Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. 507649
Sepulveda, J.
Appellants KDF Post Street, L.P. (KDF) and VPM Management, Inc. appeal following the trial court’s denial of their petition for a writ of administrative mandate (Code Civ. Proc., § 1094.5) challenging an amendment to the rent control ordinance of respondent City and County of San Francisco. They argue that the amendment is impermissibly retroactive, is preempted by state and federal law, and violates the contract clauses of the United States and California Constitutions, because it interferes with their ability to receive tax credits in connection with a building that KDF owns. We affirm.
I.
Factual and Procedural
Many of the facts come from the 13-volume administrative record, which appellants lodged with this court on September 14, 2009.
A. KDF’s Purchase of Real Property Through Tax Credit and Bond Programs.
KDF owns about 9, 000 residential units in buildings located throughout Northern and Southern California. It focuses almost exclusively on affordable housing. In late 2005, it took steps to acquire a five-story, 64-unit apartment building at 1030 Post Street in San Francisco (the building), the subject of this litigation.
In connection with its planned acquisition of the building, KDF applied in September 2005 for tax credits through the federal low-income housing tax credit (LIHTC) program. (26 U.S.C.A. § 42; Health & Saf. Code, § 50199.4 et seq. [implementing federal statute].) The LIHTC program “allows ‘eligible taxpayers [to] take a credit against federal income taxes due for qualified expenditures involving qualified low-income housing projects. To be eligible for the tax credit, the taxpayer must hold an ownership interest in a low-income housing project for which tax credits have been awarded. In exchange for the tax credits, the project owners agree to operate the project in accordance with the restrictions contained in [26 United States Code] Section 42 and IRS regulations. Furthermore, as a condition of receiving tax credits, the project owners are required to enter into a recorded regulatory agreement restricting the use of the property to its terms.” (State Building & Construction Trades Council of California v. Duncan (2008) 162 Cal.App.4th 289, 296.)
The federal government annually allocates a fixed amount of LIHTCs to the states, and each state is responsible for adopting an allocation plan to determine how to distribute its share of tax credits to eligible, competing projects. (State Building & Construction Trades Council of California v. Duncan, supra, 162 Cal.App.4th at p. 296.) “ ‘The California agency responsible for tax credit allocation, and for developing the state’s annual qualified allocation plan, is the California Tax Credit Allocation Committee [(TCAC)], a unit of the State Treasurer’s Office.’ ” (Ibid.; Health & Saf. Code, § 50199.10, subd. (a).) The TCAC “ ‘reviews applications from project developers and allocates the state’s federal tax credits on a competitive basis, using the prescribed criteria in [United States Code] section 42 and the additional [tax] criteria contained in [the TCAC’s] own regulations.’ ” (State Building & Construction, supra, at p. 296.)
To qualify under the LIHTC program, a developer must elect to designate either (1) 20 percent or more of the units in a project as rent-restricted, and set aside those units to be occupied by people whose income is 50 percent or less of area median gross income, or (2) 40 percent or more of the units in a project as rent-restricted, and set aside those units to be occupied by people whose income is 60 percent or less of area median gross income. (26 U.S.C.A. § 42(g).) A unit is considered “rent-restricted” if the gross rent for the unit does not exceed 30 percent of the imputed income limitation applicable to the unit. (26 U.S.C.A. § 42(g)(2)(A).)
KDF’s application to the TCAC committed to set aside all of the units at the building for affordable housing, with the exception of one unit intended for a building manager. KDF’s application also stated that income and rent restrictions would not cause displacement of existing tenants, because “[c]urrent residents are qualified by income, ” meaning that their incomes qualified under 26 United States Code section 42(g). An attorney who represented KDF in connection with the financing and acquisition of the building later testified, however, that he believed that statement to be inaccurate, because it was his understanding that some residents of the building who lived there before KDF acquired it did not qualify by income under the statute.
KDF’s application was approved, and KDF entered into an extended use agreement pursuant to Health and Safety Code section 50199.14, subdivision (f), part of the state’s statutory scheme implementing the federal LIHTC program. (Health & Saf. Code, § 50199.4 et seq.) The agreement provides that for a period of 55 years, at least seven units of the building will be rented or held vacant for persons or families whose income is at 50 percent or below the area median income, and at least 56 units will be rented or held vacant for persons or families whose income is at 60 percent or below the area median income. The TCAC also set maximum rates that could be charged for the various units in the building.
KDF secured bond financing through the California Debt Limit Allocation Committee to fund the purchase and rehabilitation of the building. To qualify for the bond financing, KDF entered into a regulatory agreement pursuant to Health and Safety Code section 52080. The rent restrictions and income qualifications under the regulatory agreement mimic those in the agreement regarding the LIHTC program. KDF acquired the building on January 11, 2006. A property manager with appellant VPM Management testified that if KDF charged more than the permissible rent or rents to tenants whose incomes do not qualify under the applicable tax credit and bond programs, KDF would be out of compliance and would be penalized.
For example, like the agreement governing the tax credits, the regulatory agreement provides that 63 units in the building (all except one) will be set aside for tenants whose income falls below the area median income. The TCAC oversees the rent limitations for both the LIHTC program and the bond program.
KDF hired VPM Management to manage the building.
