These four cases consolidated for appeal bring to us questions arising out of two recently enacted Massachusetts rent control statutes. The constitutionality of these statutes is under attack in three principal suits seeking declaratory and injunctive relief. In all three the existence of an actual controversy is admitted by the principal parties.
Marshal House, Inc. (Marshal House) seeks a binding determination against the town of Brookline, its board of selectmen, and its rent control board that St. 1970, c. 842, is unconstitutional.
The plaintiffs in the suit of Anna L. Aiello and another against the city of Cambridge, its mayor, its city council, its city manager, and its interim rent control administrator also seek a binding declaration that St. 1970, c. 842, is unconstitutional.
The suit of William W. Goldman and others against the town of Brookline, its board of selectmen, and its rent control board challenges the constitutionality of St. 1970, c. 843, the special rent control enabling act applicable to Brookline, and a by-law adopted by the town thereunder.
A fourth suit, brought by Esther M. Carroll and another against the city of Cambridge, its mayer, its rent control administrator, and Henry J. O'Brien, a Cambridge landlord,
All of these suits have been reserved and reported without decision by two judges of the Superior Court upon the pleadings, exhibits and statements of agreed facts.
The constitutional issues which the three principal suits present come to us on the following facts. The Legislature enacted c. 842 on or about August 24, 1970, and the Governor approved it on August 31, 1970. After a declaration of emergency, § 2 provides that the act is to be applicable "in any city and in any town with a population of fifty thousand or over, on the thirtieth day following acceptance of its provisions."
The provisions of the act were accepted by the city of Cambridge on September 17, 1970, and by the town of Brookline on September 29, 1970. On October 16, 1970, the day before it was to take effect in Cambridge, the plaintiff Anna L. Aiello and another, Cambridge landlords affected by the act, filed their bill. On October 28, 1970, the day before the act was to take effect in Brookline, Marshal House, a Brookline property owner affected by the act, filed a similar bill.
On or about August 24, 1970, the Legislature enacted c. 843, designated as "An Act to provide for the establishment and administration of rent regulation and the control of evictions in housing accommodations in the town of Brookline." The Governor approved this act on August 31, 1970. On September 29, 1970, the town of Brookline passed a local rent control by-law, in accordance with powers granted to it under c. 843, applicable exclusively to owner-occupied two and three family dwellings in the town. This by-law, art. XXX of the Brookline by-laws, was approved by the Attorney General on October 8, 1970, and after publication it became effective on October 21, 1970. Two weeks thereafter the plaintiff William W. Goldman and six other occupying owners of two or three family houses in Brookline affected by art. XXX filed their bill asking that
We omit as unnecessary a more detailed description of the proceedings which have taken place to date. The cases have aroused wide interest, as evidenced by the number of parties who were permitted to intervene and the several amicus briefs which have been submitted to us.
We will consider together the three principal cases, which present parallel issues. The numerous questions they raise can be roughly broken down into procedural objections, which do not bear on the merits of the cases; objections aimed at the various classifications, restrictions and exemptions contained in the coverage provisions of c. 842 and in many instances not present in c. 843; and objections aimed at the mechanism of rent control provided in both statutes and in art. XXX. The issues will be dealt with in that order, with headings to indicate what is the particular feature of the acts under attack. Constitutional provisions relied on by the plaintiffs are in every case the guaranty of due process of law and equal protection of the laws contained in the Fourteenth Amendment to the Constitution of the United States. The Carroll case, being susceptible to relatively summary disposition, will be dealt with separately at the end.
Jurisdiction. It is contended first by the intervener James Bush in the Marshal House case that the Superior Court did not have jurisdiction under G.L.c. 231A, § 1, to entertain the two suits for declaratory relief in which c. 842 is challenged.
As noted above, the principal parties in the Marshal House and Aiello cases admit the existence of an actual controversy. The pleadings demonstrate a "real dispute caused by the assertion by one party of a legal ... right in which he has a definite interest and the denial of such assertion by the other party, where the circumstances ... indicate that, unless a determination is had, subsequent litigation as to the identical subject matter will ensue." Hogan v. Hogan, 320 Mass. 658, 662. School Comm. of Cambridge v. Superintendent of Schs. of Cambridge, 320 Mass. 516, 518. It appears to us that these cases present constitutional questions of urgency and importance eminently suited for decision by declaratory relief. Levitt v. Maynard, 104 N.H. 243, 244.
