City & Cnty. of S.F. v. Post

• Decision Date: 11 April 2018
• Docket Number: A149136
• Citation: 22 Cal.App.5th 121,231 Cal.Rptr.3d 235
• Court: California Court of Appeals Court of Appeals
• Parties: CITY AND COUNTY OF SAN FRANCISCO et al., Plaintiffs and Respondents, v. Chuck M. POST et al., Defendants and Appellants.

22 Cal.App.5th 121

231 Cal.Rptr.3d 235

CITY AND COUNTY OF SAN FRANCISCO et al., Plaintiffs and Respondents,

v.Chuck M. POST et al., Defendants and Appellants.

A149136

Court of Appeal, First District, Division 2, California.

Filed April 11, 2018

Attorneys for Defendants and Appellants: Law Offices of Edward Singer, Edward Charles Singer, Jr.

Attorneys for Amici Curiae San Francisco Apartment Association, San Francisco Association of Realtors, Small Property Owners of San Francisco Institute, and California Apartment Association: Zacks Freedman & Patterson, Andrew Zacks, Law Office of Paul J. Katz, Paul J. Katz, San Francisco

Attorneys for Plaintiffs and Respondents: Office of the City Attorney, Dennis J. Herrera, Yvonne R. Meré, Chief Attorney, Sara J. Eisenberg, Deputy City Attorney, Bradley A. Russi, Deputy City Attorney

Attorneys for Amicus Curiae Tenants Together: Munger, Tolles & Olson LLP, Michael E. Soloff, Los Angeles

Tucher, J.^*

In 1998 the San Francisco Board of Supervisors outlawed discrimination against tenants who pay a portion of their rent with a Section 8, or similar, housing voucher. They did this by amending San Francisco's existing housing discrimination ordinance to outlaw discrimination based on a person's "source of income," a term they defined broadly to include government rent subsidies. (S.F. Police Code, § 3304, subd. (a).) The following year, the California Legislature also expanded the state's Fair Employment and Housing Act (FEHA) to prohibit discrimination based on a tenant's "source of income," but the Legislature defined the term narrowly, so that it does not reach government rent subsidies such as Section 8. ( Gov. Code, § 12955, subd. (a).) FEHA does not prevent a landlord from declining to take Section 8 tenants. ( Sabi v. Sterling (2010) 183 Cal.App.4th 916, 107 Cal.Rptr.3d 805 ( Sabi ).) The question this case poses is whether FEHA preempts San Francisco's ordinance to the extent the local ordinance outlaws discrimination based on a tenant's participation in the Section 8 program. The trial court found no preemption, and we agree.

FACTUAL AND PROCEDURAL BACKGROUND

The material facts in this case are uncontroverted. Acting as agent for Appellant Lem-Ray Properties I DE, LLC (Lem-Ray), Appellant Chuck Post sought tenants for efficiency studio apartments at 935 Geary Street in San Francisco. Between May 2013 and May 2014, he posted advertisements on Craigslist and ApartmentsInSF.com advertising these units, each advertisement stating that the landlord would not accept Section 8 vouchers.

On October 21, 2015, the City and County of San Francisco and the People of the State of California acting by and through San Francisco City Attorney Dennis J. Herrera (collectively, the People) filed this case. Their complaint alleges that Post and Lem-Ray's actions violated San Francisco Police Code section 3304 (section 3304), the ordinance that forbids discrimination based on source of income. Piggy-backing on these allegations of unlawful conduct, the complaint alleges violation of California Business and Professions Code section 17200 and of a prior injunction prohibiting Lem-Ray from employing unfair business practices. Post and Lem-Ray demurred on the ground that FEHA preempts the source-of-income provision in section 3304, but the trial court overruled the demurrer.

The People then moved for a preliminary injunction to prevent appellants from continuing to discriminate against participants in the Section 8 program. On May 20, 2016, the trial court granted the injunction, finding that the People were likely to succeed on the merits of their claims under section 3304, and that a preliminary injunction was necessary to prevent irreparable harm while the case was pending. This timely appeal followed.

LEGAL BACKGROUND

The Section 8 Program

The Housing Choice Voucher program, commonly known as "Section 8," is a partnership between the federal government and state or local public housing authorities (PHAs). The federal government funds the program, and the PHA administers it. ( Sabi , supra , 183 Cal.App.4th at p. 925, 107 Cal.Rptr.3d 805 ; 24 C.F.R. § 982.1.) The program subsidizes eligible low-income renters in paying for housing in the private rental market. The PHA identifies low-income renters who are eligible to participate in the program, approves the housing they wish to rent, and then enters into a contract with the landlord to pay directly to the landlord a portion of the tenant's rent each month. (Ibid .)