B. San Francisco’s Rent Ordinance.
A rent control ordinance (Rent Ordinance) was adopted for respondent City and County of San Francisco in 1979, and is codified in Chapter 37 of the San Francisco Administrative Code. (Golden Gateway Center v. San Francisco Residential Rent Stabilization & Arbitration Bd. (1999) 73 Cal.App.4th 1204, 1208.) The explicit mandate of the Rent Ordinance is to protect tenants from excessive rent increases. (S.F. Admin. Code, § 37.1, subd. (a)(2); Fox v. San Francisco Residential Rent etc. Bd. (1985) 169 Cal.App.3d 651, 656.) It regulates the rent that may be charged to tenants by allowing a landlord to set an initial rental rate at market levels at the beginning of a tenancy, and then permitting landlords to raise rents by only a fixed percentage thereafter. (S.F. Admin. Code, §§ 37.1, 37.3.) The Rent Ordinance also regulates evictions of tenants by setting forth the only permissible grounds for eviction. (S.F. Admin. Code, § 37.9.) The Rent Ordinance established respondent San Francisco Residential Rent Stabilization and Arbitration Board (Rent Board), which is responsible for (among other things) conducting rental arbitration hearings. (S.F. Admin. Code, §§ 37.4, 37.6, subd. (c).)
C. Proceedings Before Rent Board.
The building was occupied when KDF acquired it. In May 2006, KDF sent two letters to tenants informing them about the LIHTC program and stating that tenants could not continue to live in the building after their leases expired if they did not qualify for the LIHTC program. Tenants were asked to verify their incomes to determine whether they qualified for their rental units. At least one tenant (who was on disability) was told that his income qualified under the program, but that his rent would be raised by about $300 a month.
The attorney representing KDF in connection with the financing and purchase of the building later testified that KDF was required to terminate such tenancies. He explained that the federal government “do[esn’t] want us to put together a project that has tax credits and bonds and end up renting to a bunch of well-to-do folks that are taking advantage of the fact you’ve used credits and bonds.”
According to the VPM Management property manager, as of July 2006, no tenant of the building had been formally notified of a rent increase or otherwise been told that rental terms would change. As of September 2006, no tenant had been told to move.
Tenants of five units in the building submitted petitions to the Rent Board. They alleged that they had been told that their rents would be raised, and that they would be evicted if their incomes did not qualify under the LIHTC program. The petitions requested that the Rent Board determine whether the tenants’ current rents were lawful amounts, and asked that the Rent Board determine whether it had jurisdiction over the affected rental units.
The tenants were real parties in interest in the trial court and are respondents on appeal. To distinguish them from respondents San Francisco and Rent Board, we shall refer to the tenants as real parties in interest.
The five petitions were consolidated by the Rent Board for hearing. Tenants of three additional units also filed petitions, which were considered along with the original five. Six of the tenants are represented by counsel on appeal and have submitted a brief. No brief has been filed by other real parties in interest (most of whom are not represented by counsel). References to arguments made by real parties in interest are to the single brief filed on real parties’ behalf.
An administrative law judge (ALJ) heard testimony on the consolidated petitions over two days in July and September 2006. The sole issue to be decided was whether the Rent Board had jurisdiction to hear the tenants’ claims. Various tenants of the building testified briefly about their tenancies and how much rent they paid. A VPM Management property manager, as well as an attorney who represented KDF in connection with the financing and acquisition of the building, testified for appellants regarding the tax credit and bond programs governing the building. The attorney testified that assuming there were people living in the building who did not meet the income requirements of the relevant programs (as he believed was the case), it was his opinion that KDF was out of compliance with the agreements governing the building.
Appellants argued that the tenants’ petitions should be dismissed because the building was exempt from the Rent Ordinance. At the time of the hearing, the ordinance defined “[r]ental units” as “[a]ll residential dwelling units in the City and County of San Francisco, ” but excluded from that definition “dwelling units whose rents are controlled or regulated by any government unit, agency or authority, ” which appellants argued was the case here because of the applicable tax credit and bond programs. (Former S.F. Admin. Code, § 37.2, subd. (r)(4).) Following the close of evidence and argument, it was anticipated that the ALJ would issue a written decision by late November 2006.
On November 14, 2006, the San Francisco Board of Supervisors passed ordinance No. 281-06 (referred to by appellants as “the Peskin Amendment, ” after sponsor Aaron Peskin, hereinafter sometimes ordinance amendment), which amended the Rent Ordinance’s definition of a “[r]ental unit.” The ordinance was amended (effective December 20, 2006) to provide: “The term ‘rental units’ shall include units in a building for which tax credits are reserved or obtained pursuant to the federal low income housing tax credit program (LIHTC, Section 42 of the Internal Revenue Code, 26 U.S.C. Section 42), that satisfy the following criteria: [¶] (i) Where a tenant’s occupancy of the unit began before the applicable LIHTC regulatory agreement was recorded; and, [¶] (ii) Where the rent is not controlled or regulated by any use restrictions imposed by the City and County of San Francisco, the San Francisco Redevelopment Agency, the State of California Office of Housing and Community Development, or the United States Department of Housing and Urban Development. [¶] Nothing in this Section 37.2(r)(4)(C) precludes a landlord from seeking an exemption on the basis of substantial rehabilitation under Section 37.2(r)(6). [¶] This Section 37.2(r)(4)(C) definition of ‘rental unit’ shall apply to any unit where the qualifying tenant (see Section 37.2(r)(4)(C)(i)) is in possession of the unit on or after the effective date of this ordinance (Ord. No. 281-06), including but not limited to any unit where the tenant has been served with a notice to quit but has not vacated the unit and there is no final judgment against the tenant for possession of the unit as of the effective date of this ordinance (Ord. No. 281-06).” (S.F. Admin. Code, § 37.2, subd. (r)(4)(C).) Following the passage of the ordinance amendment, the ALJ permitted additional briefing on the effect of the amendment to the parties’ dispute.
