FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DANIEL GUGGENHEIM; SUSAN
GUGGENHEIM; MAUREEN H. PIERCE,
No. 06-56306
Plaintiffs-Appellants,
v. D.C. No.
CV-02-02478-FMC
CITY OF GOLETA, a municipal
OPINION
corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Florence-Marie Cooper, District Judge, Presiding
Argued and Submitted
June 22, 2010—Pasadena, California
Filed December 22, 2010
Before: Alex Kozinski, Chief Judge, Alfred T. Goodwin,
Stephen Reinhardt, Pamela Ann Rymer, Andrew J. Kleinfeld,
Ronald M. Gould, Richard R. Clifton, Consuelo M. Callahan,
Carlos T. Bea, Sandra S. Ikuta, and N. Randy Smith,
Circuit Judges.
Opinion by Judge Kleinfeld;
Dissent by Judge Bea
20417
GUGGENHEIM v. CITY OF GOLETA 20421
COUNSEL
Robert S. Coldren, Hart, King & Coldren, Santa Ana, Califor-
nia, for the appellants.
Andrew W. Schwartz (argued), Shute, Mihaly & Weinberger,
LLP, San Francisco, California, and Amy E. Morgan
(briefed), Burke, Williams & Sorensen, LLP, Los Angeles,
California, for appellees.
David J. Bradford (briefed), Jenner & Block LLP, Chicago,
Illinois, for amicus curiae Equity Lifestyle Properties.
Michael M. Berger (briefed), Manatt, Phelps & Phillips, LLP,
Los Angeles, California, for amicus curiae Center for Consti-
tutional Jurisprudence.
Gordon C. Atkinson (briefed), Cooley Godward Kronish LLP,
San Francisco, California, for amicus curiae Golden State
Manufactured-Home Owners League.
John J. McDermott (briefed), Arlington, Virginia, for amici
curiae National Apartment Association, National Multi Hous-
ing Council, Apartment Association of California Southern
Cities, Inc., and the Apartment Association of Orange County.
Grant Habata (briefed), California Association of Realtors,
Los Angeles, California, for amicus curiae California Associ-
ation of Realtors.
20422 GUGGENHEIM v. CITY OF GOLETA
R. S. Radford (briefed), Pacific Legal Foundation, Sacra-
mento, California, for amici curiae Pacific Legal Foundation
and Manufactured Housing Institute.
Amy E. Margolin (briefed), Bien & Summers, Novato, Cali-
fornia, for amicus curiae Western Manufactured Housing
Communities Association.
Karen K. McCay, Sonia S. Shah, Anthony J. Adair, and Ste-
panie M. Vaughan, (briefed), Pahl & McCay, San Jose, Cali-
fornia, for amicus curiae California Apartment Association.
Meaghan McLaine VerGow (briefed), O’Melveny & Myers
LLP, Washington, D.C., for amici curiae Manufactured Hous-
ing Educational Trust, Goldstein Properties, Inc., and Morgan
Partners, Inc.
Michael von Loewenfeldt (briefed), Kerr & Wagstaffe LLP,
San Francisco, California, and Jeff M. Malawy (briefed),
Aleshire & Wynder, LLP, Irvine, California, for amici curiae
League of California Cities, and California State Association
of Counties.
Terry R. Dowdall (briefed), Dowdall Law Offices, Orange,
California, for amicus curiae California Mobilehome Par-
kowners Alliance.
Elizabeth B. Wydra (briefed), Constitutional Accountability
Center, Washington, D.C., for amici curiae American Plan-
ning Association, APA California, Constitutional Account-
ability Center, and Western Center on Law and Poverty.
Meliah Schultzman (briefed), National Housing Law Project,
Oakland, California, for amici curiae AARP, California Coali-
tion for Rural Housing, Housing California, Legal Services of
Northern California, Non-Profit Housing, Association of
Northern California, R. Keith Traphagen, and Tenants
Together.
GUGGENHEIM v. CITY OF GOLETA 20423
OPINION
KLEINFELD, Circuit Judge:
We address the viability of a takings claim arising out of
a rent control ordinance affecting mobile home parks.
I. Facts
In 1979, Santa Barbara County, California adopted a rent
control ordinance for mobile homes.1 Mobile homes have the
peculiar characteristic of separating ownership of homes that
are, as a practical matter, affixed to the land, from the land itself.2
Because the owner of the mobile home cannot readily move
it to get a lower rent, the owner of the land has the owner of
the mobile home over a barrel. The Santa Barbara County rent
control ordinance for mobile homes had as its stated purpose
relieving “exorbitant rents exploiting” a shortage of housing
and the high cost of moving mobile homes.3 The rent control
1
Santa Barbara County, Cal., Ordinance 3, 122 (Oct. 22, 1979).
2
See Yee v. City of Escondido:
The term “mobile home” is somewhat misleading. Mobile homes
are largely immobile as a practical matter, because the cost of
moving one is often a significant fraction of the value of the
mobile home itself. They are generally placed permanently in
parks; once in place, only about 1 in every 100 mobile homes is
ever moved. A mobile home owner typically rents a plot of land,
called a “pad,” from the owner of a mobile home park. The park
owner provides private roads within the park, common facilities
such as washing machines or a swimming pool, and often utili-
ties. The mobile home owner often invests in site-specific
improvements such as a driveway, steps, walkways, porches, or
landscaping. When the mobile home owner wishes to move, the
mobile home is usually sold in place, and the purchaser continues
to rent the pad on which the mobile home is located.
503 U.S. 519, 523 (1992) (citation omitted).
3
The first section of the ordinance provides the “purpose” of enacting
it:
20424 GUGGENHEIM v. CITY OF GOLETA
ordinance was amended in 1987.4 The ordinance has a com-
plex scheme for setting rents, limiting how fast they rise, and
affording landlords a mechanism for disputing the limits.5
A growing shortage of housing units resulting in a critically low
vacancy rate and rapidly rising and exorbitant rents exploiting
this shortage constitutes serious housing problems affecting a
substantial portion of those Santa Barbara County residents who
reside in rental housing. These conditions endanger the public
health and welfare of the County of Santa Barbara. Especially
acute is the problem of low vacancy rates and rapidly rising and
exorbitant rents in mobile home parks in the County of Santa
Barbara. Because of such factors and the high cost of moving
mobilehomes, the potential for damage resulting therefrom,
requirements relating to the installation of mobilehomes, includ-
ing permits, landscaping and site preparation, the lack of alterna-
tive homesites for mobilehome residents and the substantial
investment of mobilehome owners in such homes, the Board of
Supervisors finds and declares it necessary to protect the owners
and occupiers of mobilehomes from unreasonable rents while at
the same time recognizing the need for mobile home park owners
to receive a fair return on their investment and rent increases suf-
ficient to cover their increased costs. The purpose of this chapter
is to alleviate the hardship caused by this problem by imposing
rent controls in mobilehome parks within the unincorporated area
of the County of Santa Barbara.
Goleta, Cal., Mun. Code § 08.14.010; see also Santa Barbara County, Cal.,
Ordinance 3,122 § 1 (Oct. 22, 1979), codified at Santa Barbara County,
Cal., Code § 11A-1.
4
Santa Clara County, Cal., Ordinance 3,678 (Dec. 21, 1987).
5
The ordinance limits the ability of park owners to increase rent of
existing tenants. Park owners may only do so once a year, or at the termi-
nation of a lease term. Goleta, Cal., Mun. Code §§ 08.14.070-080. The
amount of the increase is determined through arbitration. Goleta, Cal.,
Mun. Code § 08.14.040. Park owners can automatically raise rent by 75%
of the local consumer price index (a measure of inflation), and may seek
additional increases for various reasons provided in the ordinance. Id.
§ 08.14.050. When a tenant sells the mobile home to a new tenant, the
park owner may only increase the rent by 10%. Id. § 08.14.140.
GUGGENHEIM v. CITY OF GOLETA 20425
Eighteen years after the original rent control ordinance
went into effect, and ten years after the amendment, the plain-
tiffs Daniel and Susan Guggenheim and Maureen H. Pierce
(the Guggenheims) bought a mobile home park, “Ranch
Mobile Estates,” burdened by the ordinance.
The park, when the Guggenheims bought it in 1997, was in
what California calls “unincorporated territory” in Santa Bar-
bara County. Five years later, in 2002, the City of Goleta
incorporated in territory including the Guggenheims’ land.
California law requires a newly incorporated city comprising
previously unincorporated territory to adopt, as its first offi-
cial act, an ordinance keeping all the county ordinances in
effect for 120 days or until the new municipality changes
them, whichever happens first.6 Goleta did what was required
on its first day of existence, February 1, 2002, so the county
rent control ordinance for mobile home parks became the city
rent control ordinance on the first day of the City’s existence,
as the City’s very first official act. And on April 22, 2002,
within the 120-day sunset period, the City of Goleta adopted
the county code including the ordinance, this time without the
statutory 120-day sunset period.7 The parties have stipulated
that there was a legal gap when the ordinance was not in
effect, apparently referring to the hours between the City’s
coming into legal existence and the performance of the City’s
first official act on its first day. Those hours on the first day
of Goleta’s existence are the only time between 1979 and the
present day, and the only time during the Guggenheims’ own-
6
Cal. Gov’t Code § 57376(a) (“If the newly incorporated city comprises
territory formerly unincorporated, the city council shall, immediately fol-
lowing its organization and prior to performing any other official act,
adopt an ordinance providing that all county ordinances previously appli-
cable shall remain in full force and effect as city ordinances for a period
of 120 days after incorporation, or until the city council has enacted ordi-
nances superseding the county ordinances, whichever occurs first.”).
7
Goleta, Cal., Ordinance 02-17 (Apr. 22, 2002).
