LEXSEE DANIEL GUGGENHEIM; SUSAN ... - Land Use Law

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2010 U.S. App. LEXIS 25981, *53Page 16language ignores the actual dictionary definition of"speculate." As defined by Webster's New 20th CenturyUnabridged Dictionary (1979), one meaning of"speculate" is precisely "to buy or sell land hoping totake advantage of an expected rise or fall in price."(emphasis added). Having determined that they might beable to free their mobile home park from the Ordinance,the Guggenheims bought the land based on theseinvestment-backed expectations--expectations whichinfluenced the price they were willing to pay for theproperty as well as their expected rate of return on theinvestment.The Guggenheims' beliefs regarding the possibilityof freeing their land from the Ordinance were notself-indulgent delusions, or "starry eyed hope of winningthe jackpot if the law changes," as the majority terms it.Maj. Op. at 20435. Their beliefs were at least plausible inlight of contemporary legal, political, and academicthought. In the modern economic marketplace, thespectre of legal uncertainty haunts every commercialtransaction and influences each party's valuation of theassets involved. For example, the validity of apharmaceutical company's patent will affect thatcompany's [*54] value as a potential acquisition target.Legal uncertainty over rent control has been particularlymarked in California. In 1989 the state amended itsMobilehome Residency <strong>Law</strong> to exempt all newconstruction from local control. Cal. Civ. Code § 798.45.Less than two years before the Guggenheims purchasedtheir property, California had abolished vacancy controlfor rental apartments statewide. Costa-Hawkins RentalHousing Act, § 1, 1995 Cal. Legis. Serv. 331 (A.B. 1164)(West) (codified at Cal. Civ. Code § 1954.50-.53). InJanuary 1999, Santa Monica reformed its strict rentcontrol ordinance, repealing its operation as to any newtenants. Tierra Properties, Santa Monica: A Case Study inGrowth and Rent Control (1999).The Guggenheims and the prior owners of theirmobile home park may have reasonably thought that thestate would abolish rent control--or at least vacancycontrol--for mobile home parks. And the Guggenheimscould reasonably retain those expectations today, asrecent efforts to repeal rent control in California havegarnered significant support. For example, a 2008 ballotproposition to phase out rent control won almost 40% ofthe votes cast. Patrick McGreevy, Prop. 98 Backers[*55] Seek Eminent Domain Limits, L.A. Times, June 5,2008, at 1.Moreover, mobile home rent control ordinances havebeen heavily criticized in academia as an inefficientmethod for providing affordable housing to low andmiddle-income households. See, e.g., Mason & Quigley,16 J. Housing Econ. at 192, 205 (concluding that"housing is no more "affordable" [to subsequent tenants]afterwards than it was before the ordinance was adopted,"and that "virtually all of the economic benefits fromlower regulated rents are paid out annually to finance thehigher sales prices commanded by those dwellings").Given the instances of actual or attempted repeal andreform of rent control ordinances across the country, theparticular scrutiny paid to the issue in California, and thecriticism of mobile home rent control in the academicliterature, the Guggenheims had a reasonableexpectation--or at least, a trier of fact could reasonablyfind they had such an expectation--that they could freetheir land from the Ordinance either through the grant ofa zoning variance, political action targeted towardrepealing the regulation in its entirety, or court action toinvalidate the law. This inference is supported [*56] byevidence presented to the district court that theGuggenheims pursued relief from the Ordinance throughat least two of these avenues in the years following theirpurchase of the mobile home park. The majority readilyadmits that this investment-backed expectation couldhave materially affected the price the Guggenheims werewilling to pay for the mobile home park. "TheGuggenheims might conceivably have paid a slightspeculative premium over the value that the legal streamof rent income would yield, on the theory that rentcontrol might someday end, either because of a change ofmind by the municipality or court action." Maj. Op. at20435. At most, this concession establishes that theGuggenheims did in fact have investment-backedexpectations of freeing the land from the Ordinance; atthe very least, it raises a question of fact for the jury todecide.Finally, the majority, perhaps sensing itsvulnerability on the issue of investment-backedexpectations, attempts to distract the reader byintroducing an entirely irrelevant consideration into theanalysis: the alleged investment-backed expectations ofthe mobile home tenants. Maj. Op. at 20437. Themajority opinion paints a sympathetic [*57] portrait ofsubsequent tenants who purchased mobile homes atmarket rates, in reliance on the continued validity of theOrdinance. But, the Penn Central regulatory taking
