Court Opinion

ID: 7801014
Source: CourtListenerOpinion
Date Created: 2022-08-16 17:00:20.711667+00
Date Added: 2024-06-11T16:29:13.598401
License: Public Domain

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)
                        _____________

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

                                2
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
        1
2013. 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.

                                3
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 Short-
         Term 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 Short-
                    Term Rental use is clearly

                              4
                     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.

                               5
        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 short-
term 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

                                6
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 short-
term 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 long-
term 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

                               7
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

                               8
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.

                                9
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 long-
term 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

                               10
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.

                               11
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

                               12
(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

                                13
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 “long-
term 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.

                                14
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 sub-
leasing 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 long-
term 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

                               15
        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 short-
term 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 long-
term 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.

                               16
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.

                               17
        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

                               18
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 short-
term 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 short-
term 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

                               19
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

                               20
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, investment-
backed 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.

                               21
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

                                22
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

                               23
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 investment-
backed 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).

                                24
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

                               25
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 middle-
class 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.

                               26
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

                               27
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.

                               28
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

                               29
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 short-
term 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

                                30
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 long-
term 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.

                                31
        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

                                 32
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.

                               33
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).

                               34
      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.

                               35
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 Constitu-
tion’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 prop-
erty 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 reg-
ulations 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
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 in-
vasion.” 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 in-
vestment-backed expectations.” Id. And we may weigh other
unidentified, “relevant” factors too. Tahoe-Sierra Pres. Coun-
cil, 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 “eco-
nomic impact.” The investors argue that the city’s regulation
destroyed two thirds of their properties’ profitability. But prec-
edent is muddy on whether lost profits count as an economic
burden. Compare Penn Cent., 438 U.S. at 127, 129 n.26 (con-
sidering 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)

                                2
(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 (cata-
loguing 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 depriva-
tions 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 rea-
sonably 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

                                3
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 inves-
tors 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., con-
curring) (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 three-
factor 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?

                                4
    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 tak-
ing” 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 compensat-
ing regulatory takings only when a law takes a recognized
property right.
   First comes “property.” At the Founding, “property” in-
cluded more than just the right to exclude. Blackstone’s

                               5
Commentaries, for example, had a “broad” conception of prop-
erty 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 prop-
erty 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 under-
standing 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 Eng-
lish Language (1755) (defining “take” to cover both physical
seizure (“[t]o seize what is not given”) and intangible depriva-
tions (“[t]o deprive of”)); To Take, Thomas Sheridan, A Com-
plete Dictionary of the English Language (5th ed. 1789)
(same).

                                6
    Indeed, in other contexts, the Framers used “take” to refer
to non-physical deprivations. In Federalist No. 44, for exam-
ple, 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 Mad-
ison). And at the Constitutional Convention, delegates dis-
cussed “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 tak-
ings, 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.”).

                               7
    The text of the Takings Clause naturally reads broadly
enough to reach not only physical seizures, but also depriva-
tions 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 constitu-
tions 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. Reg-
ulations 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

                               8
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. Propri-
etors 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 de-
prived him of his “paramount right of occupation and enjoy-
ment.” Id. at 164.
    Intangible rights were likewise property protected from tak-
ings. 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.

                                9
             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’s invasion. 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. Classi-
cally, 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 his-
torically includes the rights to dig or mine below the land and
to keep others from building into the airspace above it. 2 Black-
stone *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

                               10
(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 valua-
ble 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 regula-
tion, we should look to the historical common law. Cf. Bruen,

                                11
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 reg-
ulate “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 im-
posed regulatory burdens on land use that stop short of confis-
cating 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 un-
derstanding 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 regu-
lation had interfered with distinct investment-backed expecta-
tions.” 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 ac-
tual 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 of-
ten 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).

                               12
    Similarly, the Penn Central test fails to ground “invest-
ment-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 pro-
vide not only a surer constitutional footing but also needed
clarity.

                               13