Posted by: Patricia Salkin | December 28, 2010

9th Circuit Court of Appeals Affirms Rent Control Regulation is Not a Regulatory Taking under Penn Central

Guggenheim, the owner of a mobile home park in Goleta, California, sued the City, claiming that its rent control ordinance illegally restricted his profits by limiting rental fees within the park. When Guggenheim purchased the mobile home park in 1997 it was situated within an unincorporated portion of Santa Barbara County and was subject to the County’s mobile home rent control ordinance. When it incorporated in 2002, the City of Goleta adopted a mobile home rent control ordinance identical to the one that was in place when Guggenheim purchased the property. Because Guggenheim bought the property with full knowledge of the ordinance, the Court agreed with the City that Guggenheim had no reasonable expectation that he could increase rents beyond the levels allowed in the ordinance. The Court stated, “Whatever unfairness to the mobile home park owner might have been imposed by rent control, it was imposed long ago, on someone earlier in the Guggenheims’ chain of title. The Guggenheims doubtless paid a lot less for the stream of income mostly blocked by the rent control law than they would have for an unblocked stream. The 2002 City of Goleta adoption by reference of the Santa Barbara County ordinance did not transfer wealth from them to their tenants. That transfer occurred in 1979 and 1987, from other landlords, and probably benefitting other tenants.”

The Court further explained, “Ending rent control would be a windfall to the Guggenheims, and a disaster for tenants who bought their mobile homes after rent control was imposed in the 70’s and 80’s. Tenants come and go, and even though rent control transfers wealth to “the tenants,” after a while, it is likely to affect different tenants from those who benefitted from the transfer. The present tenants lost nothing on account of the City’s reinstitution of the County ordinance. But they would lose, on average, over $100,000 each if the rent control ordinance were repealed. The tenants who purchased during the rent control regime have invested an average of over $100,000 each in reliance on the stability of government policy. Leaving the ordinance in place impairs no investment-backed expectations of the Guggenheims, but nullifying it would destroy the value these tenants thought they were buying.”

Guggenheim v. City of Goleta,2010 WL 5174984 (9th Cir. 12/22/2010)

The opinion can be accessed at: http://www.ca9.uscourts.gov/datastore/opinions/2010/12/22/06-56306.pdf


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Categories

%d bloggers like this: