interests.” Id.

at 179–80. The Court concluded that if the government wanted

public access to the former pond “after petitioners [had]

proceeded as far as they [had] . . . , it may not, without 

invoking its eminent domain power and paying just 

compensation, require them to allow free access to the dredged 

pond.” Id. at 180.

Both decisions rest on explicit assurances that are not 

present in this case.8 Ordinance 15.137 placed qualifications 

8 The plaintiffs also cite to Washington Market Enterprises, 

Inc. v. City of Trenton, 343 A.2d 408, 409 (N.J. 1975). That 

decision is inapplicable. As the first step in an urban renewal 

project, Trenton first declared the plaintiff’s property 

“blighted.” Id. at 410. That designation had a negative effect 

on the property, and the plaintiff could no longer find tenants. 

Trenton subsequently abandoned the project without 

condemning and acquiring the property, and therefore without 

paying the plaintiff. Id. at 410. That was the source of the 
26

on the operation of short-term rentals, including that such 

rentals could not change the character of the neighborhood and 

a limit on the number of rentals an investor could operate 

without obtaining a license. Mayor Fulop publicly explained 

that the purpose of Ordinance 15.137 was to permit the middleclass to earn additional income by renting out their homes but 

not to permit investors to create “informal hotel[s].” App. 224. 

And as this Court has explained, “[t]he general expectation of 

regulatory change is no less present where the value of the 

property interest is derived from the regulation itself.” Newark 

Cab Ass’n, 901 F.3d at 153 (quoting Minneapolis Taxi Owners 

Coal., Inc. v. City of Minneapolis, 572 F.3d 502, 509 (8th Cir. 

2009)) (alteration in original).

The plaintiffs may have relied on Ordinance 15.137 in 

deciding to invest in short-term rentals in Jersey City, but they 

failed to take into account the restrictions in place in the 

original ordinance and the City’s strong interest in regulating

residential housing. On balance, this factor weighs against the 

plaintiffs.

c.

Finally, we turn to the character of Ordinance 19-077. 

As the District Court observed, a taking is more “readily . . . 

found when the interference with property can be characterized 

as a physical invasion by government, than when interference 

arises from some public program adjusting the benefits and 

burdens of economic life to promote the common good.” Penn. 

Cent., 438 U.S. at 124 (quotation marks omitted). This is 

unfairness identified by the New Jersey Supreme Court. This 

decision is, therefore, inapposite.
27

especially true when the regulation concerns housing. The 

Supreme Court has “consistently affirmed that States have 

broad power to regulate housing conditions in general.” Yee 

v. City of Escondido, 503 U.S. 519, 528 (1992) (citation 

omitted). In particular, courts are more likely to uphold a 

regulation that “applies generally to a broad class of 

properties.” Rogin, 616 F.2d at 690. However, a regulation

that “substantially furthers important public policies may so 

frustrate distinct investment-backed expectations as to amount 

to a ‘taking.’” Penn Cent., 438 U.S. at 127 (citing Mahon, 260 

U.S. at 414); see also Mahon, 260 U.S. at 414–16 (holding that 

a regulation banning mining that caused subsistence of the 

surface property was a taking of the plaintiffs’ mining rights 

where the regulation merely “shift[ed] the damages” from the 

plaintiffs to the surface owners). 

The plaintiffs contend that the City, Mayor Fulop, and 

the City Council did not act in good faith in passing Ordinance 

19-077. They argue that Mayor Fulop, after deliberately 

enticing investors to come to Jersey City, turned on short-term 

rentals as a result of his personal frustrations with Airbnb. But 

as the District Court observed, regardless of Mayor Fulop’s 

subjective motivations, the council members voted 7-2 for the 

regulation, and the complaint does not attribute bad faith 

motives to these council members. 

The plaintiffs next argue that Councilman Solomon 

admitted to voting for the 2019 Ordinance to benefit those in 

hotel trade unions and that “alone is sufficient for a finding of 

a taking.” Nekrilov Br. 47. The plaintiffs rely on Arkansas 

Game & Fish Commission v. United States, 736 F.3d 1364

(Fed. Cir. 2013), for the proposition that where the government 

legislates to benefit a certain industry or trade group, there has 
28

been a taking. Arkansas Game concerned a physical taking, 

which is not subject to the Penn Central analysis. In Arkansas 

Game, the government temporarily flooded an area in response 

to requests from agricultural interests. See id. at 1370. 

Ordinance 19-077 by contrast is targeted at residential housing 

generally, regardless of Councilman Solomon’s subjective 

intentions. The plaintiffs also ignore the larger context of 

Councilman Solomon’s statement. Councilman Solomon

expressed support for hotel union workers, but he also 

commented on the harmful effects that short-term rentals had

on the residential housing market and on the potential benefits 

of more long-term residents in Jersey City.

