Opinion ID: 1193965
Heading Depth: 1
Heading Rank: 4

Heading: Regulation of Maximum Residential Rents in Berkeley as an Exercise of the Police Power

Text: We have thus far concluded (1) that in the absence of conflicting or preemptive state law the defendant city's police power within its territorial limits is as broad as the police power exercisable by the Legislature and (2) that general state law does not preclude the defendant city from imposing maximum limits on residential rents within its territory or from restricting the grounds for evicting tenants for the purpose of enforcing those limits insofar as such control of rents and evictions is a proper exercise of the police power. We now consider whether defendant could rightfully exercise its police power in this manner under the circumstances established by the record. Plaintiffs urge and the trial court concluded that rents cannot constitutionally be controlled in the absence of an emergency which the trial court defined in the language of Levy Leasing Co. v. Siegel (1922) 258 U.S. 242, 245 [66 L.Ed. 595, 602, 42 S.Ct. 289], as a condition so grave that it constitute[s] a serious menace to the health, morality, comfort, and even to the peace of a large part of the people of the State (or in this case the city). The Levy Leasing decision and Marcus Brown Co. v. Feldman (1921) 256 U.S. 170 [65 L.Ed. 877, 41 S.Ct. 465], rejected due process objections under the Fourteenth Amendment to New York State statutes enacted in 1920 to deal with a grave housing shortage resulting from the cessation of building activities incident to World War I. The statutes provided in effect that during a period of approximately two years tenants should be immune from eviction if they paid a reasonable rent to be determined by the courts and were not objectionable and if the landlord did not seek to repossess the premises for personal use or demolition. Similar congressional legislation for the District of Columbia under which the rental owed by a tenant remained the same unless modified by a rent commission was upheld as against due process objections in Block v. Hirsh, supra, 256 U.S. 135. However, in Chastleton Corp. v. Sinclair (1924) 264 U.S. 543 [68 L.Ed. 841, 44 S.Ct. 405], the court made clear it would not tolerate extension of these rent controls beyond the period of the war emergency. Faced with a challenge to a rent reduction order of the District of Columbia Rent Commission dated August 7, 1922, and effective as of the preceding March 1st, the court remanded the case for determination of whether the emergency justifying the statute still existed on the relevant dates in view of reduced government payrolls and new building activities in the City of Washington. The court stated that the increased cost of living would not in itself justify continuing the statute in effect and added that if the question were only whether the statute is in force today, upon the facts that we judicially know we should be compelled to say that the law has ceased to operate. (264 U.S. at pp. 548-549 [68 L.Ed. at p. 844].) These decisions concerning rent controls in Washington, D.C. and the State of New York during the aftermath of World War I are the last in which the United States Supreme Court has specifically considered the extent to which the due process clauses of the Fifth and Fourteenth Amendments allow state legislatures, or bodies exercising equivalent powers, to impose rent controls. [23] However, an examination of the evolution of the court's views in related fields of price and wage controls will demonstrate that the emergency doctrine invoked to uphold rent control measures of more than half a century ago is no longer operative as it was formulated as a special exception to limitations on the police power that have long since ceased to exist. At the time of its rent control decisions in the early twenties a majority of the Supreme Court was of the view that the liberty protected by the due process clause included a freedom of contract which normally precluded either state legislatures or Congress legislating for the District of Columbia from regulating the amounts of prices or wages in businesses not affected with a public interest. Legislation invalidated pursuant to this view included attempted uses of the police power to fix minimum wages for women ( Adkins v. Children's Hospital (1923) 261 U.S. 525 [67 L.Ed. 785, 43 S.Ct. 394, 24 A.L.R. 1238]), to require compulsory arbitration of disputes over wages and hours in the food