Class action. A second objection to the three principal cases, each of which was brought as a class action on behalf of all landlords affected by local adoption of the statutes challenged, is that they are not properly maintainable as class actions. It is not argued, however, that the plaintiffs do not adequately represent the interests of their class or that this group lacks the necessary element of "common relationship to a definite wrong" for joinder as a class. The bills allege in essence a "joint prejudice to all the class whom
OBJECTIONS RAISED TO COVERAGE PROVISIONS.
Optional luxury housing exemption. Statute 1970, c. 842, § 3 (b) (7), provides that a municipality accepting the act "may exempt those rental units for which the rent charges ... [exceed] limits specified by said municipality; provided that in no event shall more than twenty-five per cent of the total rental units in said municipality be exempted under this subsection." This optional exemption has come under two divergent attacks, both stemming from the latitude which the provision allows since it contains no specific guidelines and no requirement that there be any exemption at all in a given locality. On the one hand it is contended by the plaintiffs in the three principal cases that under the provision municipalities may exempt from coverage the very type of housing at which the act is aimed. On the other hand, the Brookline Landowners Association, in an amicus brief, claims that it is an abuse of the police power for the legislation not to require the exemption of so called "luxury units," however that term be defined, because its failure to do so makes possible local regulation of units which have
We see, however, no problem with the optional exemption. A mandatory exemption with the same purpose for units which rented at more than $150 a month was contained in the 1953 rent control legislation. St. 1953, c. 434, § 2 (b) (3) (iv). The 1970 situation might well have called for different treatment. In any case, the present formula gives each municipality the requisite flexibility to deal with its high income rental units according to its particularized local needs. This is subject only to the condition that the exemption not be applied so as to exclude from coverage more than twenty-five per cent of the "total rental units." That there may exist in the Commonwealth a community which cannot exempt twenty-five per cent of its units without including some low or middle income housing which the act is designed to cover provides no ground on its face for striking down the exemption. Nor does the fact that the exemption is not mandatory trouble us, for all units covered by c. 842 are subject to the comprehensive provisions for rent adjustments on an individual or class basis under §§ 8 and 10, which also provide for judicial review of all actions, regulations or orders of the local board or administrator. We view the statutory scheme as providing more than adequate protection for owners of "luxury units" in a municipality which either does not adopt the exemption or adopts it in such a way as to exclude their properties.
Exemption for owner-occupied two and three family dwellings under c. 842. The plaintiffs in the Marshal House and Aiello cases contend that the exemption in § 3 (b) (6) of c. 842 for "the rental unit or units in an owner-occupied two-family or three-family house" violates the equal protection clause of the Fourteenth Amendment in that it makes an unreasonable classification as among landlords. It is established that every presumption is to be indulged in favor of the validity of a legislative enactment. School Comm. of Boston v. Board of Educ. 352 Mass. 693, 699. Druzik v. Board of Health of Haverhill, 324 Mass. 129, 138-139.