9

 Councilman 

Solomon’s statements reflect the same public purposes 

articulated in Ordinance 19-077. 

Ordinance 19-077 is a general zoning regulation 

restricting the permissible uses of residential housing with the 

goals of protecting the residential housing market in Jersey 

City and promoting public safety by reducing the nuisance 

behavior associated with short-term rentals. We agree with the 

District Court’s conclusion that this factor weighs against a 

taking. 

* * * * *

The Penn Central takings test serves to “identify 

regulatory actions that are functionally equivalent to the classic 

taking in which government directly appropriates private 

property or ousts the owner from his domain.” Lingle, 544 

9 The complaint relies on and incorporates by reference the 

remarks made at the special council meeting held on June 25, 

2019. 
29

U.S. at 539. The ordinance effects neither a taking per se nor 

its functional equivalent of the plaintiffs’ property. The 

plaintiffs have certainly suffered losses as a result of Ordinance 

19-077, but they have not been denied all economically 

beneficial use of their properties and therefore have not 

suffered a total taking. Nor have the plaintiffs stated a partial 

takings claim under the Penn Central factors. Accordingly, we 

will affirm the District Court’s dismissal of the plaintiffs’ 

takings claim. 

B.

The plaintiffs next argue that the District Court erred in 

dismissing their Contract Clause claim. We disagree and will 

affirm the District Court’s dismissal of this claim.

The Contract Clause of Article I of the Constitution 

provides that “[n]o State shall . . . pass any . . . Law impairing 

the Obligation of Contracts.” U.S. Const. art. I, § 10, cl. 1. 

Despite its broad language, the Contract Clause does not 

disrupt a state’s ability to exercise its police powers in service 

of the public interest, even if it affects existing contracts. See

Watters v. Bd. of Sch. Dirs. of Scranton, 975 F.3d 406, 412 (3d 

Cir. 2020). To decide whether legislation violates the Contract 

Clause, the court first determines whether the legislation has 

substantially impaired the contractual relationship. See Sveen 

v. Melin, 138 S. Ct. 1815, 1821–22 (2018). If so, the court then 

“turns to the means and ends of the legislation” and evaluates 

whether the legislation (1) has “a significant and legitimate 

public purpose,” and (2) “is drawn in an appropriate and 

reasonable way to advance” that public purpose. Id. at 1822

(quotation marks omitted); see also United Steel Paper & 

Forestry Rubber Mfg. Allied Indus. & Serv. Workers Int’l 
30

Union AFL-CIO-CLC v. Gov’t of Virgin Islands, 842 F.3d 

201, 211 (3d Cir. 2016). When determining whether 

legislation is drawn in a necessary and reasonable way, and 

where the state is not itself a party to the affected contract, “the 

State is ordinarily entitled to deference in its legislative 

judgment.” United Steel, 842 F.3d at 212. The Contract 

Clause “applies equally to municipal ordinances” as it does to 

state legislation. Alarm Detection Sys., Inc. v. Village of 

Schaumburg, 930 F.3d 812, 822 (7th Cir. 2019).

The District Court dismissed the plaintiffs’ Contract 

Clause claim based on both the long-term leases and the shortterm contracts. The court concluded that the plaintiffs had not 

alleged facts sufficient to show that the City did not have a 

substantial public purpose in passing Ordinance 19-077. The 

Contract Clause claim must therefore fail regardless of whether 

Ordinance 19-077 had substantially impaired any existing 

contract. 

The plaintiffs originally alleged that Ordinance 19-077 

impaired both short-term rental contracts and the long-term 

leases into which the Nekrilovs, Tang, and Jen entered. 

However, as discussed before, the plaintiffs submitted a letter 

following oral argument to this Court indicating that the 

plaintiffs did not cancel any existing short-term rentals solely 

due to Ordinance 19-077. Because the Contract Clause

protects only existing contracts, see Bray v. Ins. Co. of Pa., 917 

F.2d 130, 135 (4th Cir. 1990) (“To violate the [C]ontracts

[C]lause the legislature must alter an existing contract.”); see 

also Sveen, 138 S. Ct. at 1821; Watters, 975 F.3d at 412, 

contracts entered into after the passage of Ordinance 19-077 

are not impaired within the meaning of the Contract Clause, 

see Easthampton Sav. Bank v. City of Springfield, 736 F.3d 
31

46, 50 n.5 (1st Cir. 2013) (“[A] state law with only prospective 

effect will not violate the Contracts Clause because it will not 

impair an existing contractual relationship.”). The District 

Court therefore did not err in dismissing the plaintiffs’ Contract 

Clause claim to the extent that it was based on the alleged 

impairment of any short-term rental contracts.

