Lawsuits challenging the constitutionality of the state’s rent-regulatory regime were struck down recently but may be heading for the Supreme Court.
Lawsuits challenging the constitutionality of the state’s rent-regulatory regime were struck down recently but may be heading for the Supreme Court.
F or decades, lawmakers in New York State have been chipping away at the rights of property owners, specifically New York City landlords. In an ill-conceived attempt to make housing more affordable, lawmakers have imposed regulations that actually worsen the problem for renters and punish the people they rent from.
Property owners have finally had enough. Several lawsuits challenging the constitutionality of the state’s rent-regulatory regime have been brought by owners of rent-stabilized apartments in federal court. These plaintiffs’ claims are correct. New York’s rent-regulatory regime, which applies to buildings containing six or more units and that were constructed between February 1, 1947, and December 31, 1973, effectively permits renters to remain in a unit in perpetuity, giving the landlord no way to evict them, even if they are delinquent on rent. This fits the Supreme Court’s definition of physical taking as a government-authorized nonconsensual physical occupation of property.
Unfortunately, the Second Circuit Court of Appeals struck down two of the lawsuits last month. The plaintiffs now say they will appeal to the highest court in the land.
Constitutionality aside, those who defend rent control, which applies to apartments that the same tenant has continuously occupied, and rent stabilization, which isn’t tied to tenant occupancy or as strictly limited, must have missed all the evidence suggesting that rent regulations make housing scarcer and more expensive, lead to a deterioration of rental units, and render neighborhoods unlivable. There’s a reason why famed Swedish economist Assar Lindbeck once quipped, “Rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”
The origins of the current situation go back to 1969, when Albany enacted the Rent Stabilization Law, which regulates nearly 1 million apartments in New York City and has remained in effect based on a triennial declaration of a housing “emergency.” The law has since been amended many times. Along with regulating rent levels, it also restricts property owners’ ability to control who lives in the apartments they own, change the purpose of their properties, or convert a residential property into space for personal use. These policies have strained the housing market in New York, reducing investment and diminishing supply. If the goal is to make housing available and affordable to renters, it’s hard to imagine a worse regulatory regime.
Enter the Housing Stability and Tenant Protection Act of 2019 (HSTPA). This law makes the onerous rent-regulatory system in New York permanent and doubles down on the failed policies of the past. For example, one of the law’s provisions lowers the rent-increase cap for major capital improvements so much that it removes any incentive for landlords to maintain and upgrade units, thereby reducing tenant quality of life. This outcome is precisely what progressive lawmakers in Albany promised to put an end to, yet they were able to pull off this ruse by painting the landlords as fat cats.
The Left may enjoy vilifying landlords, but the reality is that many are working-class. Landlords with fewer than five properties own 28 percent of the city’s roughly 2.3 million rental units. Additionally, the real-estate taxes that landlords pay are a significant source of revenue for the social services progressives champion. According to a report published last year from the Real Estate Board of New York, “In the financial year ending 2021, real estate-related taxes comprised 54.1% of tax collections, up from an average of 51.9% between 2015 and 2018.” Because the current regulatory regime is a disincentive to long-term real-estate investment, the city risks significantly diminishing this essential tax base if New York’s rent laws remain unchanged.
But these laws aren’t only bad policies. They’re also unconstitutional. In impeding their ability to raise rents or evict tenants, the law impermissibly infringes upon the property rights of landlords, devaluing their property by eroding their ability to earn a reasonable return on their investment. This is a clear violation of the Fifth Amendment’s takings clause. HSTPA also goes far beyond the state’s legitimate regulatory authority by forcing owners to cap prices for their personal property and impermissibly limiting their ability to evict tenants.
Let’s hope the Supreme Court grants certiorari to the plaintiffs in their appeal so that New Yorkers’ property rights can once again be protected.