20426 GUGGENHEIM v. CITY OF GOLETA
ership, when no rent control ordinance has burdened the Gug-
genheims’ mobile home park.8
That year, 2002, the Guggenheims sued the City claiming
that the rent control ordinance was a taking of their property
without compensation, and asserting numerous other claims.9
They have limited their takings claim to a facial challenge,
not an “as applied” challenge. They claim that it is the rent
control ordinance itself, not its particularized application to
their mobile home park or the regulatory process applied to
their park, that has denied them their constitutional rights. The
theory of the takings claim is that by locking in a rent below
market rents, and allowing tenants to sell their mobile homes
to buyers who will still enjoy the benefits of the controlled
rent (albeit subject to upward adjustment10), the ordinance
shifts much of the value of ownership of the land from the
landlord to the tenant. The Guggenheims submitted an
expert’s report with the summary judgment papers explaining
that rents for sites in their mobile home park would average
about $13,000 a year without rent control, but average less
than $3,300 with rent control, and that the tenants could sell
their mobile homes for around an average of $14,000 without
rent control, but because of rent control, the average mobile
8
We say there was a gap because the parties so stipulated, but we do not
imply a construction of California law to that effect. The California statute
says that the newly incorporated city must “immediately” and “prior to
performing any other official act” adopt an ordinance maintaining the
effectiveness of all county ordinances, so it may be that, were it not for
the stipulation, there would be an arguable question whether there was any
gap.
9
These claims include a substantive due process claim, damages for the
deprivation of constitutional rights, an equal protection claim, violations
of the California state constitution, and a variety of other claims not at
issue here. The federal constitutional claims are brought under 42 U.S.C.
§ 1983.
10
Park owners can automatically raise rent by 75% of the local con-
sumer price index (a measure of inflation), and may seek additional
increases for various reasons provided in the ordinance. Goleta, Cal., Mun.
Code § 08.14.050.
GUGGENHEIM v. CITY OF GOLETA 20427
home in the park sells for roughly $120,000. Since the Gug-
genheims lost on summary judgment, we assume for purposes
of decision that this is correct.
The case went through a complex procedural course, but
the complexities are of no importance here. First the case in
federal court was stayed pursuant to Pullman11 abstention
while the Guggenheims pursued claims in state court. They
and the City settled the state case. Returning to federal court,
the Guggenheims won summary judgment, and the City
appealed. While the appeal was pending, the Supreme Court
decided Lingle v. Chevron U.S.A. Inc.,12 and the Guggenheims
and the City agreed that Lingle so undermined the district
court judgment that they stipulated to dismiss the appeal and
they reopened the litigation in district court. This time the
City won summary judgment, and the Guggenheims appeal.
The district court observed that the Guggenheims “got exactly
what they bargained for when they purchased the Park—a
mobile-home park subject to a detailed rent-control ordi-
nance.” We reversed,13 but decided to rehear the case en banc,14
and now vacate our earlier decision and affirm.
II. Analysis
We review a grant of summary judgment de novo.15 The
Guggenheims’ challenge is to the 2002 City of Goleta ordi-
nance adopting the county rent control ordinance, and its rea-
doption within the 120-day period.
11
See Railroad Comm. of Tex. v. Pullman Co., 312 U.S. 496, 501-02
(1941).
12
544 U.S. 528 (2005).
13
Guggenheim v. City of Goleta, 582 F.3d 996 (9th Cir. 2009).
14
Guggenheim v. City of Goleta, 598 F.3d 1061 (9th Cir. 2010).
15
Carmen v. San Francisco Unified Sch. Dist., 237 F.3d 1026, 1029 (9th
Cir. 2001).
20428 GUGGENHEIM v. CITY OF GOLETA
A. Jurisdiction
[1] The City does not dispute jurisdiction, but we raised
the issues of standing and ripeness sua sponte in our panel deci-
sion.16 The Guggenheims have claimed an injury in fact to
themselves (deprivation of much of the value of their land),
which is fairly traceable to Goleta’s rent control ordinance,
and is redressable by a decision in their favor, so they do
indeed have standing to maintain their challenge to the 2002
ordinances.17 They owned the land in 2002 when the City of
Goleta promulgated the 2002 ordinances.
Ripeness is more complicated, because of Williamson
County Regional Planning Commission v. Hamilton Bank of
Johnson City.18 In Williamson, the Supreme Court imposed
two ripeness requirements on federal takings claims. First, a
regulatory takings claim is not ripe until the appropriate
administrative agency has made a final decision on how the
regulation will be applied to the property at issue.19 That
requirement has no application to this facial challenge. “Fa-
cial challenges are exempt from the first prong of the William-
son ripeness analysis because a facial challenge by its nature
does not involve a decision applying the statute or regulation.”20
Second, a property owner who sues for inverse condemnation,
16
Guggenheim, 582 F.3d at 1004 n. 4.
17
See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Col-
well v. Dep’t of Health & Human Servs., 558 F.3d 1112, 1121-22 (9th Cir.
2009) (quoting Lujan); see also Equity Lifestyle Props., Inc. v. County of
San Luis Obispo, 548 F.3d 1184, 1193 (9th Cir. 2008) (holding that a
property owner must own the affected property at the time the land use
regulation is enacted to have standing to bring a facial regulatory takings
claim); Carson Harbor Village Ltd. v. City of Carson, 37 F.3d 468, 472
(9th Cir. 1994), overruled on other grounds by WMX Techs. Inc. v. Miller,
104 F.3d 1133, 1136 (9th Cir. 1997) (same).
18
473 U.S. 172 (1985).
19
Id. at 192-93; see also Equity Lifestyle, 548 F.3d at 1190.
20
Hacienda Valley Mobile Estates v. City of Morgan Hill, 353 F.3d 651,
655 (9th Cir. 2003).
GUGGENHEIM v. CITY OF GOLETA 20429
claiming that his property was taken without just compensa-
tion, generally must seek that compensation through the pro-
cedures provided by the state before bringing a federal suit.21
In Yee v. City of Escondido, another California mobile
home rent control case, the Court held that although an “as
applied” challenge would have been unripe because the park
owner had not sought permission to increase rents from the
administrative body established by the ordinance, the facial
challenge by the park owners was indeed ripe, because it did
not depend on the extent to which they were deprived of the
economic use of their property or the extent to which they
were compensated.22 Subsequently in Suitum v. Tahoe
Regional Planning Agency, the Court described the William-
son ripeness requirements as “prudential” rather than jurisdic-
tional in the context of regulatory takings case.23 In Adam
Brothers Farming, Inc. v. County of Santa Barbara, we held
that we had discretion to waive the Williamson exhaustion
requirement where the case raised only prudential ripeness
concerns, and did so, assuming without deciding that the tak-
ings claim was ripe.24 In so doing, we applied McClung v. City
of Sumner.25 In McClung we had also interpreted Suitum as
describing Williamson ripeness as prudential rather than juris-
dictional, and concluded that “we need not determine the
exact contours of when takings claim ripeness is merely pru-
dential and not jurisdictional.”26
That is not to suggest that Williamson is dead. In Ventura
Mobilehome Communities Owners Association v. City of San
Buenaventura, we held that the only cognizable claim raised
21
Williamson, 473 U.S. at 195; Equity Lifestyle, 548 F.3d at 1190.
22
503 U.S. 519, 533-34 (1992).
23
520 U.S. 725, 733-34 (1997).
24
604 F.3d 1142, 1147-48 (9th Cir. 2010).
25
548 F.3d 1219 (9th Cir. 2008).
26
Id. at 1224.
20430 GUGGENHEIM v. CITY OF GOLETA
was an as applied challenge, so held that it was properly dis-
missed as unripe.27 And in Sinclair Oil Corp. v. County of
Santa Barbara, we held that while as applied challenges
required Williamson exhaustion, facial challenges sometimes
did and sometimes did not.28 A complication that makes it
especially difficult to determine the continuing viability of our
ripeness precedents is that many involve “substantially
advances legitimate state interests” claims under Agins v. City
of Tiburon,29 and Agins was overruled by Lingle.30 Indeed, in
the case before us, Agins was the law during state proceed-
ings, and Lingle did not come down until the first appeal was
pending in federal court. It may be that a claim (even a facial
claim), alleging a regulatory taking based on the theory that
an ordinance takes property without just compensation, is
unripe until that property owner has sought compensation
through such state proceedings as may be available. But under
Suitum this ripeness requirement now appears to be prudential
rather than jurisdictional.
[2] In this case, we assume without deciding that the claim
is ripe, and exercise our discretion not to impose the pruden-
tial requirement of exhaustion in state court. Two factors per-
suade us to follow this course. First, we reject the
Guggenheims’ claim on the merits, so it would be a waste of
the parties’ and the courts’ resources to bounce the case
through more rounds of litigation. Second, the Guggenheims
did indeed litigate in state court, and they and the City of
Goleta settled in state court. Unfortunately the law changed
after their trip to state court, so they might well have pro-
ceeded differently there had they been there after Lingle came
down, but it is hard to see any value in forcing a second trip
on them.
27
371 F.3d 1046, 1052-54 (9th Cir. 2004).
28
96 F.3d 401, 406-07 (9th Cir. 1996).
29
447 U.S. 255, 260 (1980).
30
Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 545 (2005).
GUGGENHEIM v. CITY OF GOLETA 20431
B. Penn Central and Palazzolo
[3] The Guggenheims challenge only the 2002 City of
Goleta ordinance, not the 1979 or 1987 County of Santa Bar-
bara ordinances. The fundamental weakness of the dissent is
its blending of the economic effects of all three ordinances,
even though challenges to the first two have long been barred
and are not asserted. There is a big problem with challenging
as a taking the government’s failure to repeal a long existing
law. The County ordinances were both promulgated long
before the Guggenheims bought their land, and the rent con-
trol regime created by the county ordinances limited the value
of the land when the Guggenheims bought it. The Guggen-
heims assert no claim against the County of Santa Barbara,
just the City of Goleta. They frame their challenge narrowly,
solely as a facial challenge to the City of Goleta ordinance
promulgated in 2002. And they argue that their facial chal-
lenge should be evaluated under Penn Central Transportation
Co. v. New York City.31 We assume, without deciding, that a
facial challenge can be made under Penn Central.32
Palazzolo v. Rhode Island33 is of no help to the Guggen-
heims. They do not have the problem that Palazzolo solved.
