If your brain goes full mobius strip when trying to figure out the California Court of Appeal’s rationale in Anaheim Mobile Estates, LLC v. State of California, No. G063421 (Aug. 13, 2025), you are not alone.
Here’s the bottom line in this facial challenge to a California statute that limits mobilehome parks located in two municipalities from increasing the rental rate more than 3% + cost of living (or 5%) and limits the number of times a long-term tenant may be subject to such increases: the court held that the absence of a mechanism to challenge the restriction on the grounds it does not provide a fair rate of return does not render the statute unconstitutional, because the challengers have not shown the statute does not provide a fair rate of return.
The park owner asserted that under California precedent, “a price control statute must have an individualized rate adjustment mechanism to be constitutional.” As you California rent control mavens know, an owner being able to obtain a “fair rate of return” has allowed a ton of rent control restrictions to pass muster in California courts. The owners noted that no rent control law has ever survived in California courts without a rate adjustment mechanism.
So what, held the court:
The mere fact that no rent control law has been upheld where there was no fair return adjustment mechanism in the law does not mean that a fair return adjustment mechanism is required for a rent control law to pass constitutional muster. Rather, such procedural mechanism may be required to save an otherwise unconstitutional rent control law.
Slip op. at 8.
The court’s reasoning turned on “may be required to save an otherwise unconstitutional law.” The court held that there’s no showing that this statute is “otherwise unconstitutional.”
In sum, the relevant legal precedents hold that a procedural mechanism may be necessary to remedy a constitutionally infirm rent control law, but is not a necessary component of an otherwise constitutional rent control law. AME has not shown that section 798.30.5 is confiscatory in all cases or in the majority of cases. Section 798.30.5 does not indefinitely freeze the gross rental rate. Rather, it is operative for an eight-year period, from January 1, 2022 until January 1, 2030, and it permits annual increases of 3 percent plus the cost of living or 5 percent, whichever is lower. AME has alleged no facts and there is no judicially noticed evidence suggesting this rent control scheme is or would become confiscatory in all or a majority of cases.4 Without establishing the confiscatory nature of the rent control scheme set forth in section 798.30.5, AME has not shown it has stated a viable claim that the lack of a fair return adjustment mechanism in section 798.30.5, by itself, renders the statute facially unconstitutional.
Slip op. at 10-11 (footnote omitted).
So the question remains: must a statute have a mechanism by which the government can determine if it is confiscatory because it fails to provide a fair return, or must the owner first show that the statute does so? Was any part of this outcome determined by the facial (and not as-applied) format of the claims?
Anaheim Mobile Estates, LLC v. State of California, No. G063421 (Cal. App. Aug. 13, 2025)