Fletcher Props., Inc. v. City of Minneapolis

947 N.W.2d 1

FLETCHER PROPERTIES, INC., et al., Appellants,

v.CITY OF MINNEAPOLIS, Respondent.

A18-1271

Supreme Court of Minnesota.

Filed July 29, 2020

OPINION

THISSEN, Justice.

In this case, we consider a constitutional challenge to an ordinance adopted by respondent City of Minneapolis that prohibits certain property owners, property managers, and others (collectively, landlords) from refusing to rent property to prospective tenants when that refusal is motivated by a desire to avoid the burden of complying with the requirements of Section 8 of the United States Housing Act of 1937. Appellants are property owners (Owners) who own and rent residential properties in Minneapolis. They assert that the ordinance violates the Due Process Clause and the Equal Protection Clause of the Minnesota Constitution. Because we conclude that the ordinance survives due process and equal protection rational basis scrutiny, we affirm.

FACTS

Section 8 of the United States Housing Act of 1937 provides for housing assistance to low-income people in the United States. See generally 42 U.S.C. § 1437f (2016). The United States Department of Housing and Urban Development (HUD) funds Section 8 programs and local housing authorities administer the programs in their regions. In Minneapolis, the Minneapolis Public Housing Authority (the Housing Authority) administers Section 8.

Housing choice vouchers are one form of assistance provided under Section 8. See id. , § 1437f(o). Families using housing choice vouchers have a portion of their rent payments subsidized by the government. See 24 C.F.R. § 982.1(a) (2018). Families using housing choice vouchers "select and rent units that meet program housing quality standards." 24 C.F.R. § 982.1(a)(2). If the Housing Authority approves a family's unit and tenancy, the Housing Authority "contracts with the [property] owner to make rent subsidy payments on behalf of the family." Id. The Housing Authority uses the funds provided by the federal government to pay the rent subsidy.

Under federal law, participation in Section 8 is voluntary for both landlords and tenants. See, e.g. , Salute v. Stratford Greens Garden Apartments , 136 F.3d 293, 296 (2d Cir. 1998) ; Knapp v. Eagle Prop. Mgmt. Corp. , 54 F.3d 1272, 1280 (7th Cir. 1995). Landlords who opt to participate in the program are required to enter into a Housing Assistance Payments Contract with HUD. See generally 24 C.F.R. § 982.451 (2018). Under the Housing Assistance Payments Contract, landlords are subject to certain rules and restrictions that apply only when landlords lease to voucher holders. These include minimum length of initial lease terms and housing quality standards. See id. § 982.401.

For years, voucher holders have consistently reported difficulty finding landlords who accept Section 8 housing choice vouchers. In June 2015, the Minneapolis City Council published a notice of intent to introduce an amendment "prohibiting discrimination based on receipt of public assistance, including tenant-based Section 8 assistance, regardless of any requirements of such public assistance program." Over the next two years, the City conducted private meetings, public hearings, surveys, and focus groups with landlords, tenants, tenant advocates, and representatives of housing industry organizations. The City also conducted research and gathered reports and data to further its understanding of the Section 8 housing choice voucher program, affordable housing, and the Minneapolis housing market, among other topics.

In March 2017, the City amended the section of its civil rights title addressing discrimination in real estate. Before the amendment, the section prohibited landlords from refusing to rent to prospective tenants "because of race, color, creed, religion, ancestry, national origin, sex, sexual orientation, gender identity, disability, marital status, status with regard to public assistance or familial status." Minneapolis, Minn., Code of Ordinances (MCO), tit. 7, § 139.40(e) (2016). The amendment added a new prohibition providing that a landlord may not refuse to rent to a prospective tenant "because of ... any requirement of a public assistance program."¹ MCO, tit. 7, § 139.40(e) (2017).

The ordinance was again amended in December 2017. The ordinance now states:

(e) Discrimination in property rights. It is an unlawful discriminatory practice for an owner, lessee, sublessee, managing agent, real estate broker, real estate salesperson or other person having the right to sell, rent or lease any property, or any agent or employee of any of these, when ... status with regard to a public assistance program, or any requirement of a public assistance program is a motivating factor:

(1) To refuse to sell, rent or lease, or to refuse to offer for sale, rental or lease; or to refuse to negotiate for the sale, rental, or lease of any real property; or to represent that real property is not available for inspection, sale, rental, or lease when in fact it is so available; or to otherwise make unavailable any property or any facilities of real property.

