The opinion of the Court was delivered by PASHMAN, J.
Having held that regulation of rents is within the powers delegated by the Legislature to municipalities under N.J.S.A. 40:48-2, Inganamort v. Fort Lee, 62 N.J. 521 (1973), this Court is now presented with various questions concerning when and how municipalities may exercise that power.
West Orange adopted a rent control ordinance, No. 247-72, in October 1973. It has since amended the ordinance twice (Ordinances Nos. 276-73, 287-73), each time imposing additional restrictions on the freedom of landlords within the municipality to raise rents. In its present form, the ordinance recites the existence of a limited supply of rental housing in the municipality and receipt of complaints concerning rising rents and deteriorating conditions of rental units. It establishes rent charges as of February 1, 1973 as the base rent and provides that rent increases at the expiration of a lease or a tenancy are limited to the annual percentage increase in the Consumer Price Index (CPI) for the New York metropolitan area computed by the United States Department of Labor for the period from 90 days prior to the commencement of the lease to 90 days prior to its termination.
Plaintiff-respondent Hutton Park Gardens filed a complaint in lieu of prerogative writ in the Superior Court in Essex County in which intervenors Hutton Lafayette Apartments Company and Rockledge Realty Company joined challenging the West Orange ordinance and particularly the 5% ceiling on annual rent increases imposed by the most recent amendment
The principal evidence at this hearing was the affidavit of Richard Segal, manager of apartments owned by plaintiff-intervenors Hutton Lafayette Apartments Company and Rockledge Realty Company. He estimated that operating costs of apartments owned by Hutton Lafayette would increase by 15% of the average existing rent during 1974 and of apartments owned by Rockledge Realty by 5-7% during the same period.
The trial court held the ordinance facially unconstitutional, granted summary judgment for parties plaintiff, and enjoined enforcement of the ordinance.
Plaintiffs, various apartment owners in Wayne Township, filed a complaint in lieu of prerogative writ in the Superior Court in Passaic County challenging the restriction of annual rent increases to 50% of the increase in the CPI
We granted certification
We first consider plaintiffs' contentions that the ordinances are generally arbitrary and unreasonable, that is, that they violate principles of substantive due process.
Municipal rent control is, of course, but one example of the larger and more pervasive phenomenon of governmental regulation of prices under the police power. For constitutional
Governmental regulation of prices has a long, although somewhat checkered, legal history in this country.
We may as well say at once that the dairy industry is not, in the accepted sense of the phrase, a public utility. We think the appellant is also right in asserting that there is in this case no suggestion of any monopoly or monopolistic practice. It goes without saying that those engaged in the business are in no way dependent upon public grants or franchises for the privilege of conducting their activities. But if, as must be conceded, the industry is subject to regulation in the public interest, what constitutional principle bars the state from correcting existing maladjustments by legislation touching prices? We think there is no such principle. The due process clause makes no mention of sales or of prices any more than it speaks of business or contracts or buildings or other incidents of property. The thought seems nevertheless to have persisted that there is something peculiarly sacrosanct about the price one may
Rather, it held that where, in the opinion of the legislature, regulation of prices serves the public interest, a state is entirely free to impose such regulation, provided only that it does not employ means which are arbitrary, discriminatory or demonstrably irrelevant to a legitimate purpose:
If the lawmaking body within its sphere of government concludes that the conditions or practices in an industry make unrestricted competition an inadequate safeguard of the consumer's interests, produce waste harmful to the public, threaten ultimately to cut off the supply of a commodity needed by the public, or portend the destruction of the industry itself, appropriate statutes passed in an honest effort to correct the threatened consequences may not be set aside because the regulation adopted fixes prices reasonably deemed by the legislature to be fair to those engaged in the industry and to the consuming public. [Id. at 538-39, 54 S.Ct. at 516, 78 L.Ed. at 957; footnote omitted].