In Palazzolo the taking was from the first owner and the “as
applied” lawsuit was by the second. The transfer was by oper-
ation of law, during the period when the owner was ripening
the claim by exhausting state remedies.34 One reason why
these distinctions matter is that even though in Palazzolo title
passed to the plaintiff after the land use restriction was
31
438 U.S. 104 (1977).
32
See Tahoe-Sierra Preserv. Council, Inc. v. Tahoe Reg. Planning
Agency, 535 U.S. 302, 334 (2002) (“[I]f petitioners had challenged the
application of the moratoria to their individual parcels, instead of making
a facial challenge, some of them might have prevailed under a Penn Cen-
tral analysis.”).
33
533 U.S. 604, 627-28 (2001).
34
Id. at 614.
20432 GUGGENHEIM v. CITY OF GOLETA
enacted, he acquired his economic interest as a 100% share-
holder in the corporation owning the land before the land use
restriction was enacted, and title shifted to him because his
corporation was dissolved, not because he bought the property
for a low price reflecting the economic effect of the regula-
tion.
[4] Palazzolo holds that an owner who acquires title to
property during the period required for an as applied regula-
tory taking to ripen (in that case during proceedings on appli-
cations to build on wetlands) is not necessarily barred from
bringing the action when it ripens even though he did not own
the property when the regulation first started to be applied to
the property.35 This difference matters because an as applied
challenge necessarily addresses the period during which the
administrative or judicial proceedings for relief occur, so jus-
tice may require that title transfers during the ripening period
not bar the action. By contrast, there is no such extended
period applicable to a facial challenge, because the only time
that matters is the time the ordinance was adopted.
[5] The Guggenheims, unlike the owner in Palazzolo, have
owned the mobile home park at all relevant times. The Gug-
genheims owned during, before, and after adoption of the two
City of Goleta ordinances they challenge, both upon incorpo-
ration and within the 120-day period. Palazzolo does not
revive a challenge to the 1979 and 1987 county ordinances,36
and the Guggenheims do not make one. Thus whatever
35
Id. at 628 (“A challenge to a land use regulation, by contrast, does not
mature until ripeness requirements have been satisfied, under principles
we have discussed; until this point an inverse condemnation claim alleging
a regulatory taking cannot be maintained. It would be illogical, and unfair,
to bar a regulatory takings claim because of the post-enactment transfer of
ownership where the steps necessary to make the claim ripe were not
taken, or could not have been taken, by a previous owner.”).
36
Daniel v. County of Santa Barbara, 288 F.3d 375, 384 (9th Cir. 2002).
We have also rejected the argument that Palazzolo “eliminat[es] any stat-
ute of limitations requirement.” Equity Lifestyle, 548 F.3d at 1193 n.15.
GUGGENHEIM v. CITY OF GOLETA 20433
wrongs the 1979 and 1987 county ordinances may have done
to whoever owned the mobile home park then, those wrongs
are not before us.
And the Guggenheims carefully limit their challenge to a
facial one, not an as applied challenge. By so doing, they
reserve the possibility of an as applied challenge if at some
subsequent time the City of Goleta’s arbitrator denies them a
fair rent increase.37 If the rent control scheme effects an
unconstitutional taking when applied, the challenge will be to
that application, not to the ordinance on its face, and the time
for the challenge will run from when the administrative action
became final as opposed to when the ordinance was enacted.
It is not as though an unconstitutional law becomes immu-
nized from all challenges once limitations bar facial chal-
lenges to its enactment.
As we held in Levald, Inc. v. City of Palm Desert, “[i]n the
takings context, the basis of a facial challenge is that the very
enactment of the statute has reduced the value of the property
or has effected a transfer of a property interest. This is a sin-
gle harm, measurable and compensable when the statute is
passed.”38 Nor does it matter that a challenge might not have
been worth making in 1979 or 1987 when property values
were lower, but became worth making when the housing bub-
ble inflated many prices. As Levald stated, “while the rising
property values may be relevant to an as-applied challenge,
they are not relevant to a claim that the very enactment of the
statute effected a taking.”39
37
We do not address whether the limitation on the amount by which
rents can increase and the provisions for arbitration of rent increases may
work a taking, because that cannot be determined until these limitations
are applied. That we reject the facial challenge has no bearing one way or
the other on whether an as applied challenge might succeed.
38
998 F.2d 680, 688 (9th Cir. 1993).
39
Id.
20434 GUGGENHEIM v. CITY OF GOLETA
[6] But this is not to say that passage of the county ordi-
nances in 1979 and 1987 can be ignored. It is central. Yee v.
City of Escondido40 holds that a takings challenge to mobile
home rent control ordinance materially similar to Goleta’s
should be analyzed as a regulatory taking under Penn Central,
not a physical occupation amounting to a per se taking as in
Loretto v. Teleprompter Manhattan CATV Corp.41 Lingle
explains Penn Central as identifying several factors, not a set
formula, to determine whether a regulatory action is “func-
tionally equivalent to the classic taking.”42 “Primary among
those factors are the economic impact of the regulation on the
claimant and, particularly, the extent to which the regulation
has interfered with distinct investment-backed expectations.”43
Lingle points out that the character of the government action
may also be relevant,44 but this cuts against the Guggenheims
because the government action here is a continuation of an old
ordinance. The case before us turns on the “primary” factor.
[7] That “primary factor,” “the extent to which the regula-
tion has interfered with distinct investment-backed expecta-
tions,” is fatal to the Guggenheims’ claim. We assume for
purposes of discussion (since the Guggenheims’ summary
judgment evidence would so establish) that the rent control
ordinance, unchanged since 1987, did indeed transfer about
$10,000 a year in rent for the average mobile home owner
from the landlord to the tenant, and that this has had the effect
of raising the price of the average mobile home from $14,000
to $120,000. That had happened before the Guggenheims
bought the mobile home park. Since the ordinance was a mat-
ter of public record, the price they paid for the mobile home
park doubtless reflected the burden of rent control they would
have to suffer.
40
503 U.S. 519, 532 (1992).
41
458 U.S. 419 (1982).
42
Lingle, 544 U.S. at 539.
43
Id. at 538-39 (internal editorial and quotation marks omitted).
44
Id. at 539.
GUGGENHEIM v. CITY OF GOLETA 20435
[8] They could have no “distinct investment-backed expec-
tations” that they would obtain illegal amounts of rent. To
“expect” can mean to anticipate or look forward to, but it can
also mean “to consider probable or certain,” and “distinct”
means capable of being easily perceived, or characterized by
individualizing qualities.45 “Distinct investment-backed
expectations” implies reasonable probability, like expecting
rent to be paid, not starry eyed hope of winning the jackpot
if the law changes. A landlord buys land burdened by lease-
holds in order to acquire a stream of income from rents and
the possibility of increased rents or resale value in the future.
The stream already suffered a reduced flow when the Gug-
genheims bought it, so what they paid would reflect the flow
that the law allowed. The Guggenheims might conceivably
have paid a slight speculative premium over the value that the
legal stream of rent income would yield, on the theory that
rent control might someday end, either because of a change
of mind by the municipality or court action. But that premium
could be no more than a speculative possibility, not an “ex-
pectation.” Speculative possibilities of windfalls do not
amount to “distinct investment-backed expectations,” unless
they are shown to be probable enough materially to affect the
price.46 The idea, after all, of the constitutional protection we
45
Webster’s Third New International Dictionary 658, 799 (1981).
46
The dissent suggests that any speculative possibility, including the
speculative possibility that a long existing law might change, should be
enough to give rise to a takings claim if that speculative possibility is cut
off. Thus, under the dissent’s approach, if a statute prohibiting some land
use were converted into a state constitutional amendment, the identical
language in the constitutional amendment would amount to a taking,
because it reduced the speculative possibility that the law might be
repealed.
It is one thing to speculate that the value of your land might change
based on market demand; it is another to gamble that a stable law may be
repealed or nullified. While there is always some possibility that the law
may change, and the dissent suggests that possibility may be especially
great in California, that possibility ought generally to be deemed too slight
to give rise to a takings claim when the law is reenacted rather than
repealed.
20436 GUGGENHEIM v. CITY OF GOLETA
enjoy in the security of our property against confiscation is to
protect the property we have, not the property we dream of
getting. The Guggenheims bought a trailer park burdened by
rent control, and had no concrete reason to believe they would
get something much more valuable, because of hoped-for
legal changes, than what they had.
The Guggenheims and the City of Goleta stipulated that
there was a period of time when their mobile home park was
free of rent control. That was the period of hours after “orga-
nization” of the City of Goleta and, “prior to performing any
other official act.”47 This period could not have given rise to
a reasonable investment-backed expectation, because the
Guggenheims had already made their investment years before,
and even if they had bought the mobile home park during
those few hours, they would have known that Goleta’s first
official act would, under controlling law, have to be adoption
of the county’s rent control ordinance.
The Guggenheims also argue that the 120-day period when
the rent control ordinance would be terminated unless readop-
ted gave them a reasonable expectation that it would not be
readopted. This argument too fails to account for the fact that
their investment had already been made, years before. And
even if it had been made during the 120 days, it is not as
though the ordinance was in limbo during that period. The
rent control ordinance was the law. Though the city might
choose to let the ordinance lapse instead of readopting it, that
possibility was as speculative as the possibility that the city
might end rent control after the 120-day period. This specula-
tion is less than an expectation.
Lingle holds that Penn Central, though not establishing a
set formula, identifies significant factors, “the economic
effect on the claimant and, particularly, the extent to which
the regulation has interfered with distinct investment-backed
47
See Cal. Gov’t Code § 57376(a).
GUGGENHEIM v. CITY OF GOLETA 20437
expectations. In addition, the character of the governmental
action—for instance whether it amounts to a physical invasion
or instead merely affects property interests through some pub-
lic program adjusting the benefits and burdens of economic
life to promote the common good—may be relevant in dis-
cerning whether a taking has occurred.”48 The character of the
government action does not help the Guggenheims. The City
of Goleta did not adjust the benefits and burdens of economic
life, it left them as they had been for many years.