On May 21, 2007, the ALJ granted tenants’ petitions, concluding that the ordinance amendment applied to the tenant petitioners’ units and that the Rent Board therefore had jurisdiction. Appellants appealed to the Rent Board, which denied the appeal on July 10, 2007.
The ALJ’s written decision contemplated further proceedings, as it stated: “To the extent that the tenant petitioners wish to pursue any additional claims in the petitions that were not addressed in this Decision, those matters will be scheduled for further hearings after the Decision on Jurisdiction becomes final.”
D. Proceedings in Trial Court.
Appellants filed a petition for a writ of administrative mandamus. (Code Civ. Proc., § 1094.5.) They requested that the trial court set aside the ALJ’s decision and prohibit the Rent Board from enforcing the ordinance amendment. The trial court denied the petition, rejecting appellants’ arguments that the ordinance amendment was preempted by federal and state law, violated the contract clauses of the federal and state constitutions, and was impermissibly retroactive. This timely appeal followed.
II.
Discussion
A. Challenges to ALJ’s “Factual Findings.”
We first address appellants’ argument that the ALJ made a finding that was not supported by the evidence. In posthearing briefing regarding the effect of the ordinance amendment, appellants stated, “If the changes in the law embodied in Ord. No. 281-06 are constitutional and otherwise valid, then tenant petitioners’ rental units are now subject to [the] Rent Ordinance, ” then argued that the amendment was invalid. (Italics omitted.) In concluding that the ordinance amendment applied to the affected rental units, the ALJ’s decision stated that “the landlords concede that the amendment to Ordinance Section 37.2(r)(4) as written applies to the petitioner’s units, ” but that they contended that the amendment was invalid.
Appellants argue that the ALJ abused her discretion by erroneously finding that appellants conceded that the ordinance amendment applied to the tenants’ units. (Code Civ. Proc., § 1094.5, subds. (b), (c) [trial court may issue writ of administrative mandamus where agency abused its discretion by making finding unsupported by evidence]; Fukuda v. City of Angels (1999) 20 Cal.4th 805, 824 [both trial and appellate courts determine whether findings are supported by substantial evidence in the light of whole record].) Reading the ALJ’s statement in context, however, it is clear that the ALJ recognized that appellants conceded (as they were all but required to do given the language of the ordinance amendment) only that the ordinance amendment applied to them assuming that the amendment was otherwise valid. The ALJ acknowledged that appellants nonetheless challenged the amendment on several grounds. There was no erroneous factual “finding” by the ALJ.
B. Challenges to ALJ’s Legal Conclusions.
The ALJ also concluded that she lacked the authority to consider any of appellants’ legal challenges to the ordinance amendment, and therefore declined to consider them. When appellants appealed the ALJ’s decision to the Rent Board, they argued that the ALJ abused her discretion in refusing to consider their challenges. In response, the ALJ directed the Rent Board to article III, section 3.5 of the California Constitution, which provides that an administrative agency has no power to declare a statute unenforceable or unconstitutional, or to refuse to enforce a statute. On appeal, appellants accuse the ALJ of “ignoring” their legal arguments and characterize her decision to do so as “remarkable.” However, they cite no legal authority for the proposition that the ALJ was authorized or required to consider their specific legal challenges to the ordinance amendment, and they apparently do not argue that this court should reverse based on the ALJ’s failure to consider their challenges to the ordinance amendment.
In the trial court, no party questioned whether filing a writ of administrative mandate was the proper procedure for challenging the application of the ordinance amendment to the building. On appeal, real parties in interest argue (apparently for the first time) that appellants “should file a separate action to challenge the Ordinance” because the ALJ concluded that she did not have the authority to rule on the legal challenges to the ordinance amendment. Real parties do not cite any legal authority for this argument or further specify what sort of “separate action” appellants were required to file. To the extent that real parties challenge the jurisdiction of the trial court or this court to consider appellants’ arguments, we reject this argument. “A challenge of the constitutionality of [an] act as it is applied to an individual under the facts of a particular case by an administrative board is essentially a review of the validity of the administrative action and as such is properly brought under the provisions of [Code of Civil Procedure] section 1094.5 rather than by means of a separate action for declaratory relief [citations].” (Mobil Oil Corp. v. Superior Court (1976) 59 Cal.App.3d 293, 307 [right to challenge constitutionality of administrative agency’s regulation in trial court]; see also Fenske v. Board of Administration (1980) 103 Cal.App.3d 590, 595 [superior court has authority to declare statute unconstitutional].) “The interpretation of statutes and ordinances ‘is ultimately a judicial function.’ ” (MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 219 [administrative mandamus action challenging interpretation of mobile home rent control ordinance].)
We separately address appellants’ challenges to the ordinance amendment, which are issues of law we review de novo. (Horwitz v. City of Los Angeles (2004) 124 Cal.App.4th 1344, 1354; MHC Operating Limited Partnership v. City of San Jose, supra, 106 Cal.App.4th at p. 220.)