The plaintiffs further argue that Ordinance 19-077 

impaired the long-term leases. To determine whether a 

regulation has substantially impaired an existing contract, we 

“consider[] the extent to which the law undermines the 

contractual bargain, interferes with a party’s reasonable 

expectations, and prevents the party from safeguarding or 

reinstating his rights.” Sveen, 138 S. Ct. at 1817. The 

plaintiffs have not articulated how Ordinance 19-077 has 

substantially impaired the contractual relationships between 

the lessors and the plaintiffs. Ordinance 19-077 has no effect 

on the plaintiffs’ obligations to pay rent to the long-term 

landlords or the landlords’ obligations to provide the plaintiffs 

with access to the property. Ordinance 19-077 does not negate 

the plaintiffs’ ability to sublet but limits the plaintiffs to longterm sublets. The plaintiffs suggest that because unlimited 

short-term rentals were legal at the time they entered into the 

long-term leases, Ordinance 19-077 undermines their 

legitimate expectations that they could indefinitely conduct 

short-term sublets. As we have explained, it is not reasonable 

for the plaintiffs to conclude from the passage of Ordinance 

15.137 that they could continue to conduct short-term rentals 

indefinitely without additional restrictions. The plaintiffs do 

not articulate any other way in which Ordinance 19-077 has 

impaired their long-term leases.
32

But as the District Court observed, even assuming 

Ordinance 19-077 substantially impaired the long-term leases, 

the plaintiffs have still failed to plead a Contract Clause claim 

because the City has articulated a legitimate public purpose for 

the Ordinance, which was drawn in an appropriate and 

reasonable manner. A legitimate public purpose is one that is 

“aimed at remedying a broad and general social or economic 

problem.” United Steel, 842 F.3d at 211. Ordinance 19-077

articulates multiple public purposes, including the desire to 

protect the residential character of neighborhoods and reduce 

nuisance activity associated with short-term rentals. The 

plaintiffs suggest that these purposes are not legitimate because 

of Mayor Fulop’s personal dissatisfaction with Airbnb. The

plaintiffs do not cite any decision which would permit this 

Court to take into account the subjective intent of the 

individual legislators.

That there is a significant and legitimate public purpose 

for Ordinance 19-077 does not end our inquiry. See id. We 

must next decide whether the ordinance is “both necessary and 

reasonable to meet the purpose advanced by the [City] in 

justification.” Id. But as the Supreme Court has repeatedly 

held, where the state is not itself a party to the affected contract, 

“courts should properly defer to legislative judgment as to the 

necessity and reasonableness of a particular measure.” 

Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 

470, 505 (1987) (quotation marks omitted). The City is not a 

party to any of the long-term leases and therefore is entitled to 

deference in its judgments regarding the necessity and 

reasonableness of Ordinance 19-077. The City has expressed 

in Ordinance 19-077 that short-term rentals can negatively 

affect the long-term housing supply, have “deleterious” affects 

on residential neighborhoods, and impact the character of 
33

residential neighborhoods and determined that restrictions on 

such rentals are necessary. App. 147. We therefore “refuse to 

second-guess the [the City’s] determinations” that restrictions 

on short-term rentals “are the most appropriate ways of dealing 

with the problem.” DeBenedictis, 480 U.S. at 505.

Accordingly, we will affirm the District Court’s 

dismissal of the plaintiffs’ Contract Clause claim.

C.

The plaintiffs next argue that the District Court erred in 

dismissing their substantive due process claim. The Fourteenth 

Amendment provides that “[n]o State shall . . . deprive any 

person of life, liberty, or property, without due process of law.” 

U.S. Const. amend. XIV, § 1. Substantive due process is a 

“component of the [Fourteenth Amendment] that protects 

individual liberty against ‘certain government actions 

regardless of the fairness of the procedures used to implement 

them.’” Collins v. City of Harker Heights, 503 U.S. 115, 125 

(1992) (quoting Daniels v. Williams, 474 U.S. 327, 331 

(1986)). There exist two “threads” of substantive due process 

actions: “substantive due process relating to legislative action 

and substantive due process relating to non-legislative action.” 

Newark Cab Ass’n, 901 F.3d at 155. Legislative acts are

subjected to rational basis review. See Am. Exp. Travel 

Related Servs., Inc. v. Sidamon-Eristoff, 669 F.3d 359, 366 (3d 

Cir. 2012).10 The City must demonstrate “(1) the existence of 

10 A non-legislative action “violates substantive due process if 

arbitrary, irrational, or tainted by improper motive, or if so 

egregious that it shocks the conscience.” Cnty. Concrete Corp. 
34

a legitimate state interest that (2) could be rationally furthered 

by the statute.” Id. This Court has held that where a New 

Jersey municipal body votes for “‘a change in the permitted 

uses in a zoning district,’ the act is legislative in character.” 