Whatever unfairness to the mobile home park owner might
have been imposed by rent control, it was imposed long ago,
on someone earlier in the Guggenheims’ chain of title. The
Guggenheims doubtless paid a lot less for the stream of
income mostly blocked by the rent control law than they
would have for an unblocked stream. The 2002 City of Goleta
adoption by reference of the Santa Barbara County ordinance
did not transfer wealth from them to their tenants. That trans-
fer occurred in 1979 and 1987, from other landlords, and
probably benefitting other tenants.
[9] The people who really do have investment-backed
expectations that might be upset by changes in the rent control
system are tenants who bought their mobile homes after rent
control went into effect. Ending rent control would be a wind-
fall to the Guggenheims, and a disaster for tenants who
bought their mobile homes after rent control was imposed in
the 70’s and 80’s. Tenants come and go, and even though rent
control transfers wealth to “the tenants,” after a while, it is
likely to affect different tenants from those who benefitted
from the transfer. The present tenants lost nothing on account
of the City’s reinstitution of the County ordinance. But they
would lose, on average, over $100,000 each if the rent control
ordinance were repealed. The tenants who purchased during
the rent control regime have invested an average of over
48
Lingle, 544 U.S. at 538-39 (internal editorial and quotation marks
omitted).
20438 GUGGENHEIM v. CITY OF GOLETA
$100,000 each in reliance on the stability of government poli-
cy.49 Leaving the ordinance in place impairs no investment-
backed expectations of the Guggenheims, but nullifying it
would destroy the value these tenants thought they were buy-
ing.
C. Equal Protection and Due Process Claims
The Guggenheims make two other arguments, that the ordi-
nance denies them substantive due process because it does not
assure them a fair return on their investment, and that it denies
them equal protection of the law because it treats mobile
home park owners differently from other landlords.
[10] Due process claims can succeed when a rent control
ordinance fails to substantially further a legitimate govern-
ment interest.50 The dissent argues that this ordinance did not
achieve its purpose because it fails to control the price of sub-
lets. It is true that the rent control ordinance at issue here does
not control the rental price of a mobile home for occupants
such as subletters. It controls the rental price of the land on
which the mobile home is situated. This is in keeping with the
purpose of the ordinance, which is not just to lower rents, but
to “alleviate the hardship” to mobile home owners caused by
“the high cost of moving mobilehomes, the potential for dam-
age resulting therefrom, requirements relating to the installa-
tion of mobilehomes, including permits, landscaping and site
preparation, the lack of alternative homesites for mobilehome
49
We do not imply that a change in government policy amounts to a tak-
ing from the beneficiaries. See Madera Irrigation Dist. v. Hancock, 985
F.2d 1397, 1403 (9th Cir. 1993) (holding that “[r]easonable expectations
arising out of past policy but without a basis in cognizable property rights
may be honored by prudent politicians, because to do otherwise might be
unfair, or because volatility in government policy will reduce its effective-
ness in inducing long term changes in behavior. But violation of such
expectations cannot give rise to a Fifth Amendment claim.”).
50
Richardson v. City and County of Honolulu, 124 F.3d 1150, 1165 (9th
Cir. 1997).
GUGGENHEIM v. CITY OF GOLETA 20439
residents and the substantial investment of mobilehome own-
ers in such homes.”51 The ordinance protects mobile home
owners, not all renters. Such a purpose does not protect
mobile home renters from all market increases in the value of
occupancy. It protects owners of mobile homes from the
leverage owners of the pads have, to collect a premium
reflecting the cost of moving the mobile home on top of the
market value of use of the land. This is a legitimate govern-
ment purpose, related to but distinct from lowering housing
prices for all renters.
[11] Whether the City of Goleta’s economic theory for rent
control is sound or not, and whether rent control will serve the
purposes stated in the ordinance of protecting tenants from
housing shortages and abusively high rents or will undermine
those purposes, is not for us to decide. We are a court, not a
tenure committee, and are bound by precedent establishing
that such laws do have a rational basis.52 Students in Econom-
ics 101 have for many decades learned that rent control causes
the higher rents and scarcity it is meant to alleviate,53 but the
Due Process Clause does not empower courts to impose
sound economic principles on political bodies.54
51
Goleta, Cal., Mun. Code § 08.14.010.
52
See Pennell v. City of San Jose, 485 U.S. 1, 13 (1988) (“we have long
recognized that a legitimate and rational goal of price or rate regulation is
the protection of consumer welfare”); Equity Lifestyle Props., Inc. v.
County of San Luis Obispo, 548 F.3d 1184, 1194 (9th Cir. 2008) (“The
Supreme Court and this Circuit have upheld rent control laws as rationally
related to a legitimate public purpose.”); Carson Harbor Village Ltd. v.
City of Carson, 37 F.3d 468, 472 (9th Cir. 1994), overruled on other
grounds by WMX Techs. Inc. v. Miller, 104 F.3d 1133, 1136 (9th Cir.
1997) (“A generally applicable rent-control ordinance will survive a sub-
stantive due process challenge if it is ‘designed to accomplish an objective
within the government’s police power, and if a rational relationship
existed between the provisions and the purpose of the ordinances.’ ”).
53
See, e.g., William J. Baumol & Alan S. Blinder, ECONOMICS: PRINCIPLES
AND POLICY 64-67 (2d ed. 1982).
54
See Lochner v. New York, 198 U.S. 45, 75 (1905) (Holmes, J., dissent-
ing) (“The Fourteenth Amendment does not enact Mr. Herbert Spencer’s
Social Statics.”).
20440 GUGGENHEIM v. CITY OF GOLETA
[12] The Guggenheims’ equal protection theory is also
foreclosed by precedent,55 and would have no force even if it
were not, because only a rational basis is needed for this ordi-
nance, and mobile parks differ from most other property in
the separation of ownership of the land from the improve-
ments affixed to the land. It is possible that application of the
ordinance by the arbitrator will violate substantive or proce-
dural due process requirements, but that remains to be seen,
if at all, in an as applied challenge to its application.
AFFIRMED.
BEA, Circuit Judge, dissenting, joined by KOZINSKI, Chief
Judge, and IKUTA, Circuit Judge:
I must respectfully dissent for two reasons.
First, because the majority misapplies the Supreme Court’s
analysis of regulatory takings claims. It ignores two essential
elements of that analysis, and fails to follow the Court’s
instructions on the one element it uses to disqualify the claim.
The majority impermissibly picks out only one of the three
factors the Court has told us to consider in determining
whether a regulation effects a taking under the Penn Central
test—whether the claimant had “distinct investment-backed
expectations”—and inexplicably disdains the other two. This
converts a three-factor balancing test into a “one-strike-
you’re-out” checklist. Not content to rewrite one binding pre-
cedent, the majority ignores the Court’s recent holding in
Palazzolo that an investor can validly expect that a land con-
trol measure, in place when he invests, is not necessarily eter-
nal and therefore does not disqualify his claim of regulatory
taking. Palazzolo v. Rhode Island, 533 U.S. 606, 627 (2001).
55
Equity Lifestyle, 548 F.3d at 1195 (9th Cir. 2008) (“This equal protec-
tion challenge must be considered under rational basis review because
mobilehome park owners are not a suspect class.”).
GUGGENHEIM v. CITY OF GOLETA 20441
Second, because it decides the substantive due process and
equal protection claims by citing rent control cases. But, the
Goleta ordinance is not a rent control law for the simple rea-
son that it is not designed to—nor does it—control rents. It
does not just miss the mark because of unintended conse-
quences or inefficient administration. Its very structure was
designed and intended not to provide housing rent control, but
to transfer wealth from mobile home park owners to one
group of lucky tenants. The measure we deal with here is a
wealth transfer, pure and simple, with none of the features of
rent control thought legitimate governmental interests. As
such, its enforcement violates due process and equal protec-
tion.
I. Background
Appellants Daniel Guggenheim, Susan Guggenheim, and
Maureen H. Pierce (collectively, the “Guggenheims”), appeal
the district court’s grant of summary judgment in favor of the
City of Goleta. The Guggenheims own the land on which
mobile homes sit. In 2002, the City of Goleta adopted a
mobile home rent control ordinance. The Ordinance capped
the rate of annual rent the Guggenheims could charge for the
mobile home lots, and provided for a maximum of 10% rent
increases upon the sale of the mobile home to a new tenant.
Importantly, the Ordinance provided no cap on the amount
mobile home owners could charge when leasing or selling the
actual mobile home.
The Guggenheims brought suit alleging the Ordinance con-
stituted a regulatory taking, thus entitling them to just com-
pensation under the Fifth and Fourteenth Amendments. The
Guggenheims also alleged due process and equal protection
claims. Although the Guggenheims presented evidence that
the Ordinance effects a wealth transfer from the mobile home
land owners to the lucky, “windfall tenants” who held tenan-
cies at the time of the enactment of the Ordinance, and that
the Ordinance is not written in such a way as to effect a legiti-
20442 GUGGENHEIM v. CITY OF GOLETA
mate state interest—such as providing affordable housing to
low income people—the district court granted summary judg-
ment against them.1
II. Takings Clause
Claiming to apply the three-factor test from Penn Central,
the en banc majority opinion holds as a matter of law that the
Guggenheims cannot establish the mobile home rent control
ordinance effects a regulatory taking of its property for public
use within the meaning of the Fifth Amendment, as applied
to Goleta through the Fourteenth Amendment. The majority’s
principal error is its finding, as a matter of law, that the Ordi-
nance could not interfere with the Guggenheims’ “distinct
investment-backed expectations” of freeing their land from
“rent control.” Maj. Op. at 20434. The majority reaches this
conclusion only by adopting a view of the law and of the eco-
nomic effects of the Goleta ordinance that is static and pro-
vides no opportunity for change or innovation. While
attractive for its simplicity, such stasis does not reflect the
world in which we live, nor the teachings of the Court.