In so deciding, the Court reverted to its earliest view of the limitations imposed upon such state action by the fourteenth amendment. Munn v. Illinois, 94 U.S. 113, 24 L.Ed. 77 (1877); Peik v. Chicago & N.W.R. Co., 94 U.S. 164, 24 L.Ed. 97 (1877). In subsequent decisions, the United States Supreme Court has consistently reaffirmed its holding in Nebbia. E.g., Cities Service Gas Co. v. Peerless Oil & Gas Co., 340 U.S. 179, 71 S.Ct. 215, 95 L.Ed. 190 (1950) (wellhead price of natural gas); Olsen v. Nebraska ex rel. Western Reference & Bond Ass'n, 313 U.S. 236, 61 S.Ct. 862, 85 L.Ed. 1305 (1941) (fees of employment agencies); Mayo v. Lakeland Highlands Canning Co., 309 U.S. 310, 60 S.Ct. 517, 84 L.Ed. 774 (1940) (prices of citrus fruits); Townsend v. Yeomans, 301 U.S. 441, 57 S.Ct. 842, 81 L.Ed. 1210 (1937) (fees of tobacco factors); Hegeman Farms Corp. v. Baldwin, 293 U.S. 163, 55 S.Ct. 7, 79 L.Ed. 259 (1934) (price of milk).
These cases [Nebbia and its progeny] represent more than scattered examples of constitutionally permissible price-fixing schemes. They represent in large measure a basic departure from the philosophy and approach of the majority in the Ribnik Case. The standard there employed, following that used in Tyson & Bro. — United Theatre Ticket Offices v. Banton, 273 U.S. 418, 430 et seq., 71 L.Ed. 718, 722, 47 S.Ct. 426, 58 A.L.R. 1236, was that the constitutional validity of price-fixing legislation, at least in absence of a so-called emergency, was dependent on whether or not the business in question was "affected with a public interest." Cf. Brazee v. Michigan, 241 U.S. 340, 60 L.Ed. 1034, 36 S.Ct. 561, Ann. Cas. 1917C 522. It was said to be so affected if it had been "devoted to the public use" and if "an interest in effect" had been granted "to the public in that use." Ribnik v. McBride, supra (277 U.S. p. 355, 72 L.Ed. 915, 48 S.Ct. 545, 56 A.L.R. 1327). That test, labelled by Mr. Justice Holmes in his dissent in the Tyson Case (273 U.S. at p. 446, 71 L.Ed. 729, 47 S.Ct. 426, 58 A.L.R. 1236) as "little more than a fiction," was discarded in Nebbia v. New York, supra (291 U.S. pp. 531-539, 78 L.Ed. 953-958, 54 S.Ct. 505, 89 A.L.R. 1469). It was there stated that such criteria "are not susceptible of definition and form an unsatisfactory test of the constitutionality of legislation directed at business practices or
Clearly, proof of "special circumstances" or "emergent conditions" was long ago rejected as the only standard for determining whether legislative enactments violate substantive due process.