Cnty. Concrete Corp., 442 F.3d at 169 (quoting Timber Props., 

Inc. v. Chester Twp., 500 A.2d 757, 763 (N.J. Super. Ct. App. 

Div. 1984)).

The test is easily satisfied here. As the District Court 

observed, Ordinance 19-077 articulates several legitimate state 

interests furthered by the change in regulation: (1) protecting

the long-term housing supply; (2) reducing “deleterious 

effects” on neighborhoods caused by short-term rentals; and 

(3) protecting the residential character and density of 

neighborhoods. App. 147. This Court has reversed a grant of 

a motion to dismiss substantive due process claims related to 

zoning changes where the complaint contained no facts “that 

would indicate any possible motivation for the enactment of 

the Ordinance other than a desire to prevent appellants from 

continuing to operate and expand their . . . business.” Cnty. 

Concrete Corp., 442 F.3d at 170. But here, the face of the 

ordinance articulates the very state interests that the ordinance 

furthers.

The plaintiffs argue that Mayor Fulop was subjectively 

motivated by his dissatisfaction with Airbnb over campaign 

donations. But the subjective intentions of the legislators are 

“constitutionally irrelevant.” Flemming v. Nestor, 363 U.S. 

603, 612 (1960). And the plaintiffs do not make any other legal 

arguments in support of their substantive due process claim.

v. Town of Roxbury, 442 F.3d 159, 169 (3d Cir. 2006)

(quotations omitted). 
35

For these reasons, we will affirm the District Court’s 

dismissal of the substantive due process claim.11

IV.

For the foregoing reasons, we will affirm the judgment

of the District Court. 

11 Finally, the plaintiffs challenge the District Court’s denial of 

their motion for a preliminary injunction. The District Court, 

having dismissed the complaint, denied the motion as moot. 

Because we will affirm the District Court’s dismissal of the 

complaint, this issue is moot, and we will affirm the District 

Court’s denial of the plaintiffs’ injunction motion.
BIBAS, Circuit Judge, concurring.

I join the majority’s excellent opinion in full. And I write 

separately only to offer thoughts on a question that the majority 

need not resolve today: what should be the test for regulatory 

takings?

Modern regulatory-takings doctrine has a laudable goal:

protecting property owners against novel, potent, and intrusive 

regulations. To make that happen, the Supreme Court has given 

us a few different tests. But they overlap and are notoriously 

hard to apply. Worse, they are unmoored from the Constitution’s text.

The better solution is to go back to the Takings Clause’s 

original public meaning. Under that standard, the government

would have to compensate the owner whenever it takes a property right and presses it into public use—even if the taking did 

not involve a physical invasion.

I. THE LAY OF THE LAND: TAKINGS DOCTRINE TODAY

The Takings Clause bans “tak[ing]” “private property ... 

for public use, without just compensation.” U.S. Const. amend. 

V. A century ago, the Supreme Court suggested that not only 

confiscations, but also regulations, can be takings if they “go[] 

too far.” Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).

But regulatory-takings doctrine is a mess. To identify regulations that “go[] too far,” we apply various tests. Regulations 

that authorize even a temporary physical invasion are per se 

takings, regardless of their economic impact. Cedar Point 

Nursery v. Hassid, 141 S. Ct. 2063, 2073–74 (2021). So are 
2

regulations that leave land “without economically beneficial or 

productive options for its use.” Lucas v. S.C. Coastal Council, 

505 U.S. 1003, 1018–19 (1992).

But for all other regulations, we conduct an “essentially ad 

hoc, factual inquir[y].” Penn Cent. Transp. Co. v. New York 

City, 438 U.S. 104, 124 (1978). As with the other tests, we ask 

whether the regulation can be characterized as a “physical invasion.” Id. (also describing this prong as the “character of the 

governmental action”). But we look at its “economic impact”

as well, especially how much it “interfere[s] with distinct investment-backed expectations.” Id. And we may weigh other 

unidentified, “relevant” factors too. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Plan. Agency, 535 U.S. 302, 322 (2002)

(internal quotation marks omitted). 

Applying the Penn Central factors is challenging. For one, 

they are hard to define and thus hard to meet. See Bridge Aina 

Le’a, LLC v. Hawaii Land Use Comm’n, 141 S. Ct. 731, 731–

32 (2021) (Thomas, J., dissenting from denial of certiorari); 

Steven J. Eagle, The Four-Factor Penn Central Regulatory 

Takings Test, 118 Penn. St. L. Rev. 601, 605 (2014).

