NAHB, Other Groups Urge Supreme Court to Take New York Rent Control Case

NAHB and three other organizations are calling on the Supreme Court to consider whether a New York rent control law acts as a regulatory taking because the property owners have been deprived of all meaningful rights with respect to their property, including:

• The right to exclude others from the property;
• The right to occupy, possess or use the property; and
• The right to freely dispose of the property.

In addition, the New York Rent Guidelines Board has precluded stabilized property owners from raising rents at a rate consistent with the board’s own estimate of the increased costs of ownership and maintenance. Not surprisingly, the value of rent stabilized properties are now far below their market-based peers.

And despite the rent stabilization law’s (“RSL”) imposition of what amounts to a privately funded and randomly assigned housing subsidy, the law has failed to achieve any of the goals for which it was ostensibly created: It does not increase vacancy rates, it does not increase the supply of affordable housing, it does not target those in greater financial need, and it does not promote diversity in the city.

Furthermore, the New York legislature enacted the Housing Stability and Tenant Protection Act of 2019 (HSTPA), which eliminates any previous opportunities for property owners to reset their units to market rate.

The HSTPA prevents owners from substantially recovering investments in individual apartment improvements or major capital improvements, forcing owners to choose between bearing repair costs themselves without any ability to recover those costs through increased rent or allowing buildings to deteriorate over time.

The HSTPA further restricts the ability of owners to convert properties to condominiums or cooperatives. Under the new law, they must have 51% of all tenants agree to purchase contracts for their units — a requirement that effectively precludes the ability to convert altogether.

As a result of these draconian actions, NAHB, along with the National Apartment Association, the National Association of Realtors and the Mortgage Bankers Association, have filed a friend-of-the-court brief in support of New York property owners regarding two rent stabilization cases that are currently pending.

The Supreme Court has not indicated yet whether it will address the New York rent control laws, but NAHB and our allies are making a forceful case that this is a takings claim because New York’s rent control scheme does not allow property owners the fundamental right to possess and dispose of their own property.

The due process claim is that the law does not accomplish its goals — it does not increase vacancy rates or the supply of affordable housing. And it does not help those in financial need or increase diversity.

As these are constitutional claims, NAHB believes this is truly a national case.