C. Ordinance Amendment Not Impermissibly Retroactive.
Appellants argue that they are exempt from the Rent Ordinance under the version of the ordinance that was in effect when they purchased the building in January 2006 (former S.F. Admin. Code, § 37.2, subd. (r)(4) [ordinance not applicable to “dwelling units whose rents are controlled or regulated by any government unit, agency or authority”]) and that the ordinance amendment was impermissibly retroactive, depriving them of a vested right without due process of law. We first stress that appellants’ argument presupposes that appellants were, in fact, exempt from the Rent Ordinance before the adoption of the ordinance amendment, an issue that was vigorously disputed before the ALJ and never resolved.
Appellants claim that both the Rent Board and San Francisco Superior Court previously had ruled that “units subject to government control or regulations are exempt from the Rent Ordinance.” They purport to cite to three cases, but it is unclear whether those cases appear anywhere in the record, as they direct us only to the ALJ’s decision that referred to the cases. Appellants’ posthearing brief to the Rent Board cited the cases at issue but did not include them as exhibits to the brief. Real parties in interest refer to the ordinance amendment as a “[c]larification of the definition of ‘rental unit, ’ ” without any supporting legal authority for this proposition. (Cf. City of West Hollywood v. 1112 Investment Co. (2003) 105 Cal.App.4th 1134, 1143 [amendment to Civil Code was change in law, not clarification of existing law].) We agree with respondents that the question of whether the Rent Ordinance previously applied to the building “remains unresolved.”
Even though the ALJ did not address the issue of whether appellants previously were exempt, real parties in interest apparently contend that this court should decide the issue. They argue in passing that the building was always subject to the Rent Ordinance because it underwent seismic strengthening, and that we therefore need not decide whether the ordinance amendment was applied in an impermissibly retroactive manner. (S.F. Admin. Code, § 37.2, subd. (r)(4).) The inquiry in a proceeding for a writ of administrative mandate “shall extend to the questions whether the respondent [administrative agency] has proceeded without, or in excess of jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion.” (Code Civ. Proc., § 1094.5, subd. (b).) Because the ALJ made no finding on whether any seismic strengthening done to the building made it subject to the Rent Ordinance, we decline to address this disputed factual issue on appeal. (In re Marriage of Davis (1983) 141 Cal.App.3d 71, 75-76 [Code Civ. Proc., § 909 authorizes appellate court to make findings only under certain circumstances]; see also Wachovia Bank v. Lifetime Industries, Inc. (2006) 145 Cal.App.4th 1039, 1048 [power to make additional factual findings on appeal should be invoked sparingly]; Replogle v. Ray (1941) 48 Cal.App.2d 291, 311 [power of appellate court to make factual findings may be exercised in court’s sound discretion].)
The Rent Ordinance provides that “units in unreinforced masonry buildings which have undergone seismic strengthening in accordance with Building Code Chapters 16B and 16C shall remain subject to the Rent Ordinances to the extent that the ordinance is not in conflict with the seismic strengthening bond program or with the program’s loan agreements or with any regulations promulgated thereunder.” (S.F. Admin. Code, § 37.2, subd. (r)(4).) Real parties in interest submitted documents to the Rent Board showing that the building underwent seismic strengthening in 1999, but appellants disputed that the seismic strengthening provision of the Rent Ordinance applied.
Assuming arguendo that the building was previously exempt from the Rent Ordinance, we disagree that the ordinance amendment was impermissibly “retroactive.” “A statute has retrospective effect when it substantially changes the legal consequences of past events. [Citation.] A statute does not operate retrospectively simply because its application depends on facts or conditions existing before its enactment. [Citation.]” (Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 243; see also 20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216, 281 [regulations retroactive if they alter past legal consequences of past actions].) “ ‘In deciding whether the application of a law is prospective or retroactive, we look to function, not form.... Does the law “change[] the legal consequences of past conduct by imposing new or different liabilities based upon such conduct[?]” [Citation.] Does it “substantially affect[] existing rights and obligations[?]” [Citation.] If so, then application to a trial of preenactment conduct is forbidden, absent an express legislative intent to permit such retroactive application. If not, then application to a trial of preenactment conduct is permitted, because the application is prospective.’ [Citation.] Viewed functionally, a statute that establishes rules for the conduct of pending litigation without changing the legal consequences of past conduct ‘ “ ‘is not made retroactive merely because it draws upon facts existing prior to its enactment.... [Instead, ] [t]he effect of such statutes is actually prospective in nature since they relate to the procedure to be followed in the future.’ [Citations.] For this reason, [the Supreme Court] ha[s] said that ‘it is a misnomer to designate [such statues] as having retrospective effect.’ ” ’ [Citation.]” (Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 230-231.)
The trial court concluded that the ordinance amendment was not impermissibly retroactive because “[i]n legal effect, it operates only on a going forward basis, making residential tenancies in units at 1030 Post Street (and at any other residential rental properties that fall within the terms of Ordinance No. 281-06) subject to the City’s Rent Ordinance only from the date Ordinance No. 281-06 takes effect onward, not before.” Appellants disagree, arguing that the amendment “has a retroactive effect in that it changed existing law and made units in the Building that were once exempt from the Rent Ordinance now come under the protections of the Rent Ordinance.” But just because a law is changed does not mean that its application in a given case is necessarily “retroactive.” Here, application of the ordinance amendment does not alter the “legal consequences of past events.” (Western Security Bank v. Superior Court, supra, 15 Cal.4th at p. 243, italics added.) In other words, real parties in interest did not seek refunds on amounts previously paid in rent or seek to alter the legal effect of any of their or appellants’ past conduct. Instead, they sought a determination whether their current rent was lawful, and whether the Rent Ordinance currently applied to the subject building.