In Penn Central Transportation Company v. New York
City, 438 U.S. 104 (1978), the Court set forth the three factors
that must be considered in determining whether a regulation
effects a taking: (1) the economic impact of the regulation on
the claimant; (2) the character of the government’s action; and
(3) the extent to which the regulation interferes with the
claimant’s investment-backed expectations. Id. at 124. The
majority opinion deals only with the last factor, as if Penn
Central established a “one-strike-you’re-out” checklist for
1
We review the district court’s order granting summary judgment in
favor of the City de novo. Lovell v. Chandler, 303 F.3d 1039, 1052 (9th
Cir. 2002). We “must determine, viewing the evidence in the light most
favorable to the non-moving party, whether there are any genuine issues
of material fact and whether the district court correctly applied the rele-
vant law.” Ventura Packers, Inc. v. F/V Jeanine Kathleen, 305 F.3d 913,
916 (9th Cir. 2002).
GUGGENHEIM v. CITY OF GOLETA 20443
knocking property owners out of court, rather than a three-
factor balancing test in which each factor must be considered.
No one factor is “talismanic,” Justice O’Connor said in Palaz-
zolo when she criticized the state supreme court for “elevating
what it believed to be ‘[petitioner’s] lack of reasonable
investment-backed expectations’ to ‘dispositive status.’ ”
Palazzolo, 533 U.S. at 634 (O’Connor, J., concurring). The
extent of interference with investment-backed expectations
instead “is one factor that points toward the answer to the
question whether the application of a particular regulation to
particular property ‘goes too far.’ ” Id. (quoting Penn. Coal
Co. v. Mahon, 260 U.S. 393, 415 (1922)). Since Penn Central
requires all factors be considered, that is what I shall do. Each
of these factors militates in favor of finding that Goleta’s so-
called rent control ordinance (the “Ordinance”) effected a reg-
ulatory taking.
A. The Economic Impact of the Ordinance
Primary among [the Penn Central] factors are the
economic impact of the regulation on the claimant
and, particularly, the extent to which the regulation
has interfered with distinct investment-backed
expectations.
Lingle v. Chevron, 544 U.S. 528, 538-39 (2005) (internal quo-
tation marks omitted).2
2
In Lingle, an oil company brought suit under the Fifth and Fourteenth
Amendments challenging a Hawaii statute which limited the rent oil com-
panies could charge dealers to lease company-owned service stations.
Applying Agins v. City of Tiburon, 447 U.S. 255 (1980)—in which the
Supreme Court declared that government regulation of private property
“effects a taking if [it] does not substantially advance legitimate state
interests—the District Court held that the rent cap effected a taking. The
Ninth Circuit affirmed. The Supreme Court reversed and remanded, hold-
ing that Agins’ “substantially advances” test is not a valid takings test.
Lingle, 544 U.S. at 548.
20444 GUGGENHEIM v. CITY OF GOLETA
The majority opinion settles on the factor of “distinct
investment-backed expectations,” but fails to provide any
analysis of the general economic impact of the Goleta Ordi-
nance on the claimant.3 Let’s provide that analysis.
The Guggenheims presented evidence that the Ordinance
deprives them of approximately 80% of the market value of
their mobile home park land—nearly all of which value is
effectively transferred to the original tenants by enactment of
the Ordinance. The Ordinance limits the amount by which
rents on the mobile home pads may be increased to 75% of
the Consumer Price Index, plus an additional amount to pass
through increased operating costs, capital expenses, and capi-
tal improvements. Ordinance §§ 11A-5, 11A-6. The Ordi-
nance also contains a vacancy control provision, which limits
to 10% the permissible rent increase on the mobile home pad
when a mobile home unit changes ownership. Id. § 11A-14.
The parties and the district court did not dispute that the Ordi-
nance seriously impacted the value of the Guggenheims’
property:
During the time that [the Guggenheims] have owned
the Park, housing costs in the City have increased
approximately 225%. Because of the rent-control
ordinance, the rents charged by [the park owners]
have not kept pace with this increase . . . existence
3
I am puzzled, but grateful, to learn what the majority thinks is the fun-
damental weakness of this dissent: “[the] blending of the economic effects
on the Guggenheims of all three ordinances.” Maj. Op. at 20431.
Puzzled, because there are no economic effects on the Guggenheims
from the two previously-enacted ordinances: the Santa Barbara 1979 and
1987 ordinances. Since Goleta incorporated itself into a city in 2002, only
the 2002 Goleta ordinance imposes price control on the land the Guggen-
heims rent out. Indeed, the majority acknowledges it is only the 2002 ordi-
nance which the Guggenheims challenge. Maj. Op. at 20431.
Grateful, to learn that I need not worry about the economic effects of
the Santa Barbara ordinance; neither do the Guggenheims.
GUGGENHEIM v. CITY OF GOLETA 20445
of lower-than-market value rents has resulted in the
ability of mobilehome owners to sell their homes at
a significant premium [the “transfer premium”].
According to the analysis of [the Guggenheims’]
expert, based on the sale of 64 mobile homes from
January 15, 1999 through July 21, 2004, the pre-
mium amounted to, on average, 88% of the sale
price. In other words, an average mobile home worth
$12,000 would sell for approximately $100,000.
As outlined in the report by the Guggenheims’ expert, Dr. Quig-
ley4, and accepted by the district court, the Ordinance required
the Guggenheims to rent all Park mobile home pad spaces at
approximately 20% of their market value.5 The market price
of a mobile home increases when the rent the homeowner
pays for space in a mobile home park decreases. Dr. Quigley
estimated that, on average, almost 90% of a mobile home’s
sale price represented the value of the lower rents set by the
Ordinance, and this premium went into the pockets of the ten-
ants incumbent at the time of the Ordinance’s enactment,
hereafter the “windfall tenants.”
There is no authority for the proposition relied on by the
district court that a taking has not occurred when the com-
plaining party continues to receive some return on investment.
See Cienega Gardens v. United States, 331 F.3d 1319, 1343
(Fed. Cir. 2003) (finding that an exaction of 96% of the prop-
erty’s return on equity was severe enough to constitute a tak-
ing under Penn Central). The Penn Central test looks at the
severity of the economic burden, and a finder of fact could
4
Dr. Quigley is a professor of economics, business, and policy at the
University of California, Berkeley. See Carl Mason & John M. Quigley,
The Curious Institution of Mobile Home Rent Control, 16 J. Housing
Econ. 189, 189 (2007).
5
Of course, as the years go by, and if housing costs increase, this 80%
disparity between market and regulated rents will increase and the magni-
tude of the Ordinance’s economic impact will grow.
20446 GUGGENHEIM v. CITY OF GOLETA
easily determine that a loss of 80% of the market value of
property is just such a severe economic burden, even though
the property owner receives some return on investment. In
Penn Central, the Court held that enforcement of a landmark
preservation ordinance to bar construction of a fifty-story
office building was not a regulatory taking because the
restricted airspace rights could be transferred to other parcels
owned by the litigant; the option of constructing an office
building at those other locations reduced the economic impact
of the regulation. Penn Central, 438 U.S. at 137. But the Gug-
genheims are not so positioned: (1) they have no other lots,
and (2) if they had, there is no benefit under the Ordinance
which they could transfer to such lots. Moreover, the Penn
Central landmark ordinance was generally-applicable to all
types of property owners and barred only expansions of exist-
ing uses.
Further, California imposes considerable obstacles to alter-
nate uses of the mobile home park. To convert the park to any
other use, the Guggenheims must obtain approval of their plan
from the city council. Cal. Gov. Code § 66427.5(e). As part
of the approval process, they must file a plan outlining the
new use to which the property will be put and detailing the
impact of the conversion on existing residents, and also con-
duct a “survey of support of residents . . . . pursuant to a writ-
ten ballot,” the results of which must be submitted along with
the application and may be taken into account by the city
council when it votes on the conversion plan. Id.
§ 66427.5(b), (d); see Colony Cove Props., LLC v. City of
Carson, 114 Cal. Rptr. 3d 822, 835 (Cal. Ct. App. 2010).
Additionally, because the cost of the Ordinance is borne
solely by mobile home park owners—and not lessors of other
housing—its economic impact on those park owners is more
severe than a broad-based housing regulation. This factor
favors finding a “taking” has occurred.
GUGGENHEIM v. CITY OF GOLETA 20447
B. Investment-Backed Expectations of All the Park
Owners
The majority opinion holds that the determinative Penn
Central factor must be the extent to which the regulation has
interfered with the claimant’s distinct investment-backed
expectations; and that factor “is fatal to the Guggenheims’
claim.” Maj. Op. at 20434. In addition to avoiding the ques-
tion of how a single factor in a three-factor test could be
“fatal” without consideration or balancing of the other factors,6
this holding is incorrect for three reasons.
First, the majority opinion holds, as a matter of law, that the
Guggenheims cannot have investment-backed expectations of
freeing their land from the rent control ordinance because
they knew the regulation was in effect when they purchased
the mobile home park. This could be a logical conclusion to
reach—but only were one to ignore (1) the instructions of the
Supreme Court, (2) decades of political, legal, and economic
developments, and (3) the actions of the Guggenheims.
First, the Supreme Court has specifically held that the fact
claimants knew of a land-use regulation at the time they took
title to their land does not bar them from challenging that reg-
ulation, nor from contending that the ordinance lessened the
value of their land by interference with their investment-
backed expectations.
Were we to accept the State’s rule [that appellants
had no investment-backed expectations because the
ordinance was enacted before they purchased the
land], the postenactment transfer of title would
absolve the State of its obligation to defend any
action restricting land use, no matter how extreme or
unreasonable. A State would be allowed, in effect, to
6
Justice O’Connor made this precise point in her concurrence in Palaz-
zolo, supra at p. 20443.
20448 GUGGENHEIM v. CITY OF GOLETA
put an expiration date on the Takings Clause. This
ought not to be the rule. Future generations, too,
have a right to challenge unreasonable limitations on
the use and value of land.
