Will Supreme Court Scrap NY Rent-Control Laws?

Issue 278

Landlords who want NY’s rent control laws abolished are hoping the Supreme Court will take their case.

Steven Wishnia Mar 20, 2023

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New York City landlords are preparing an appeal to the Supreme Court after a federal appeals court rejected their effort to void the state’s rent-stabilization law.

The Second Circuit Court of Appeals on Feb. 6 dismissed two challenges to the law, one led by two real-estate trade groups, the Community Housing Improvement Program and the Rent Stabilization Association, and the other by a group of individual landlords. A three-judge panel unanimously held that rent stabilization did not violate the Fifth Amendment’s “takings clause” that the government cannot take private property without compensating the owner. It also rejected the claim that the law violated the 14th Amendment’s substantive due-process clause because it did not have a rational basis.

The Supreme Court in 1992, it noted, unanimously ruled in Yee v. City of Escondido that the California city’s rent controls for mobile homes were not a “taking” because the landlords had voluntarily rented out their land and could evict tenants, within limits. 

“Government regulation of rents is a well-established precedent,” longtime Legal Aid Society staff attorney Ellen Davidson told The Indypendent.

The New York landlords argued that rent stabilization was a “taking,” because tenants’ right to renew their leases “effectively eliminates an owner’s right to determine who may occupy the property after it is first rented,” and that considering tenants’ ability to pay while determining rent increases puts a burden on landlords that “should be borne by the public as a whole.” They also contended that the law had no rational relation to a “legitimate government interest,” because its benefits were not “targeted to low-income tenants,” as wealthy people live in rent-stabilized apartments.

New York’s rent-stabilization law protects 2.5 million renters, and a ruling against it would also endanger rent controls in other states. 

The Court of Appeals rejected all those arguments on procedural and practical grounds. It held that states “have broad power to regulate housing conditions in general and the landlord-tenant relationship in particular without paying compensation,” that owners retained the right to evict tenants for specific causes and that most, if not all, current landlords bought their properties knowing they were regulated. 

The rent-stabilization law, it concluded, had a rational purpose: It “was primarily enacted to permit low- and moderate-income people to reside in New York City when they otherwise could not afford to do so. It is beyond dispute that neighborhood continuity and stability are valid bases for enacting a law.” 

According to the federal 2021 Housing and Vacancy Survey, more than half the city’s 960,000 rent-stabilized households had incomes below $50,000 a year.

The landlords have until early May to ask the Second Circuit for permission to appeal to the Supreme Court. 

“We’re considering our next steps,” a spokesperson for the plaintiffs said in a statement. “In our view, the Supreme Court’s decision in Yee and its recent Cedar Point decision demonstrate that the [rent-stabilization law] effects a physical taking.” (In Cedar Point, the Court struck down a California law requiring farm owners to give union organizers limited access to their property, saying it granted “a right to invade property closed to the public.”)

“They’ve been clear that their entire purpose was to get to the Supreme Court,” says Davidson. 

The first question, she says, is whether the Court will take the case. She doubts it will. It hears only about 1% of cases appealed to it. 

Unlike abortion or Janus v. AFSCME, the 2018 decision that barred union shops for public-sector workers, she explains, there is no history of previous cases where justices indicated they wanted to overturn a rent-regulation precedent — the Court declined to consider a similar challenge by New York landlords in 2012 — and the Second Circuit ruling was not an “our hands are tied” apology, but a comprehensive defense of rent stabilization’s constitutionality and necessity.

The landlords, however, cited a 1988 dissent by Justices Antonin Scalia and Sandra Day O’Connor in Pennell v. City of San Jose, which upheld San Jose, California’s rent-control ordinance. One of that law’s stated purposes was “alleviating individual tenant hardship.” Scalia and O’Connor argued that meant forcing property owners to fund a “welfare program,” and said the only constitutional way to alleviate tenant hardship would be by government aid such as public housing and rent vouchers.

“We are unpersuaded,” the appeals court responded. 

If the Supreme Court agreed to take the case, that would indicate at least four Justices want to overturn the Yee precedent, Davidson says — and that “would be a disaster.” New York’s rent-stabilization law protects 2.5 million renters, and a ruling against it would also endanger rent controls in other states and laws barring eviction without “good cause.” 

The right to renew your lease and having limits on rent increases, she says, are essential to “any law that protects tenants.”

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