This distinction is illustrated by City of West Hollywood v. 1112 Investment Co., supra, 105 Cal.App.4th 1134, upon which appellants rely. There, appellant city filed suit against property owners in June 2000 seeking injunctive relief to prohibit the owners from collecting rents authorized by the city’s rent control ordinance and requiring the owners to refund to tenants excess rent collected since 1999. (Id. at p. 1141.) After the trial court granted summary judgment for the property owners, the Legislature amended the Civil Code to eliminate an exemption to local rent control ordinances that previously applied to the property at issue. (City of West Hollywood at p. 1142.) The main issue in the case was whether the amendment simply clarified existing law or, as the court concluded, constituted a change in the law. (Id. at p. 1143.) The court reasoned that “[t]o apply the amendment [to the Civil Code] to respondent owners in this case would substantially change the legal consequences of their past actions: the rents they charged in previous years. In other words, were we to accept City’s invitation to apply the amendment to this case, we would be giving the amendment retrospective effect. The Legislature did not indicate its intent to do that.” (Id. at p. 1145, italics added.)
Here, by contrast, the application of ordinance No. 281-06 would not change the legal consequence of any past actions taken by appellants. Although the amendment may affect the legal status of a building purchased before the adoption of the amendment, application of the amendment “ ‘ “ ‘is not made retroactive merely because it draws upon facts existing prior to its enactment.’ ” ’ ” (Californians for Disability Rights v. Mervyn’s, LLC, supra, 39 Cal.4th at p. 231.) “[A] statute is not retroactive merely because it draws upon antecedent facts for its operation.” (Burks v. Poppy Construction Co. (1962) 57 Cal.2d 463, 474 [no problem of retroactivity in applying law prohibiting discrimination in connection with sale of publicly assisted housing to property that began receiving public assistance before effective date of statute].) We agree with the trial court that the ordinance amendment is not impermissibly retroactive.
Because we conclude that the ordinance amendment is not impermissibly retroactive, we need not consider whether retroactive application of the amendment is necessary to promote an important state interest, or whether it deprives appellants of vested rights in violation of the due process clause, as appellants claim. (In re Marriage of Bouquet (1976) 16 Cal.3d 583, 592-593 [upholding retroactive application of amendment affecting community property rights because of state interest in equitable distribution of marital property].)
D. No Preemption of Rent Ordinance.
Appellants also argue that the Rent Ordinance is preempted by federal and state laws to the extent that it attempts to regulate units at the building. “ ‘The supremacy clause of article VI of the United States Constitution grants Congress the power to preempt state law. State law that conflicts with a federal statute is “ ‘without effect.’ ” [Citations.] It is equally well established that “[c]onsideration of issues arising under the Supremacy Clause ‘start[s] with the assumption that the historic police powers of the States [are] not to be superseded by... Federal Act unless that [is] the clear and manifest purpose of Congress.’ ” [Citation.] Thus, “ ‘ “[t]he purpose of Congress is the ultimate touchstone” ’ of pre-emption analysis.” [Citation.]’ ” (Jevne v. Superior Court (2005) 35 Cal.4th 935, 949.)
There are four types of preemption: “express, conflict, obstacle, and field. [Citation.] [¶] First, express preemption arises when Congress ‘define[s] explicitly the extent to which its enactments pre-empt state law. [Citation.] Pre-emption fundamentally is a question of congressional intent, [citation], and when Congress has made its intent known through explicit statutory language, the courts’ task is an easy one.’ [Citations.] Second, conflict preemption will be found when simultaneous compliance with both state and federal directives is impossible. [Citations.] Third, obstacle preemption arises when ‘ “under the circumstances of [a] particular case, [the challenged state law] stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” ’ [Citations.] Finally, field preemption, i.e., ‘Congress’ intent to pre-empt all state law in a particular area, ’ applies ‘where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress “left no room” for supplementary state regulation.’ [Citations.]” (Viva! Internat. Voice for Animals v. Adidas Promotional Retail Operations, Inc. (2007) 41 Cal.4th 929, 935-936.) It is the burden of the party claiming preemption to prove it. (Id. at p. 936.)
Appellants claim field and conflict preemption, which we address separately below.
Appellants assert that conflict preemption exists “where it is impossible to comply with both local and federal requirements, or where local law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” (Italics added.) The latter principle defines obstacle preemption, which the California Supreme Court has recognized is often grouped together with conflict preemption, such that courts often identify only express, field, and conflict preemption. (Viva! Internat. Voice for Animals v. Adidas Promotional Retail Operations, Inc., supra, 41 Cal.4th at p. 935, fn. 3 [past United States Supreme Court and California Supreme Court opinions identify only three species of preemption].) Because the California Supreme Court has concluded that conflict and obstacle preemption “are analytically distinct and may rest on wholly different sources of constitutional authority” (id. at p. 936, fn. 3), and because appellants argue that the Rent Ordinance interferes with the implementation of federal and state laws (another way of saying that the local ordinance serves as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress), we also separately address obstacle preemption.
1. Conflict preemption
Appellants argue that conflict preemption applies because it is impossible for them to comply simultaneously with the agreements governing the building and the Rent Ordinance, insofar as they are not permitted to charge the rents set by the TCAC and may not evict tenants based on their income levels. (County of San Diego v. San Diego NORML (2008) 165 Cal.App.4th 798, 820 [conflict preemption where “ ‘simultaneous compliance with both state and federal directives is impossible’ ”].) We disagree.