Given these standards, we are unable to conclude that the Legislature overstepped the bounds of its police power when it established the exemption for owner-occupied two and three family dwellings. Several plausible reasons for such an exemption have been suggested to us. Landlords who live with only a few tenants and have to get along with them on a day to day basis might well have been thought to be less likely to raise rents to an exorbitant level. Furthermore, such landlords are more likely, due to the pride of ownership, to maintain common passageways and the exteriors of their premises in a safe and clean condition. For them the premises are not only a business property but also their home. In any case, since they live there, they are more susceptible to tenant pressure to keep up the premises. Since the act is a product not only of unduly high rents but also of "deterioration of a substantial portion of the existing housing stock" (c. 842, § 1), this consideration might well have been another reason why the Legislature deemed it advisable to exclude owner-occupied two and three family units. A further consideration is that many landlords within the exemption are not in the business of real estate but are merely renting out portions of their homes not necessary for their own day to day living. The Legislature might well have concluded that the evils at which the statute is aimed are not sufficiently present among this
Our examination of other rent control statutes, moreover, has revealed the existence of similar exemptions. The Federal Housing and Rent Act of 1947, 61 Stat. 193, was amended in 1948 to exclude from coverage "nonhousekeeping, furnished housing accommodations, located within a single dwelling unit not used as a rooming or boarding house, but only if (A) no more than two paying tenants, not members of the landlord's immediate family, live in such dwelling unit, and (B) the remaining portion of such dwelling unit is occupied by the landlord or his immediate family." 62 Stat. 93, 94. A substantially identical provision is contained in the New York State Rent Control Statute of 1950, 65 McKinney's Consol. Laws (N.Y.) (annotated), part 3, § 8582 2.(d); in regulations passed pursuant to that act (§ 9, par. 8); and in the New York City rent and rehabilitation law, Y51 - 3.0 e, 2 (e) of the Administrative Code of the City of New York, passed pursuant to the local emergency housing rent control law of 1962. This fact, plus the fact that all these laws have been upheld against numerous constitutional attacks without any serious attack having been launched on this aspect of them,
Finally, we note that although the earlier rent control
Nor are we troubled by the objection raised by the plaintiffs in the Goldman case with respect to the exemption in c. 842 as it operates in conjunction with art. XXX of the Brookline by-laws passed pursuant to c. 843 and covering only owner-occupied two and three family houses. Chapter 843 states that "a serious public emergency exists in the town of Brookline with respect to the housing of a substantial number of the citizens of said town." It goes on to describe the emergency as created in part by an "expanding student population ... [and] a substantial elderly population," causes not assigned in the comparable statement of emergency in c. 842. Chapter 843 under § 2 grants the town broad general regulatory powers, unencumbered by the various restrictions and exemptions contained in § 3 of c. 842, to deal with its particular housing crisis. It is apparent from a comparison of §§ 1 and 2 of c. 843 and comparable sections of c. 842 that the problem in Brookline was unique; the question raised is whether in dealing with this situation the path which the Legislature and the town have taken is constitutionally sound.
The history of c. 843 is instructive to an understanding of it in conjunction with c. 842. It was enacted by the Legislature at the same time and approved by the Governor on the same day as c. 842. Chapter 843 was introduced on the petition of the board of selectmen by members of the Legislature from Brookline in response to our decision in Marshal
We stated in the previous Marshal House case that the Legislature might conclude that an emergency existed in certain areas, as it clearly did here as to Brookline in passing c. 843. We said in Russell v. Treasurer & Recr. Gen. 331 Mass. 501, 507, "Having adopted a policy of rent control by ... emergency legislation ... [the Legislature] may also delegate to the cities and towns as governmental agencies the administration of its details in respect to matters peculiarly affecting local interests." In our view the town in enacting art. XXX of its by-laws is acting within the concededly and intentionally broad legislative authorization granted in c. 843, an act which in turn was necessary since under art. 89 of the Amendments to the Massachusetts Constitution the town itself could not continue to regulate rents without such enabling legislation.
Quite apart from the history of c. 843, which indicates it should be read according to its terms, any attempt to read into it the restrictions of c. 842 founders on our well established principle of construction that "strong terms are required to show a legislative intent to supersede by a general act a special act which `may be made in regard to a place, growing out of its peculiar wants, condition, and circumstances.'" Haffner v. Director of Pub. Safety of Lawrence, 329 Mass. 709, 714. Welch v. Contributory Retirement Appeal Bd. 343 Mass. 502, 507. In addition, the passage of two statutes on the same subject in the same session of the
The special treatment provided by laws such as c. 843, passed in compliance with § 8 of art. 89, does not amount to a denial of equal protection, for any other city or town is free to follow the same procedure in seeking legislation. Should another municipality feel, as Brookline evidently did, that c. 842, for whatever reason, is not adequate for its needs in the area of rent control, the way is open for it to take the legislative avenue Brookline took. The result would be a less uniform pattern of rent control Statewide than presently exists,
Applicability of c. 842 to all cities and to towns of population over 50,000. The plaintiffs in the Marshal House and Aiello cases contend that the limited local option provided in § 2 of c. 842 for cities regardless of population and towns with a population of 50,000 or over results in a violation of equal protection with respect to towns with a population under 50,000, which are excluded from the option. However, the limitation contained in § 2 follows from the declaration of emergency in § 1, which recites that "a serious public emergency exists with respect to ... housing ... in certain areas of the commonwealth but especially in the cities of the commonwealth regardless of population and towns with a population of fifty thousand or over' (emphasis supplied). This elaboration on the phrase "certain areas of the commonwealth" may in turn be read into the emergency preamble, which uses the same phrase without amplification. Enlargement of the meaning of the bare terms of an emergency
OBJECTIONS RAISED TO MECHANISM OF RENT CONTROL.