Principles of substantive due process are found in Article I, § I of the New Jersey Constitution of 1947, as well as in the federal constitution, Reingold v. Harper, 6 N.J. 182, 190 (1951); Washington Nat'l Ins. Co. v. Bd. of Review, 1 N.J. 545, 554 (1949). In construing that article, we are not obliged to rigidly follow the Supreme Court in its construction of the fourteenth amendment to the federal constitution. Southern Burlington Cty. NAACP v. Mt. Laurel Tp., 67 N.J. 151 (1975), cert. den. ___ U.S. ___, 96 S.Ct. 18, 46 L.Ed.2d 28 (1975); King v. South Jersey National Bank, 66 N.J. 161 (1974); Robinson v. Cahill, 62 N.J. 473, 490-92 (1973), cert. den. 414 U.S. 976, 94 S.Ct. 292, 38 L.Ed.2d 219 (1973). In this particular area, however, we have explicitly chosen to do so. In State Bd. of Milk Control v. Newark Milk Co., 118 N.J. Eq. 504, 516-19 (E. & A. 1935), the former Court of Errors and Appeals upheld State regulation of milk prices and embraced the principles enunciated in Nebbia as being sound construction not only of the federal constitution but also of the parallel provisions of the State constitution:
It is suggested that this construction of the fourteenth amendment "does not bind this court as to meaning and effect of the due process clauses of our own constitution." Even so, they are employed in the same sense in our constitution; and we entertain the view that the foregoing is a sound interpretation of the like constitutional provision. The legislature is supreme in its proper sphere: the exercise of power by it is subject only to the restraints imposed by the federal and state constitutions, and those which are fundamental in the social compact. A legislative enactment should not be set aside unless its unconstitutionality indisputably appears. If
We have since had occasion to apply these principles to sustain regulation of the prices of cigarettes, Lane Distributors, Inc. v. Tilton, 7 N.J. 349, 364-68 (1951), and gasoline, Fried v. Kervick, 34 N.J. 68, 71 (1961). See also Gaine v. Burnett, 122 N.J.L. 39 (Sup. Ct. 1939) aff'd o.b. 123 N.J.L. 317 (E. & A. 1939) (upholding regulation of liquor prices).
N.J. Const. (1947), Art. 1, § 1, like the federal due process clause, makes the constitutionality of governmental price regulation dependent on neither the existence of an "emergency,"
The decisions both of this Court and of the United States Supreme Court concerning price regulation are the natural consequence of the limited role of the judiciary in applying the principles of substantive due process to economic and social legislation. The proper function of the courts in this area was stated by the United States Supreme Court in Nebbia v. New York:
So far as the requirement of due process is concerned, and in the absence of other constitutional restriction, a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy, or, when it is declared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper
This position has consistently been reaffirmed by that Court, most recently in North Dakota State Bd. of Pharmacy v. Snyder's Drug Stores, 414 U.S. 156, 94 S.Ct. 407, 38 L.Ed.2d 379 (1973) and Ferguson v. Skrupa, 372 U.S. 726, 83 S.Ct. 1028, 10 L.Ed.2d 93 (1963).
To similar effect, we observed in Lane Distributors, Inc. v. Tilton, supra:
Whether free and unlimited competition in an industry shall prevail is an economic question and the policy with reference thereto is primarily for the legislature to determine. Courts are not concerned with the wisdom of such legislation; their function is to determine whether or not the statute is one having a lawful purpose for its object. The expediency of the statute is for the lawmaking body alone. [7 N.J. at 365].
Accord Burton v. Sills, 53 N.J. 86, 95 (1968), appeal dismissed 394 U.S. 812, 89 S.Ct. 1486, 22 L.Ed.2d 748 (1969); Hudson County News Co. v. Sills, 41 N.J. 220 (1963), appeal dismissed 378 U.S. 583, 84 S.Ct. 1914, 12 L.Ed.2d 1036 (1964); cf. King v. South Jersey Nat'l Bank, 66 N.J. 161, 189 (1974); N.J. Chapter, American Institute of Planners v. N.J. State Bd. of Professional Planners, 48 N.J. 581, 609 (1967), appeal dismissed 389 U.S. 8, 88 S.Ct. 70, 19 L.Ed. 2d 8 (1967).
It follows from the foregoing that legislative enactments regulating prices, including municipal rent control ordinances, are subject to the same narrow scope of review
In the context of price regulation the question is whether the legislative body could rationally have concluded that the unrestrained operation of the competitive market was not in the public interest. In the area of rent control this conclusion has in the past usually been drawn from the existence of a serious housing shortage, see, e.g., Block v. Hirsh, supra; Helmsley v. Fort Lee, supra 362 F. Supp. at 594; Stoneridge Apts. Co. v. Lindsay, 303 F.Supp. 677, 680 (S.D.N.Y. 1969); Jamouneau v. Harner, supra; but one can conceive of other circumstances which might rationally persuade a legislative body that the free housing market was not functioning in the public interest. See, e.g., Block v. Hirsh, supra, 256 U.S. at 156, 41 S.Ct. at 459, 65 L.Ed. at 871 (monopoly power), N.J.S.A. 2A:42-74 et seq. (prevalence of substandard housing); Marshal House, Inc. v. Rent Control Bd. of Brookline, 358 Mass. 686, 266 N.E.2d 876, 883 (Sup. Jud. Ct. 1971) (deterioration of existing housing stock).