Palazzolo, 533 U.S. at 627 (emphasis added). In his concur-
rence, Justice Scalia was even more explicit in criticizing the
methodology employed by the majority here:
In my view, the fact that a restriction existed at the
time the purchaser took title . . . should have no bear-
ing upon the determination of whether the restriction
is so substantial as to constitute a taking. The
‘investment-backed expectations’ that the law will
take into account do not include the assumed validity
of a restriction that in fact deprives property of so
much of its value as to be unconstitutional.
Id. at 637 (Scalia, J., concurring) (emphasis added) (internal
citation omitted). The majority’s dismissal of the Guggen-
heim’s investment-backed expectations, on the basis that they
knew what they were getting into, directly contravenes
Supreme Court precedent and assumes the eternal validity,
without reform, of the so-called rent control ordinance.7 It
7
Not only does Palazzolo recognize the Guggenheims’ ability to bring
a takings claim on the basis of their own reasonable investment-backed
expectations, but it also acknowledges the ability of a land owner to bring
a regulatory takings action for a loss in value that was suffered by a previ-
ous land owner. As Palazzolo points out, the government is not absolved
of its obligation to defend actions restricting land use, merely on account
of a postenactment transfer of title. 533 U.S. at 627. A rule barring land
owners from challenging ordinances that were enacted during a previous
landowner’s tenure, the Court explained, “would work a critical alteration
to the nature of property, as the newly regulated landowner is stripped of
the ability to transfer the interest which was possessed prior to the regula-
tion. The State may not by this means secure a windfall for itself.” Id.
Consequently, the panel majority’s observation that any unfairness attrib-
utable to the rent control ordinance “was imposed long ago[ ] on someone
GUGGENHEIM v. CITY OF GOLETA 20449
does not come as a surprise the majority’s stance on this sub-
ject comes without legal authority.
The majority opinion asserts that Palazzolo “is of no help
to the Guggenheims,” Maj. Op. at 20431, but one is puzzled
by its attempts to distinguish Palazzolo. The majority notes
that the claimant in Palazzolo challenged the land-use regula-
tion as it was applied to him, whereas here, the Guggenheims
bring a facial challenge to the Ordinance. Id. at 20431. So?
Penn Central involved an as-applied challenge; but it gave us
rules of general application as to what constitutes a regulatory
taking.8 Next, the majority points out the transfer in Palazzolo
was by operation of law (the claimant, as controlling share-
holder of the corporation which owned the land, acquired the
property when the corporation dissolved), whereas the Gug-
genheims purchased the mobile home park on the open mar-
ket. So? The plaintiff in Palazzolo acquired title after the
challenged land-use restriction was enacted and nonetheless
prevailed without claiming that he should be considered to
have become the owner when his corporation bought the land
before the restriction’s enactment, on some theory of advanta-
geous piercing of the corporate veil cum relation back. These
“distinctions” are mere differences, no more significant than
earlier in the Guggenheims’ chain of title,” is unavailing. Maj. Op. at
20437. Palazzolo makes clear that to the extent a previous landowner had
the right to bring a regulatory takings challenge against an ordinance
enacted during its tenure, successive landowners enjoy the same right. 533
U.S. at 627. Thus, even though the ordinance at issue effected a wealth
transfer from the previous land owner to tenants in 1979 and 1987, which
wealth transfer is kept in place by the 2002 Goleta ordinance, the Guggen-
heims may challenge the ordinance and seek recovery on the basis of the
previous land owner’s loss. Id. That loss is passed on to the Guggenheims
as an incident of property ownership. In accounting terms, it is a transfer-
able contingent asset.
8
See Lingle, 544 U.S. at 539 (calling the Penn Central factors the “prin-
cipal guidelines for resolving regulatory takings claims”); see also Chev-
ron USA, Inc. v. Cayetano, 224 F.3d 1030, 1032-33 (9th Cir. 2000)
(describing the facial challenge addressed in Lingle).
20450 GUGGENHEIM v. CITY OF GOLETA
that the Palazzolo land was in Rhode Island9 and the Guggen-
heim land was in California.
Tellingly, the majority opinion provides no justification or
legal support for why these proposed distinctions matter. Why
should the investment-backed expectations of a land owner
bringing a facial challenge be analyzed differently from those
of an as-applied claimant? If the expectations are valid and
are expropriated, what does it matter as to their existence that
they will be injured in all cases (facial challenge) or just in
some (as-applied challenge)? Either they are valid expecta-
tions, or they aren’t. Likewise, the majority opinion provides
no justification, legal or otherwise, for limiting the broad lan-
guage of Palazzolo to the type of transaction that vests title.
But this misprism of Supreme Court precedent is made
worse by the majority opinion’s failure to recognize specific
evidence of the Guggenheims’ investment-backed (after all,
the Guggenheims invested money to buy the property) expec-
tations. As the Court noted in Palazzolo, a court should ana-
lyze the claimant’s investment-backed expectations as if the
regulation at issue could be repealed at any time. Id. at 637.
Here, the Guggenheims purchased the mobile home park with
the apparent belief they could free the land from the Ordi-
nance, either through administrative action, political lobbying,
or court action. After buying the property in 1997, they
applied for a variance from the zoning commission, which
variance could exempt their land from the Ordinance.10 The
9
Where he was up against a more formidable and resourceful takings
opponent: the State of Rhode Island and Providence Plantations. Here, the
Guggenheims face the town of Goleta.
10
Although the Guggenheims did not need to seek a land-use variance
to bring their facial challenge to the Ordinance, see Sinclair Oil Corp. v.
Cnty. of Santa Barbara, 96 F.3d 401, 406 (9th Cir. 1996), the fact that
they applied for such a variance immediately after purchasing the mobile
home park is objective evidence that they had at least some investment-
backed expectations they could free the land from the Ordinance. Refer-
ence to such administrative action is made to strengthen that prong of the
Guggenheims’ regulatory taking claim, and should not suggest any uncer-
tainty as to whether this is an as-applied or facial challenge; this is indis-
putably a facial challenge.
GUGGENHEIM v. CITY OF GOLETA 20451
application was denied. They subsequently instituted this
court action to have the Ordinance declared facially unconsti-
tutional under the Fifth Amendment.11
The majority opinion even acknowledges the possibility of
rent control repeal or reform by conceding that “[t]he Gug-
genheims might conceivably have paid a speculative premium
over the value that the legal stream of rent income would
yield, on the theory that rent control might someday end,
either because of a change of mind by the municipality or
court action.” Maj. Op. at 20435. But, the majority dismisses
this contention as a “speculative possibility, not an ‘expecta-
tion,’ ” id. at 20435, without any citation of authority as to
why a “speculative possibility” is not an expectation, nor why
a judge, not a jury, should determine whether there was such
an “expectation.” The majority opinion flatly states (without
a citation to any case, statute, or even a law review article)
that “speculative possibilities of windfalls do not amount to
‘distinct investment-backed expectations,’ unless they are
shown to be probable enough materially to affect the price.”
Id. at 20435. However, this self-supporting, self-defining lan-
guage ignores the actual dictionary definition of “speculate.”
11
The Guggenheims’ complaint contains further description of their
efforts to contest the validity of the rent control ordinance and prevent its
application to their mobile home park.
Prior to the incorporation of the City, Plaintiffs unsuccessfully
attempted to meet with City officials-elect to discuss the City’s
adoption of the mobilehome rent control provisions of the Orin-
dance [sic]. In addition, Plaintiffs caused to be sent to the City
Attorney-elect, a proposed ordinance that stayed the City’s
enforcement and the effectiveness of the newly adopted Ordi-
nance relating to the vacancy control provision of mobilehome
rent control and specifically the limitation of the adjustment of
rents upon the sale of a mobilehome, i.e., vacancy control. Plain-
tiffs applied to the City for relief from the vacancy control
restriction in the Ordinance. . . . Defendant’s City Council con-
sidered adoption of the proposed moratorium and rejected it.
Guggenheim Complaint at ¶¶ 6-7.
20452 GUGGENHEIM v. CITY OF GOLETA
As defined by Webster’s New 20th Century Unabridged Dic-
tionary (1979), one meaning of “speculate” is precisely “to
buy or sell land hoping to take advantage of an expected rise
or fall in price.” (emphasis added). Having determined that
they might be able to free their mobile home park from the
Ordinance, the Guggenheims bought the land based on these
investment-backed expectations—expectations which influ-
enced the price they were willing to pay for the property as
well as their expected rate of return on the investment.
The Guggenheims’ beliefs regarding the possibility of free-
ing their land from the Ordinance were not self-indulgent
delusions, or “starry eyed hope of winning the jackpot if the
law changes,” as the majority terms it. Maj. Op. at 20435.
Their beliefs were at least plausible in light of contemporary
legal, political, and academic thought. In the modern eco-
nomic marketplace, the spectre of legal uncertainty haunts
every commercial transaction and influences each party’s val-
uation of the assets involved. For example, the validity of a
pharmaceutical company’s patent will affect that company’s
value as a potential acquisition target. Legal uncertainty over
rent control has been particularly marked in California. In
1989 the state amended its Mobilehome Residency Law to
exempt all new construction from local control. Cal. Civ.
Code § 798.45. Less than two years before the Guggenheims
purchased their property, California had abolished vacancy
control for rental apartments statewide. Costa-Hawkins Rental
Housing Act, § 1, 1995 Cal. Legis. Serv. 331 (A.B. 1164)
(West) (codified at Cal. Civ. Code § 1954.50-.53). In January
1999, Santa Monica reformed its strict rent control ordinance,
repealing its operation as to any new tenants. Tierra Proper-
ties, Santa Monica: A Case Study in Growth and Rent Control
(1999).
The Guggenheims and the prior owners of their mobile
home park may have reasonably thought that the state would
abolish rent control—or at least vacancy control—for mobile
home parks. And the Guggenheims could reasonably retain
GUGGENHEIM v. CITY OF GOLETA 20453
those expectations today, as recent efforts to repeal rent con-
trol in California have garnered significant support. For exam-
ple, a 2008 ballot proposition to phase out rent control won
almost 40% of the votes cast. Patrick McGreevy, Prop. 98
Backers Seek Eminent Domain Limits, L.A. Times, June 5,
2008, at 1.