This case highlights some of the difficulties. Take “economic impact.” The investors argue that the city’s regulation 

destroyed two thirds of their properties’ profitability. But precedent is muddy on whether lost profits count as an economic 

burden. Compare Penn Cent., 438 U.S. at 127, 129 n.26 (considering the property owners’ “ability to profit”), and Keystone 

Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 499 

(1987) (same), with Andrus v. Allard, 444 U.S. 51, 66 (1979) 
3

(suggesting that lost profits “provide[] a slender reed upon 

which to rest a takings claim”).

Plus, we do not know how severe an economic loss must be

to satisfy that factor. Indeed, the Supreme Court has declined 

to spell out a “mathematically precise” formula. Tahoe-Sierra, 

535 U.S. at 326 & n.23 (internal quotation marks omitted). 

Precedent suggests that very few regulatory takings suffice. 

Though wiping out almost all of a property’s value might 

count, other severe devaluations do not. Compare Lucas, 505 

U.S. at 1016–19 nn.7–8 (suggesting that 95% reduction in 

value might suffice), with Penn Cent., 438 U.S. at 131 (cataloguing rejected claims for 75% and 87.5% reductions), and

Pace Res., Inc. v. Shrewsbury Twp., 808 F.2d 1023, 1031 (3d 

Cir. 1987) (rejecting 90% reduction). And that calculation is 

tricky for another reason: it is “unclear” whether total deprivations of one use of land should be treated as deprivations of one 

property right or “a mere diminution in the value of the tract as 

a whole.” Lucas, 505 U.S. at 1016 n.7.

Or consider “investment-backed expectations.” Here, the 

investors argue that city officials’ statements led them to reasonably expect that they could keep short-term leasing. But 

“investment-backed expectations are reasonable only if they 

take into account the power of the state to regulate in the public 

interest.” Pace Res., 808 F.2d at 1033; see also Good v. United 

States, 189 F.3d 1355, 1361–62 (Fed. Cir. 1999). Perhaps the 

investors must point to something close to a promise that their 

property interests would be protected. See, e.g., Ruckelshaus v. 

Monsanto Co., 467 U.S. 986, 1008–10 (1984). If so, it is 
4

unclear where “investment-backed expectations” fall in the 

gray area between expected regulations and formal contracts. 

Even considering these issues, this case is clear. The investors have not shown a regulatory taking. But in closer cases, 

the lack of rules and guidance invites chaos.

Applying Penn Central can be hard for a second reason: we 

do not know how much weight to give each factor. Courts often 

knock out regulatory-takings claims for lacking one factor. 

See, e.g., Palazzolo, 533 U.S. at 634–35 (O’Connor, J., concurring) (chiding lower court for giving “investment-backed 

expectations ... exclusive significance”); Guggenheim v. City 

of Goleta, 638 F.3d 1111, 1123 (9th Cir. 2010) (en banc) (Bea, 

J., dissenting) (objecting that the majority “converts a threefactor balancing test into a ‘one-strike-you’re-out’ checklist”); 

Adam R. Pomeroy, Penn Central After 35 Years: A Three Part 

Balancing Test or a One Strike Rule?, 22 Fed. Cir. Bar J. 677, 

689 (2013) (empirical study “show[ing] that the actual practice 

of the courts is to use the Penn Central test not as a balancing 

test but as a checklist, ... habitually failing to utilize or analyze 

all three factors”).

This one-strike-you’re-out practice is especially troubling 

because Penn Central overlaps with per se regulatory takings 

claims. The first Penn Central factor considers whether the 

regulation can be characterized as a physical invasion. But 

physical invasions are also per se takings. Cedar Point, 141 S. 

Ct. at 2073–74. Smart lawyers will frame their challenges as 

per se takings if they can. But where does that leave Penn 

Central?
5

Perhaps most importantly, Penn Central is hard to apply 

because it is not “ground[ed] ... in the Constitution as it was 

originally understood.” Murr v. Wisconsin, 137 S. Ct. 1933, 

1957 (2017) (Thomas, J., dissenting). Thus, rather than look to 

history for answers to regulatory-takings questions, we must 

puzzle through Penn Central’s factors. Recognizing these 

problems, Justice Thomas recently encouraged his colleagues 

to clarify whether there is any “such thing as a regulatory taking” and “if there is, ... make clear when one occurs.” Bridge 

Aina, 141 S. Ct. at 732.