Municipalities have the power and authority to enact ordinances in support of the police power. Municipal ordinances, like statutes, carry a presumption of validity. Moyant v. Paramus, 30 N.J. 528, 534-35 (1959); Guill v. Mayor & Council of Hoboken, 21 N.J. 574, 581 (1956). The presumption is not an irrebuttable one, Collingswood v. Ringgold, 66 N.J. 350 (1975); Moyant v. Paramus, supra, but it places a heavy burden on the party seeking to overturn the ordinance. Legislative bodies are presumed to act on the basis of adequate factual support and, absent a sufficient showing to the contrary, it will be assumed that their
Plaintiffs, in attacking the ordinances generally as violative of principles of substantive due process, have produced no evidence to meet their burden of proof and to overcome the ordinance's presumption of validity, and the Court knows of no facts of which it may take judicial notice that would support such a result.
The more substantial claim made by plaintiffs is that the West Orange and Wayne Township ordinances are confiscatory. Although the law once was that the courts may not review legislative determinations as to prices to be charged by businesses affected with a public interest, see Munn v. Illinois, supra; see generally, FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 599, 62 S.Ct. 736, 749, 86 L.Ed. 1037, 1056 (1942) (Black, Douglas and Murphy, JJ. concurring); Wilson v. Brown, 137 F.2d 348, 351 (Emer. Ct. App. 1943), it is now well-established that the constitution requires that price regulation be non-confiscatory in effect and that the courts will enforce that requirement. FPC v. Texaco, Inc., 417 U.S. 380, 391-92, 94 S.Ct. 2315, 2323-24, 41 L.Ed.2d 141, 152-53 (1974); Permian Basin Area Rate Cases, 390 U.S. 747, 769-70, 88 S.Ct. 1344, 1361-62, 20
The term "confiscatory" must be understood in light of the surrounding circumstances. There are undoubtedly times of great public exigency during which landlords may temporarily be required to rent their property at rates which do not permit them to obtain what would ordinarily be considered a fair return. Bowles v. Willingham, supra, 321 U.S. at 519, 64 S.Ct. at 649, 88 L.Ed. at 905; Wilson v. Brown, supra, 137 F.2d at 351-52; Teeval, Co. v. Stern, 301 N.Y. 346, 362, 93 N.E.2d 884, 890 (Ct. App. 1950). See also Western States Meat Packers Ass'n v. Dunlop, 482 F.2d 1401, 1403-4 (Temp. Emer. Ct. App. 1973); Int'l Brotherhood of Electrical Workers, Local No. 11 v. Boldt, 481 F.2d 1392, 1395 (Temp. Emer. Ct. App. 1973), cert. denied 414 U.S. 1092, 94 S.Ct. 723, 38 L.Ed.2d 549 (1973). Emergency conditions do not create new powers nor do they permit the government to transgress specific constitutional prohibitions, but they may present occasions for the appropriate exercise of powers which would otherwise remain dormant, and they justify flexible applications of constitutional restrictions in order to facilitate rather than obstruct governmental steps necessary to cope with the emergency. Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 426, 54 S.Ct. 231, 235, 78 L.Ed. 413, 422 (1934); Jamouneau v. Harner, supra, 16 N.J. at 514. As Justice Holmes observed in an early decision upholding a rent control provision:
The regulation is put and justified only as a temporary measure. * * * A limit in time, to tide over a passing trouble, well may justify a law that could not be upheld as a permanent change. [Block v. Hirsh, 256 U.S. at 157, 41 S.Ct. at 460, 65 L.Ed. at 871; citations omitted]
By emergency more is meant than merely a general public need. The existence of a chronic housing shortage
