Constitutional rights have no expiration date. Yet, the 9th Circuit decided they do after the city of San Rafael, California regulated away 80% of the property value of the Contempo Marin mobile home park and then transferred it to a politically powerful private party. The City wanted to convey a windfall to well-connected residents at the expense of an out-of-state owner. The 9th Circuit chose to allow it because part of the impermissible transfer occurred before the current owner took title.
Left unchallenged, the ruling threatens to undermine the most basic premise of the 5th Amendment: that the government may not take someone’s private property without just compensation or to bestow a private benefit.
The controversy arose when the City of San Rafael enacted several rounds of rent control ordinances at the behest of a group of residents. The group wished to purchase the Contempo Marin, a wealthy community of mobile homes owned by MHC Financing Limited Partnership (MHC), and sought to accomplish this through the law rather than through the market. After inquiring whether the City could exercise its power of eminent domain to seize the property outright, the residents encouraged the City to enact a chain of rent control ordinances that slowly ate away at the property’s value. These ordinances not only curbed the amount of rent that the park’s owners could charge its existing tenants, but they also required that the owners extend the lower rates to any new resident that purchased a mobile home from an existing tenant. This, in effect, gave existing residents an immediate premium of $100,000 apiece because it allowed them to add the below-market rent to each unit’s selling price.
MHC filed suit claiming that the ordinances constituted a regulatory taking under Penn Central and a private taking under Kelo. The district court agreed. It ruled that the rent control ordinances constituted both a regulatory taking and a private taking. The court then made three important findings of fact from its extensive record. It determined that 1) the City singled out MHC to bear a disproportionate burden as the only landowner in San Rafael that could not obtain market value for its property, 2) the City acted in concert with mobile home owners to give the residents a windfall, and 3) the ordinance sapped over 80% of the land’s economic value, eliminating any reasonable return MHC could expect from the property.
The 9th Circuit, however, disregarded the district court’s factual findings and ruled in favor of the City. It reasoned that since MHC only took title of the park after the City enacted the first round of rent control regulations, MHC could not have any investment-backed expectations. This reasoning flies directly in the face of Supreme Court precedent, which clearly states a valid takings claim does not vanish when the property changes hands. To rule otherwise would attach an expiration clause on the 5th Amendment and permit the government to appropriate private property merely by outlasting its true owner.
As it stands, the ruling threatens to undermine the 5th Amendment since it would allow the government to take private property through successive enactments that each eliminated only a fraction of the property’s value, accomplishing by degrees what the government could not do outright.
That is why the Texas Public Policy Foundation, along with the Cato Institute, filed an amicus brief today in support of certiorari, urging the Court to review the 9th Circuit’s questionable disregard of past precedent and basic notions of constitutional rights. The brief asks the Court to confirm two fundamental principles of limited government: First, that the government may not seize property on the behalf of a politically powerful patron under the mere pretext of a public purpose; and second, that an unreasonable regulatory takings does not fade away with the passage of time and title. Governments should not be able to evade their constitutional limitations merely by outlasting their citizens. The Supreme Court, therefore, should refortify the 5th Amendment and ensure that property owners in California, Texas, and throughout the United States retain the rights which the Constitution grants them.