Check out the U.S. Court of Appeals for the Eighth Circuit's opinion in 301, 712, 2103 and 3141 LLC v. City of Minneapolis, No. 20-3493 (Mar. 14, 2022), in which the court held that a Minneapolis ordinance prohibiting property owners from rejecting a prospective tenant because of the applicant's criminal, credit, or rental history isn't a taking.
The challenged ordinance "requires landlords to evaluate applicants for rental housing by either (1) 'inclusive screening criteria' or (2) 'individualized assessment.'" Slip op. at 2. That's a roundabout way of saying that a property owner cannot reject an applicant for their criminal or credit background, unless the owner first considers other "supplemental evidence" to justify why the applicant should become a tenant in spite of these problems, and notifies the tenant why this evidence isn't enough to outweigh the problems.
The court first rejected the owners' claim that the ordinance allows third parties whom the owners don't want in their properties to physically occupy their spaces. Relying on Yee, the court concluded that the ordinance doesn't require owners to allow people to occupy their property whom the owner doesn't want there. Wait, you say, doesn't the ordinance prohibit the owner from making that call? Well, not quite according to the Eighth Circuit: yes, the owner cannot use the applicant's sketchy credentials alone as a reason to deny a tenancy, but may still deny an applicant if, after reviewing the "supplemental [mitigating] evidence" submitted by the applicant, the owner still thinks s/he doesn't want the person as their tenant. Thus, the court concluded, this isn't some kind of compelled occupation:
True, an ordinance that would require landlords to rent to individuals they would otherwise reject might be a physical-invasion taking. Regardless, the Ordinance here has an “individualized assessment” option that allows landlords to reject individuals due to undesirable criminal, credit, rental, and other history so long as they comply with the Ordinance’s procedural requirements (including considering supplemental evidence and providing a written explanation of rejection). Due to the individualized assessment option, the Ordinance is a restriction on the landlords’ ability to use their property, not a physical-invasion taking.
Slip op. at 7.
Come on, man, argued the landlords, that "individualized assessment" option isn't really an option at all, because it is really difficult, time-consuming, and expensive to go through that process. The court considered that option under Penn Central, concluding that there was no taking because the property owners didn't introduce sufficient evidence to support any of the three factors. Slip op. at 9 ("None of the Penn Central factors support a taking in this case.").
And finally, the court also rejected a substantive due process claim, concluding that that the owners here do not have a fundamental property right. Say what? Didn't the owners assert a right to exclude, and didn't Cedar Point say that was about as fundamental a property right as you can assert? Here, the Eighth Circuit reached back to its takings analysis, and concluded that the ordinance here does not infringe any right to exclude, it merely adds layers of process that a property owner must work through before s/he excludes:
This court need not address whether the right to exclude is a fundamental right under substantive due process. As discussed, the Ordinance does not infringe any right to exclude others from entering and using landlords’ property. Rather, it requires them to follow tenant-screening procedures before excluding others, including considering supplemental materials and later providing a written explanation.
Slip op. at 10. And here, it isn't really a plain-old right to exclude that is the "property." Rather, the court defined the property as "the right to exclude others from property without following tenant-screening procedures like considering supplemental materials and providing a written explanation." Slip op. at 10 (emphasis added). Having narrowly defined the property right as the right to be free of regulation, the court concluded, "[t]he landlords have not shown that such a right is 'objectively, deeply rooted in this Nation's history and tradition.'" Slip op. at 10 (citations omitted).
That very nearly seems like a sleight-of-law to us, because if you always define the property right being asserted as the right to be free of the challenged regulation, well, you are almost never going to find that the right is "deeply-rooted" and "traditional."
Having defined the right narrowly and thus not fundamental, the court applied rational basis review. Do we need to tell you what that meant here for the due process claim?
301, 712, 2103 and 3141 LLC v. City of Minneapolis, No. 20-3493 (8th Cir. Mar. 14, 2022)
