City of Seattle sued over move-in fee legislation (UPDATED)

Yesterday the Rental Housing Association of Washington filed a lawsuit against the city over the ordinance passed last December that caps move-in fees a landlord may charge and requires most landlords to allow those fees to be paid over six months in installments.

The RHA is a trade association representing over 5400 landlords throughout the state.

The lawsuit asks a King County Superior Court judge to rule that the ordinance violates the state ban on rent control, as well as three sections of the state constitution: I.16, I.3, and I.5. It also asks for a permanent injunction barring the city from implementing or enforcing the ordinance.

There is a lot of bluster in the complaint filed yesterday, especially when it comes to the purported constitutional violations (we’ll come back to those in a bit). But the heart (and most specific) of the claims is that the move-in fee legislation violates the state ban on rent control. Here is the text of the relevant state law, RCW 35.21.830:

Controls on rent for residential structures—Prohibited—Exceptions.
The imposition of controls on rent is of statewide significance and is preempted by the state. No city or town of any class may enact, maintain, or enforce ordinances or other provisions which regulate the amount of rent to be charged for single-family or multiple-unit residential rental structures or sites other than properties in public ownership, under public management, or properties providing low-income rental housing under joint public-private agreements for the financing or provision of such low-income rental housing. This section shall not be construed as prohibiting any city or town from entering into agreements with private persons which regulate or control the amount of rent to be charged for rental properties.

This raises two issues:

  • It says cities can’t regulate “the amount of rent to be charged.” But do move-in fees such as pet deposits, security deposits, etc. count as “rent?”  The move-in fee ordinance definitely regulates the amounts to be charged for those other fees. However, the state law fails to actually define the term “rent,” so it’s unclear whether the law constrains the city’s ability to regulate them.
  • The title and first sentence of the state law refer to “controls on rent.” Is that limited to “regulating the amount to be charged” as described in the following sentence, or is it more broadly interpreted to mean other forms of “controls” such as requiring landlords to allow a security deposit and last month’s rent to be paid in installments?

The Rental Housing Association argues that the state law also prohibits regulating all the ancillary fees, as well as broadly prohibiting other kinds of “controls on rent.”  In its press materials, the RHA says “There are many things that go in to forming a rental agreement and a part of the financial agreement, not exclusively the rent value itself. The ordinance violates those rights.”

As for the constitutional violations, let’s review the sections of the state constitutions cited:

  • Article I, Section 3 says “No person shall be deprived of life, liberty, or property, without due process of law.”  The RHA argues that the ordinance’s terms are “unduly oppressive” and “deprive property owners of property without due process of law.” It does so broadly, without identifying specific terms that violate due process requirements.
  • Article I, Section 5 says “Every person may freely speak, write and publish on all subjects, being responsible for the abuse of that right.” Again, it casts this allegation in broad terms without specifying what in the ordinance violates landlords’ free speech rights.
  • Article I, Section 16 says “Private property shall not be taken for private use, except for private ways of necessity, and for drains, flumes, or ditches on or across the lands of others for agricultural, domestic, or sanitary purposes. No private property shall be taken or damaged for public or private use without just compensation having been first made…”  Here the RHA is a bit more specific, claiming “the right to rent property, the right to rent property on financial terms of one’s choosing, and the right to collect security deposits up front in an amount that the owner deems necessary to protect property and ensure performance of a tenant’s obligations, as is customary in the residential rental industry, are, inter alia, fundamental attributes of property ownership.” In essence, the RHA is arguing that imposing regulations on move-in fees is an illegal “taking” of private property from a landlord for the benefit of another private party (the tenant). Still, given the broad set of regulations that apply to rental housing, many of which impose financial burdens on landlords (such as maintaining the unit to a safe and habitable standard, as well as general limits on predatory or discriminatory pricing) it will be a challenge to argue that the city’s move-in fee ordinance is an illegal violation of property rights.

The complaint accuses the city of instituting “a cumulative web of oppressive regulations as if invasive municipal management of residential rental property will solve the housing affordability situation.” In fact, it asks the judge to declare that “the Ordinance and the specific provisions challenged in this action impermissibly impose on individual private landlords what should be the common burden of the City as a whole to underwrite governmental ‘solutions’ to the affordable housing situation in the City of Seattle.” This is a fairly laughable attempt to play the victim card, suggesting that the city is laying all the blame for the housing affordability crisis on landlords.

I’ve argued before that the move-in fee ordinance is not a great piece of legislation: it started out well intentioned with many good ideas but poorly constructed and unnecessarily complex. It improved through the legislative process, over the protestations of the bill’s sponsor, Council member Sawant, and ended up being a good (but not great) ordinance.  Perhaps the strongest argument the RHA put forward is that the ordinance violates the state ban on rent control — and even that is far from an easy sell. Nevertheless, it will be up to the courts to interpret the state and local law.

It’s curious, and perhaps telling, that the RHA complaint doesn’t cite any case law precedents in support of its position. To be sure, the bulk of the citations are normally in the briefs to follow, but if there were a handful of clearly-established precedents that support its case, we would expect to see references to them. Their absence suggests that either the case law isn’t on their side, or this is uncharted territory.

It’s also interesting that the RHA didn’t ask for a preliminary injunction (though that may still be forthcoming). To get one would require meeting a high bar: they would need to show that they are likely to succeed on the merits of their case, they are likely to suffer irreparable harm without one, the balance of interests tips in their favor, and granting an injunction is in the public interest. That might be beyond their reach.

By law, the RHA can only file this case on behalf of its members if it doesn’t require the participation of any of those members in litigating the case. That speaks volumes about the RHA’s legal strategy: they won’t be arguing “facts on the ground,” but instead they will be arguing legal interpretation of the ordinance itself, as the Washington constitution and state law applies to it.

As far as suing the City of Seattle over recent legislation, the RHA has plenty of company. They join:

  • the ACLU suing over homeless encampment “sweeps”;
  • Uber suing over the city granting its drivers the right to unionize;
  • The US Chamber of Commerce suing over granting drivers for Uber, Lyft and other companies the right to unionize;
  • a group of Uber drivers suing over the way the city structured the process of establishing collective bargaining;
  • a group of Seattle landlords suing over the “first in time” ordinance;
  • The Hotel Association and Hospital Association suing over I-124.

A spokesperson for the City Attorney’s Office says that they will “vigorously defend the ordinance.” UPDATE: A spokesperson for the RHA says that that they will not be seeking an emergency injunction.

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