Rent Control Challenges Take a Blow From the Supreme Court

New York City's stringent regulations will stay intact, but opponents vow to keep battling.

New York City’s strict rent stabilization measures will stay intact, at least for now. Image by Fotios Tsarouhis

Opposition to rent stabilization received a major setback on Tuesday as the result of a step by the U.S. Supreme Court. On the first day of its 2023-2024 term, the court declined to consider a challenge by industry groups to New York City’s controversial measures, which will stay intact for now. But opponents of the law indicate that avenues for further challenges remain open.

The lawsuit was brought by a pair of local groups: the Community Housing Improvement Program, which represents owners of more than 400,000 units, and the Rent Stabilization Association of N.Y.C., whose owners and agents represent some 1 million rent-stabilized units. At issue was the city’s Rent Stabilization Law, which generally applies to apartments built before 1974 that are not subject to much stricter rent control policies and that are located in buildings with six or more units.

The plaintiffs’ principal contention is that the law amounts to an unconstitutional seizure of private property, which is prohibited under the Fifth Amendment. In their petition to the high court, CHIP and RSA argued that “The RSL severely restricts (and in several instances completely negates) many of the rights that make up building owners’ property interests—specifically their rights to exclude, occupy, use, change the use of, and dispose of their property.”

In a July 2023 research note, Chris Bruen, senior director of research for the National Multifamily Housing Council, pointed out that—unlike the rent stabilization laws other major cities such as Washington, D.C.—the New York City laws do not allow owners an automatic right to increase rents in line with inflation. Instead, allowable rent increases are determined on an annual basis by the New York City Rent Guidelines Board.

Major changes arrived in 2019 with the enactment of the Housing Stability and Tenant Protection Act, a state law which had the effect of tightening New York City’s restrictions on landlords. That law stripped property owners of the right to raise stabilized apartment rents by as much as 20 percent when a resident moved out.

Prior to the 2019 law, owners were allowed to enact permanent rent increases, capped at 6 percent annually, for stabilized apartments whose properties underwent building-wide improvements. The new reforms rolled the cap on those increases back to 2 percent and placed a 30-year limit on them.

The new law also repealed the owners’ right to deregulate vacated stabilized units if rents had surpassed a certain threshold or when rents in occupied units had surpassed that threshold and occupant incomes reached a certain level.

Parties weigh in

The Legal Aid Society, which represented N.Y. Tenants & Neighbors, Community Voices Heard and the Coalition for the Homeless in the suit, praised the court’s action. “We welcome this decision, one rooted in the law and long-standing legal precedent, from the Supreme Court denying CHIP’s meritless and frivolous lawsuit challenging our city’s rent stabilization laws,” a spokesperson for the group said in an emailed statement. “We’re hopeful that the other two related cases, which lost in both the lower court and unanimously upheld on appeal, will meet a similar fate.”

Conversely, CHIP criticized the move.  “Since the time of our filing in July of 2019 foreclosures have accelerated and the law’s punitive effects have dramatically worsened,” Jay Martin, the organization’s executive director, said in a statement. “While we were hopeful a broad facial challenge would have delivered the most relief to the most owners as quickly as possible, we remain convinced that the law is irrational and vulnerable to more specific challenges.”

While CHIP expressed a preference for seeking change through legislative avenues, the group signaled that it will not be shying away from legal action it deems necessary. “One way or another this law must go down, its current form is destroying New York’s housing,” the group said in its statement.

CHIP will be supporting several major reforms in the upcoming legislative session, including proposals to provide a pathway for vacant rent-stabilized apartments requiring significant repairs to be brought back on the market and to overhaul a property tax system the organization says is racist and unfairly targets older rent-stabilized buildings. The group will also target what it identifies as redlining by insurance companies which it says drive up operating costs for “rent-stabilized property owners who rent a significant portion of their apartments to voucher holders.”

“While it was a blow to them, they’re still trying to go back to legislation and have them (the New York City Council) make some changes as it relates to this,” said Rob Gilman, co-head of the real estate division at accounting advisory Anchin. However, the legislative path is a rocky one for groups like CHIP.

“There are more tenants than landlords and you’d be voting to take something away from your constituents, even though your landlords are (also) your constituents and may give you more money if you’re running, but votes win,” said Gilman. “It’s a major uphill battle to try and have changes in legislation.”

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