Challenge to NY's Rent Control Law Heads to US Supreme Court

A federal appeals court this week tossed out two lawsuits, backed by NYC landlords, that sought to challenge New York’s rent reform and rent stabilization law, passed by the state legislature in 2019.

Landlord groups who were plaintiffs in one of the lawsuits immediately said after the ruling was handed down that they would appeal the case to the US Supreme Court, which could set the stage for the high court to weigh in on rent control.

The decision by a panel of three Second Circuit judges affirmed a September 2020 ruling in NY’s Eastern District Court that had dismissed the lawsuits. The appeals court agreed with the lower court’s decision that building owners had failed to prove in their arguments that the 2019 rent reform law was an unconstitutional infringement on their property rights.

The 2019 rent reform law limited when and how a landlord can increase rents on stabilized apartments, of which there are an estimated 900K units in NYC. The reform also allowed tenants of any income to lease rent-stabilized apartments.

The appeals court found that New York State “has broad authority to regulate land use without running afoul of the Fifth Amendment.”

“The legislature has determined that the [rent law] is necessary to prevent serious threats to the public health, safety and general welfare,” the appeals court ruling stated. “No one can seriously contend that these are not important public interests, and courts are not in the business of second-guessing legislative determinations.”

The appellate judges noted that some property owners “may be legitimately aggrieved” by the value of their rent-stabilized apartments compared to market-rate units but said the plaintiffs had failed to prove that the rent reform law had caused economic harm to every owner of buildings with rent-stabilized units.

Landlord group spearheading one of the lawsuits and calling themselves the Community Housing Improvement Program (CHIP) and Rent Stabilization Association (RSA), said they would take the case to the US Supreme Court.

“We always expected these issues to be decided by the Supreme Court and are confident we will ultimately prevail, and finally compel leaders around the country to create real and fair solutions for our nation’s housing challenges,” the groups said, in a statement.

The plaintiffs had argued in the lawsuits, one of which was brought by CHIP and RSA and the other by building owners Dino, Dimos and Vasiliki Panagoulias, that the Housing Stability and Tenant Protection Act of 2019, the official name of NY’s rent reform law, violates the Fifth Amendment’s “takings clause” governing property seizures and the Fourteenth Amendment’s due process clause.

The landlord groups have indicated that they’re hoping the conservative majority on the Supreme Court will not only strike down NY’s rent law, but also will issue a broader judgement that deems rent control of any sort as a violation of building owners’ rights to use their properties.

Parties in the lawsuit who defended the 2019 NY rent law, including Legal Aid, Legal Services NYC and Selendy Gay Elsberg, issued a joint statement in the wake of the federal appeals court ruling calling the lawsuits “meritless.”

“These lawsuits were meritless from the outset. They have failed in both the district court and the court of appeals, and we’re confident that any further attempt at appeal will fail as well,” the joint statement said.

There is no guarantee that the US Supreme Court, which in the past has declined to take up cases concerning rent control, will hear the challenge to the NY rent law.

If the nation’s highest court—which usually agrees to hear only about 100 of the 7,000 cases that reach it each year—doesn’t put the case on its docket, the appeals court ruling dismissing the case will stand as the final judgement on the matter.