The determination of the existence of such an emergency is, in the first instance, a legislative function, and, where the legislature has expressly determined that such a situation exists its determination is entitled to a distinct presumption of validity. Block v. Hirsh, supra, 256 U.S. at 154-55, 41 S.Ct. at 459, 65 L.Ed. at 870; Burlington Food Store, Inc. v. Hoffman, 45 N.J. 214, 221 (1965); Jamouneau v. Harner, supra, 16 N.J. at 515; Como Farms, Inc. v. Foran, supra, 6 N.J. Super. at 314. Nevertheless, a formal legislative declaration of emergency is not necessary for a court to find that legislation is in fact sustainable as an emergency measure, Jamouneau v. Harner, supra, 16 N.J. at 516, nor does adoption of such a declaration preclude the
Nevertheless, we need not here determine whether present economic conditions constitute an "emergency" warranting a denial to a landlord of a fair return nor explore the difficult question of just how far the State may impose on rights of private property in times of emergency since the record here does not disclose that the ordinances under review impose any such drastic burden on landlords.
In ordinary circumstances, price controls which do not permit an economically efficient operator to obtain a "just and reasonable" return on his investment are deemed confiscatory.
The requirement that rent regulation must permit a just and reasonable return does not place any undue restriction on the mechanism of regulation. The regulatory scheme need not take a particular predetermined form. So long as the means chosen to accomplish the object are not wholly arbitrary and unreasonable, the courts are concerned solely with the question of whether the return actually permitted is just and reasonable. Permian Basin Area Rate Cases, supra, 390 U.S. at 768-70, 88 S.Ct. at 1360-62, 20 L.Ed.2d at 336-38; FPC v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 287, 88 L.Ed.2d 333, 344 (1944); see FPC v. Texaco, supra, 417 U.S. at 391-92, 94 S.Ct. at 2323-24, 41 L.Ed.2d at 152-53; Wisconsin v. FPC, 373 U.S. 294, 309, 83 S.Ct. 1266, 1274, 10 L.Ed.2d 357, 368 (1963). Thus the municipality is not required to make an individual determination as to the proper rent level for each individual landlord but may adopt regulations governing rent levels of broad classes of property if fair and reasonable in application. Permian Basin Area Rate Cases, supra, 390 U.S. at 769, 88 S.Ct. at 1361, 20 L.Ed.2d at 337; cf. Wisconsin v. FPC, supra; Bowles v. Willingham, supra. Further, if the municipality chooses to regulate by adoption of class regulations, there is no particular formula which it is constitutionally bound to employ. Albigese v. Jersey City, supra.
The term "just and reasonable" is hardly more precise than the term "confiscatory," its antonym. It is no objection that the regulation may incidentally cause the value of the property to be reduced. Permian Basin Area Cases, supra, 390 U.S. at 769, 88 S.Ct. at 1361, 20 L.Ed.2d
Whether a particular regulation of prices fails to permit a just and reasonable return is a mixed fact-law question. The burden of proof is heavily upon the parties alleging confiscation to demonstrate it. The fact that costs
Plaintiffs in the present case have not tendered evidence as to their actual profits or losses, the value of their properties, the state of the housing market, or any of the other factors which a court would have to consider to determine whether the ordinances failed to permit a just and reasonable return. See Troy Hills Village v. Parsippany-Troy Hills Tp. Council, supra, 68 N.J. at 621.
