After New York State legislators passed a set of new rent laws that stunned the industry last month, a group of landlords and two real estate trade groups in New York City have struck back, filing a lawsuit in federal court alleging that the new regulations violate the Constitution.
The complaint was filed July 15 in the Eastern District of New York by the Community Housing Improvement Program (CHIP), the Rent Stabilization Association and seven New York City-area landlords against the City of New York, the Rent Guidelines Board and the New York State Division of Housing and Community Renewal. In the suit, the plaintiffs argue that the rent laws amount to a “taking of property,” violating the Fourteenth Amendment’s Due Process Clause and the Takings Clause.
Lawyers for the plaintiff argue in the complaint that the rent laws exacerbate New York’s lack of housing, make market-rate apartments more expensive, benefit higher-income tenants and penalize low-income tenants, and de-incentivize property owners from making improvements to pre-war buildings.
While tenants and tenant advocacy groups hailed the new regulations as a huge achievement for tenants that expanded rent protections and closed loopholes that led to eviction, landlord groups vowed to fight back the laws after they were signed into law one month ago.
The lawsuit comes on the heels of the Blackstone Group backing out of renovations at Stuyvesant Town and Peter Cooper Village—the largest apartment complex in Manhattan with 11,000 units—as a result of the new rent regulations, according to a report by Crain’s New York.
An industry stunned
Luise Barrack, a real estate attorney at Rosenberg & Estis in New York City, told Multi-Housing News that the property owners are still reeling following the passage of the new laws. In the first weeks after Governor Cuomo signed the bills into law, she was bombarded with concerned calls from clients.
“I was pretty much working 18 hours a day for weeks just with all the questions,” she said. “What was most concerning about it was that it was effective immediately.”
Some owners she spoke with were in the midst of apartment renovations and were concerned about running afoul of the new laws inadvertently. Going forward, owners are concerned about property taxes continuing to rise while rents stay frozen, or lenders getting cold feet.
But as the industry continues to regroup and get a hold on the new statutes, Barrack said property owners are optimistic that the lawsuit challenging the laws will be successful, despite previous challenges that were not.
“I think those who are like-minded feel that the laws that were passed are just so overreaching and so unfair that they’re hopeful the court really looks at this and how far these laws have gone,” she said.