Landlords Take NY Rent Law Appeal to US Supreme Court

Landlord groups that filed two lawsuits against New York’s 2019 state rent-stabilization law have filed a petition asking the US Supreme Court to consider the case after several lower courts ruled against them.

The petition was filed on behalf of the Rent Stabilization Association (RSA), the Community Housing Improvement Program (CHIP) and several individual landlords who argued in their lawsuits that the 2019 law, which regulates rents for about 1 million apartments in NYC, violates the US Constitution.

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.

In February, a panel of three Second Circuit federal judges affirmed a September 2020 ruling in NY’s Eastern District Court that had dismissed the lawsuits.

After the federal court decision, RSA and CHIP issued a joint statement indicating they expect to prevail in an appeal to the nation’s top court—and that they’re aiming for a ruling that broadly defines rent control as a violation of building owners’ rights to use their properties.

“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 federal 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. The reform also allowed tenants of any income to lease rent-stabilized apartments.

In their petition, the groups ask the US Supreme Court to affirm a “fundamental limitation against undue burden on select property owners.”

The petition asked the nation’s top court to “clarify the framework that applies when a law places the burden of rectifying a societal problem on a select minority of property owners.”

The petition cited a 2021 Supreme Court decision in Cedar Point Nursery v. Hassid that ruled unconstitutional a California law requiring employers to allow union organizers onto their property for up to three hours a day.

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.

Earlier this month, the city’s Rent Guidelines Board (RGB) proposed increases of 4% to 7% for two-year leases and hikes of 2% to 5% for one-year leases.

If approved in a final vote next month, this would be the second consecutive year the board has enacted rent increases for the nearly 1 million rent-stabilized apartment units in NYC, which are occupied by an estimated 2M people.

During the pandemic, the rent board froze rents multiple times. Last year, it increased rents in stabilized units by 3.25% on one-year leases and 5% on two-year leases.

Earlier this year, the RGB issued a report that indicated that rents would have to rise by as much as 8.35% for one-year leases and 15.75% on two-year leases to maintain net operating income at current levels for landlords.