Though I am bound by Supreme Court precedent, I can still 

take up part of Justice Thomas’s challenge. I suggest that the 

Takings Clause, originally understood, would have allowed 

regulatory-takings claims for regulations that take a state-law 

property right and press it into public use.

II. REGULATORY TAKINGS AND THE 

ORIGINAL PUBLIC MEANING

To discern the Constitution’s original public meaning, we 

start with its text. The Fifth Amendment bars the government 

from “tak[ing]” “private property” “for public use, without just 

compensation.” U.S. Const. amend. V. That spare clause holds 

three key textual puzzles: What counts as “private property”? 

When is it “taken”? And when is that taking “for public use”? 

The answers reveal that the Constitution requires compensating regulatory takings only when a law takes a recognized 

property right.

First comes “property.” At the Founding, “property” included more than just the right to exclude. Blackstone’s 
6

Commentaries, for example, had a “broad” conception of property that extended beyond physical possession. See William 

Michael Treanor, The Original Understanding of the Takings 

Clause and the Political Process, 95 Colum. L. Rev. 782, 827 

(1995) (summarizing Blackstone). It defined the right to property as consisting in the “free use, enjoyment, and disposal of 

all of [one’s] acquisitions, without any control or diminution.” 

1 William Blackstone, Commentaries *134.

The Founders shared this broad conception. See Treanor at

827 & n.234 (describing the Founders’ definitions). James 

Madison, for instance, approvingly quoted Blackstone’s understanding that property included the whole “dominion which 

one man claims and exercises over the external things of the 

world.” James Madison, Property, National Gazette (Mar. 27, 

1792), https://perma.cc/WN9Q-X3FE. (Indeed, he would have 

gone further and defined property as anything of “value” or any 

“right.” Id.) This approach treats “property” broadly enough to 

include rights beyond physical possession of land or chattels.

Second is “taken.” Dictionaries of the time defined “to 

take” in many ways. But because property encompassed both 

physical and intangible rights, the “aptest, most likely sense[]” 

covered both physical seizure and non-physical deprivation. 

Antonin Scalia & Bryan Garner, Reading Law 418 (2012); see

Take (defs. 2, 67), Samuel Johnson, A Dictionary of the English Language (1755) (defining “take” to cover both physical 

seizure (“[t]o seize what is not given”) and intangible deprivations (“[t]o deprive of”)); To Take, Thomas Sheridan, A Complete Dictionary of the English Language (5th ed. 1789) 

(same). 
7

Indeed, in other contexts, the Framers used “take” to refer 

to non-physical deprivations. In Federalist No. 44, for example, James Madison discussed “tak[ing]” the “right of coining 

money” from the states. The Federalist No. 44, at 231 (James 

Madison) (George W. Carey & James McClellan eds., Gideon 

ed. 2001). A few essays later, he mentioned the rights “taken 

away” from slaves. The Federalist No. 54, at 283 (James Madison). And at the Constitutional Convention, delegates discussed “tak[ing]” sovereignty and authority over the militia 

from the states and “tak[ing]” responsibility from the executive 

branch. 1 The Records of the Federal Convention of 1787, at 

42, 545 (Max Farrand ed. 1911); 2 Records at 331. So at the 

Founding, deprivations of property rights would have been takings, regardless of whether they involved physical intrusions.

Last is “for public use.” In the eighteenth century, that 

would have signified “employing” the taken property interest 

“to any purpose” for the “good of the community.” Use (def. 

1) and Publick (def. 4), Samuel Johnson, A Dictionary of the 

English Language (1755) (emphasis added). “Employing” 

property means more than just regulating the owner’s chosen 

use. It means pressing property into a government-approved 

use instead. See Jed Rubenfeld, Usings, 102 Yale L.J. 1077, 

1150 (1993). Grammatically, the clause limits only “use[s]” for 

the public, not bans or limits. Id. at 1114–18. So preventing a 

nuisance is not “us[ing]” the property and does not require just 

compensation. See Kelo v. City of New London, 545 U.S. 469, 

510 (2005) (Thomas, J., dissenting) (“Blackstone and Kent, for 

instance, both carefully distinguished the law of nuisance from 

the power of eminent domain.”).
8

The text of the Takings Clause naturally reads broadly 

enough to reach not only physical seizures, but also deprivations of any property right to serve a governmental use. And 

cases leading up to the Fourteenth Amendment—which may 

well be relevant to the meaning of the Clause as incorporated 

against the states—confirm that reading. See generally 

Michael B. Rappaport, Originalism and Regulatory Takings: 

Why the Fifth Amendment May Not Protect Against Regulatory 

Takings, but the Fourteenth Amendment May, 45 San Diego L. 

Rev. 729 (2008). But cf. N.Y. State Rifle & Pistol Ass’n v. 

