Rent Control is Fully Constitutional And Good Public Policy By PAUL HOGARTH Commentary

Friday December 17, 2004

I normally don’t waste my time responding to anti-rent-control hit pieces by Berkeley landlord and former BPOA President Robert Cabrera, but his latest attack on rent control (“Berkeley’s Rent Control Violates the U.S. Constitution,” Daily Planet, Dec. 7-9) contained so many lies and inaccuracies that even a second-year law student can easily refute them. So I’ve decided to take time out of studying for final exams to write a response.  

First, rent control does not violate the constitutional right to contract. As the courts have repeatedly ruled, the Contracts Clause in the U.S. Constitution only prevents government from interfering with pre-existing contracts. Berkeley’s Rent Ordinance was enacted in 1980, so any tenancy that began afterwards was clearly operating under existing law that the voters had overwhelmingly approved. 

As for tenancies that started prior to 1980, government can still regulate such contracts when (a) it serves a legitimate and significant goal, (b) the industry has been regulated before, and (c) the law is reasonable in light of that goal. Back in the late 1970s, rents were spiraling out of control, tenants were getting evicted for no just reason, and Berkeley was losing its precious diversity. It was only reasonable then to enact controls on a powerful industry that had always been familiar dealing with regulations. 

If rent control violates the right to contract, as Mr. Cabrera claims, so does the minimum wage, the eight-hour workday, and child labor laws.  

Second, rent control does not violate the Takings Clause of the Fifth Amendment, which prohibits government from taking private property without just compensation. Upset that landlording is a less profitable business than he would like it to be, Mr. Cabrera confuses basic regulatory laws like rent control and zoning restrictions with actual takings of private property like eminent domain (where the government does have an obligation to fully compensate the owner.)  

As the Supreme Court said in Penn Central Station v. New York (1978), the mere fact that a government regulation diminishes a property’s value does not make it a taking. If a local government feels the need to enact proper zoning regulation or control rents so that they are affordable, they can do so as long as the property owner gets a “fair return on his investment.” It only becomes a “taking” under the Fifth Amendment if the regulation makes it completely worthless. 

Fortunately, the Berkeley Rent Ordinance does not make a property completely worthless. Enacted in 1980, when landlords were already making enormous profits, the Rent Ordinance guarantees that all property owners maintain the same profits (adjusted for inflation) that they made in 1980. Any landlord can petition the Rent Board for an upward adjustment in rent if they can prove that their net operating income (total rental income minus operating expenses) has decreased over time.  

Furthermore, with the advent of Costa-Hawkins, landlords are now able to set initial rents in at market value, and with Cal students who move frequently making almost 50 percent of the tenant population, owning real estate in Berkeley will always be a highly profitable business. What Mr. Cabrera and other landlords really complain about is that they can’t make even more of a profit than they are now making under rent control.  

As the number one affordable housing program in Berkeley, rent control is a vitally needed program that helps the entire community. Low-income tenants who can never hope to afford owning a home in the Bay Area need rent control so that they can still live here and contribute to our culture. Young upwardly-mobile tenants who have not worked long enough to accumulate savings also need rent control, so that they can eventually have enough money to make a down payment and become homeowners.  

As real estate becomes more and more expensive in the Bay Area, and homeownership becomes a more difficult goal to accomplish, it is only sensible public policy to have rent control in a place like Berkeley.  


Paul Hogarth served on the Berkeley Rent Stabilization Board from 2000 to 2004, and is a second-year law student at Golden Gate University.‰