Statutory Authority to Enact Ordinance Prohibiting Housing Discrimination based on Source of Income; Home Rule Law; Pennsylvania Human Relations Act

Apartment Ass’n of Metro. Pittsburgh v. City of Pittsburgh, 228 A.3d 960 (Pa. Cmwlth. 2020), allocatur granted Nov. 4, 2020, appeal dockets 27 & 28 EAP 2020

The Pennsylvania Supreme Court granted review to consider whether, under the Pennsylvania Supreme Court’s analysis in Pennsylvania Restaurant and Lodging Association v. City of Pittsburgh, 211 A.3d 810 (Pa. 2019) (Pennsylvania Restaurant), the City of Pittsburgh (City) had express statutory authority to enact an ordinance prohibiting housing discrimination against City residents based on their sources of income.

This case arises from the City’s enactment of Ordinance 2015-2062 (Ordinance), which amended certain provisions of the City’s Code of Ordinances by adding a new protected class of persons based on the source of income used to pay rent. The purpose of the Ordinance was to prevent residential property owners, real estate brokers, and others from denying a person access to housing based on his or her source of income. The court summarized the relevant sections of the Ordinance as follows:

Section 1 of the Ordinance defines “source of income” as follows:

All lawful sources of income or rental assistance program [sic], including, but not limited to, earned income, child support, alimony, insurance and pension proceeds, and all forms of public assistance including federal, state and local housing assistance programs. This includes the Section 8 Housing Choice Voucher Program.

Section 2 of the Ordinance provides that the following acts shall be unlawful housing practices:

(a) For any owner, real estate broker or any other person to refuse to sell, lease, sublease, rent, assign or otherwise transfer, or to refuse to negotiate for the sale, lease, sublease, rental, assignment or other transfer of, the title, leasehold or other interest in any dwelling to any person, or to represent that any dwelling is not available for inspection, sale, lease, sublease, rental, assignment or other transfer when in fact it is so available, or otherwise to deny or withhold any dwelling from any person because of . . . source of income . . . or to discriminate against, segregate or assign quotas to any person or group of persons in Housing is subsidized by the federal government pursuant to Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f.

(b) For any person, including any owner or real estate broker, to include in the terms, conditions or privileges of any sale, lease, sublease, rental, assignment or other transfer of any dwelling any clause, condition or restriction discriminating against or requiring any other person to discriminate against, any person in the use or occupancy of such dwelling because of . . . source of income . . . of the user.

(c) For any person, including any owner or real estate broker, to discriminate in the furnishing of any facilities or services for any dwelling because of . . . source of income . . . of the user. .

. . .

(f) For any real estate broker or real estate salesperson or agent, or any other person for business or economic purposes, to induce, directly or indirectly, or to attempt to induce directly or indirectly, the sale or rental or the listing for sale or rental, of any dwelling by representing that a change has occurred or will or may occur regarding the entry or prospective entry into the neighborhood of a person or persons of a particular . . . source of income . . . .

Slip op. at 3-4 (emphasis in original). Apartment Association filed a Complaint for Equitable Relief and Request for Declaratory Judgment against the City. In its Complaint, Apartment Association alleged that the Ordinance violated both the Home Rule Law and the Pennsylvania Constitution. The trial court held that notwithstanding home rule municipality’s broad powers, Section 2962(f) of the Home Rule Law imposes a limitation on the municipality’s authority to enact certain types of legislation. This provision, commonly referred to as the “Business Exclusion,” states:

A municipality which adopts a home rule charter shall not determine duties, responsibilities or requirements placed upon businesses, occupations and employers, including the duty to withhold, remit or report taxes or penalties levied or imposed upon them or upon persons in their employment, except as expressly provided by statutes which are applicable in every part of this Commonwealth or which are applicable to all municipalities or to a class or classes of municipalities. This subsection shall not be construed as a limitation in fixing rates of taxation on permissible subjects of taxation.

53 Pa. C.S. § 2962(f) (emphasis added by Commonwealth Court). Thus, the trial court concluded that the Ordinance violated Section 2962(f) of the Home Rule Law because the Ordinance placed affirmative duties and responsibilities on businesses. The City appealed and an en banc panel of Commonwealth Court affirmed the Trial Court’s decision and held that although nondiscrimination ordinances are a valid exercise of a home rule municipality’s police powers, the Ordinance nonetheless violated Section 2962(f) of the Home Rule Law, explaining that:

While it is true that anti-discrimination ordinances are a valid exercise of a municipality’s police powers, the Ordinance here . . . does more than just ban discrimination against certain protected classes of people. By defining “source of income” to include Section 8 Program subsidies, the Ordinance in this case necessarily mandates that all landlords in the City comply with the federal Section 8 Program requirements, when previously their participation in the Section 8 Program was voluntary. This is clearly an affirmative obligation and more invasive to the operation of rental business than [a] general anti-discrimination ordinance . . . .