Undoubtedly, rent control ordinances can be written which are so restrictive as to facially preclude any possibility of a just and reasonable return. See Mora v. Mejias, 223 F.2d 814 (1 Cir.1955) (prices set so low that all members of industry would have to operate at a loss); Kress, Dunlap & Lane, Ltd. v. Downing, 193 F.Supp. 874 (D.V.I. 1961) (rent control ordinance continued in operation for fourteen years without any provision for rent increases); Miami Beach v. Forte Towers, Inc., 305 So.2d 764, 768-69 (Fla. Sup. Ct. 1974) (Dekle, J. concurring specially). It is only these or comparably drastic ordinances which can be struck down as facially confiscatory. See FPC v. Texaco, Inc., supra, 417 U.S. at 392-93, 94 S.Ct. at 2323-24, 41 L.Ed.2d at 153-54.
The provisions challenged here by plaintiffs do not fall into this category. Both the West Orange and Wayne Township ordinances take the rent level set by the landlord at a recent date as the base rent. They permit the landlord to obtain annual increases over this rent as a matter of course and to obtain special increases to compensate for certain extraordinary expenses at the discretion of the rent leveling board or governing body. Although the total increases permitted under these ordinances are sharply limited, and may be less than price increases prevailing in other sectors of the economy, cf. Equitable Trust Co. v. Bowles, 143 F.2d 735
We further call attention to what we have said in Troy Hills Village v. Parsippany-Troy Hills Tp. Council, supra, 68 N.J. at 621-630 as to the formulation of standards and criteria of fair return in a rent control context.
We therefore conclude that plaintiffs have not borne their burden of proof in demonstrating that the ordinances are confiscatory. In so holding, we note that the Supreme Judicial Court of Massachusetts, faced with a similar challenge to the facial constitutionality of a statute adopted under local option by various municipalities in that state, has reached the same conclusion. Marshal House, Inc. v. Brookline Rent Control Bd., supra, 266 N.E.2d at 889.
The final question to be considered is whether, as argued by plaintiffs, the specific formulae adopted by West Orange and Wayne Township to govern permissible rent increases are so arbitrary and unreasonable as to violate principles of substantive due process. Plaintiffs' contention is, in effect, that limiting increases to a fraction of the percentage increase
The scope of judicial review under principles of substantive due process has been discussed above and need not be repeated. A wide variety of techniques have been employed over the past 35 years in various jurisdictions to regulate rents, some more successfully than others. Undoubtedly, still other techniques could be devised. It is not for the courts to dictate the method of regulation to be employed; subject to constitutional limitation, that is a matter wholly within the discretion of the legislative body. Albigese v. Jersey City, supra. Legislative bodies are not obliged to shape regulations under the police power with mathematical exactitude. They may make approximations and, if need be, informed guesses. Dandridge v. Williams, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970). For constitutional purposes, it suffices that the means adopted be rationally related to the purpose sought to be accomplished.
The ordinances at issue are not models of careful draftsmanship. Their history is one of repeated tinkering and patching as the municipalities have discovered problems not previously dealt with and have sought to cope with changing economic conditions. To some degree this might have been avoided had the State legislature adopted a uniform enabling act. Cf. N.J.S.A. 2A:42-74 et seq.; 2A:42-14 et seq. (expired).
Inganamort v. Fort Lee, supra, was decided after a State rent control bill had passed the Assembly and was withdrawn in the Senate (reportedly it was facing serious opposition). The present challenges to municipal rent control point up the necessity for uniform standards and procedures for deciding rent increases that are fair and equitable to both landlord and tenant. Uncertain rent controls discourage housing construction, capital improvements and property maintenance. Developers and owners seek even-handedness in rent leveling so that there will be a degree of certainty.
The element of irrationality identified by plaintiffs is that the ordinances do not adequately allow landlords to recover increases in operating costs. Constitutional principles require only that the landlord be permitted to obtain a just and reasonable return; they do not require that landlords uniformly be permitted to pass particular costs through to their tenants. The ordinances themselves do not purport to represent efforts to guarantee landlords more than the constitutional minimum. We have considered and rejected the contention that the ordinances facially deny the opportunity to obtain a just and reasonable return; precisely the same considerations compel the conclusion that the challenged provisions do not violate principles of substantive due process.
