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Minneapolis landlords challenge tenant-screening rules

The group argued before the Eighth Circuit that a city ordinance runs afoul of a recent Supreme Court decision.

ST. PAUL, Minn. — Minneapolis landlords sought to take advantage of a June Supreme Court decision Wednesday morning in their Eighth Circuit challenge to a city ordinance governing tenant-screening processes. 

Attorneys for a group of landlords argued before an Eighth Circuit panel that a city ordinance regulating tenant-screening procedures was an unconstitutional taking, citing the U.S. Supreme Court’s recent decision in Cedar Point Nursery v. Hassid as widening the range of regulations that constitute takings. 

The ordinance blocks landlords from screening for credit scores, insufficient credit history and certain criminal and rental histories unless they go through a more in-depth “individualized assessment” process. It went into effect in June of 2020 for landlords with more than 15 units, and in December for smaller-scale property owners. 

Assistant City Attorney Brian Carter defended the ordinance before judges Lavenski Smith and Duane Benton, both George W. Bush appointees, and Roger Wollman, a Ronald Reagan appointee, in St. Paul’s federal courthouse on Wednesday morning. District judge Paul Magnuson denied the landlords’ motion for a preliminary injunction suspending the ordinance in January, and Carter argued that the decision was appropriate. 

“If a landlord decides to do an individualized assessment, they can use any criteria they want, as long as it’s not illegal under the federal Fair Housing Act,” Carter said of the ordinance. “There are some additional hoops to jump through,” he conceded, such as a requirement to invite applicants to provide supplemental evidence regarding potential barriers to their application.

But, Carter continued, “the landlord can pick any tenants he or she wants. And that is why this does not implicate the right to exclude.”

Bob Hayes of Cozen O’Connor, arguing for a coalition of Minneapolis landlords, saw it differently.

“Any impingement on the right to exclude implicates the takings clause. And in this instance, even if you believe that the individual assessment doesn’t require you to accept any purpose, it is still impinging on your right to exclude,” he said.

The arguments focused heavily on whether Cedar Point applied or whether the court should look to earlier cases. Carter cited Yee v. City of Escondido, PruneYard Shopping Center v. Robins and Penn Central v. New York, all takings-clause cases decided against the plaintiffs. He argued that these rulings were preserved by the Cedar Point decision, which concerned fruit growers’ challenge to a California law requiring them to allow union organizers access to their properties. 

The Supreme Court, Carter noted, was careful to make sure its decision didn’t apply to spaces open to the public. Rental properties, he said, fall under Yee, which allowed California to limit the bases on which a mobile home park owner could terminate tenancies.

“The city of Portland and the city of Seattle had similar ordinances — in fact, they were a good deal more onerous than Minneapolis’,” Carter noted, noting that those ordinances had a “first-in-time” provision that required landlords to screen tenants on a first-come, first-served basis. Those too, he said, were upheld. 

Judge Benton took that question to Hayes.

“I’m quoting the Supreme Court: ‘The government may require the landowner to accept tenants he does not like, without automatically having to pay compensation,’” Benton said, citing Yee. “The United States Supreme Court wrote that sentence.” 

Hayes said it still wasn’t applicable.

“It doesn’t matter if you want to call it regulatory or another kind of statute, if it impinges on the right to exclude, then it implicates the takings clause.” 

Hayes also pointed to other issues the landlords had with the ordinance, particularly its discouragement from considering criminal histories from 3 years or longer before the application date and the ordinance’s imposition of criminal penalties for failures to comply.

“If I’m an owner, and I'm subject to criminal penalties, that’s going to make me review my assessment,” Hayes said. 

Steve Katkov, another Cozen O’Connor attorney who worked with Hayes on the case, said after the arguments that the ordinance was the wrong solution to a serious issue.

“Housing in America is under stress, if not in crisis, and I think most reasonable people agree with that,” he said. “This kind of issue is really just coming to the surface now, and I think we’ll see years of handwringing over solutions for affordable housing — we just think this is the wrong approach.”

Katkov noted that Cozen O’Connor and a group of Saint Paul landlords had successfully pushed the City Council to rescind a similar ordinance across the river last year after Magnuson issued an injunction against it. The Supreme Court’s decision in Cedar Point, he said, was a step in the direction of protecting property rights. 

“I think we are seeing the first of what will be a return to protection of private property interests. And so Cedar Point is a major turn in that direction,” he said. “It is not a complete repudiation of prior land-use positions of the court, but it is a significant decision in its own right.” 

“One of the justices this morning specifically asked, if Justice Magnuson had had the benefit of the Cedar Point decision. … Would he have ruled differently?” he added. “And I believe Mr. Hayes said he may have.”

Tim Thompson of Saint Paul’s Housing Justice Center, who cowrote an amicus brief on behalf of local tenants-rights group HOME Line, said the split methodologies laid out by the ordinance for tenant screening both defended it from a takings-clause claim and gave would-be tenants the right to plead their cases. 

“The basic structure of the ordinance is that it gives landlords a choice. And one choice is to adopt a set of, I think the word was ‘low-barrier screening standards.’ Which I think are pretty fair, all in all, and are standards that a lot of landlords use already,” he said. “If they don’t want to adopt those, they’ve got the alternative choice of engaging in an individualized assessment of a tenant’s application.”

That individualized assessment, he said, allows tenants to give explanations for any marks on their record that they wouldn’t otherwise be able to.

“The application process, for larger landlords, is almost completely automated,” he said. “The idea of the individualized assessment is that you give clients the chance, up front, to explain reasons for the barriers in their background for the landlords’ consideration.” 

The Minneapolis City Attorney’s office did not respond to a request for comment.

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