Levin v. City and County of San Francisco (2014)

Issue

Whether a San Francisco law requiring property owners to pay lump sums to their displaced tenants violates the Takings Clause of the Fifth Amendment.

Facts

San Francisco is facing a housing crisis of “remarkable proportions.” The demand for housing in the city has risen steadily but the supply of housing has only marginally increased. The situation has caused rental rates to skyrocket and rental vacancy rates to plummet. San Francisco has instituted a myriad of policies to combat ever-rising rent rates, including the Ellis Act of 2014. 

In 2008, Daniel and Maria Levin purchased a home in San Francisco consisting of an upper and lower unit, each containing one bedroom. At the time of purchase, a tenant occupied the lower unit. The Levins moved into the upper unit of their home as their primary residence and desired to occupy the lower unit as well. On December 16, 2013, the Levins served a Notice of Termination of Tenancy and filed a Notice of Intent to Withdraw with the Rent Board, which would have taken the lower unit out of the rent market. As a result, the Levins would be required to pay their tenant $117,958 on the day he vacated the unit in addition to $6,079 they had already paid him in compliance with a 2005 ordinance.

The San Francisco Administrative Code established lump-sum payouts to tenants evicted under the Ellis Act. Under the 2014 ordinance, landlords must pay an amount equal to twenty-four times the difference between the unit’s current monthly rate and the fair market value of a comparable unit in San Francisco, as calculated by a schedule developed by the Controller’s Office. Disabled or elderly tenants are entitled to an additional payout. Landlords can petition the Control Board for relief, which could be a reduction in payment or setting up a payment plan. There is no evidence of any standard the Control Board uses to evaluate petitions. The Levins filed suit against San Francisco alleging that the administrative code violated the Takings Clause of the Fifth Amendment.

The Court Below

On October 6, 2014, the court held a bench trial on the merits and issued a Memorandum of Findings of Fact and Conclusions of Law on October 21, 2014. The court struck down San Francisco’s ordinance as an unconstitutional taking. See opinion below:

Levin v. City and County of San Francisco, No. 3:14-cv-03352-CRB N.D. Cal., 2014

The City of San Francisco altered the ordinance, lowering the total payout amount, and then appealed to the Ninth Circuit. The court dismissed the case as moot because the law was “significantly changed” from its original state and remanded the case back to the district court. See opinion below:

Levin v. City and County of San Francisco, 680 Fed.Appx. 610 9th Cir., 2017

The case then went back to District Court for the Northern District of California, where the city moved to be granted relief from judgment. The court denied the motion. See opinion below:

Levin v. City and County of San Francisco 257 F.Supp.3d 1092 N.D. Cal., 2017

The case then moved back to the Ninth Circuit, where it was dismissed. See opinion below:

Levin v. City and County of San Francisco No. 17–16341 9th Cir., 2017

Questions examined by the Ninth Circuit

“Whether the exaction demanded by the City in exchange for an Ellis Act withdrawal bears the ‘required degree of connection between the exactions imposed by the city and the projected impacts’ of the property owner’s proposed change in land use.”

Center for Constitutional Jurisprudence filed an amicus curiae brief in support of Levin

Summary:

The concept of “property” encompasses more than mere possession—it includes the individual rights that we have long recognized relating to how people can use and interact with physical goods. The most essential of these rights is the right to exclude others from a given resource, including land. English common law understood this “right to exclude” centuries before the drafting of the American Constitution. From Sir Edward Coke’s assertion in 1644 that “a man’s house is his castle,” the common law has recognized the essential nature of property as the right to exclude others. This is bolstered by other Supreme Court rulings. Most notably, in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board 1979 the Court noted that “the hallmark of a protected property interest is the right to exclude others.”

Destruction of the right to exclude is a permanent physical invasion of property. Further, forcing property owners to stay in the rental business also takes the property by negating the right to exclude. Rental owners have a constitutional right to withdraw from the rental business and exercise their right to exclude others from their property. This right is not dependent upon California’s Ellis Act, but rather is an inherent right based on the nature of the individual rights in property, which was recognized and protected by the Constitution. Compelling property owners to remain in the rental business requires the owner to admit people to the property on an ongoing basis that the owner wishes to exclude. This constitutes a physical invasion requiring compensation. The city cannot constitutionally leverage its permitting power to extract property for the exercise of enumerated constitutional rights. It cannot do this by imposing financial penalties either. San Francisco’s ordinance violates the Constitution no matter which way it is characterized.

San Francisco’s ordinance attempts to condition the exercise of an enumerated right by attempting to force landlords to pay “extortionate” sums of money to evicted tenants, who would be able to spend that money with no limitations on its use. Property owners have a right to exclude others from their property by leaving the rental business. The city may not take that right without paying just compensation. Since the founding of the United States, courts have recognized a limit on police power regarding the taking of property. This limit prohibited the taking of property from one private party and bestowing it on another. San Francisco’s ordinance compels property owners to give up to hundreds of thousands of dollars to non-indignant renters who have been able to take advantage of the low rent rates that have contributed to the depression of the San Francisco housing market. 

Final Outcome

The decision-making power of this case ultimately fell to the district court because San Francisco altered the ordinance before it reached the Ninth Circuit, which then remanded it to the district court. The district court ruled in favor of the CCJ’s position, holding that “the Ordinance effects an unconstitutional taking by conditioning property owners’ right to withdraw their property on a monetary exaction not sufficiently related to the impact of the withdrawal.” The city’s ordinance violated the Takings Clause of the Fifth Amendment.