Slip op. at 6, quoting Apartment Ass’n of Metro. Pittsburgh v. City of Pittsburgh, 205 A.3d 418, 425 (Pa. Cmwlth.) (en banc), vacated and remanded, 217 A.3d 801 (Pa. 2019). The City filed a petition for allowance of appeal with Supreme Court, arguing that both the Second Class City Code and the Pennsylvania Human Relations Act (PHRA) provided express statutory authorization for its enactment of the Ordinance. In the interim the Pennsylvania Supreme Court decided  Pennsylvania Restaurant in which the Court considered whether two ordinances enacted by the City of Pittsburgh violated the Business Exclusion provision. Slip op. at 9. The Supreme Court summarized its holdings as follows:

What constitutes an express grant of authority to “determine duties, responsibilities or requirements placed upon businesses, occupations and employers” is a vexing question. If we interpret the word “express” too stringently, virtually any incidental burden upon employers arising from a local ordinance will be barred. If we interpret it too broadly, we subvert the General Assembly’s manifest intent to limit the burdens that a home-rule municipality can impose upon businesses. Thus, we must find a middle ground.

Even if this case does not pronounce the ever-elusive bright-line rule, it enables us to bracket the gray area between what is and is not allowed by the limitations upon business regulation imposed by the Business Exclusion. While the PSDA certainly burdens [City] employers, it clearly falls within the ambit of the City’s express statutory authority to legislate in furtherance of disease control and prevention.

Conversely, the City fails to identify any statutory authority sufficient to sustain the SSBA. While the training that the SSBA mandates may well have a salutary public effect in disaster management, the measure’s multifarious provisions simply want for any statutory authority, express or otherwise. For owners and operators of qualifying facilities, maintaining and securing those facilities is a major, if not principal, function, and the definitions of “security officer” and “building service employee,” are sufficiently broad to capture, at least as to some properties, virtually every individual employed by the building’s management. For the foregoing reasons, we must conclude that no statutory provision cited by the City comes close to authorizing such requirements.

Slip op. at 14-15, quoting Pennsylvania Restaurant at 837-38 (emphasis added by Commonwealth Court). Subsequently, Supreme Court vacated Commonwealth Court’s March 12, 2019 Order in this case, and remanded the matter for reconsideration in light of its holding in Pennsylvania Restaurant and directed Commonwealth Court “to include in its review the sections of the Second Class City Code and the Pennsylvania Human Relations Act cited by the City.” Slip op. at 7. On remand, the City argued that the Second Class City Code expressly authorized its enactment of the Ordinance by granting the City broad police powers over its residents. Specifically, Section 3 of the Second Class City Code authorizes the City:

[t]o make all such ordinances, by-laws, rules and regulations, not inconsistent with the Constitution and laws of this Commonwealth, as may be expedient or necessary, in addition to the special powers in this section granted, for the proper management, care and control of the city and its finances, and the maintenance of the peace, good government and welfare of the [C]ity, and its trade, commerce and manufactures . . . .

Slip op. at 16, quoting 53 P.S. § 23158 (emphasis added by Commonwealth Court). Additionally, the City argued that Section 12.1 of the PHRA provides express statutory authority for the source of income ordinance in providing that: “The legislative body of a political subdivision may, by ordinance or resolution, authorize the establishment of membership in and support of a Local Human Relations Commission.” The City also cited to Section 12 of the PHRA, which provides in relevant part:

(a) The provisions of [the PHRA] shall be construed liberally for the accomplishment of the purposes thereof, and any law inconsistent with any provisions hereof shall not apply.

(b) . . . [N]othing contained in [the PHRA] shall be deemed to repeal or supersede any of the provisions of any existing or hereafter adopted municipal ordinance, municipal charter or of any law of this Commonwealth relating to discrimination because of race, color, familial status, religious creed, ancestry, age, sex, national origin or handicap or disability[] . . . .

Slip op. at 20, quoting 43 P.S. § 962(a), (b) (emphasis added by Commonwealth Court). Specifically, Commonwealth Court summarized the City’s PHRA argument as follows:

…the Ordinance at issue here, like the PHRA, is aimed at protecting residents against discrimination. The City claims that, by authorizing a municipality to establish its own human relations commission to combat discriminatory practices, see 43 P.S. § 962.1,14 the General Assembly intended to preserve a local municipality’s power to enact greater protections against discrimination in its own community.

The City analogizes the Ordinance in this case to the PSDA at issue in Pennsylvania Restaurant, which the Supreme Court upheld. In that case, the Supreme Court explained that “[w]hile the PSDA certainly burdens [City] employers, it clearly falls within the ambit of the City’s express statutory authority [under the DPCL] to legislate in furtherance of disease control and prevention.” Pa. Rest., 211 A.3d at 837. Likewise, the City argues that the Ordinance here imposes only “incidental” burdens on landlords and “clearly falls within the ambit of the City’s express statutory authority [under the PHRA] to legislate to provide protections for its residents in the area of anti-discrimination.” City’s Br. at 29.