Certain elements of the Section 8 program vary in response to "local housing needs and priorities." ( 24 C.F.R. § 982.207.) For example, the PHA sets income requirements for program participation based on the cost of living in a local community, and varies the size of rent subsidies according to local market rents. ( 24 C.F.R. §§ 982.201, 982.503.) Here, the PHA is the San Francisco Housing Authority. Analyzing data from 1997, the San Francisco Housing Authority reported in 1988 that because so little housing stock was available to Section 8 tenants in San Francisco, a third of the households receiving Section 8 vouchers for the first time left San Francisco to find housing in other communities.

San Francisco's Ordinance

When San Francisco faced a shortage of low-income housing and widespread displacement of Section 8 tenants in 1998, the San Francisco Board of Supervisors responded by passing a package of three measures. First, they amended an existing ordinance outlawing housing discrimination to add a person's "source of income" as a protected category, defining "source of income" to include Section 8 and other public or nonprofit rent subsidies so that landlords could not refuse to accept tenants relying on Section 8 subsidies. (S.F. Police Code, § 3304, subd. (a).) Second, they added a requirement to the ordinance that any landlord using "a financial or income standard" to determine whether a tenant qualified for a rental contract must account, in its calculation, for (a) any portions of the rental payment that would be made by others, such as the PHA, and (b) the combined income of all persons proposing to reside together or cosign the lease. (S.F. Police Code, § 3304, subd. (b).) This measure prevents landlords from turning away low-income tenants who could make the rent with the assistance they receive from others. Third, the Board of Supervisors brought units occupied by Section 8 tenants under the umbrella of the city's rent ordinance, limiting a landlord's ability to evict such tenants and raise rents. (See S.F. Admin. Code, §§ 37.2, 37.3, 37.9.)

Today, San Francisco's housing discrimination ordinance, section 3304, continues to prevent landlords from discriminating on the basis of a tenant's "source of income." Section 3304 broadly defines the term to mean "all lawful sources of income or rental assistance from any federal, State, local, or nonprofit-administered benefit or subsidy program." (S.F. Police Code, § 3304, subd. (a)(5), italics added.) Relevant portions of the ordinance are set forth more completely in the margin, with language added in 1998 in italics.¹

FEHA

FEHA is a 1980 recodification of the state's pre-existing fair employment and fair housing acts. ( Rojo v. Kliger (1990) 52 Cal.3d 65, 72, 276 Cal.Rptr. 130, 801 P.2d 373 ( Rojo ).) FEHA declares that the opportunity to obtain and retain employment and housing without discrimination based on race, religion, or other protected attributes is "a civil right," and the purpose of the statute is "to provide effective remedies that will eliminate" these discriminatory practices. ( Gov. Code, §§ 12920, 12921.) To that end, the statute establishes enforcement procedures. With regard to acts of housing discrimination that the statute identifies as unlawful, aggrieved individuals may file complaints with the Department of Fair Employment and Housing, or the director of the Department or the Attorney General may file a complaint. ( Gov. Code, § 12925, subd. (b), § 12980, subds. (a), (b).) The statute sets out details on the timeline and procedures the department must follow in investigating and resolving these complaints, including a provision that if the department elects not to proceed with a case it must provide a right-to-sue notice to the claimant. ( Gov. Code, § 12980, subds. (c) - (j).)

Until 1999, FEHA was silent on source-of-income discrimination. When San Francisco amended section 3304 in 1998 to include discrimination based on source of income, broadly defined, FEHA made no mention of income in the list of personal attributes for which it was unlawful to discriminate. But the following year, the Legislature amended the statute to add source-of-income discrimination. FEHA now declares it to be unlawful "[f]or the owner of any housing accommodation to discriminate against or harass any person because of the race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income , disability, or genetic information of that person." ( Gov. Code, § 12955, subd. (a), italics indicating language added by Stats. 1999 (S.B. No. 1098).) The 1999 FEHA amendment defined "source of income" more narrowly than does San Francisco's ordinance. In FEHA, the term means "lawful, verifiable income paid directly to a tenant or paid to a representative of a tenant," where "a landlord is not considered a representative of a tenant." ( Gov. Code, § 12955, subd. (p)(1).)

This definition means that Section 8 subsidies, because they are paid directly to the landlord, do not count as a tenant's income for purposes of FEHA's source-of-income provision. ( Sabi , supra , 183 Cal.App.4th at p. 934, 107 Cal.Rptr.3d 805.) Nothing in FEHA prevents a landlord from opting out of the Section 8 program, but FEHA is not altogether silent on the subject of government rent subsidies. Another provision added to FEHA in 1999 makes it unlawful, "[i]n instances where...