MCO, tit. 7, § 139.40(e) (2020).² Under the ordinance, the Section 8 housing choice voucher program is a public assistance program. Id. , § 139.20 (2020) (defining "[p]ublic assistance program" to include any "tenant-based federal, state or local subsidies, including, but not limited to, rental assistance, rent supplements, and housing choice vouchers").

The 2017 amendments also added an affirmative defense for landlords providing that refusing to rent due to a requirement of a public assistance program is not unlawful if the "requirement would impose an undue hardship." Id. , § 139.40(e)(1). "Undue hardship" is defined as "a situation requiring significant difficulty or expense when considered in light of a number of factors to be determined on a case-by-case basis." Id. , § 139.20. The factors include, but are not limited to:

(1) The nature and net cost of complying with any requirement of a public assistance program, taking into consideration existing property management processes;

(2) The overall financial resources of the landlord, taking into consideration the overall size of the business with respect to the number of its employees, and the number, type, and location of its housing stock; and

(3) The impact of complying with any requirement of a public assistance program upon the business and dwelling.

Id.

The ordinance also provides that four categories of landlords are exempt from the prohibition on refusing to rent because of the requirements of the housing choice voucher program without needing to prove undue hardship. The ordinance states:

The provisions of section 139.40(e) relating to tenant-based federal, state or local subsidies, including, but not limited to, rental assistance, rent supplements, and housing choice vouchers, or any requirement of such a program, shall not apply to:

(1) Renting or leasing a room in an owner occupied single-family dwelling.

(2) Renting or leasing a single-family dwelling, a single dwelling unit, or a single dwelling unit of a condominium, townhouse, or housing cooperative, by the owner of the dwelling or dwelling unit, for no more than thirty-six (36) months, when such dwelling or dwelling unit is an owner occupied homestead at the start of the thirty-six (36) month period.

(3) Renting or leasing a dwelling with two dwelling units when a person who owns or has an ownership interest in the dwelling is residing in the other dwelling unit.

(4) Renting or leasing a single-family dwelling, a single dwelling unit, or a single dwelling unit of a condominium, townhouse, or housing cooperative, by the owner of the dwelling or dwelling unit, while the owner is on active military duty and when such dwelling or dwelling unit is an owner occupied homestead at the start of the active military duty.

Id. , § 139.30(b) (2020).³

The Owners’ complaint alleged that the amended ordinance (1) is preempted by state law; (2) violates the Due Process Clause of the Minnesota Constitution, Minn. Const. art. I, § 7 ; (3) is an unconstitutional partial regulatory taking; (4) unlawfully interferes with freedom of contract; and (5) violates the Equal Protection Clause of the Minnesota Constitution, Minn. Const. art. I, § 2. The Owners also requested temporary and permanent injunctive relief. After the parties filed cross-motions for summary judgment, the district court granted summary judgment in favor of the Owners, concluding that the ordinance violated the due process and equal protection clauses. The district court did not address the Owners’ other claims.⁴ The court of appeals reversed on both claims and remanded to the district court for it to consider the Owners’ other claims. Fletcher Props., Inc. v. City of Minneapolis , 931 N.W.2d 410, 429–30 (Minn. App. 2019). The Owners sought review and we granted their petition.

ANALYSIS

This case comes to us on appeal from a grant of summary judgment. We review a grant of summary judgment de novo. Kratzer v. Welsh Cos., LLC , 771 N.W.2d 14, 18 (Minn. 2009). We view the evidence "in the light most favorable to the party against whom judgment was granted"—here, the City. See Fabio v. Bellomo , 504 N.W.2d 758, 761 (Minn. 1993). We will affirm the judgment "if no genuine issues of material fact exist and if the court below properly applied the law." Kratzer , 771 N.W.2d at 18.

The constitutionality of a statute is a question of law which we review de novo. State v. Larsen , 650 N.W.2d 144, 147 (Minn. 2002). Because statutes are presumed constitutional, we "exercise our power to declare a statute unconstitutional with extreme caution and only when absolutely necessary." Boutin v. Lafleur , 591 N.W.2d 711, 714 (Minn. 1999).

I.

A.

We start with the Owners’ due process challenge to the ordinance. The Due Process Clause of the Minnesota Constitution provides that "no person shall ... be deprived of life, liberty or property without due process of law." Minn. Const. art. I, § 7....