The six month rollback of c. 842 and art. XXX. It is strongly argued to us that the six month rollback feature of c. 842, § 6 (a), violates equal protection and due process of the law. This section provides that the "maximum rent of a controlled rental unit shall be the rent charged the occupant for the month six months prior to the acceptance of this act by a municipality." Presumably this objection is not voiced on the ground that maximum rents are fixed as of a given date, for this is the method of rent control to which there has been the widest resort (Willis, Rent Control: The Maximum Rent Date Method, 98 U. of Pa. L. Rev. 654), and its constitutionality has been universally upheld.
On the other hand, it would appear that the six month rollback, if inflexible Statewide, could produce difficulties that are eliminated by the very fact that it does operate differently from community to community. Institution of a rollback provides a safeguard against freezing last minute rent increases into controlled rental levels and carries the advantage of setting rents "at levels which landlords and tenants had worked out for themselves by free bargaining in a competitive market" (Hillcrest Terrace Corp. v. Brown, 137 F.2d 663, 664 (Emer. Ct. App.) at a time either before undue rent increases commenced or at least before they became so evident. The only distinction of importance between the fixing of the maximum rent date under this act and its fixing in other rent control legislation is that the effective date is not established at the beginning for each area individually to coincide with the emergency which produced the legislation nor is a procedure prescribed to ascertain such a date. We are of opinion, however, that the operation of the act as a whole is in accord with our recent suggestion that rent control legislation should take "into account circumstances in more than one community in determining the existence of an emergency." Marshal House, Inc. v. Rent Review & Grievance Bd. of Brookline, 357 Mass. 709, 719, fn. 6. "In this connection it is to be remembered that uniformity in the application of regulatory statutes is not required by the Constitution." Taylor v. Brown, 137 F.2d 654, 659 (Emer. Ct. App.).
Initially we note that the legislation is not self-executing. The preamble declares an emergency "in certain areas of the Commonwealth," and the act is to take effect accordingly only in those communities which accept it.
The term "fair net operating income" as it appears in cc. 842 and 843. A cluster of constitutional objections has been raised to the standards set forth in cc. 842 and 843 for the individual or general adjustment of rents by the local administrator provided for in the two statutes.
It is contended first that both of these standards are confiscatory because they do not in terms provide for a reasonable return to landlords over and above all costs. We do not agree with this construction of the acts. We have previously recognized that those engaged in a lawful calling have "a right to rates which are not confiscatory, or which satisfy any higher applicable statutory standards." Aetna Cas. & Sur. Co. v. Commissioner of Ins. ante, 272, 281. We have also suggested that a rent control law should contain some such higher statutory standard, so as to insure to landlords "a fair return on the value of the property." Answer of the Justices, 356 Mass. 769, 773. Mindful therefore of our duty to construe statutes in a way so as to sustain their validity if possible, we read the term "fair net operating income," as used in both statutes, to require that rents be set so as to assure to landlords a reasonable return on their investment.
We are further faced with contradictory allegations with respect to the different elaborations of the term "fair net operating income" in cc. 842 and 843. First, it is contended that the lack of a definition of the term in c. 842 puts landlords governed by that act in a worse position than those governed by c. 843, resulting in a denial of equal protection to the former. On the other hand, it is maintained that the lack of a list of factors relevant to fair net operating income in c. 843 as in c. 842, and the very presence of a definition in c. 843, will lead to the reverse result. The fact that both arguments have been raised is indicative of the answer to both. Neither formulation of the term "fair net operating income" is inflexible enough to require a result more or less advantageous to landlords than the other. The lack of a list of relevant factors in c. 843 in no way precludes the administrator under that act from considering them; nor is he by the terms of § 3 of c. 843 irrevocably wedded in every case to the definition of "fair net operating income" therein contained. Likewise, local administrators under c. 842 are free to define "fair net operating income" by regulation as defined in c. 843.
