WASHINGTON (CN) — The Supreme Court decided Tuesday that a group of New York landlords won't have their day in court in a suit over rent stabilization laws, but left the door open for similar suits.
Trade associations for the managers and owners of New York City rental properties questioned the constitutionality of 2019 amendments to New York's Rent Stabilization Law.
"It strips owners of their rights to use, possess and exclude others from their property," the property owners' brief to the Second Circuit states. "The amended RSL likewise annihilates owners' investment-backed expectations by making it impossible to recover capital investments and locking in below-market rents in perpetuity."
The landlords claim the law grants tenants and their successors an indefinite, infinitely renewable lease that can be ended only for reasons beyond the landlord's control, in violation of the Takings Clause of the Fifth Amendment, which stands to prevent against the government taking private property for public use without just compensation. They also claim that they violated the Fourteenth Amendment's Due Process Clause.
Supreme Court Justice Clarence Thomas, a George H. W. Bush appointee, explained in a short statement that while the topic was worthy of the high court's consideration, the proceedings needed more specificity to evaluate the petitioners' challenges.
"The constitutionality of regimes like New York City's is an important and pressing question," Thomas wrote. "[I]n an appropriate future case, we should grant certiorari to address this important question."
Juanita O. Lewis, executive director of Community Voices Heard, said in a statement provided to Courthouse News that while she was happy to see the case denied, she worried about future possibilities.
"Tenants who live in rent-stabilized apartments — which comprises 41% of the rental apartments in New York City alone — can breathe a sigh of relief," Lewis said.
"But we are concerned that the Supreme Court left open the possibility of reviewing the constitutionality of rent stabilization in a future case. New York, like most of the United States, is in a deep housing crisis. Working-class people cannot afford their rent. Our leaders need to do more to preserve affordable housing and protect tenants."
Attorneys representing the property owners and the government did not respond to requests for comment.
Five months after the Housing Stability and Tenant Protection Act took effect on June 14, 2019, the plaintiffs filed suit against the city of New York, the Rent Guidelines Board and its chair and members, the state of New York and the New York State Division of Housing and Community Renewal.
A New York federal court dismissed the case, concluding no physical nor regulatory taking had occurred and that the law did not violate due process.
In New York City, rent-stabilized apartments are generally those in buildings with six or more units that were built between February 1, 1947, and January 1, 1974. Another category of rent-stabilized apartments covers buildings regulated under governmental supervision or tax benefit programs.
Like rent control, stabilization provides tenants with other protections besides limited rental increases. Tenants are entitled to receive certain services, their leases must be renewed and they can't be evicted except on grounds allowed by law.
Under the 2019 state law, any locality in New York can enact rent stabilization if it declares an emergency regarding available apartments under the Emergency Tenant Protection Act of 1974. A locality can declare an emergency if the vacancy rate for the housing accommodations or a class of housing accommodations within such municipality is less than five percent.
The law regulates more than one million apartments in the state, including nearly half the rental stock in New York City, according to the Coalition for the Homeless, Community Voices Heard and New York Tenants and Neighbors, who served as intervenors on the government's behalf.
"Reversing the district court's carefully reasoned opinion would not only be legally indefensible but would fundamentally reshape New York's economic and social fabric," the intervenors wrote in a brief. "Replacing the economic policy choices of five decades of democratically elected state and local governments with those of a few current landlords."
The Second Circuit agreed with the lower court finding that states have broad power to regulate housing conditions in general, and the landlord-tenant relationship in particular, without paying compensation for all economic injuries that such regulation entails.
"Pinehurst claims that landlords have been compelled to offer renewal leases to at least one tenant to whom they would not voluntarily lease an apartment, that successor rights force landlords to continue leasing to a deceased tenant's relatives and that they have been prevented from reclaiming an apartment for personal use," the opinion penned by Senior U.S. Circuit Court Judge Barrington Parker, a George W. Bush appointee reads. "Through these restrictions, Pinehurst contends, the RSL compels landlords, against their objections, to continue renting their properties to unwelcome tenants, thereby constituting an as-applied physical taking. We disagree."
The government successfully argued that the Rent Stabilization Law does not force property owners to place their properties into the regulated housing market.
The Second Circuit also found that the property owners hadn't exhausted the mechanisms contemplated by the law that would allow a landlord to evict current tenants. "Without allegations that the RSL has compelled a physical invasion of the property of any of the plaintiffs raising an as-applied claim, Pinehurst has failed sufficiently to plead an as-applied physical taking," the opinion states.
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