processing, clothing, fuel and transportation industries ( Wolff Co. v. Industrial Court (1923) 262 U.S. 522 [67 L.Ed. 1103, 43 S.Ct. 630]), and to limit markups on resold theatre tickets ( Tyson & Brother v. Banton (1927) 273 U.S. 418 [71 L.Ed. 718, 47 S.Ct. 426, 58 A.L.R. 1236]) and fees chargeable by employment agencies ( Ribnik v. McBride (1928) 277 U.S. 350 [72 L.Ed. 913, 48 S.Ct. 545, 56 A.L.R. 1327]). In these cases the court distinguished its rent control decisions as involving statutes ... of a temporary character, to tide over grave emergencies. ( Tyson & Brother v. Banton, supra, 273 U.S. at p. 437 [71 L.Ed. at p. 725]; accord, Wolff Co. v. Industrial Court, supra, 262 U.S. at p. 542 [67 L.Ed. at p. 1111]; Adkins v. Children's Hospital, supra, 261 U.S. at pp. 551-552 [67 L.Ed. at pp. 793-794].) But during the thirties this restrictive view of the police power was completely repudiated. Heralding the court's change of view was Nebbia v. New York (1934) 291 U.S. 502 [78 L.Ed. 940, 54 S.Ct. 505, 89 A.L.R. 1469], where the court declared: [T]here can be no doubt that upon proper occasion and by appropriate measures the state may regulate a business in any of its aspects, including the prices to be charged for the products or commodities it sells. [¶] So far as the requirement of due process is concerned, and in the absence of other constitutional restriction, a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy, or, when it is declared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio.  (291 U.S. at p. 537 [78 L.Ed. at p. 957].) Many of the prior restrictive decisions were expressly overruled. Upholding a women's minimum wage statute and overruling Adkins v. Children's Hospital, supra, 261 U.S. 525, the court pointed out that the Constitution does not speak of freedom of contract but only of liberty subject to due process of law, and regulation which is reasonable in relation to its subject and is adopted in the interests of the community is due process. ( West Coast Hotel Co. v. Parrish (1937) 300 U.S. 379, 391 [81 L.Ed. 703, 708, 57 S.Ct. 578, 108 A.L.R. 1330].) The sweeping nature of the court's change of views and its direct relationship to the earlier rent control decisions is perhaps seen most clearly in Olsen v. Nebraska (1941) 313 U.S. 236 [85 L.Ed. 1305, 61 S.Ct. 862, 133 A.L.R. 1500], where a unanimous court upheld a statute regulating employment agency fees and not merely overruled Ribnik v. McBride, supra, 277 U.S. 350, but depicted a flood of its intervening decisions as engulfing and repudiating the philosophy and approach of the Ribnik majority. [24] The repudiated legal standard was described as one by which the constitutional validity of price-fixing legislation, at least in absence of a so-called emergency, was dependent on whether or not the business in question was `affected with a public interest'. (Fn. omitted; italics added.) (313 U.S. at p. 245 [85 L.Ed. at p. 1309].) The Olsen court thus made clear that existence of a so-called emergency is no longer a prerequisite to the constitutionality of legislation fixing prices regardless of whether the regulated enterprise is affected with a public interest. Notwithstanding this basic change in the United States Supreme Court's view of the state's power to regulate prices, the courts of several American jurisdictions have continued to treat the existence of a grave emergency as a constitutional prerequisite to any form of governmental rent control. In some instances the requirement has been held to be satisfied by a legislative declaration of emergency in the rent control statute itself and the absence from the record of any ground for treating the declaration as untrue. ( Amsterdam-Manhattan, Inc. v. City Rent & Rehab. Adm'n (1965) 15 N.Y.2d 1014 [260 N.Y.S.2d 23, 207 N.E.2d 616]; Lincoln Bldg. Associates v. Barr (1956) 1 N.Y.2d 413 [153 N.Y.S.2d 633, 135 N.E.2d 801] (office space rent control); Israel v. City Rent & Rehab. Adm'n (S.D.N.Y. 1968) 285 F. Supp. 908; Russell v. Treasurer & Receiver General (1954) 331 Mass. 501, 507 [120 N.E.2d 388].) In other cases the lack of a sufficiently grave emergency has been set forth as a reason for holding rent control legislation invalid. ( Kress, Dunlap & Lane, Ltd. v. Downing (3d Cir.1960) 286 F.2d 212 (reversing summary judgment); id. (D. Virgin Is. 1961) 193 F. Supp. 874 (finding sufficient emergency as to low-rent housing but not as to high-rent housing or commercial property); City of Miami Beach v. Fleetwood Hotel, supra, 261 So.2d 861; [25] Warren