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The U.S. Supreme Court has declined to hear a constitutional challenge to a fee imposed on two Oakland landlords who moved back into their property at the expiration of the lease term and were compelled to pay a “relocation fee” to their tenant.

Oakland City Attorney Barbara Parker said in a statement, “This is an important and just victory for the City of Oakland — and for tenants’ rights.”

The statement went on to say, “This challenge to Oakland’s tenant protections is not an isolated case; it is part of a longstanding, and growing, nationwide campaign against progressive policy and policymakers who seek to balance the scales by providing protections for historically and currently marginalized communities.”

The determination was a setback for the plaintiffs’ counsel — the Pacific Legal Foundation, a nonprofit organization that represents, for free, individuals who challenge government action believed to infringe rights granted under the U.S. Constitution.

The organization’s tagline is: “We sue the government when it violates Americans’ constitutional rights — and win!”

At least in the case of the Oakland relocation fee, the tagline was overly optimistic.

Expensive homecoming

The controversy goes back to 2016 when Lyndsey and Sharon Ballinger were majors in the U.S. Army living in a small home they owned in Oakland. They were assigned to duty on the East Coast and rented their home on a one-year lease, expecting to move back after their assignment was complete.

In January 2018, while they were still away, the city of Oakland passed a local ordinance that required landlords moving back into their homes to pay their tenants a relocation fee in order to retake occupancy.

The Ballingers completed their assignment and decided to return to their home in Oakland.

By this point, the initial one-year term had run and the lease had converted to a month-to-month lease. The Ballingers gave their tenants 60 days’ notice that they were going to retake occupancy.

“This is an important and just victory for the City of Oakland — and for tenants’ rights.”

Barbara Parker, Oakland city attorney

Under the Oakland ordinance, the Ballingers were required to pay their tenants $6,582 to retake the property. The fee was calculated on a number of factors, including the size of the home. For larger homes, the fee was close to $10,000.

Although they believed that the payment was akin to having to pay “ransom” to get their home back, the Ballingers made the payment.

They then sued the city of Oakland, claiming the local ordinance had unconstitutionally taken their property without just compensation. They also argued that the relocation charge was an unconstitutional “exaction” imposed against them.

In pressing their challenges, the Ballingers pointed out that while the ordinance was purportedly to help tenants deal with the high cost of housing and relocation costs, there was no requirement that the tenants spend the money on relocation or housing or anything else; the money was theirs for whatever purpose they wanted.

Inequitable equity

The Ballingers also argued that the ordinance took their money “for private, tenant use, without compensation, and without any connection between the home and the social problems the tenant payment mandate seeks to redress; i.e., high housing costs and social ‘equity.’”

In their opinion, they “should not be forced to submit to such an irrational, extortionate, and unconstitutional taking of property to come home.”

In 2019, the U.S. District Court for the Northern District of California disagreed with the Ballingers and rejected their challenge. In February, the U.S. Court of Appeals for the 9th Circuit affirmed. The Ballingers then sought review, unsuccessfully, by the U.S. Supreme Court.

In affirming the District Court, the 9th Circuit reasoned that even though the Constitution requires the government to pay just compensation when it takes private property for public purposes — as it does in eminent domain cases — that does not mean that the government may not regulate commercial relationships, even if the regulation has financial impact on the parties.

The court pointed to rent controls as an example of a situation where the law arguably “transfers wealth from landlords to tenants.” Similarly, zoning regulations may transfer wealth from an owner to his or her neighbors.

“We see little difference between lawful regulations, like rent control, and the Ordinance’s regulation of the landlord-tenant relationship here,” the appeals court wrote.

J. David Breemer, a senior attorney at the Pacific Legal Foundation and counsel for the Ballingers, did not immediately respond to a request for comment.