When all else failed, landlord-friendly groups in NY like the Rent Stabilization Association and Community Housing Improvement Program (better known as RSA and CHIP) turned to the US Supreme Court to hear their challenge to the 2019 rent stabilization law. And why not, the court is stacked with conservative justices and it was reasonable to think they would take this on. Not so, the court declined to hear the case.
The Case Made by Landlord-Friendly Groups
The case was largely premised on the idea that the rent law was so onerous and, therefore, amounted to a “taking” under the Fifth Amendment to the Constitution (a.k.a. eminent domain). And that requires proper compensation to the landlords.
Eminent Domain in NYC: Physical “Takings” Nothing New
In New York City’s history, there have been instances of legal government “takings” using eminent domain, such as the redevelopment of Times Square in the 1990s and the transformation of Central Park more than 150 years ago. In Times Square, it was pornographic theaters that were shut down, while Central Park was converted from rocky swampland dotted with small farms into the 843-acre oasis of greenery it is today. These were both constitutional “physical” takings as the property owners were fairly compensated for their lost land.
2019 Rent Law Case: Regulatory Taking?
The case brought by RSA and CHIP is a bit more nuanced and arguably a tougher case to make as landlords weren’t stripped of their assets. Instead, the new law imposed financial burdens on property owners and significantly restricted their ability to optimize the value of their properties. Landlords contend that the unfair burden placed on them involves providing “public assistance” to tenants at the owners’ expense through mechanisms like low rents, mandatory lease renewals, and succession rights. A role more suited for government than the private sector the argument goes.
The Law is Nonsensical and Hurts NYC’s Housing Stock, but Is it Unconstitutional?
CHIP’s executive director, Jay Martin, slams the law as “irrational” and claims that it is “destroying New York’s housing.” While there is merit in these claims, it does not necessarily render the law unconstitutional. After all, states and cities often impose onerous property restrictions that, although cumbersome, are still lawful—examples include zoning laws, building height restrictions and parking requirements, to name a few). Had the case been heard, the Supreme Court would have had to decide whether the 2019 rent law effectively deprived owners of all economically reasonable use or value of their properties. I’m not so sure that it does but it is certainly causing a lot of hurt for landlords.
The Lawsuit was a Hail Mary
The truth is the lawsuit was a long shot to begin with, in part, because the Supreme Court hears so few cases each year (about 70-80 out of 7,000-8,000 petitions each term). Furthermore, rent regulation issues have been covered by the court in the past with existing precedent (little of it favorable to landlords). In 1988 and, again in 1992, the Supreme Court determined that rent control, on its face, does not constitute a taking. Perhaps the case survives on appeals but I think owners of rent regulated properties in NYC are stuck contending with the status quo.
Website Source: Rebong, K. (2023, October 2). End of the road? Supreme Court declines to take up challenge to New York’s rent law. The Real Deal. https://therealdeal.com/new-york/2023/10/02/supreme-court-rejects-ny-rent-law-challenge/
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