v. City of Philadelphia (1956) 387 Pa. 362 [127 A.2d 703].) [26] In none of these cases does the prevailing opinion discuss the continued viability of the emergency requirement in light of the United States Supreme Court's fundamental change of approach to the constitutionality of price regulation under the due process clause. (But see dissenting opn. in Amsterdam-Manhattan, Inc. v. City Rent & Rehab. Adm'n, supra, 15 N.Y.2d 1014, 1015.) The courts that have considered the implications of this change have concluded that it renders the former emergency requirement obsolete. Thus, the Second Circuit Court of Appeals, in affirming dismissal of a landlord's action against a rent control official under the Civil Rights Act (42 U.S.C.A. § 1983 [42 U.S.C.S. § 1983]) stated that we have no doubt that it [the United States Supreme Court] would sustain the validity of rent control today.... The time when extraordinarily exigent circumstances were required to justify price control outside the traditional public utility areas passed on the day that Nebbia v. New York, 291 U.S. 502, 539, 54 S.Ct. 505, 78 L.Ed. 940, 89 A.L.R. 1469 (1934), was decided. Whether, as some believe, rent control does not prolong the very condition that gave it birth, is a policy issue not appropriate for judicial concern. ( Eisen v. Eastman (2d Cir.1969) 421 F.2d 560, 567.) Similarly the New Jersey Supreme Court in sustaining the validity of municipal rent control ordinances recently observed that rent control is, of course, but one example of the larger and more pervasive phenomenon of governmental regulation of prices under the police power. For constitutional purposes, rent control is indistinguishable from other types of governmental price regulation. ( Hutton Park Gardens v. Town Council (1975) 68 N.J. 543 [350 A.2d 1, 7].) Accordingly the New Jersey court concluded that the United States Supreme Court's abandonment of the emergency prerequisite for price regulation generally was fully applicable to rent control legislation. ( Id. [350 A.2d at pp. 8-10].) The same conclusion was reached by the Maryland Court of Appeals in Westchester West No. 2 Ltd. Part. v. Montgomery County (1975) 276 Md. 448 [348 A.2d 856]. Before the present case California appellate courts have not been called upon to consider the validity of a rent control measure. However, the United States Supreme Court's previously described enlargement of its view of the scope of the police power to regulate prices and its consequent repudiation of any emergency prerequisite for price or rent controls find their parallels in our own decisions. (11) It is now settled California law that legislation regulating prices or otherwise restricting contractual or property rights is within the police power if its operative provisions are reasonably related to the accomplishment of a legitimate governmental purpose ( Wilke & Holzheiser, Inc. v. Dept. of Alcoholic Bev. Control (1966) 65 Cal.2d 349, 359 [55 Cal. Rptr. 23, 420 P.2d 735]; Allied Properties v. Dept. of Alcoholic Beverage Control (1959) 53 Cal.2d 141, 146 [346 P.2d 737]; Wholesale T. Dealers v. National etc. Co. (1938) 11 Cal.2d 634, 643 [82 P.2d 3, 118 A.L.R. 486]) and that the existence of an emergency is not a prerequisite to such legislation ( Jersey Maid Milk Products Co. v. Brock (1939) 13 Cal.2d 620, 637-638 [91 P.2d 577]; Wholesale T. Dealers v. National etc. Co., supra, 11 Cal.2d at pp. 654-655). [27] Plaintiffs contend that a more pressing necessity is constitutionally required for regulation of rents than for the regulation of prices generally because of the historic preference for real property exemplified by the legal presumption that breach of an agreement to transfer real property cannot be adequately compensated by money damages (Civ. Code, § 3387; Remmers v. Ciciliot (1943) 59 Cal. App.2d 113, 119-120 [138 P.2d 306]). This contention is without merit. Among the foremost examples of proper exercises of the police power are restrictions on the use of real property. (See, e.g., Consolidated Rock Products Co. v. City of Los Angeles (1962) 57 Cal.2d 515 [20 Cal. Rptr. 638, 370 P.2d 342]; Miller v. Board of Public Works (1925) 195 Cal. 477 [234 P. 381, 38 A.L.R. 1479].) Plaintiffs' contention was fully answered in the earliest of the rent control cases on which they rely, where the court referred to such restrictions on the use of real property as building height limitations and succinctly observed that if, to answer one need, the legislature may limit height, to answer