With respect to the c. 842 formulation of "fair net operating income," it is argued that its lack of definiteness will permit different communities to set up inconsistent regulations under § 5 of the act, resulting in a denial of equal protection as among the landlords in such communities. While we agree with the premise, we do not agree with the conclusion the plaintiffs Marshal House and Aiello would have us draw from it. The flexibility which c. 842 allows to each community to mold the term "fair net operating income" to accord with its peculiar local needs is a desirable feature of the act. Compare Burnham v. Board of Appeals of Gloucester, 333 Mass. 114, 118. What would be a reasonable return to landlords in one community may be much higher or lower than a comparable figure in another community. In addition, conditions may change in one community and not in another. A more rigid system which did not empower the local authority to deal with the changing needs of the locality as they developed might well only aggravate the conditions it was designed to alleviate.
The terms of § 7 of c. 842 are not original with this act. They are substantially identical to those contained in § 5 (a) of St. 1953, c. 434, earlier rent control legislation passed in this Commonwealth. We upheld that act in its entirety in Russell v. Treasurer & Recr. Gen. 331 Mass. 501, although no one thought to raise the particular point now raised by the plaintiffs. Compare Nayor v. Rent Bd. of Brookline, 334 Mass. 132, 136. The language in § 5 (a) of c. 434 seems to have been taken, in turn, from substantially identical language in § 203 of the Federal housing and rent act of 1949 (63 Stat. 18), amending § 204 (b) of the Housing and Rent Act of 1947, and authorizing individual and general adjustments by the expediter and local boards. Pursuant to § 203, the expediter set up a series of regulations which translated these criteria into specific percentage returns on the annual income from the building. The validity of § 203 and the subsequent regulations were not questioned before
A related argument is raised by the plaintiffs in the Goldman case: that the definition of "fair net operating income" in c. 843 is unconstitutionally vague. Without going into the possible meanings of each of the terms used in the definition, we do not accept the argument for the same reasons that we rejected its counterpart leveled at c. 842. The flexibility contained in the definition is needed in order to administer rent control effectively. As formulated, it is entirely consistent with the overriding requirement of a reasonable return on investment which we feel to be incorporated in the term "fair net operating income."
Finally, it should be noted both with respect to the various attacks on the term "fair net operating income" and on the six month rollback provision of c. 842 and art. XXX that the attacks here are levied on the face of the statute and by-law involved. None of the plaintiffs has introduced any evidence that the operation of either will necessarily be confiscatory with respect to him individually or with respect to a general class of landlords. Compare Aetna Cas. & Sur. Co. v. Commissioner of Ins., ante, 272, 274-276. G. & M. Employment Serv. Inc. v. Commonwealth, ante, 430, 438-443. Thus we have been given no basis for striking down these provisions in the present context. Any landlord in the future who feels that they are being applied to him in a way which deprives him of a fair return on his investment is free to pursue his grievance in the courts after having exhausted the procedures provided in both c. 842 and art. XXX for adjustment of rents and judicial review of orders of the board or administrator.
THE CARROLL CASE.
Having dealt with the major constitutional objections raised by the plaintiffs in the three principal cases, we need pause only briefly on the Carroll case, which arose in a different frame and which presents somewhat distinct issues. Like the other cases, this was a bill for declaratory and injunctive relief brought originally as a class action. However, unlike the others, the plaintiffs here are tenants and the bill does not allege unconstitutional features of the rent control statute but rather complains of actions of the Cambridge
We see no need to reach the substantive issues raised by the plaintiffs, to the extent that they have not been made moot by the subsequent order of November 24,
It follows from our holding as to the applicability of § 10
Various other points raised by the plaintiffs in the four cases herein decided have been carefully considered by the court but we do not feel they are of sufficient import to warrant further discussion.
A declaration is to be made in the three principal cases that St. 1970, c. 842 and c. 843, as well as art. XXX of the by-laws of the town of Brookline, are valid on their face. These cases are remanded to the Superior Court in the counties in which they respectively arose for proceedings consistent with this opinion. A decree is to enter dismissing the bill in the Carroll case.
In fact, although not required to do so in c. 842, the administrator of rent control in Cambridge has stayed the operation of the rollback with respect to those landlords who filed for individual adjustments before December 1, 1970, the effective date of the rollback. Rent Control Official Announcement, November 24, 1970.