SAN FRANCISCO (CN) - A federal judge ruled Tuesday that San Francisco cannot solve its housing shortage by requiring landlords, through a relocation assistance ordinance, to retroactively pay massive amounts to evict tenants under California's Ellis Act.
"The City seeks to have its cake and eat it too, looking to the ordinance's stated public purposes to satisfy the Public Use Clause but looking only to an individual tenant's private circumstance to satisfy rough proportionality," U.S. District Judge Charles Breyer wrote.
Breyer said the city crossed the constitutional line with its "unprecedented" massive lump-sum payout requirement.
Breyer, after a one-day bench trial this month, said the ordinance does serve a public purpose, as the city passed the law to combat rising rents and rampant tenant evictions.
But in finding that the law fails to survive Fifth Amendment scrutiny, Breyer wrote, "It seeks to force the property owner to pay for a broad public problem not of the owner's making."
Breyer added: "A property owner did not cause the high market rent to which a tenant who chooses to stay in San Francisco might be exposed, nor cause the lower rent-controlled rate the tenant previously enjoyed."
At the center of the legal battle are Daniel and Maria Levin, who faced having to pay their tenant $117,000 to move out of the two-unit building they bought in 2008.
The Levins claimed they never wanted to be landlords and immediately informed the woman, who had been living in the first-floor unit since 1988, that they planned to remodel and use both units themselves.
The Levins moved into the one-bedroom top floor, and after the tenant protested their attempts to remodel, the Levins decided to take the ground-floor apartment off the rental market, through the 1985 Ellis Act, which allows landlords to evict tenants if the landlord wants to get out of the rental business.
The Levins said they paid the tenant, Thina Holman, $8,000 under old tenant payment laws.
But because Holman was still living in the unit when a new rent ordinance took effect in June this year, the Levins had to pay her the difference between her old rent of $2,479 a month and the price of comparable housing in the city, for two years.
Co-plaintiffs in Levin's case include Park Lane Associates, which owns a 33-unit building; the San Francisco Apartment Association, and the Coalition for Better Housing.
Park Lane claims it will have to pay the tenants of 15 of its units more than $1.4 million.
At the bench trial on Oct. 6, the landlords' Pacific Legal Foundation attorney took issue with the absence of a means test to ensure the tenant is in need, and said the ordinance lacks controls to ensure that the money paid to evicted tenants is used for housing in San Francisco.
Judge Breyer had the same concern.
"The payout comes with no restrictions on how it is spent, no ability to ensure that the money be spent on housing or in San Francisco at all, and is not limited to low-income tenants whom the payout might persuade to stay in San Francisco-all factors that weigh against the City's ability to prove that the exaction 'further[s] the end advanced as the justification' for the Ordinance," Breyer wrote.
Neither Pacific Legal Foundation attorney J. David Breemer nor City Attorney Christine Van Aken were immediately available for comment Tuesday afternoon.
At trial, Van Aken argued that the ordinance helps mitigate the loss of rent control on tenants, a direct impact of the Ellis Act. "When a landlord evicts a tenant, he or she is removing from that tenant the protection of rent control. The landlord is exposing those tenants to market rates. San Francisco has said to landlord you must at least mitigate two years of that impact," Van Aken said.
But Breyer wrote in his ruling: "This contention is as ungrounded in law as it is bizarre."
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