another it may limit rent. ( Block v. Hirsh, supra, 256 U.S. 135, 156 [65 L.Ed. 865, 871].) The court also stated that to restrict landlords to a reasonable rent goes little if at all farther than the restriction put upon the rights of the owner of money by the more debatable usury laws. (256 U.S. at p. 157 [65 L.Ed. at p. 871].) Moreover, the virtual equivalence under modern conditions between the renting of property for residential purposes and the purchase of consumer goods and services (see Green v. Superior Court, supra, 10 Cal.3d 616, 623, 627) points to our applying the same constitutional standards to the regulation of rents that we apply to the regulation of other consumer prices. It is suggested that the existence of a serious public emergency should be constitutionally required for rent controls because they create uncertainty about returns from capital investment in rental housing and thereby discourage construction or improvement of rental units, exacerbate any rental housing shortage, and so adversely affect the community at large. Such considerations go to the wisdom of rent controls and not to their constitutionality. (12) In determining the validity of a legislative measure under the police power our sole concern is with whether the measure reasonably relates to a legitimate governmental purpose and [w]e must not confuse reasonableness in this context with wisdom. ( Wilke & Holzheiser, Inc. v. Dept. of Alcoholic Bev. Control, supra, 65 Cal.2d 349, 359; accord, Consolidated Rock Products Co. v. City of Los Angeles, supra, 57 Cal.2d 515, 522.) (13a) We turn then to the question of whether the imposition of any form of residential rent controls for the purposes stated in the present charter amendment is within defendant's police power in that it is reasonably related to the accomplishment of an objective for which the power can be exercised. It has long been settled that the power extends to objectives in furtherance of the public peace, safety, morals, health and welfare and is not a circumscribed prerogative, but is elastic and, in keeping with the growth of knowledge and the belief in the popular mind of the need for its application, capable of expansion to meet existing conditions of modern life. ( Miller v. Board of Public Works, supra, 195 Cal. 477, 485; accord, Consolidated Rock Products Co. v. City of Los Angeles, supra, 57 Cal.2d 515, 521-522.) The charter amendment includes in its stated purposes for imposing rent control the alleviation of the ill effects of the exploitation of a housing shortage by the charging of exorbitant rents to the detriment of the public health and welfare of the city and particularly its underprivileged groups. (§ 1.) [28] The amendment thus states on its face the existence of conditions in the city under which residential rent controls are reasonably related to promotion of the public health and welfare and are therefore within the police power. (14) However, the constitutionality of residential rent controls under the police power depends upon the actual existence of a housing shortage and its concomitant ill effects of sufficient seriousness to make rent control a rational curative measure. (15) Although the existence of constitutional facts upon which the validity of an enactment depends (see D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 15 [112 Cal. Rptr. 786, 520 P.2d 10]) is presumed in the absence of any showing to the contrary ( In re Petersen (1958) 51 Cal.2d 177, 182 [331 P.2d 24]; Hart v. City of Beverly Hills (1938) 11 Cal.2d 343, 348 [79 P.2d 1080]), their nonexistence can properly be established by proof. ( D'Amico v. Board of Medical Examiners (1970) 6 Cal. App.3d 716, 727 [86 Cal. Rptr. 245]; see U.S. v. Carolene Products Co. (1938) 304 U.S. 144, 152 [82 L.Ed. 1234, 1241, 58 S.Ct. 778].) In the present case the trial court received evidence presented by the parties from which it made findings concerning the existence of facts justifying the rent control provisions of the charter amendment and concluded that the emergency conditions that the court deemed constitutionally required for rent control did not exist. As already stated no such emergency was constitutionally required. (13b) On this state of the record our task is to review the findings (there being no reporter's transcript) and to sustain the propriety of rent controls under the police power unless the findings establish a complete absence of even a debatable rational basis for the legislative determination by the Berkeley electorate that