Moreover, mobile home rent control ordinances have been
heavily criticized in academia as an inefficient method for
providing affordable housing to low and middle-income
households. See, e.g., Mason & Quigley, 16 J. Housing Econ.
at 192, 205 (concluding that “housing is no more “affordable”
[to subsequent tenants] afterwards than it was before the ordi-
nance was adopted,” and that “virtually all of the economic
benefits from lower regulated rents are paid out annually to
finance the higher sales prices commanded by those dwell-
ings”).
Given the instances of actual or attempted repeal and
reform of rent control ordinances across the country, the par-
ticular scrutiny paid to the issue in California, and the criti-
cism of mobile home rent control in the academic literature,
the Guggenheims had a reasonable expectation—or at least, a
trier of fact could reasonably find they had such an
expectation—that they could free their land from the Ordi-
nance either through the grant of a zoning variance, political
action targeted toward repealing the regulation in its entirety,
or court action to invalidate the law. This inference is sup-
ported by evidence presented to the district court that the
Guggenheims pursued relief from the Ordinance through at
least two of these avenues in the years following their pur-
chase of the mobile home park. The majority readily admits
that this investment-backed expectation could have materially
affected the price the Guggenheims were willing to pay for
the mobile home park. “The Guggenheims might conceivably
have paid a slight speculative premium over the value that the
legal stream of rent income would yield, on the theory that
rent control might someday end, either because of a change
20454 GUGGENHEIM v. CITY OF GOLETA
of mind by the municipality or court action.” Maj. Op. at
20435. At most, this concession establishes that the Guggen-
heims did in fact have investment-backed expectations of
freeing the land from the Ordinance; at the very least, it raises
a question of fact for the jury to decide.
Finally, the majority, perhaps sensing its vulnerability on
the issue of investment-backed expectations, attempts to dis-
tract the reader by introducing an entirely irrelevant consider-
ation into the analysis: the alleged investment-backed
expectations of the mobile home tenants. Maj. Op. at 20437.
The majority opinion paints a sympathetic portrait of subse-
quent tenants who purchased mobile homes at market rates,
in reliance on the continued validity of the Ordinance. But,
the Penn Central regulatory taking analysis does not apply to
them for the simple reason that no government action took
economic value from them or would take such value from
them were the Goleta ordinance held invalid. The Takings
Clause prohibits only takings, without compensation, by gov-
ernment action, not losses from the workings of the free mar-
ket. See Madera Irrigation Dist. v. Hancock, 985 F.2d 1397,
1403 (9th Cir. 1993) (“Reasonable expectations arising out of
past policy but without a basis in cognizable property rights
. . . . cannot give rise to a [taking].”). Moreover, Penn Central
does not contemplate any consideration of the expectations of
other market players, or any balancing of the interests of vari-
ous market players in determining whether the government
has taken property. Its analysis is focused solely on the
investment-backed expectations of the claimants, here, the
Guggenheims.
In sum, the majority opinion ignores Supreme Court prece-
dent by holding that a claimant cannot have investment-
backed expectations if he purchases property with notice of an
existing regulation, by assuming the eternal regnancy of a
land-use regulation, and by introducing irrelevant consider-
ations which tend only to confuse the regulatory taking analy-
sis. Furthermore, the majority adopts a static and somewhat
GUGGENHEIM v. CITY OF GOLETA 20455
simplistic view of law, politics, and economics by failing to
recognize that the Guggenheims had a reasonable expectation
of freeing their land from the Ordinance through political or
legal means, and by failing to acknowledge that this belief
could influence the price they were willing to pay for the land.
The Guggenheims presented sufficient evidence to raise a
triable issue of fact regarding their investment-backed expec-
tations to survive a motion for summary judgment. The case
should have gone to trial.
C. The Character of the Government’s Action
The majority opinion also ignores the final Penn Central
factor, the character of the governmental action, which like-
wise cuts in favor of the Guggenheims. In analyzing this fac-
tor, a court looks at the purpose of the regulation, the effect
it has in practice, and the distribution and magnitude of the
burdens and benefits it places on private citizens. Penn Cen-
tral, 438 U.S. at 130-34.
The stated purpose of Goleta’s mobile home rent control
ordinance was to protect “owners and occupiers of mobile-
homes from unreasonable rents” brought about by a shortage
of housing and the high cost of moving mobile homes. Ordi-
nance § 11A-1 (emphasis added). Rent control measures also
have the claimed ancillary benefit of allowing stable commu-
nities to form. See Jay M. Zitter, Validity, Construction, and
Application of Inclusionary Zoning Ordinances and Pro-
grams, 22 A.L.R.6th 295, § 13 (2007). However, as discussed
below with regard to the substantive due process claim, this
Ordinance does not serve its stated purposes because of the
way it is structured and written. The Ordinance restricts only
the amount the landowner can charge a tenant for rental of the
mobile home parcel; it does not limit the amount which that
tenant, in turn, can demand for sale or lease of the mobile
home to other owners or tenants. The designed structure and
working of the ordinance amounts to nothing more than a
20456 GUGGENHEIM v. CITY OF GOLETA
wealth transfer from the landowner to the original tenant, and
indisputably does nothing to curb housing costs or provide a
stable population once the original tenant has sold or leased
the mobile home.
The Ordinance unquestionably places a high burden on a
few private property owners instead of apportioning the bur-
den more broadly among the tax base. See Armstrong v.
United States, 364 U.S. 40, 49 (1960) (“[The Takings Clause]
was designed to bar Government from forcing some people
alone to bear public burdens which, in all fairness and justice,
should be borne by the public as a whole.”); see also Lingle,
544 U.S. at 542-43; First English Evangelical Lutheran
Church of Glendale v. County of Los Angeles, 482 U.S. 304,
318-19 (1987). Similar laws concentrating the cost of afford-
able housing on a small group of property-owners have been
found unconstitutional. In Cienega Gardens, developers of
low-income apartments were able to secure low-interest,
forty-year loans from private lenders because the Department
of Housing and Urban Development provided the developers
with mortgage insurance. Cienega Gardens, 331 F.3d at 1325.
Two federal statutes eliminated the developers’ contractual
rights to prepay their forty-year mortgage loans after twenty-
years. Id. at 1326-27. The purpose of the statutes was to pre-
vent the developers from exiting the low-rent housing pro-
grams in which they were required to participate while
carrying the loans, but not once they paid off the loans. See
id. at 1323. But the statutes caused a 96% loss of return on
equity for the developers. Id. at 1343. The developers brought
suit against the government, claiming that the federal statutes
restricting their right to prepay their mortgage loans effected
a regulatory taking under the Fifth Amendment.
The Federal Circuit, applying Penn Central, found that the
character of the government action was to place the expense
of low-income housing on a few private property owners
(those who had previously participated in the federal loan pro-
gram but now wanted to pay their way out), instead of distrib-
GUGGENHEIM v. CITY OF GOLETA 20457
uting the expense among all taxpayers in the form of
incentives for developers to construct more low-rent apart-
ments. Id. at 1338-39.
Similarly, here it is undisputed that the Ordinance applies
only to mobile home park owners. The district court found
that the City did not impose such extreme costs for providing
affordable housing on any other property owners in the City,
except as a condition of new development. In contrast to the
burden of renting all the low-rent housing property at an 80%
discount, the burden on new developers was to make only
20% of their housing available at below-market rates. There
is nothing in the record to suggest why the Federal Circuit’s
reasoning should not be applied to the facts of this case; sub-
stituting “Goleta” for “Congress”:
Unquestionably, Congress acted for a public purpose
(to benefit a certain group of people in need of low-
cost housing), but just as clearly, the expense was
placed disproportionately on a few private property
owners. Congress’ objective . . .—preserving low-
income housing—and method—forcing some own-
ers to keep accepting below-market rents—is the
kind of expense-shifting to a few persons that
amounts to a taking. This is especially clear where,
as here, the alternative was for all taxpayers to shoul-
der the burden.
331 F.3d at 1338-39. This analysis, ignored by the majority
opinion, weighs heavily in favor of finding a regulatory taking
under Penn Central.
D. Weighing the Penn Central Factors Shows the Gug-
genheims Suffered a Regulatory Taking.
The majority opinion errs in considering only one element
of a three-factor, balancing test—investment-backed
expectations—and making that element dispositive. It treats
20458 GUGGENHEIM v. CITY OF GOLETA
the factors as a requirements checklist, rather than a list of
considerations to weigh, one against or with another. Further,
it flouts the Supreme Court’s holding in Palazzolo that a “pos-
tenactment transfer of title [does not] absolve the [govern-
ment] of its obligation to defend” the restrictions a regulation
imposes on property-owners. Palazzolo, 533 U.S. at 627. At
a minimum, the case should be remanded for trial on the
severity of the economic impact on the claimants, the exis-
tence of investment-backed expectations, and the character of
the governmental action because these are at least mixed
questions of fact and law on which reasonable triers of fact
could find that there was a taking. The Guggenheims pro-
duced evidence from which a finder of fact could find that a
taking had occurred: the Guggenheims bought the mobile
home park with the reasonable expectation that they could
free the land from the Ordinance either through a variance,
repeal of the regulation, or through court action. They were
forced to rent mobile homes at 20% of the current market rate,
and sit by as incumbent mobile home owners captured a trans-
fer premium averaging approximately 90% of the sale price
of their mobile homes. On summary judgment, drawing all
reasonable inferences in favor of the non-moving party, the
district court erred in holding, as a matter of law, that the
Ordinance was not a taking. See Ventura Packers, Inc., 305
F.3d at 916.
III. Substantive Due Process Claim
The Supreme Court in Lingle clarified the difference
between a challenge to a rent control ordinance as a regula-
tory takings claim and as a substantive due process claim, and
affirmed the independent vitality of both theories.
