San Francisco’s “Stick em up” Tenant Relocation Assistance Payment Ordinance Held Unconstitutional

San Francisco’s Tenant Relocation Ordinance was struck down as unconstitutional on October 21, 2014 by U.S. District Court Judge Charles Breyer.  San Francisco’s first-in-the-nation law required property owners who elected to withdraw units from the rental market to pay evicted renters as much as hundreds of thousands of dollars to leave their units.  Under the ordinance, the amount required to be paid to tenants who were to be displaced by withdrawal of their units could be used for any purpose, not just for relocation purposes.  According to the judge’s ruling, the ordinance required one multi-unit property owner to pay more than $1 million to tenants being legally evicted from thirteen units.

Enacted in June 2014, the law increased relocation payments from a few thousand dollars for some tenants to as much as twenty-four times the difference between the current monthly rent-controlled rate and the fair market value of a comparable unit in San Francisco. The law was passed in response to evictions of a few long-time residents, some of whom were working-class or elderly, as the region’s technology company boom has ignited real estate values.  The law ignored the fact that a natural consequence of rent control measures is that long-time residents usually reap years of benefits from below-market rents and create a distortion in the rental market.

Judge Breyer ruled that the law crossed the constitutional line between legitimate government regulation and a money grab. He ruled that the Fifth Amendment to the United States Constitution prohibits the City from forcing “some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”  Legally speaking, the ordinance was not a permissible government regulation of land but was an impermissible monetary exaction that lacked an essential nexus and rough proportionality to the impact of the withdrawal of the unit from the rental market.

The plaintiffs in the case at issue were Dan and Maria Levin, who live in the upstairs unit of their two-story home.  They wanted to use the lower unit for friends and family, but under the San Francisco law they were required to pay their tenant $118,000 to withdraw it from the rental market.

“This is a great victory for every San Franciscan who owns any kind of home or property, small or large, and for everyone who values property rights as a fundamental freedom,” said the Levin’s attorney, J. David Breemer.  Mr. Breemer stated that the “ruling makes it clear that government can’t force people to stay in the rental-property business against their will.  And government can’t force owners to pay a massive ransom in order to make use of their own property.  The Constitution protects property rights for everyone, including rental property owners.  Today’s ruling should remind city leaders that the Constitution protects property owners in San Francisco, like everywhere else.”

Since no other city had a relocation scheme like San Francisco’s, this ruling will have little benefit to landlords in other jurisdictions.  However, the case is an important example that there are limits to what City governments can require in the area of relocation assistance.

by Chris Halling


*Photo credit: Pacific Legal Foundation