rent control is a reasonable means of counteracting harms and dangers to the public health and welfare emanating from a housing shortage. ( Hamer v. Town of Ross (1963) 59 Cal.2d 776, 783 [31 Cal. Rptr. 335, 382 P.2d 375]; Lockard v. City of Los Angeles (1949) 33 Cal.2d 453, 461-462 [202 P.2d 38, 7 A.L.R.2d 990].) In reviewing the findings we also look to the trial court's memorandum opinion as an aid to their interpretation. ( Williams v. Puccinelli (1965) 236 Cal. App.2d 512, 516 [46 Cal. Rptr. 285]; 6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, § 231, p. 4221.) Far from dispelling any rational basis for rent control, the findings affirm the existence of housing problems that correspond in kind even if not in degree of gravity with the conditions described in section 1 of the charter amendment (see fn. 28, ante ). A clause appearing at the outset of the findings on the emergency issue states that whole segments of Berkeley's population suffer from a serious housing shortage. Additional findings indicating serious rental housing problems in Berkeley when the charter amendment was adopted include the following: 1. The City of Berkeley offers a distinctive and attractive life style, and a superior school system which, because integrated, is desirable to minorities and to young people generally, ... is the site of the original campus of the University of California and has an established reputation as a university city ... [, and] is primarily residential in character with some industrial areas. 2. The vacancy rate for residential housing was in excess of 3% and such a vacancy rate is low. According to the court's memorandum opinion, the vacancy rate for apartment rental housing was 3.1 percent and [b]y any standard the rate is low. 3. The population of [Berkeley] ... was approximately 116,000 of which approximately 63% were tenants. Of the total population, approximately 30,000 persons comprise a group which spends in excess of 35% of its income for housing.... Of said 30,000 persons, about 25,000 were in the group earning under $5,000 per year, and such group consisted largely of students, low income (aged, minorities, and disabled) and `other young people' in about equal numbers.... It is evident that the housing conditions of low-income persons in Berkeley are serious.... 4. In 1970 Berkeley had a black population of approximately 23.5 percent. These residents have received housing aid from federally-funded assistance programs but such programs have, for the most part, ceased. Many of the families of South Berkeley and West Berkeley [predominantly black] had low incomes or were receiving public assistance. 5. [S]ome of the aged and disabled persons in Berkeley suffer adverse conditions in their capability of finding reasonably priced low-cost housing, ... and it is recognized that aid programs are inadequate for their needs.... [T]he housing conditions for such groups in Berkeley were and are serious. 6. The group designated other young people for the main part, consist of non-students who choose to live in Berkeley because they are attracted to its life style. Many of them have marginal incomes and the condition of their housing is generally comparable to that of the low-income group. Offsetting these findings of serious housing problems are other findings of ameliorative conditions which would provide appropriate material for arguing to a legislative body that it should not enact rent controls but which do not dispel the constitutionally sufficient rational basis for residential rent control provided by the charter amendment's statement of purpose (§ 1; fn. 28, ante ) and the findings previously summarized. The findings of ameliorative conditions are of three kinds. First are findings of improvement in housing conditions which state as follows: Between 1960 and 1970 new rental housing increased faster than population and the vacancy rate rose from 2.6 percent in 1971 to 3.1 percent in 1972. At the time of trial further vacancies were expected to result from the carrying out of the plans of certain employers to move out of Berkeley or to reduce personnel. Dormitory space was available for almost all university students needing it and according to a university official adequate financial aid was available for students who established that their parents could not support them. The percentage of rental housing available for less than $200 per month in certain districts of Berkeley in 1970 ranged between 85 and 98 percent. Nonwhite home ownership increased