Justices uphold Minneapolis low-income housing rule

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During the COVID-19 crisis, housing for low-income residents has become a hot topic. A recent decision by the Minnesota Supreme Court could prove to be a boon for citizens who live in Section 8 housing.

The court considered a constitutional challenge to an ordinance adopted by respondent city of Minneapolis that prohibits some property owners, property managers, and others from refusing to rent property to prospective tenants if that refusal is motivated by wanting to avoid the burden of complying with the requirements of Section 8 of the United States Housing Act of 1937.

The appellants in the case, Fletcher Properties, own and rent residential properties in Minneapolis. They assert that the ordinance violates the Due Process Clause and the Equal Protection Clause of the Minnesota Constitution.

The United States Department of Housing and Urban Development (HUD) funds Section 8 programs, and local housing authorities administer the programs in their regions. In the case of Minneapolis, the administrator is the Minneapolis Public Housing Authority.

Under federal law, participation in Section 8 is voluntary for both landlords and tenants. Landlords who opt in are required to enter into a Housing Assistance Payments Contract with HUD, which subjects them to rules that apply only when landlords lease to renters who have vouchers to help pay their rent.

For years, voucher holders had trouble finding landlords who accept Section 8 housing choice vouchers. Since 2015, the Minneapolis City Council has held private meetings, public hearings, surveys, and focus groups with landlords, tenants, tenant advocates, and representatives of housing industry organizations to address that issue.

In March 2017, the city amended the section of its civil rights title addressing discrimination in real estate. The amendment added a new prohibition providing that a landlord may not refuse to rent to a prospective tenant “because of … any requirement of a public assistance program.”

In its final form, the pertinent section of the ordinance reads, “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 … status with regard to a public assistance program, or any requirement of a public assistance program is a motivating factor.”

The amendments also added an affirmative defense for landlords providing that refusing to rent due to a requirement of a public assistance program is not unlawful if the “requirement would impose an undue hardship.”

Fletcher’s complaint alleged that the amended ordinance is pre-empted by state law, violates the Due Process Clause of the Minnesota Constitution, is an unconstitutional partial regulatory taking, unlawfully interferes with freedom of contract and violates the Equal Protection Clause of the Minnesota Constitution.

Hennepin County District Court granted summary judgment in favor of the owners, concluding that the ordinance violated the due process and equal protection clauses. The Court of Appeals reversed on both claims and remanded to the District Court for it to consider the other three claims. The Supreme Court granted the owners’ petition for review.

The court affirmed the Court of Appeals on both counts. The due process challenge, it found, because case law says government action is constitutional when the objective of the law is permissible, the means chosen to achieve that objective are reasonable and the legislative body did not act arbitrarily or capriciously in enacting the law.

“A law is not arbitrary or capricious when it emerged from a reasoned, deliberative process, rather than as a result of legislative chance, whim or impulse,” wrote Justice Paul Thissen in his opinion.

The court also said that the Minneapolis ordinance does not violate the owners’ substantive due process rights. The owners had contended that the ordinance will not increase housing opportunities because it will not overcome the actual barriers that voucher holders face in finding housing in Minneapolis — such as a tight rental market, screening criteria and rent increases.

They also found the conclusion that the ordinance will increase housing opportunities for voucher holders to be “at least debatable,” and that the concentration of Section 8 housing is driven by the supply of housing and not the refusal of landlords to participate in the Section 8 housing choice voucher program.

Minneapolis, though, had evidence that low participation by landlords in the Section 8 housing choice voucher program contributed to the concentration of voucher holders in poorer, more segregated neighborhoods. The city therefore could determine that making it unlawful to refuse to participate in the housing choice voucher program due to the requirements of the program would increase the number of landlords who participate in the voucher program.

“Some subset of landlords in Minneapolis does not rent to voucher holders,” wrote Thissen. “Refusing to allow landlords to opt out of the housing choice voucher program due to the burden of complying with its requirements is one rational step toward reducing refusals to rent based on prejudice against voucher holders.”

In a concurrence seconded by Chief Justice Lorie Gildea, Justice Barry Anderson wrote, “We should neither weigh the credibility of legislative testimony nor second-guess the accuracy of legislative determinations of fact absent overwhelming contrary evidence. Doing otherwise impermissibly encroaches on the legislative branch and violates the separation of powers doctrine.”

RELATED: Fletcher Properties Inc., et al. v. City of Minneapolis