“A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.” (Cal. Const., art. XI § 7.) A local ordinance is preempted if it “mandate[s] what state law expressly forbids, [or] forbid[s] what state law expressly mandates.” (Great Western Shows, Inc. v. County of Los Angeles (2002) 27 Cal.4th 853, 866.) Cases that find conflict preemption often involve direct conflicts in the content and purpose of the laws at issue. (Stevenson v. San Francisco Housing Authority (1994) 24 Cal.App.4th 269, 281-282.)
Although appellants frame their argument in terms of federal and state laws conflicting with the ordinance amendment, it is really the particular agreements governing the building that arguably conflict with the amendment (and the Rent Ordinance). As respondents correctly observe, appellants’ agreements relating to tax credits and bonds are not legislation, and appellants cite no legal authority for the proposition that a private entity’s contract may be the basis for preemption. Instead, appellants direct this court to various state statutes that authorize the agreements governing the tax credits and bond financing of the building. (Health & Saf. Code, §§ 50199.4 et seq. [implementing Tax Reform Act of 1986]; 50199.14, subd. (f) [requiring regulatory agreement to be eligible for tax credits]; 52080 [occupancy requirement for bond financing].) However, they do not articulate why it would be impossible to comply with both the Rent Ordinance and those laws (as opposed to the particular agreements governing the building).
In the context of considering whether the National Labor Relations Act (NLRA) preempted enforcement by a state water resources authority of a lawful prehire collective-bargaining agreement, the United States Supreme Court observed that “pre-emption doctrines apply only to state regulation, ” as opposed to private contracts. (Building & Constr. Trades Council v. Associated Builders & Contractors of Mass./R.I., Inc. (1993) 507 U.S. 218, 227, original italics.) “The fact that a private actor may ‘regulate’ does not mean, of course, that the private actor may be ‘pre-empted’ by the NLRA; the Supremacy Clause does not require pre-emption of private conduct. Private actors therefore may ‘regulate’ as they please, as long as their conduct does not violate the law.” (Id. at p. 229.)
In fact, as the trial court concluded in denying the petition for a writ of administrative mandate, it is not impossible to simultaneously comply with the cited statutes and the Rent Ordinance. Appellants correctly note that Health and Safety Code section 52080, subdivision (a) mandates that a recipient of bond financing set aside a certain percentage of rental units for tenants whose incomes are below a certain level, and limits the rent that may be charged to those tenants. However, this provision does not directly conflict with the ordinance amendment, which simply states that San Francisco’s Rent Ordinance applies to rental units occupied before a building is subject to the federal low income housing tax credit program (S.F. Admin. Code, § 37.2, subd. (r)(4)(C)), not that landlords must charge more than state statutes require or that landlords may not rent to people whose income is above a certain level. (Cf. Tri County Apartment Assn. v. City of Mountain View (1987) 196 Cal.App.3d 1283, 1289 [conflict preemption where state law and local ordinance required different notification period for raising tenants’ rent].) Appellants could have lawfully entered into an agreement that set aside fewer units to low-income residents (26 U.S.C.A. § 42(g)), which would have permitted them to comply with both the Rent Ordinance and the LIHTC program.
There are, nevertheless, two potential conflicts between the Rent Ordinance and the specific agreements at issue (as opposed to the federal and state statutes authorizing those agreements). The first is that because the building is now subject to limits on rental increases set forth in the Rent Ordinance, appellants may not raise rents to levels authorized by the TCAC. However, the attorney representing KDF in connection with the financing and acquisition of the building testified that there is no requirement that KDF charge the maximum rent level permitted by the TCAC, and that it would not be a violation of LIHTC rules to charge lower rents than what is permissible under the tax credit program. In other words, KDF could charge rental rates that complied with both the relevant agreements and the Rent Ordinance.
Respondents acknowledged below that under the ordinance amendment, appellants would not be able to charge some tenants the maximum rental rates otherwise permitted under the relevant agreements. They did not, as appellants claim, concede that it is impossible to comply with both the relevant agreements and the Rent Ordinance.
The second potential conflict between the Rent Ordinance and the agreements applicable to the building is that under the Rent Ordinance tenants may not be evicted based on their income, as appellants claim is required by the LIHTC program. However, although appellants contend that they now lack “the requisite ‘just cause’ to evict tenants who do not meet the threshold income requirements under the” relevant programs, they do not specify the source of such “ ‘just cause’ ” to evict tenants that they argue otherwise existed under the relevant statutes or the specific agreements governing the building.
The attorney who represented KDF in connection with the financing and acquisition of the building testified that he was not aware of any particular eviction procedure under the LIHTC program, and this court’s own research reveals no provision for eviction of tenants who do not meet income requirements. Although the federal statute provides for situations where tenants who initially meet income requirements but later fail to meet such requirements (26 U.S.C.A. § 42(g)(2)(D)), the statute simply provides that affected units may cease to qualify for a tax credit, not that the landlord may evict tenants. (See also 8 Mertens, Law of Federal Income Taxation (20100 § 32B:47 [“no penalty” assessed when tenant’s income rises if other rental unit that becomes vacant rented to tenants satisfying income requirements].) One of the agreements governing the building provides that “[n]o tenant in the Project shall be denied continued occupancy in the Project because, after occupancy, such tenant’s household income increases such that the income for such household will no longer qualify such household as Low Income Tenants.” It apparently does not address situations where, as here, people who are not income qualified occupy a unit before a building is acquired pursuant to the LIHTC or bond financing programs.
