Minnesota Supreme Court Adopts Yee Framework and Upholds Minneapolis’s Voucher-Acceptance Ordinance: No Taking Under Minnesota Constitution; MHRA Does Not Preempt Local Anti-Discrimination Measures

Precedents Cited and Their Influence

• Yee v. City of Escondido, 503 U.S. 519 (1992): The Court adopts Yee under the Minnesota Constitution for physical takings in the landlord-tenant context. Yee teaches that when owners voluntarily rent property, regulations that shape the landlord-tenant relationship—including limits on tenant selection—do not per se convert into compelled physical occupations. This is the opinion’s most notable doctrinal development for Minnesota takings law.
• Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021): The Court distinguishes Cedar Point, emphasizing its acknowledgement that health and safety inspection regimes generally are not takings and that rules applicable to businesses open to the public differ from invasions of property closed to the public. That carveout substantiates Minneapolis’s HQS inspections.
• Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978): Minnesota generally applies Penn Central for regulatory takings. Here, all three factors—economic impact, investment-backed expectations, and character of government action—cut against finding a taking on the facial record presented.
• Wensmann Realty, Inc. v. City of Eagan, 734 N.W.2d 623 (Minn. 2007); Westling v. County of Mille Lacs, 581 N.W.2d 815 (Minn. 1998); Zeman v. City of Minneapolis, 552 N.W.2d 548 (Minn. 1996): Minnesota takings jurisprudence embracing Penn Central and the “goes-too-far” heuristic informs the Court’s application and contextualizes the role of general welfare regulation.
• Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470 (1987): Used to frame economic impact by comparing value with and without regulation.
• Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926); Hadacheck v. Sebastian, 239 U.S. 394 (1915); Colony Cove Properties, LLC v. City of Carson, 888 F.3d 445 (9th Cir. 2018): Cited to show that even very significant value diminutions do not automatically establish a taking where regulations promote the general welfare.
• Wegner v. Milwaukee Mutual Insurance Co., 479 N.W.2d 38 (Minn. 1991); Dale Properties, LLC v. State, 638 N.W.2d 763 (Minn. 2002): Minnesota precedents recognizing the scope of physical takings and invasions, providing a state-law backdrop to adopting Yee.
• DeCook v. Rochester International Airport Joint Zoning Board, 796 N.W.2d 299 (Minn. 2011): The Court explains that DeCook’s “substantial and measurable decline” test is limited to airport runway safety-zone regulation and does not apply here, reaffirming Penn Central as the default test.
• Mangold Midwest Co. v. Village of Richfield, 143 N.W.2d 813 (Minn. 1966): Provides the touchstone for conflict preemption analysis (ordinance permits what statute forbids or forbids what statute permits) and the four-factor test used for field preemption.
• Minnesota Chamber of Commerce v. City of Minneapolis, 944 N.W.2d 441 (Minn. 2020); Graco Inc. v. City of Minneapolis, 937 N.W.2d 756 (Minn. 2020); Jennissen v. City of Bloomington, 913 N.W.2d 456 (Minn. 2018): Recent preemption decisions clarify that local laws may add to statewide floors absent irreconcilable conflict or clear legislative occupation of the field. These cases guide both the conflict and field preemption determinations in favor of Minneapolis.
• Abel v. Abbott Northwestern Hospital, 947 N.W.2d 58 (Minn. 2020): Used to construe MHRA’s exclusivity clause: it applies only while a Human Rights Act claim is pending and only for “acts declared unfair” by specified sections—limitations that do not reach this ordinance.
• Edwards v. Hopkins Plaza Ltd. Partnership, 783 N.W.2d 171 (Minn. App. 2010): The Court of Appeals case is distinguished. It held the MHRA does not itself require Section 8 participation, but it did not create a statutory right to refuse participation or purport to preempt local measures that regulate that choice.

Legal Reasoning

1) The Takings Clause (Minn. Const. art. I, § 13)

Facial challenge posture. The Court applies the demanding facial standard: Fletcher must show the ordinance is unconstitutional in all its applications. This frames both the physical and regulatory takings analyses and is particularly important because the ordinance contains an undue hardship defense that will, by design, negate significant hardships in some cases.

No physical taking. Adopting Yee for Minnesota’s Takings Clause, the Court holds there is no per se physical occupation where landlords voluntarily rent their property and the government merely regulates the terms of that relationship. The ordinance does not require landlords to continue renting or bar changes of use (subject to statutory notice rules). Contention that HCV tenants constitute a compelled, “total invasion” is rejected; the rule simply governs reasons for refusing a willing, qualified tenant. As to HQS inspections, the Court underscores Cedar Point’s carveout: health and safety inspection regimes generally do not effect takings, particularly where the business is voluntarily operating in a regulated space.