[The Takings Clause] is designed not to limit the
governmental interference with property rights per
se, but rather to secure compensation in the event of
otherwise proper interference. . . . Due process viola-
tions cannot be remedied under the Takings Clause,
GUGGENHEIM v. CITY OF GOLETA 20459
because if a government action is found to be
impermissible—for instance because it fails to meet
the ‘public use’ requirement or is so arbitrary as to
violate due process—that is the end of the inquiry.
No amount of compensation can authorize such
action.
Crown Point Develop., Inc. v. City of Sun Valley, 506 F.3d
851, 856 (9th Cir. 2007) (quoting Lingle, 544 U.S. at 537).
The majority opinion summarily dismisses the Guggen-
heims’ substantive due process claim by noting that while the
Ordinance may not perfectly accomplish its stated purposes,
this court is bound by precedent establishing that rent control
ordinances are rationally related to a legitimate state interest.
Maj. Op. at 20439. The majority opinion even cites Justice
Holmes’s iconic language from Lochner: “The Fourteenth
Amendment does not enact Mr. Herbert Spencer’s Social
Statics.” Id. n.54. And the majority might be correct if this
case involved a true rent control ordinance. But, at the very
least, a rent control ordinance must control rents, and Goleta’s
ordinance does no such thing.
The stated purpose of the Ordinance was to protect “owners
and occupiers of mobilehomes from unreasonable rents,” with
the hope that affordable housing would create a stable popula-
tion. Ordinance § 11A-1. But, the Ordinance is so structured
so that it cannot achieve its designated purpose. Instead of
controlling the price of rental housing, the Ordinance restricts
only the amount the landowner can charge for one component
of the cost of rental housing: land rent. There are no limits on
the amount the “windfall tenant” and his successors as tenants
or owners can charge when he in turn sub-leases or sells the
mobile home to future tenants; as the housing market
improves (as it did between 1997 and 2002), he has every
incentive to capture that transfer premium by leasing or sell-
ing the mobile home.12 The district court found it undisputed
12
Nor can it be argued that the future effects of the Ordinance should
not be considered in the due process analysis. By providing for a 10% rent
20460 GUGGENHEIM v. CITY OF GOLETA
that this transfer premium equaled approximately 90% of the
current sale price of a mobile home in the Park. As soon as
the “windfall tenant” leases or sells the mobile home at a pre-
mium, the stated purposes of the Ordinance are nullified: the
lease or sale is at the market rate, and the turnover in tenants
has already interrupted the stability of the population and the
goal of “affordable” (non-market) housing.
Thus, the Ordinance does not effect rent control, but simply
transfers wealth from a small group of land owners to a larger
group of fortunate tenants. While the government has author-
ity to tax or encumber citizens for the common good, it cannot
violate individual rights merely to enrich a small, private
interest group. As the Court held in Citizens’ Sav. & Loan
Ass’n v. City of Topeka, 87 U.S. 655 (1874):
To lay with one hand the power of the government
on the property of the citizen, and with the other to
bestow it upon favored individuals to aid private
enterprises and build up private fortunes, is none the
less a robbery because it is done under the forms of
law. . . .
Id. at 664. The burden of this wealth transfer is borne entirely
by mobile park lot owners, whose property rights are taken
from them based solely on the nature of their business. Own-
ers of condominium complexes, houses, or apartment build-
ings are not regulated by the Ordinance, even though their
rental rates will affect the overall housing market to a greater
extent than mobile home owners. See Quigley, supra.
Our court has several times found a rent control ordinance
that creates such windfalls for lucky tenants and does not
increase each time a mobile home is sold, the drafters of the Ordinance
clearly contemplated the future effect of the rent control ordinance on
future tenants, and this fact broadens the temporal scope of this court’s
review.
GUGGENHEIM v. CITY OF GOLETA 20461
lower prices to be unconstitutional under the theory that it
failed “substantially [to] advance a legitimate state interest.”
See Chevron USA, Inc. v. Bronster, 363 F.3d 846, 855-57 (9th
Cir. 2004) (ordinance limiting the rent oil company could col-
lect from gas station operators was unconstitutional because
operators could sell their lease rights at a premium), rev’d
sub. nom. Lingle, 544 U.S. at 545; Richardson v. City & Cnty.
of Honolulu, 124 F.3d 1150, 1165-66 (9th Cir. 1997) (ordi-
nance regulating condominium assessments that allowed
condo sellers to capture value of the regulation by selling at
a premium was unconstitutional). One panel went so far as to
hold that “a [mobile home] rent control ordinance that does
not on its face provide for a mechanism to prevent the capture
of a premium is unconstitutional, as a matter of law, absent
sufficient evidence of externalities rendering a premium
unavailable.” Cashman v. City of Cotati, 374 F.3d 887, 897
(9th Cir. 2004) (emphasis altered).
Of course, these were regulatory takings cases, and the
Supreme Court in Lingle disapproved of the “substantially
advances” theory as a means of bringing a takings claim. 544
U.S. at 540. But Lingle upheld the independent validity of
substantive due process claims and held that ordinances creat-
ing a transfer premium might not advance a legitimate gov-
ernment interest. The Court indicated that the “substantially
advances” test was a way to bring substantive due process
claims:
The ‘substantially advances’ formula suggests a
means-ends test: It asks, in essence, whether a regu-
lation of private property is effective in achieving
some legitimate public purpose. An inquiry of this
nature has some logic in the context of a due process
challenge, for a regulation that fails to serve any
legitimate governmental objective may be so arbi-
trary or irrational that it runs afoul of the Due Pro-
cess Clause
20462 GUGGENHEIM v. CITY OF GOLETA
Id. at 542; see also Crown Point Dev., Inc., 506 F.3d at 856.
Also puzzling is the majority’s assertion the Ordinance
meets the legitimate purpose of alleviating the hardship to
owners in the “costs of moving” mobile homes from the
Goleta pads. Maj. Op. at 20439. Surely, the costs of moving
a mobile home, from forklift to flatbed to “wide load” flags
fluttering down the road to a new site, are the same if the
mobile home is moved from a rent controlled lot or from a
market controlled lot.
But perhaps what the majority means as the “costs of mov-
ing” is the increased land rent the mobile home owner may
have to pay at the new location. What the majority overlooks,
however, is that—unless the mobile home owner is one of the
lucky original “windfall” tenants—the price he paid for his
mobile home was jacked up by the present value of the differ-
ence between Goleta rent controlled land (lower) and market
price rental land (higher). See discussion of Prof. Quigley’s
report, supra at p. 20445. If the present value of the difference
between rent controlled and market land rentals is correctly
reckoned in the market price of the mobile home, the only
additional “costs of moving” to be incurred are indeed the
costs of permits, trucking, possible damage to the unit, etc.
But those costs would be incurred regardless whether the
mobile home owners were moving from a rent controlled or
a market rate lot. Thus, just as the Ordinance does not control
rents—a point on which the majority agrees, Maj. Op. at
20438-39—it does not protect mobile home owners from the
“costs of moving,” properly reckoned.
The Guggenheims do not base their substantive due process
claim on Economics 101 or Herbert Spencer. See Maj. Op. at
20439 & n.54. To the contrary: the Guggenheims presented
undisputed evidence that the Ordinance—by design—creates
transfer premiums which increase the sublet rental or sale
price of mobile homes. Such transfer premiums raise the
eventual price to a Goleta tenant or buyer so that notwith-
GUGGENHEIM v. CITY OF GOLETA 20463
standing the Goleta-mandated lower regulated land rent he
must pay, the combined cost of his land rent and mobile home
sublease or purchase approximates the total housing price for
similar mobile home use on unregulated land rentals outside
of Goleta.
This evidence creates a genuine question as to whether the
Ordinance is so ineffective at serving its stated public purpose
of “providing affordable (low-cost) housing” that it is not
rationally related to a legitimate state interest. Despite the
great deference owed to legislative acts which do not impli-
cate a fundamental right or suspect classification, Justice
Holmes’s quote from Lochner is not a talisman which protects
all government regulations from examination and review,
regardless of their structural integrity or effectiveness.
IV. Equal Protection Claim
The Guggenheims also argue that the Ordinance violates
the Equal Protection Clause because it singles out mobile
home park owners, as opposed to other sorts of housing pro-
viders, to bear the burden of an affordable housing program.
This court has previously held that a mobile home rent control
ordinance does not per se violate the Equal Protection Clause
because it is rationally related to the legitimate public interest
of promoting affordable housing. Equity Lifestyle Props., Inc.
v. Cnty. of San Luis Obispo, 548 F.3d 1184, 1195 (9th Cir.
2008). Equity Lifestyle held that this is true even if the statute
singles out mobile home owners such as the Guggenheims,
does not increase the amount of available affordable housing,
and “serve[s] the sole purpose of transferring the value of [the
park owner’s] property to a select private group of tenants.”
Id. at 1193. Such a naked transfer of wealth between two pri-
vate actors, based solely on the manner in which individuals
choose to use their land, violates the Equal Protection Clause.
Equity Lifestyle should have been overruled by this en banc
panel to bring our Equal Protection analysis into line with the
Supreme Court’s views as to takings and substantive due pro-
20464 GUGGENHEIM v. CITY OF GOLETA
cess.13 As we are an en banc court, we are not bound by the
“law of the circuit” rule of Miller v. Gammie, 335 F.3d 889,
899-900 (9th Cir. 2003) (en banc).
We should reverse the district court’s finding that there has
been no compensable taking and no due process or equal pro-
tection violation, and remand for a trial on the merits.
13
Pennell v. City of San Jose, 485 U.S. 1, 13-14 (1988), which held the
rent control ordinance at issue in that case was rationally related to a legit-
imate state interest is not contrary to our reasoning because Pennell
involved a true rent control ordinance of rental apartments. The old tenants
in that case had no power to charge the new tenants a premium over the
rent controlled amount. Thus, the rent control ordinance was effective in
carrying out the goal of providing affordable housing. Again, if our case
involved a true rent control ordinance that was designed to be effective in
attaining its goals, I would not dissent from the majority’s conclusion that
the Ordinance does not violate substantive due process or equal protection.