Even assuming arguendo that authority exists for evicting tenants whose income does not qualify under the LIHTC program, the argument that the Rent Ordinance deprives appellants of that right is wholly speculative. Although the ALJ concluded that the rents for the relevant units authorized by the TCAC would “substantially exceed the allowable rents under the Rent Ordinance, ” she made no ruling on whether there were grounds to evict building tenants. The hearing before the Rent Board concerned only “the jurisdictional issue of whether the units are exempt from the Rent Ordinance.” Indeed, although it is clear that appellants consider it appropriate to terminate the tenancy of any tenant whose income does not qualify under the relevant LIHTC and bond agreements, appellants apparently had not actually sought to evict any tenant at the time of the Rent Board hearing. Moreover, appellants did not demonstrate that any tenants of the building failed to qualify based on their income (although a KDF attorney testified that he believed there were tenants living at the building who did not qualify). Unless and until appellants can demonstrate that they are unable to evict tenants as they would otherwise be authorized to do, any conflict preemption claim is wholly speculative. For all these reasons, we conclude that conflict preemption does not apply here. (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1242 [party claiming preemption has burden of demonstrating preemption].)
2. Field preemption
Field preemption occurs “ ‘where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress “left no room” for supplementary state regulation.’ [Citations.]” (Viva! Internat. Voice for Animals v. Adidas Promotional Retail Operations, Inc., supra, 41 Cal.4th at p. 936.) An intent to occupy an area exclusively “ ‘may be inferred from a “scheme of federal regulation... so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it, ” or where an Act of Congress “touch[es] a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of states laws on the same subject.” [Citation.]’ [Citation.]” (Stevenson v. San Francisco Housing Authority, supra, 24 Cal.App.4th at p. 280.) “When Congress legislates in a ‘field which the States have traditionally occupied[, ]... we start with the assumption that the historic police powers of the States were not superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” (County of San Diego v. San Diego NORML, supra, 165 Cal.App.4th at p. 822.)
As for whether state law preempts a local ordinance, “ ‘[i]f the subject matter or field of the legislation has been fully occupied by the state, there is no room for supplementary or complementary local legislation, even if the subject were otherwise one properly characterized as a “municipal affair.” [Citations.] ’ [Citation.]” (People ex rel. Deukmejian v. County of Mendocino (1984) 36 Cal.3d 476, 484-485.) “In determining whether the Legislature has preempted by implication to the exclusion of local regulation we must look to the whole purpose and scope of the legislative scheme. There are three tests: ‘(1) the subject matter has been so fully and completely covered by general law as to clearly indicate that it has become exclusively a matter of state concern; (2) the subject matter has been partially covered by general law couched in such terms as to indicate clearly that a paramount state concern will not tolerate further or additional local action; or (3) the subject matter has been partially covered by general law, and the subject is of such a nature that the adverse effect of a local ordinance on the transient citizens of the state outweighs the possible benefit to the municipality.’ [Citations.]” (Id. at p. 485.) “ ‘The task is... to determine whether the state has occupied a relevant field—an area of legislation which includes the subject of the local legislation, and is sufficiently logically related so that a court, or a local legislative body, can detect a patterned approach to the subject.’ ” (Tri County Apartment Assn. v. City of Mountain View, supra, 196 Cal.App.3d at p. 1296.)
Appellants argue that “Federal and State lawmakers intended for their laws to fully occupy the field of rent regulations and controls on projects under TCAC supervision. The laws leave no opportunity for a local Rent Board to have any say in the rent levels of these TCAC tax credit projects.” We disagree. “Preemption by implication of legislative intent may not be found when the Legislature has expressed its intent to permit local regulations. Similarly, it should not be found when the statutory scheme recognizes local regulations.” (People ex rel. Deukmejian v. County of Mendocino, supra, 36 Cal.3d at p. 485.) Although we are aware of nothing in the relevant statutory schemes that specifically recognize local rent ordinances, it is “the well-established case law of the United States Supreme Court and of [the California Supreme Court]... that ordinary rent control statutes are generally constitutionally permissible exercises of governmental authority.” (Santa Monica Beach, Ltd. v. Superior Court (1999) 19 Cal.4th 952, 962; see also Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 135-136; Tri County Apartment Assn. v. City of Mountain View, supra, 196 Cal.App.3d at p. 1286, and cases cited therein.) Appellants point to nothing in the statutory scheme that evidences an intent to displace this recognized, permissible exercise of local authority. As the trial court concluded in denying appellants’ petition for writ of administrative mandamus, “[t]he federal and state statutes at issue do not expressly occupy the field of housing regulation or rent control (including rent limits and eviction controls), and those statutes also do not evidence any intent on the part of Congress or the Legislature, respectively, to occupy those fields to the exclusion of local rent control laws.”
Respondents and real parties in interest argue that because state law and regulations require LIHTC housing projects to comply with all applicable local land use and zoning ordinances (Health & Saf. Code, § 50199.14, subd. (c)(1)(E); Cal. Code Regs., tit. 4, § 10326, subd. (g)(3)), this demonstrates that the Legislature intended to permit local control over units governed by the LIHTC program. Although it is certainly true that the Legislature anticipated local regulation, we disagree that the relevant statute and regulation explicitly authorize rent ordinances, because land use and zoning ordinances do not necessarily encompass rent control ordinances. As the attorney for KDF testified, the rules requiring compliance with land use and zoning ordinances are meant to ensure that the state does not allocate tax credits to projects that have not secured all necessary local approvals.