Bruen, 142 S. Ct. 2111, 2163 (2022) (Barrett, J., concurring) 

(noting the open question whether, for rights incorporated 

against the states, courts should consider the original public 

meaning as of 1791 or 1868).

True, there are not many cases from the Founding to 

Reconstruction. At the Founding, a handful of state constitutions did not limit takings, and those with takings clauses did 

not require compensation. Steven G. Calabresi, Sarah E. 

Agudo & Kathryn L. Dore, State Bills of Rights in 1787 and 

1791: What Individual Rights Are Really Deeply Rooted in 

American History and Tradition?, 85 S. Cal. L. Rev. 1451, 

1505–06 (2012). And the federal government sometimes relied 

on states to condemn property for federal use. See Kohl v. 

United States, 91 U.S. 367, 373 (1875). But the cases that exist 

show that takings were not limited to physical invasions. Regulations could count if they deprived owners of a valid property 

right for some public use.

In Gardner v. Trustees of Newburgh, for instance, a New 

York law empowered a village to divert a stream to supply 
9

itself with water. 2 Johns. Ch. 162, 163–64 (N.Y. Ch. 1816). In 

doing so, the village cut off the flow of water to Gardner’s land. 

Id. The Chancery Court held that this was a taking because 

Gardner’s “right to a stream of water is as sacred as a right to 

the soil over which it flows.” Id. at 165–66; accord Cooper v. 

Williams, 5 Ohio 391, 392 (1832); see also Stevens v. Proprietors of the Middlesex Canal, 12 Mass. 466, 468 (1815). See 

generally Kris W. Kobach, The Origins of Regulatory Takings: 

Setting the Record Straight, 1996 Utah L. Rev. 1211, 1234–45 

(discussing Gardner, Cooper, and other riparian cases).

Or consider Patterson v. City of Boston, 37 Mass. (20 Pick.) 

159 (1838). There, the city widened a street. Id. at 163. For two 

years, the construction prevented a store owner from accessing 

his shop. Id. at 165. Even though the city never occupied the 

premises, it had to compensate the store owner. Id. at 164–66. 

As Chief Justice Lemuel Shaw recognized, the construction deprived him of his “paramount right of occupation and enjoyment.” Id. at 164.

Intangible rights were likewise property protected from takings. The revocation of a franchise, for instance, was treated as 

a compensable taking “on the theory that the revocation was a 

seizure of intangible property.” Treanor at 792 n.54; see W. 

River Bridge Co. v. Dix, 47 U.S. (6 How.) 507, 523, 533–34 

(1848); id. at 543 (Woodbury, J., concurring); 2 James Kent, 

Commentaries on American Law 340 n.a (4th ed. 1840). Since 

property need not be physical, takings need not be physical either.

In short, when the government takes a property right for 

some governmental use, it must compensate the owner. I now 

turn to how that rule squares with current doctrine.
10

III. APPLYING ORIGINALISM TO

MODERN REGULATORY TAKINGS

Courts must identify both a property right that has been 

taken and a public use into which that right has been pressed. 

If we look at takings that way, only the first Penn Central factor 

aligns closely with the original meaning of the Takings Clause.

1. The character of the government’sinvasion. Penn Central

reasoned that courts should more readily find physical invasions 

to be takings “than when interference arises from some public 

program adjusting the benefits and burdens of economic life.” 

438 U.S. at 124. As early takings practice shows, we should read 

this factor to ask whether the government has taken a property 

right from the “collection of individual rights” that “constitute 

property.” United States v. Craft, 535 U.S. 274, 278 (2002).

To define each right, we look to state property law. Classically, the central right is the right to exclude others. See 2 

Blackstone *2; Kaiser Aetna v. United States, 444 U.S. 164, 

176 (1979). Another is the right to occupy your property. 2 

Blackstone *8, *10. Current per se takings doctrine properly 

secures these rights. See Cedar Point, 141 S. Ct. at 2073–74.

But these are not the only property rights. Property law historically includes the rights to dig or mine below the land and 

to keep others from building into the airspace above it. 2 Blackstone *18. It also includes the rights to graze, to fish, and to 

draw water. Id. at *32–36. There is the right to pass property 

on to one’s heirs. Id. at *11; see Hodel v. Irving, 481 U.S. 704, 

716 (1987). And there are easements, like rights of way and 

access to light and air. Restatement (Third) of Property 
11

(Servitudes) §1.2; J.A. Robinson, Implied Easements of Light 

and Air, 4 Yale L.J. 190 (1895).

If the state deprives property owners of one of these rights, 

it may commit a taking. Existing doctrine hints as much. For 

example, the government may not ban all economically valuable use without paying compensation. Lucas, 505 U.S. at 1019. 