Finally, it cannot be said that limiting increases to a fraction of the percentage increase in the CPI or to a fixed percentage of existing rents rather than to the actual increases in operating costs is not rationally related to the purposes of rent control legislation. We note that the rent increase formulae chosen by defendants in the instant case are superimposed upon base rents that the landlord selected. It is conceivable that, when first selected, these base rents yielded an exorbitant or unreasonably high profit return. Permitting a landlord under these circumstances to pass on to his tenants all increases in costs or a percentage increase equal to 100% of the CPI would simply perpetuate the recovery of exorbitant rents. Therefore, at least in some instances, rent increase formulae which limit rent increases to an amount less than the percentage increase in the CPI
The pleadings in both these cases would appear to be broad enough to encompass attacks on the ordinances in question both as facially unconstitutional and unconstitutional as applied. The record presently before this Court does not clearly indicate that plaintiffs have abandoned possible claims as to unconstitutionality of the ordinances as applied. We therefore affirm the judgment of the Appellate Division in Cosden v. Wayne Tp. and reverse the judgment of the Law Division in Hutton Park Gardens v. West Orange Town Council, and remand both cases for further proceedings not inconsistent with this opinion.
CONFORD, P.J.A.D., Temporarily Assigned (concurring).
I join the court's opinion except as to the references to public utility rate cases in connection with the matter of "fair return". See my concurring opinion in Troy Hills Village v. Parsippany-Troy Hills, 68 N.J. 604 (1975).
Justice CLIFFORD joins in this concurring opinion.
CLIFFORD, J., and CONFORD, P.J.A.D., concurring in the result.
For reversal and remandment in Hutton Park Gardens — Chief Justice HUGHES, Justices MOUNTAIN, SULLIVAN,
For affirmance — None.
For affirmance and remandment in Cosden — Chief Justice HUGHES, Justices MOUNTAIN, SULLIVAN, PASHMAN, CLIFFORD and SCHREIBER and Judge CONFORD — 7.
For reversal — None.
However, a contrary result was recently reached in an intermediate appellate court decision in California. Birkenfeld v. City of Berkeley, 122 Cal.Rptr. 891 (Cal. App. 1975). In Birkenfeld, the court noted that appellants had raised the argument that, under Nebbia v. New York, supra and related cases, the existence of a housing emergency is not required in order to uphold the constitutionality of rent control legislation. However, having recognized this argument, the court failed to discuss it but instead held that the validity of the Berkeley rent control provision "must be judged in light of its stated purpose," to wit: to impose rent controls to deal with a "serious public emergency." Id. at 899. The court then went on to explain that rent control should be treated as an "emergency" measure since it "tends to exacerbate a shortage of rental housing" by discouraging "the construction of new rental units and the replacement of old, deteriorated rental units." Id. at 899. While these statements may be true, the weight to be given to such considerations must be left to the legislative body. The sole task of the Court is to determine whether the legislation is without a reasonable supporting factual basis viewed as a police power measure. In any event, as will be more thoroughly discussed in Troy Hills Village, supra at Point II, protection of a landlord's investment is adequately provided by the requirement that rent leveling ordinances permit recovery of a "just and reasonable" rate of return.
Nonetheless, we reject this contention as being both unsound in principle and unsupported by contemporary judicial authority. The supposed freedom of landlords to abandon the business is largely illusory. Although in theory the owner of a large apartment building may convert it to other uses or tear it down and construct something else in its place, in practice such a course is ordinarily economically prohibitive, and to force it would be confiscatory. Nor, if the permissible rents are set significantly below what is just and reasonable, is he likely to be able to find a buyer willing to pay a reasonable price. The fictitious character of the argument has long been recognized. E.g., Charles Wolff Packing Co. v. Court of Industrial Relations, 262 U.S. 522, 543, 43 S.Ct. 630, 635, 67 L.Ed. 1103, 1111 (1923); Mora v. Mejias, 223 F.2d 814, 817 (1 Cir.1955).