Appellants acknowledge that the tax credit program does not occupy the entire field of rental regulation, but they contend that the statutes “expressly occupy the field of tax credits and low-income housing programs.” (Original italics.) Even assuming this is true, the San Francisco Rent Ordinance does not purport to occupy either field, as it does not regulate in the area of tax credits or establish a low-income housing program. San Francisco therefore did not attempt to regulate in an area occupied by the state or federal governments. Because appellants have not established that the applicable federal or state statutes occupy the field of rent control, we conclude that field preemption does not apply.
3. Obstacle preemption
Finally, we reject appellants’ argument that the ordinance amendment “ ‘ “ ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’ ” ’ ” (County of San Diego v. San Diego NORML, supra, 165 Cal.App.4th at p. 821.) Appellants contend that because the Legislature and the courts have expressly declared housing to be a matter of statewide concern (Buena Vista Gardens Apartments Assn. v. City of San Diego Planning Dept. (1985) 175 Cal.App.3d 289, 306), San Francisco must yield to the applicable state laws. (Baggett v. Gates (1982) 32 Cal.3d 128, 135-136 [state Constitution’s “home rule provision” gives chartered cities power to make and enforce ordinances regarding municipal affairs, but home rule charter cities are controlled by general state laws as to matters of statewide concern].) But neither respondents nor real parties in interest contend that state law does not apply here. Instead, they contend that the Rent Ordinance (which expressly declares that affordable housing is a matter of citywide importance (S.F. Admin. Code, § 37.1)) also applies to some units covered by the relevant tax credit and bond programs.
Appellants apparently contend that the ordinance amendment presents an obstacle to implementation of applicable tax credit and bond programs, because KDF is no longer able to evict certain tenants in order to free up those units for low-income tenants. We are not persuaded that Congress or the Legislature intended to promote the evictions of longtime residents of buildings, especially in a situation such as this one where appellants’ application to the TCAC represented that no current tenants would be displaced because they all qualified by income, suggesting that this is not a situation where units are being rented to “well-to-do folks” while the owner takes advantage of tax credits and bonds. We conclude that obstacle preemption does not apply.
Respondents and real parties in interest characterize KDF’s statements to the TCAC as misrepresentations, and real parties go so far as to argue that San Francisco should not recognize “fraudulently obtained rent-restrictions.” Because the KDF attorney testified that it was his understanding that information about tenants’ income was obtained from the previous owner of the building, it is an overstatement to suggest that KDF’s statements on its application were intentionally fraudulent. In any event, neither the ALJ’s decision nor the trial court’s order was based on any alleged misrepresentations to the TCAC.
E. No Violation of Contract Clauses.
Appellants argue that retroactive application of the ordinance amendment violates the state and federal contract clauses, which prohibit any law impairing the obligation of contracts. (U.S. Const., art. I, § 10, cl. 1; Cal. Const., art. I, § 9.) They claim that two questions are involved: whether a governing body intended for legislation to be applied retroactively, and whether retroactive application of the legislation is constitutional. This analysis is inappropriate, however, because we have concluded that the ordinance amendment is not, in fact, “retroactive.” (Ante, fn. 11.)
We agree with the trial court that the ordinance amendment does not violate the federal or state contract clauses, because “a local government may adopt an ordinance imposing rent control within the jurisdiction as an exercise of its police power without violating the strictures of the Contracts Clause.” (E.g., Interstate Marina Development Co. v. County of Los Angeles (1984) 155 Cal.App.3d 435, 447 [rent control reasonable response to remedying broad social and economic problem]; Friedman et al., Cal. Practice Guide: Landlord-Tenant (The Rutter Group 2009) ¶ 5:45, p. 5-24.4 [California courts have “rejected challenges alleging rent control laws unconstitutionally impair preexisting contracts”].) Appellants fail to demonstrate impairment of contract “in any persuasive manner, ” and their contended injury “is speculative at best.” (Interstate Marina at p. 449.) We reject their contract clauses argument.
F. No Taking Without Just Compensation.
Finally, we reject appellants’ brief and legally unsupported argument that the ordinance amendment amounts to an improper taking of their tax credits without just compensation. “Tax credits are, at best, intangible inducements offered by government, but they are not actual or de facto expenditures by government.” (State Building & Construction Trades Council of California v. Duncan, supra, 162 Cal.App.4th at p. 294 [allocated tax credits under LIHTC program are not payment of money pursuant to state’s prevailing wage laws].) They are not property, and “the mere receipt of a tax credit confers no economic benefit because the credits ‘have no value in themselves.’ ” (Id. at p. 318.)
The trial court concluded that the ordinance amendment did not deprive appellants of “substantially all value of their property.” (E.g., Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 686 [police power legislation such as rent control ordinance results in confiscatory taking only when owner has been deprived of substantially all reasonable use of property; even “significant diminution in value” insufficient to establish confiscatory taking].) On appeal, appellants argue generally that they “will not receive the tax credits [they are] entitled to under the law, ” without specifying an amount or demonstrating that the amount results in a significant diminution in the value of their investment in the building. We reject appellants’ takings argument.
III. Disposition
The order denying a petition for writ of administrative mandate is affirmed. Respondents and real parties in interest shall recover their costs on appeal.
We concur: Ruvolo, P. J. Rivera, J.