markedly between 1960 and 1970. While all these facts are encouraging they do not push beyond the pale of rational debate the existence of a housing shortage and accompanying excessive rents serious enough to warrant the imposition of rent controls. The second category of ameliorative findings consists in comparisons between housing conditions in Berkeley and in adjoining areas. It is found that Berkeley is part of one continuous urban area geographically indistinguishable from Richmond on the north through Oakland on the south and that the rental housing vacancy rate in both Richmond and Oakland was 6 percent as compared to 3.1 percent in Berkeley. With respect to the low-income group designated as other young people it is found that their mobility is such as to make it possible for them to live in surrounding, relatively high vacancy areas. On the other hand the finding stating the adverse housing problems faced by the aged and disabled group in Berkeley adds that their condition is not unlike that experienced in other metropolitan areas. Neither the availability to some low-income residents of housing in adjoining cities nor the fact that the problems of the aged and disabled in Berkeley are no worse than in other metropolitan areas detracts from Berkeley's power to safeguard and promote the health and welfare of persons who choose to live in that city. (16) In a field of regulation not occupied by general state law such as rent control each city is free to exercise its police power to deal with its own local conditions which may differ from those in other areas. (See Galvan v. Superior Court, supra, 70 Cal.2d 851, 863-864.) Among Berkeley's local conditions, according to a previously quoted finding, are a distinctive lifestyle, school system, and reputation as a university city all of which attract residents and offer a likely explanation for a rental housing vacancy rate that is markedly lower than in adjoining cities. Berkeley is not constitutionally required to ignore any of its housing problems on the ground that they would not exist if some of its residents were to live elsewhere. Finally the findings indicating the existence of serious housing problems are offset by statements in the findings that such problems are not so wide-spread as to constitute an emergency and that no such emergency as referred to in [section 1 of the charter amendment] actually existed. We have already held herein that the existence of such an emergency is not a constitutional prerequisite for the imposition of rent controls. Plaintiffs contend however that the declaration in the charter amendment's preamble of the existence of a serious public emergency with respect to housing problems in Berkeley (§ 1, quoted in fn. 28, ante ) makes the amendment invalid unless such an emergency actually existed even though the amendment would be valid in the absence of such declaration. With this contention plaintiffs challenge the measure not by disputing its statement of constitutional facts but by disputing statements not necessary to constitutionality. Their position is that the city electorate cannot have intended to adopt the charter amendment unless the preamble's statement of underlying facts were true and that such truth can be determined by a court which can then declare the measure invalid if it finds upon sufficient evidence that the statement is incorrect. (17) Even if it be assumed that legislation can be invalidated for mistakes in its preamble concerning facts not essential to constitutionality or legislative authority, the mistakes asserted here are not grounds for invalidation. They involve at most only descriptive differences in the degree of seriousness of the housing problems sought to be remedied and any question of their correspondence with the findings could have been completely eliminated by only minor changes of wording. [29] The preamble accurately declares the nature of the conditions to be alleviated and it is to be presumed that the Berkeley electorate became sufficiently informed from election campaign arguments for and against the measure to decide for themselves whether those conditions gave rise to a public emergency or were simply serious. The ballot argument in favor of the charter amendment contained no representation of the existence of any emergency. We conclude that the emergency wording of the preamble did not prevent the adoption of rent controls to deal with those conditions described in the preamble which are consistent with the trial court's findings.