2010 U.S. App. LEXIS 25981, *57Page 17analysis does not apply to them for the simple reason thatno government action took economic value from them orwould take such value from them were the Goletaordinance held invalid. The Takings Clause prohibitsonly takings, without compensation, by governmentaction, not losses from the workings of the free market.See Madera Irrigation Dist. v. Hancock, 985 F.2d 1397,1403 (9th Cir. 1993) ("Reasonable expectations arisingout of past policy but without a basis in cognizableproperty rights . . . . cannot give rise to a [taking].").Moreover, Penn Central does not contemplate anyconsideration of the expectations of other market players,or any balancing of the interests of various marketplayers in determining whether the government has takenproperty. Its analysis is focused solely on theinvestment-backed expectations of the claimants, here,the Guggenheims.In sum, the majority opinion ignores Supreme Courtprecedent by holding that a claimant cannot haveinvestment-backed expectations if he purchases property[*58] with notice of an existing regulation, by assumingthe eternal regnancy of a land-use regulation, and byintroducing irrelevant considerations which tend only toconfuse the regulatory taking analysis. Furthermore, themajority adopts a static and somewhat simplistic view oflaw, politics, and economics by failing to recognize thatthe Guggenheims had a reasonable expectation of freeingtheir land from the Ordinance through political or legalmeans, and by failing to acknowledge that this beliefcould influence the price they were willing to pay for theland.The Guggenheims presented sufficient evidence toraise a triable issue of fact regarding theirinvestment-backed expectations to survive a motion forsummary judgment. The case should have gone to trial.C. The Character of the Government's ActionThe majority opinion also ignores the final PennCentral factor, the character of the governmental action,which likewise cuts in favor of the Guggenheims. Inanalyzing this factor, a court looks at the purpose of theregulation, the effect it has in practice, and thedistribution and magnitude of the burdens and benefits itplaces on private citizens. Penn Central, 438 U.S. at130-34.The [*59] stated purpose of Goleta's mobile homerent control ordinance was to protect "owners andoccupiers of mobilehomes from unreasonable rents"brought about by a shortage of housing and the high costof moving mobile homes. Ordinance § 11A-1 (emphasisadded). Rent control measures also have the claimedancillary benefit of allowing stable communities to form.See Jay M. Zitter, Validity, Construction, and Applicationof Inclusionary Zoning Ordinances and Programs, 22A.L.R.6th 295, § 13 [*60] (2007). However, as discussedbelow with regard to the substantive due process claim,this Ordinance does not serve its stated purposes becauseof the way it is structured and written. The Ordinancerestricts only the amount the landowner can charge atenant for rental of the mobile home parcel; it does notlimit the amount which that tenant, in turn, can demandfor sale or lease of the mobile home to other owners ortenants. The designed structure and working of theordinance amounts to nothing more than a wealth transferfrom the landowner to the original tenant, andindisputably does nothing to curb housing costs orprovide a stable population once the original tenant hassold or leased the mobile home.The Ordinance unquestionably places a high burdenon a few private property owners instead of apportioningthe burden more broadly among the tax base. SeeArmstrong v. United States, 364 U.S. 40, 49, 80 S. Ct.1563, 4 L. Ed. 2d 1554 (1960) ("[The Takings Clause]was designed to bar Government from forcing somepeople alone to bear public burdens which, in all fairnessand justice, should be borne by the public as a whole.");see also Lingle, 544 U.S. at 542-43; First EnglishEvangelical Lutheran Church of Glendale v. County ofLos Angeles, 482 U.S. 304, 318-19, 107 S. Ct. 2378, 96 L.Ed. 2d 250 (1987). [*61] Similar laws concentrating thecost of affordable housing on a small group ofproperty-owners have been found unconstitutional. InCienega Gardens, developers of low-income apartmentswere able to secure low-interest, forty-year loans fromprivate lenders because the Department of Housing andUrban Development provided the developers withmortgage insurance. Cienega Gardens, 331 F.3d at 1325.Two federal statutes eliminated the developers'contractual rights to prepay their forty-year mortgageloans after twenty-years. Id. at 1326-27. The purpose ofthe statutes was to prevent the developers from exitingthe low-rent housing programs in which they wererequired to participate while carrying the loans, but notonce they paid off the loans. See id. at 1323. But thestatutes caused a 96% loss of return on equity for thedevelopers. Id. at 1343. The developers brought suit
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LEXSEE DANIEL GUGGENHEIM; SUSAN ... - Land Use Law

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