Slip op. at 20-21.

On remand, Commonwealth Court limited its analysis to the focus of the parties’ arguments – the portion of the source-of-income definition pertaining only to the federal Section 8 Program. Commonwealth Court  noted that in Pennsylvania Restaurant, the Supreme Court rejected the City’s argument that the general police powers in Section 3 provided the express authorization necessary to satisfy the exception to the Business Exclusion, reasoning:

While we have rejected the proposition that the “express authorization” precludes any generality whatsoever, we certainly do not suggest that what amounts to a broad account of traditional police powers constitutes “express” authorization for purposes of the Business Exclusion exception. Were we to do so, the exception would devour the rule quite completely. Section[] [3 of the Second Class City Code, 53 P.S. § 23158] amount[s] to a general warrant to legislate in service of the general health and welfare, which lies within a home-rule municipality’s powers absent any statutory prohibition. Here, however, the Business Exclusion furnishes such a prohibition. Consequently, the City’s resort to the [Second Class City Code] fails. 211 A.3d at 835 (emphasis added).

Slip op. at 17, quoting Pennsylvania Restaurant at 835 (emphasis added by Commonwealth Court). Based on this analysis, Commonwealth Court concluded that the City failed to demonstrate a direct nexus between Section 3 of the Second Class City Code and the Ordinance to satisfy the exception in the Business Exclusion. The court further determined that the Ordinance was not authorized by the PHRA, reasoning that:

…unlike the addition of the above classes to the Ordinance, the addition of the “source-of-income” class does more than just ban housing discrimination based on source of income. By expressly defining “source of income” to include federal housing assistance, and specifically Section 8 Program vouchers, the Ordinance requires residential landlords to participate in the Section 8 Program, when previously their participation was wholly voluntary.

***

Given the nature and extent of the Section 8 Program requirements, we cannot conclude that mandating landlords’ participation in the Section 8 Program is merely an “incidental” burden, as the City suggests.

Nor do we find express authorization for the imposition of these requirements in the PHRA. The Ordinance here is more akin to the SSBA at issue in Pennsylvania Restaurant, which the Supreme Court struck down under the Business Exclusion. The Court determined that Section 2962(4) of the Home Rule Law – which gives home rule municipalities the power to enact building codes and safety regulations – did not authorize the City to enact an ordinance imposing extensive safety education and training obligations on private building owners in furtherance of disaster preparedness. Pa. Rest., 211 A.3d at 835.

***

Similarly, while the PHRA is aimed at protecting citizens from discrimination, the Ordinance here goes far beyond that aim. By expressly including federal housing subsidies in the definition of “source of income,” the Ordinance mandates that residential landlords in the City participate in the Section 8 Program and comply with its numerous, and often burdensome, regulations. See Trial Ct. Op., 3/14/18, at 4 (unpaginated). Just as the Supreme Court in Pennsylvania Restaurant determined that the City cannot require private building owners to educate and train their employees in emergency management for the purpose of disaster preparedness, see Pa. Rest., 211 A.3d at 835-37, the City also cannot compel private landlords to participate in a voluntary federal housing subsidy program. See Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co., 920 F.3d 890, 900 (5th Cir. 2019) (recognizing that “[l]andlord participation in the [Section 8] voucher program is voluntary” under federal law); see also Salute v. Stratford Greens Garden Apartments, 136 F.3d 293, 300 (2d Cir. 1998) (“[T]he voluntariness provision of Section 8 reflects a congressional intent that the burdens of Section 8 participation are substantial enough that participation should not be forced on landlords, either as an accommodation to handicap or otherwise.”). We agree with Apartment Association that the Ordinance here “exemplifies the very essence of the invasive regulations that [the Business Exclusion] is designed to prevent, and strictly prohibits.” Bldg. Owners, 985 A.2d at 715-16.

Slip op. at 22-24.

The Supreme Court granted allocatur to determine the following issues, as stated by the petitioner:

(1) Did the Commonwealth Court err where it failed to follow the dictates of this Honorable Court in Pennsylvania Rest. & Lodging Ass’n v. City of Pittsburgh, 211 A.3d 810 (Pa. 2019), and rather than analyzing whether the Second Class City Code and the Pennsylvania Human Relations Act satisfy the “expressly provided by statute” exception to the Business Exclusion (i.e. whether relevant statutory authority has a nexus to the core functions of the Nondiscrimination Ordinance) as Pa. Restaurant requires, the Commonwealth Court instead focused its analysis on the perceived weight of the burdens that the Nondiscrimination Ordinance might impose on landlords?

(2) Does the Commonwealth Court’s [r]emand [d]ecision invalidating the Nondiscrimination Ordinance improperly narrow Home Rule authority, providing non-Home Rule municipalities with greater authority to enact anti-discrimination legislation than Home Rule municipalities, all contrary to the clear intent of the Home Rule Law?

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