Supreme Court Rejects NY Rent Law Challenge

As an increasing number of landlords face foreclosure or sell off their properties at a steep discount, the U.S. Supreme Court has dashed their hopes of finding relief from rent regulation.

The court on Monday declined to hear landlord groups’ challenge to New York’s rent stabilization law.

The Rent Stabilization Association, the Community Housing Improvement Program and a few individual landlords filed a petition in May, asking the court to consider arguments that the state’s rent stabilization represents an unlawful taking of property without just compensation.

The decision thwarts the hopes of struggling landlords and means any relief is likely up to state lawmakers. That is an iffy proposition at best.

The legal petition claimed that landlords are forced to provide “public assistance” to tenants through low rents, lease renewals and succession rights. The city’s Rent Guidelines Board, which determines annual rent increases for stabilized apartments, considers tenants’ ability to pay rent, which has led to “a widening gap between owner costs and regulated rents,” the petition states.

The groups claim that the rent law fails to actually address the state’s housing crisis while placing “the burden of rectifying a societal problem on a select minority of property owners.” New York City has about 900,000 rent-stabilized units and its suburbs have perhaps 100,000 more.

Extensive changes to the state’s rent law in 2019 further restricted how and when landlords can increase rent on stabilized apartments and when apartments can be taken back by the owner.

Landlords have blamed those changes for their inability to renovate apartments needing extensive repairs, resulting in tens of thousands of units being removed from the market and building revenue failing to keep up with expenses.

Defenders of the law say landlords purchased their buildings knowing they were subject to further regulation by lawmakers, and if the 2019 reform cost them money, that does not make it unconstitutional.

Foreclosure filings are on the rise as property owners struggle to pay off their debt, and high interest rates spell trouble for those with impending loan maturities.

The Supreme Court challenge was a long shot, given the court’s history of declining rent control cases and the tiny fraction of cases that are heard by the high court each year.

Even the court’s conservative majority was not enough to push the case forward. Four votes among the nine justices were needed to hear the case.

“While we were hopeful a broad facial challenge would have delivered the most relief to the most owners as quickly as possible, we remain convinced that the law is irrational and vulnerable to more specific challenges,” Jay Martin, CHIP’s executive director, said in a statement. “One way or another this law must go down. Its current form is destroying New York’s housing.”

In a joint statement, CHIP and RSA called the decision “a signal to bring more targeted challenges to specific provisions of the law illustrating direct impacts on housing providers.”

The landlords’ arguments relied on a 2021 decision by the high court in Cedar Point Nursery v. Hassid. In that case, the court found a California law unconstitutional because it required employers to allow union organizers onto their property for up to three hours.

The groups filed their lawsuit in July 2019, intent on eventually bringing their claims before the Supreme Court. Lower courts rejected their arguments.

Two other similar petitions challenging the state’s rent law could still be picked up by the high court, though the odds are against them as well. The Legal Aid Society, which opposed the landlord groups’ petition, said it was hopeful that the other two cases will meet a similar fate.

“We welcome this decision, one rooted in the law and long-standing legal precedent, from the Supreme Court denying CHIP’s meritless and frivolous lawsuit challenging our city’s rent stabilization laws,” the group said in a statement.

Other states were watching this case closely, with some landlords hoping a Supreme Court ruling would require changes to rent control beyond New York.

In an amicus curiae brief in support of the landlord groups, the California Business Roundtable cited California’s 2019 cap on rent increases, pointing to Los Angeles and San Francisco as “some of the most burdensome rent-control regimes in the country.”

“Some of California’s largest cities … contain many of the same troubling features that petitioners challenge here — e.g., substantial restraints on a property owner’s ability to remove tenants, to reclaim units for personal use, to withdraw units from the market, and to charge fair-market rates,” the brief states.