Fletcher Properties, Inc. v. City of Minneapolis

• Court: Minnesota Supreme Court
• Writing for the Court: McKEIG, Justice.
• Citation: 24 N.W.3d 287
• Docket Number: A23-0191
• Decision Date: 30 July 2025
• Parties: FLETCHER PROPERTIES, INC., et al., Appellants, v. CITY OF MINNEAPOLIS, Respondent, Poverty & Race Research Action Council, et al., Respondents, HOME Line, Respondent.
• topic: Civil Rights,Commercial Litigation,Contracts,Administrative Law

24 N.W.3d 287

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

v. CITY OF MINNEAPOLIS, Respondent,Poverty & Race Research Action Council, et al., Respondents,HOME Line, Respondent.

A23-0191

Supreme Court of Minnesota.

Filed: July 30, 2025

[24 N.W.3d 295]

Court of Appeals

Tamara O’Neill Moreland, Inga K. Kingland, Larkin Hoffman Daly & Lindgren Ltd., Minneapolis, Minnesota, for appellants.

Kristyn Anderson, Minneapolis City Attorney, Kristin R. Sarff, Tracey N. Fussy, Assistant City Attorneys, Minneapolis, Minnesota, for respondent City of Minneapolis.

Lawrence McDonough, Samuel Spaid, Daniel P. Suitor, Bloomington, Minnesota, for respondent HOME Line.

Keith Ellison, Attorney General, Rachel Bell-Munger, Anne Kealing, Assistant Attorneys General, Saint Paul, Minnesota, for amicus curiae Minnesota Department of Human Rights and Minnesota Housing Finance Agency.

Keith Ellison, Attorney General, Liz Kramer, Solicitor General, Michael Goodwin, Katherine Kelly, Rebecca Stillman, Assistant Attorneys General, Saint Paul, Minnesota, for amicus curiae State of Minnesota.

John D. Cann, Margaret Kaplan, Shana Tomenes, Housing Justice Center, Saint Paul, Minnesota, for amicus curiae Minnesota Housing Partnership.

OPINION

McKEIG, Justice.

Appellants are persons and entities who own multi-tenant residential properties in Minneapolis (collectively, Fletcher). An ordinance adopted by respondent City of Minneapolis (the Ordinance) prohibits certain property owners, property managers, and others (collectively, Minneapolis landlords) from refusing to rent property to tenants when their refusal is motivated by a desire to avoid the burden of complying with the requirements of a public assistance program, including Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f. In a previous appeal in this matter, we concluded that the Ordinance does not violate the Minnesota Constitution’s guarantees of substantive due process and equal protection. Fletcher Props., Inc. v. City of Minneapolis, 947 N.W.2d 1, 6 (Minn. 2020). Fletcher now asserts two claims under Minnesota law: (1) that the Ordinance violates the Takings Clause of the Minnesota Constitution, Minn. Const. art. I, § 13; and (2) that the Ordinance is preempted by the Minnesota Human Rights Act (MHRA), Minn. Stat. chapter 363A (2024). Because we conclude that the Ordinance does not effect a taking under the Minnesota Constitution, and it is not preempted by the MHRA, we affirm.

FACTS

The Housing Choice Voucher program (HCV or voucher program), is part of the federal program, known as Section 8, that provides rent subsidies to eligible families, seniors, and people with disabilities to help them pay for housing in the private market. See generally 42 U.S.C. § 1437f(o); 24 C.F.R. § 982.1(a) (2024). The United States Department of Housing and Urban Development (HUD) funds Section 8 programs. Specifically, HUD “pays rental subsidies so eligible families can afford decent, safe, and sanitary housing.” 24 C.F.R. § 982.1(a)(1). Local public housing authorities enter annual contracts with HUD, and they administer the program in their region.

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24 C.F.R. § 982.151(a) (2024). In Minneapolis, the Minneapolis Public Housing Authority (MPHA) administers the voucher program. Fletcher Props., Inc. v. City of Minneapolis (Fletcher I), 947 N.W.2d 1, 7 (Minn. 2020).

Under the HCV program, families can select privately owned rental units that meet “housing quality standards.” 24 C.F.R. § 982.1(a)(2). The family pays a portion of the rent, usually about 30 percent of their income. See 24 C.F.R. § 982.1(a)(3). The public housing authority—here, MPHA—pays the remainder of the rent, up to a maximum amount based on HUD’s calculation of the fair market value for the area. See 42 U.S.C. § 1437f(c)(l)(B); 24 C.F.R. § 982.4(b) (2024); 24 C.F.R. § 982.1(a)(2).