Nor can it ban bequests and devises to one’s heirs. Hodel, 481 

U.S. at 716–18. Nor may it demand a right of way over private 

property without paying for the easement. Nollan v. Calif. 

Coastal Comm’n, 483 U.S. 825, 827, 841–42 (1987). It can 

regulate coal mining without paying compensation, but it may 

well have to pay if it bans mining entirely (at least if it does so 

for a public use). Hodel v. Va. Surface Mining & Reclamation 

Ass’n, 452 U.S. 264, 268–72, 295–97 (1981); Pa. Coal Co., 

260 U.S. at 412–13 (holding that a ban on coal mining below 

homes to prevent their collapse is a taking).

Here, Jersey City’s regulation did not take over the owners’ 

right to rent. Indeed, they could still lease out their property as 

long as they followed the duration limits. And maintaining

those use restrictions is within the state’s ordinary police 

power. See, e.g., Sobel v. Higgins, 590 N.Y.S.2d 883, 884 

(N.Y. App. Div. 1992) (“The regulation of rental housing ... 

has long been upheld ... as a valid exercise of the government’s 

police power to protect the public health, safety, and general 

welfare.”).

Of course, not all burdens on these rights amount to takings. 

See, e.g., Penn Central, 438 U.S. at 124–27. To draw the line 

between impermissible deprivations and permissible regulation, we should look to the historical common law. Cf. Bruen, 
12

142 S. Ct. at 2127 (courts may assess the scope of rights by 

examining the “historical tradition that delimits the outer 

bounds of the right”). Historically, states have been able to regulate “for the protection of the health, morals, and safety of the 

people” without “directly encroaching upon private property.” 

Mugler v. Kansas, 123 U.S. 623, 668 (1887). Indeed, as far 

back as the Founding, states have forbidden nuisances and imposed regulatory burdens on land use that stop short of confiscating property rights. See generally John F. Hart, Land Use 

Law in the Early Republic and the Original Meaning of the 

Takings Clause, 94 Nw. U. L. Rev. 1099 (2000). 

2. Economic impact & investment-backed expectations. 

Though the first Penn Central factor fits with the original understanding of the Takings Clause, the rest of the test is hard to 

square with the Constitution’s text and history. The second and 

third factors look to “[t]he economic impact of the regulation 

on the claimant and, particularly, the extent to which the regulation had interfered with distinct investment-backed expectations.” Penn Cent., 438 U.S. at 124. These expectations must 

be more than mere hopes or mental plans. See id. at 130. But 

Penn Central stopped short of tying those expectations to actual property rights. 

Yet it is hard to see how merely diminishing something’s 

value amounts to taking property. An owner has no right to 

have his property hold a specific economic value. Its value often fluctuates with the market or the neighborhood. Indeed, 

current precedent already recognizes as much. See Lucas, 505 

U.S. at 1016 n.7 (leaving open whether a 90% diminution in 

value would suffice).
13

Similarly, the Penn Central test fails to ground “investment-backed expectations” in an owner’s recognized property 

rights. This is not to say that property owners do not enjoy any 

protections. If the expectation arises from a contract with the 

government, then the owner can pursue contract remedies. See, 

e.g., 41 U.S.C. §§7101–09. Plus, the Contracts Clause prevents 

states from “impairing the Obligation of Contracts.” U.S. 

Const. art. I, §10, cl. 1. That bar applies to contracts with a 

state as well as those between private parties. Fletcher v. Peck, 

10 U.S. (6 Cranch) 87, 137 (1810); Trs. of Dartmouth Coll. v. 

Woodward, 17 U.S. (4 Wheat.) 518, 652, 664, 712 (1819). 

Thus, states may not defeat the “reasonable expectations” of a 

party to a contract. Sveen v. Melin, 138 S. Ct. 1815, 1822 

(2018). The investors here never explain how the short-term 

rental policy harms a “contractual relationship.” United Steel 

Paper & Forestry Rubber Mfg. Allied Indus. & Serv. Workers 

Int’l Union v. Virgin Islands, 842 F.3d 201, 210 (3d Cir. 2016) 

(emphasis added). So they have no contractual claim. But the 

Contracts Clause, not the Takings Clause, provides a better 

guide for analysis here.

* * * * *

We properly reject the investors’ takings claim today, but 

only after applying a fuzzy test. The Takings Clause’s text and 

history focus cleanly on whether a state has taken a property 

right and pressed it into public use. Of course, the Supreme 

Court’s precedent binds us. But if the Court reconsiders, going 

back to the Clause’s text and historical understanding will provide not only a surer constitutional footing but also needed 

clarity.