No regulatory taking under Penn Central. The Court evaluates all three factors:

• Economic impact: Even studies cited by landlords showed mixed effects and variability by property, with some voucher-accepting properties having higher effective gross income. On a facial record, and especially given the ordinance’s undue hardship defense (which is most likely to apply where the burdens are largest), the Court cannot conclude that all applications cause constitutionally significant economic harm. Moreover, even substantial value diminutions do not automatically establish takings where regulations promote the general welfare.
• Investment-backed expectations: The primary expectation in purchasing rental property is to rent it. That core use remains. Expectations of specific profit levels, expense profiles, or capitalization rates are inherently mutable and discounted in heavily regulated industries. The ordinance does not transmute rental property into a different use; it sets a rule for how the owner may exercise tenant-selection criteria.
• Character of government action: The ordinance is a general, public-welfare regulation designed to expand access to housing and reduce discriminatory denial to voucher holders. It applies across the city’s rental market (subject to previously sustained exemptions) and is not targeted at a particular parcel or owner. This factor weighs strongly against a taking.

Because all three factors weigh against Fletcher, there is no facial regulatory taking. The Court therefore does not reach the separate “public use” element and leaves for another day the appropriate remedy if a state facial takings violation were ever found (e.g., invalidation vs. compensation).

2) Preemption (MHRA, Minn. Stat. ch. 363A)

Conflict preemption. Under Mangold, there is a conflict only if the ordinance permits what state law forbids or forbids what state law permits. The MHRA prohibits discrimination based on, among other things, status with regard to public assistance, but it does not create an affirmative right to refuse Section 8 participation. The ordinance’s prohibition on refusing to rent due to “requirements” of a public assistance program is complementary—another rational means to address discriminatory exclusion—and not inconsistent. The Court rejects the suggestion that the ordinance “shoehorns” program requirements into an MHRA scheme focused only on individual characteristics; the MHRA establishes a floor and a purpose (securing freedom from discrimination in housing) that local governments may advance by different, yet harmonious, means.

Field preemption. Applying Mangold’s four-factor test, the Court identifies the shared subject matter as “housing discrimination based on status of public assistance” and concludes:

• Comprehensiveness: The MHRA does not fully occupy the field. Its text is to be construed liberally; it contemplates and empowers local commissions; and it contains no uniformity mandate foreclosing municipal action.
• Legislative intent: There is no clear expression of intent to exclude municipal regulation in this space. The MHRA’s limited exclusivity clause applies only while an MHRA claim is pending and only for delineated “acts declared unfair,” which are not at issue here.
• Adverse statewide effects: The possibility of a patchwork of local standards is not, by itself, an unreasonably adverse effect on the state’s populace. If the Legislature perceives problematic fragmentation, it can assert uniformity by statute.

Accordingly, the MHRA neither conflicts with nor preempts Minneapolis’s ordinance.

Impact and Significance

• Doctrinal anchor for Minnesota takings law: By expressly adopting Yee, the Court provides a clear analytical path for physical takings claims in the landlord-tenant context under the Minnesota Constitution. This solidifies that regulating tenant selection in a voluntarily rented property does not, by itself, create a per se taking.
• Reaffirmation of Penn Central as the default test: The opinion confirms that Penn Central remains the ordinary standard for regulatory takings in Minnesota outside narrow contexts like DeCook’s runway-safety-zone regime.
• High bar for facial takings challenges: The decision underscores the exceptional difficulty of facial claims, particularly where an ordinance has a built-in safety valve (here, undue hardship). Future challenges are more likely to be framed as as-applied claims testing the scope and administration of the undue hardship defense.
• Municipal authority preserved and clarified: Home-rule cities in Minnesota may augment the MHRA’s anti-discrimination floor with local ordinances addressing barriers to housing access, including program-requirement-based refusals. The opinion provides a robust roadmap for cities crafting similar protections.
• MHRA preemption boundaries: The Court’s analysis confirms that the MHRA does not grant landlords a statutory right to refuse Section 8 participation and does not occupy the field of anti-discrimination in housing. Cities can continue to innovate to reach goals consistent with MHRA’s purposes.
• Inspections and Cedar Point: The Court’s embrace of Cedar Point’s inspection carveout will resonate in future cases challenging inspection regimes as takings. Health and safety inspections tied to voluntary commercial activity will generally survive.
• Open issues: The Court leaves unresolved the remedy for a facial takings violation under the Minnesota Constitution and does not decide the “public use” element because no taking occurred. The administration of the undue hardship process—including standards the City may promulgate—could generate future as-applied litigation.