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Tenants Catch a Break

Steve Wishnia May 3, 2012

The Supreme Court won’t do to rent controls what it did to campaign finance laws in 2010. On April 20, the Court announced that it would not consider a challenge to New York City’s rent-stabilization law.

Manhattan landlords James and Jeanne Harmon filed the suit in 2008, claiming that rent regulations were an unconstitutional violation of their property rights. Two lower federal courts rejected it, but at least one Supreme Court justice thought it was worth considering.

If the Court had taken the case and struck down rent stabilization, it would have endangered the homes of one million New York households — almost one-third of the city’s population. It would also have ended the regulations that protect renters in Westchester and Nassau counties; Jersey City, Bayonne, Hoboken, and other cities in New Jersey; Los Angeles, San Francisco, and several smaller California cities; and Washington, D.C.

However, doing that would have required reversing numerous legal precedents. Several previous Supreme Court decisions, the most recent in 1992, have held that rent controls are constitutional. To overturn them, longtime tenant attorney Tim Collins said in a statement, the Court would have had to return to its pre-New Deal legal philosophy, in which it consistently struck down child-labor and worker-safety laws. Since the late 1930s, numerous Court decisions have set strict standards for judging economic regulations unconstitutional, such as putting an unfair burden on property owners or being “arbitrary, discriminatory, or demonstrably irrelevant.”

“In the final analysis, extreme conservative aspirations for heavily constitutionalized property rights cannot be reconciled with popular sovereignty,” Collins concluded. “I feel like we just passed one large ominous ship in the night.”

The Court’s move leaves the city’s status quo intact: Rent regulations are eroding while housing costs are exploding. The median rent for all rental apartments in the city in 2011 was $1,100 a month, a $150 increase from 2008, according to the Housing and Vacancy Survey, a Census Bureau study done every three years for the city’s Department of Housing Preservation and Development.

More than half of the city’s tenants now spend more than 30 percent of their income on rent, and almost 30 percent pay more than half of what they make. Less than half the city’s 2,173,000 rental apartments are still covered by rent regulations, with 987,000 rent-stabilized and 38,000 rent-controlled. Less than one-sixth rent for below $700, and almost all of those are in public or subsidized housing.

That hasn’t stopped a propaganda offensive by the real estate lobby, propagating the myth that rent control is for Hollywood celebrities who pay $800 for a nine-room apartment on the Upper West Side. Landlords, they claim, are being forced to “subsidize” these affluent tenants, while people in their twenties are forced to pay $2,500 a month or more.

In reality, according to the Housing and Vacancy Survey, half of rent-stabilized households make less than $37,000 a year, and their median rent is $1,050 a month — more than one-third of their median income. The city Rent Guidelines Board, which sets allowable increases for rent-stabilized apartments each year, has never once denied owners a rent increase. When one of the board’s five “public members” joined the two tenant representatives in voting for a rent freeze in 2004, Mayor Michael Bloomberg fired him. The remaining rent-controlled tenants, most of them elderly people who’ve lived in their apartments for more than 40 years, face annual increases of up to 7.5 percent.

Rent controls are not about “subsidizing” tenants, their supporters point out. They are an emergency measure to prevent landlords from taking advantage of the city’s chronic housing shortage — legally defined as less than 5 percent of apartments vacant and available for rent — to gouge tenants. Since World War II, the city’s vacancy rate has never risen above 5 percent. It was 3.1 percent in the 2011 Housing and Vacancy Survey — and only 1.1 percent for apartments renting for less than $800, with barely 5,000 available.

The inequities of younger, newer tenants paying much more than older, longtime renters are the direct result of the weakening of the state’s rent laws in 1997. The real estate lobby won the ability to deregulate vacant apartments that rented for more than $2,000 a month. That change, then-Gov. George Pataki argued, wouldn’t hurt “tenants in place.” In other words, all the burden of higher rents on vacant apartments would fall on new tenants. (The loophole also gave landlords a strong incentive to harass “tenants in place.”)

Pataki compounded the damage by virtually eliminating enforcement of the rent laws. No one knows how many apartments have been deregulated — estimates range from 100,000 to 300,000 — or how many of them were illegally deregulated. Last year, a study by the Bushwick-based community group Make the Road New York estimated that almost half of apartments that were still rent-stabilized had illegally high rents.

Tenants have tried to get the vacancy-decontrol law repealed, but were thwarted in 2009, when since-indicted state Senator Pedro Espada switched parties to block a vote on it, and again last year, when Governor Andrew Cuomo refused to press the issue. The three most prominent Democratic mayoral hopefuls for next year — City Council Speaker Christine Quinn, Public Advocate Bill de Blasio and Manhattan Borough President Scott Stringer — have all spoken out for strengthening rent controls in the past, with Stringer the most frequent. However, they have also taken substantial donations from real estate interests, especially Quinn. In any case, a 1971 state law bars the city from enacting stronger rent laws on its own.

The Rent Guidelines Board will meet May 1 at 5:30 p.m. at Cooper Union to vote on its preliminary recommendation for next year’s rent increases. Tenants turn out to protest at that meeting every year, and this year, it coincides with a massive Occupy Wall Street demonstration planned for nearby Union Square.

The board will set its final guidelines on June 21, and more protests are planned.

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