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Court hesitant to strike down New York rent-control protections

A coalition of landlords and property owners challenging amended protections to New York's rent-stabilization law faced a dubious appeals panel on Wednesday.

MANHATTAN (CN) — The Second Circuit put landlords under pressure Wednesday to support their constitutional challenge to New York’s rent-control laws.

During a 90-minute hearing this morning, a three-judge panel appeared wary of dismantling New York state's Housing Stability and Tenant Protection Act of 2019, which bolstered protections for the state’s rent-controlled housing, unconstitutional.

Signed on June 14, 2019, the law expanded protections for New York renters, and firmly limited the opportunity for regulated rents to rise at rates higher than the Rent Guidelines Board’s annual limits.

A coalition of landlords and property owners have allege in briefing before the appeals court, however, that the rent-control protection deprives apartment owners whose units are rent-stabilized of their “rights to use, possess, and exclude others from their property,” which they claim “results in a physical occupation, and thus a physical taking of regulated apartments.”

Kevin King, an attorney at Covington & Burling who represents the landlord appellants 74 Pinehurst, told the court Wednesday that, after the 2019 amendment, “The thing that changed is that owners no longer have the ability to exercise their right to exclude.”

“All the way up until 2019, owners always had ability to reclaim units for their own or their family’s uses as residents; they had decontrol provisions,” King said.

Senior U.S. Circuit Judge Guido Calebresi asked the counselor about a provision in the rent-stabilization law that allows property owners to reclaim a single unit in rent-controlled buildings for their personal use.

“As to all of the apartments other than the one, those are categorially ineligible for owner recovery so there is no way to get them back,” King replied. “There is no way, with the respect to those apartments, to exercise the right to exclude. … The RSL compels these lease renewals, and so after 2019 it doesn’t regulate the tenant-landlord relationship, what it does is it mandates the existence of such a relationship where otherwise wouldn’t exist.”

“Realistically how many apartments could one use for one’s personal use,” pondered Circuit Judge Calebresi, an 89-year-old Clinton-appointed judge.

Senior U.S. Circuit Judge Barrington Parker voiced more skepticism on behalf of the panel that the rent-stabilization law could be broadly struck down unconstitutional. “It seems to me, essentially what you’re complaining about it not so much a seachange in regime,” the George W. Bush appointee said at Wednesday’s hearing. “It’s just a change in some other regulatory features.”

Community Housing and other landlords brought this suit against the city in 2019, saying its Rent Stabilization Law effects “a physical taking by depriving Plaintiffs of core aspects of property ownership.”

A federal judge in New York’s Eastern District sided with the city and dismissed the landlords’ suit for failure to state a claim.

The landlords argue on appeal that the RSL is facially unconstitutional, adding that it decreases the value of their properties when they have to offer rent renewals at below market value.

Attorneys representing the city and state argued that the rent-stabilization law is designed to protect renters and stabilize the intense renting market in the city.

Claude Platton, an attorney with the New York City Law Department, said rent stabilization has been “a mainstay of life in New York City for half a century, protecting tenants from unreasonable rent increases, enabling them to put down roots, and fostering neighbor stability.”

“Today, 2 million city residents receive its protections, and this court has rightly rejected past attempts to hold that the RSL effects a taking or violates due process, and it should reject plaintiffs’ challenges here and affirm the judgment of the district court dismissing the two suits,” Platton said.

Ester Murdukhayeva, assistant solicitor general with the New York State Office of the Attorney General, defended the state’s rent-stabilization law at Wednesday’s arguments.

“The appellants seek to invalidate in its entirety the comprehensive statutory scheme that is designed to provide stability in New York City’s volatile housing market,” Murdukhayeva told the appeals panel on Wednesday. “Appellants’ constitutional challenges are largely foreclosed by well-settled precedent and this court affirm the dismissal of both complaints.”

“If this law were removed from the books, thousands and thousands of families would be driven directly to the shelter system,” she said later during oral arguments.

Attorney Caitlin Joan Halligan, representing intevenor New York Tenants and Neighbors, briefly spoke in support of the rent-stabilization protections, told the appeals panel the consequence of what the landlords are asking “would be Draconian.”

Senior Circuit Judges Calebresi and Parker were joined on the panel by U.S. Circuit Judge Susan Carney, an Obama appointee.

The three-judge panel did not immediately issue a ruling on the landlords’ appeal on Wednesday afternoon.

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