Under federal law, participation in the HCV program is voluntary for both landlords and tenants. See, e.g., Salute v. Stratford Greens Garden Apartments, 136 F.3d 293, 296 (2d Cir. 1998); Knapp v. Eagle Prop. Mgmt. Corp., 54 F.3d 1272,1280 (7th Cir. 1995). Owners who participate in the program enter into a Housing Assistance Payments Contract (HAP contract) with the public housing authority for each participating tenant. See 24 C.F.R. § 982.451(a)(1) (2024). A HAP contract is a legal agreement between a public housing authority and a property owner that outlines the terms of rental assistance for a specific unit under the HCV program. As part of the HAP contract, landlords must, among other things, specify a minimum length of initial lease and agree to maintain the rental unit according to housing quality standards. 24 C.F.R. § 982.401 (2024). The HAP contract also provides that the public housing agency, in this case the MPHA, may change the amount it pays to a landlord during the contract term upon notice. As part of the HAP contract, landlords must agree to a tenancy addendum. The tenancy addendum outlines the specific terms and conditions of the tenancy, particularly those related to the HCV program. In Minnesota, the MPHA allows owners to retain and enforce the terms of their own lease under the HCV program.

Before a voucher holder rents a unit, the MPHA conducts an inspection to determine whether the unit meets HCV housing quality standards (HQS inspection).¹ 24 C.F.R. § 982.305(b)(l)(i) (2024). After the initial inspection, periodic HQS inspections must be conducted at least biennially. 24 C.F.R. § 982.405(b) (2024).

As of 2018, the MPHA administered around 4,870 vouchers annually, benefiting about 17,000 people. Rental housing in Minneapolis has become increasingly competitive and expensive over the past 10 years. Certain types of units are extremely scarce; for “rental units accessible to very low-income families,” the vacancy rate has been less than one percent.

In June 2015, the Minneapolis City Council published notice of its intent to introduce an amendment “prohibiting discrimination based on receipt of public assistance, including tenant-based Section 8 assistance.” Over the next two years, the City conducted meetings and phone calls with owners, tenants, advocates, and representatives of industry organizations. It also held focus groups and large meetings

[24 N.W.3d 297]

with individual stakeholders and the public at large.

In March 2017, the City amended the section of its civil rights ordinances addressing discrimination in real estate. Before the amendment, the section prohibited landlords from refusing to rent to prospective tenants “because of race, color, creed, religion, ancestry, national origin, sex, sexual orientation, gender identity, disability, marital status, status with regard to public assistance or familial status.” Minneapolis Code of Ordinances (MCO), tit. 7, § 139.40(e) (2016). The amendment made it “an unfair discriminatory act” for a landlord to refuse to rent to a prospective tenant “because of … any requirement of a public assistance program.” MCO, tit. 7, § 139.40(e) (2017).

The City amended the Ordinance again in December 2017. It currently reads, as is relevant here:

(e) Discrimination in property rights.

It is an unlawful discriminatory practice for an owner, lessee, sublessee, managing agent, real estate broker, real estate salesperson or other person having the right to sell, rent or lease any property, or any agent or employee of any of these, when race, color, creed, religion, ancestry, national origin, sex, sexual orientation, gender identity, disability, marital status, familial status, emancipated minor status, status with regard to a public assistance program, or any requirement of a public assistance program is a motivating factor:

(1)To refuse to sell, rent or lease, or to refuse to offer for sale, rental or lease; or to refuse to negotiate for the sale, rental, or lease of any real property; or to represent that real property is not available for inspection, sale, rental, or lease when in fact it is so available; or to otherwise make unavailable any property or any facilities of real property. It is an affirmative defense if the refusal, denial, or withholding is due to a requirement of a public assistance program and that requirement would impose an undue hardship. The department may promulgate rules or regulations establishing standards for undue hardship determinations.

….

MCO, tit. 7, § 139.40(e)(1) (2025) (emphasis added). Under the Ordinance, the HCV program is a public assistance program. MCO, tit. 7, § 139.20 (2025) (defining “[p]ublic assistance program” to include any “tenant-based federal, state or local subsidies, including, but not limited to, rental assistance, rent supplements, and housing choice vouchers”).

As reflected above, the 2017 amendment also includes an affirmative defense of undue hardship for landlords. Minneapolis landlords may raise the defense if a “refusal, denial, or withholding is due to a requirement of a public assistance program and that requirement would impose an undue hardship.” MCO, tit. 7, § 139.40(e)(1). “Undue hardship” is defined as “a situation requiring significant difficulty or expense when considered in light of a number of factors to be determined on a case-by-case basis.” MCO, tit. 7, § 139.20. The factors include, but are not limited to:

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

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

(3) The impact of complying with any requirement of a public assistance

[24 N.W.3d 298]

program upon the business and dwelling.

Id. Whether a landlord qualifies for the undue hardship defense is determined through an administrative process led by the City’s Department of Civil Rights. See generally MCO, tit. 7, §§ 139.20,...