WASHINGTON - Dealing another setback to the property rights
movement, the Supreme Court on Monday upheld a San Francisco
ordinance that required building owners to pay the city a
fee when they converted rental units into hotel rooms.
The owners of the San Remo Hotel said the $567,000 fee they
were forced to pay violated the Constitution's guarantee that
"private property [shall not] be taken for public use
without just compensation."
Three years ago, the California Supreme Court upheld the
ordinance. But in a dissent, Justice Janice Rogers Brown called
it an example of "thievery" by the government. The
city said the law's purpose was to preserve rental units for
low-income people and the homeless.
On Monday, the U.S. Supreme Court ruled unanimously that
the hotel's owners did not have a right to challenge such
fees in federal court once they had lost in state courts.
The decision ended a 12-year legal battle.
The California and U.S. Supreme Court rulings made clear
that local and state governments had broad power to regulate
private property and to charge special fees for developers.
They also dashed the hopes of property rights advocates who
believed they could fare better in federal courts.
"In state courts, and in particular in California, it
is very difficult for property owners to win a 'takings' claim,"
said Meriem L. Hubbard, a lawyer for the Pacific Legal Foundation
in Sacramento. "There are a lot of extreme land-use ordinances
in California, and these opinions are making it very hard
to challenge them."
But lawyers for planning groups and environmental causes
applauded the ruling.
"The Supreme Court has wisely put to rest the attempt
by the national developers' lobby to get something no other
claimant receives: two bites at the litigation apple,"
said Timothy J. Dowling, a lawyer for Community Rights Counsel
in Washington. "The ruling will allow local officials
and planners to protect our communities through reasonable
Last month, the high court unanimously upheld a peculiar
rent control law in Hawaii and said that such regulations
should not be second-guessed by federal judges. The Hawaii
statute limited the rents charged to operators of gasoline
stations. It was intended to hold down gasoline prices paid
The rulings leave a surprising legacy for the Rehnquist court.
In 1986, when William H. Rehnquist became chief justice and
Antonin Scalia joined the court, both signaled that they intended
to strengthen the rights to private property. Rehnquist once
said there was no reason that private property rights in the
Constitution should take a back seat to the rights to free
speech or freedom from unreasonable searches.
But the property rights movement has faded in recent years.
One major property rights case is pending. The justices will
decide in a Connecticut case whether cities can seize private
homes to make way for business development.
The San Francisco housing ordinance drew the attention of
property rights advocates because it looked to be an extreme
example of local regulation.
In 1979, the city's Board of Supervisors said it had a "severe
shortage" of affordable rental housing for elderly, disabled
and low-income people. It later barred owners of residential
hotels from converting units into rooms for tourists. However,
they could obtain a permit to convert units if they agreed
to build units for renters or if they paid a fee to the city.
The San Remo Hotel is a three-story, 62-unit hotel in the
Fisherman's Wharf neighborhood. Its owners paid the $567,000
fee under protest and filed a suit contending it was unconstitutional.
They argued that hotel owners should not be forced "to
bear the public burden of housing the poor."
The state high court upheld the ordinance. Property could
be highly regulated and the hotel fees were "reasonably
related" to the loss of low-income housing in the city,
the 4-3 majority said.
"Private property, already an endangered species in
California, is now entirely extinct in San Francisco,"
wrote Justice Brown in a dissent that was criticized by Democrats
who unsuccessfully opposed her nomination to the U.S. Court
of Appeals for the District of Columbia.
The hotel owners sued in the federal courts but lost. Last
year, the Supreme Court agreed to hear the case of San Remo
Hotel vs. San Francisco to decide whether property owners
had a right to have their federal claims decided in a federal
They do not, the justices ruled Monday.
"State courts are fully competent to adjudicate constitutional
challenges to local land-use decisions," said Justice
John Paul Stevens.
Paul F. Utrecht, a San Francisco lawyer for the hotel owners,
said the decision was a defeat for his clients but it might
be helpful to others in the future by shortening the legal
"There is a bit of good news. It is now clear you can
bring all your claims in one state court proceeding,"