By: Jordan Sciascia
Published On: November 20, 2023
Rent stabilization policies are in place across many states and localities.[1] These laws cap the rent of a particular unit under the terms of a lease and place other restrictions on landlords.[2] The rent stabilization laws (“RSL”) in New York requires both that landlords adhere to a legal limit on how much they can increase the rent, and that tenants be allowed to renew their lease. In some circumstances, it requires that a tenant’s family members be able to take over their lease and keep the same rent controlled prices.[3] The most recent amendments to the New York RSL cap a landlord’s ability to recover their unit, make it more difficult to evict tenants, and more difficult to convert their units into condominiums or cooperatives.[4] This policy was disfavored by building owners who argued that the requirement was an impermissible taking under the Constitution, and as such should not be allowed.[5]
The Supreme Court ruled on takings in Penn Central Transportation Company v. New York City.[6] In that case, the court held that a taking depends on the extent to which a regulation interferes with a distinct investment backed expectation, taking the character of the government’s actions into account.[7] Using that precedent, the lower court ruled in favor of the City of New York in the present case in part because the petitioners failed to meet any of the Penn Central factors: the court held the petitioners did not have a constitutional right to earn what they might have earned in a market without rent stabilization, the city’s actions did not interfere with an investment backed expectation because the rent regulation scheme has existed for more than 70 years and they could not argue they were unaware, and because the RSL is a longstanding regulatory scheme.[8]
Currently, the Supreme Court is reviewing a petition for certiorari on 335-7 LLC v. City of New York, New York.[9] The petition seeks to challenge New York’s rent stabilization law on the grounds that it limits an owner’s ability to exclude, it deprives them of a just and reasonable return on their property, and it unconstitutionally restricts their use of the property.[10] The petition takes issue with the provision that allows family members to take over rent controlled units and in turn extend a rent controlled lease.[11]
If the Court decides to take up this petition, the potential of overturning New York’s rent stabilization law would have negative implications for tenants across the country.[12] Though controversial, rent stabilization law have many positive impacts for renters: rent stabilization policies allow renters to build community and remain in affordable units without the fear of being priced out as well as leading to safer living conditions.[13] Studies show that individuals living in rent controlled units are more likely to seek repairs knowing that their rent will not be impacted.[14] While not a solution to all the affordable housing issues in the country, rent control is an important factor in protecting tenants’ rights and preventing gentrification and displacement.[15] By finding rent stabilization policies to be an unconstitutional taking, the court would prohibit capping rents in this way moving forward, ultimately reducing the stock of affordable housing and displacing many individuals.[16]
Critically, though, leaving in place the rent stabilization as it relates specifically to New York’s law and the 335-7 LLC case could set a dangerous precedent and incentive to landlords to discriminate against their tenants. If the court upholds the rent stabilization law, the RSL would permit family members to take over rent stabilized units.[17] Knowing this, landlords who do not wish to have perpetual rent controlled leases with tenants and then their family members might be inclined to exclude families and elderly individuals from renting.[18] The Fair Housing Act is designed to prevent against such discrimination, but bringing a successful fair housing claim can prove difficult.[19] Ultimately, if the Court takes up this case and upholds New York’s policy, which would be beneficials to renters across the city, New York should act to strictly enforce fair housing across the state to avoid discrimination resulting from a policy designed to benefit renters.
[1] HUD User, https://www.huduser.gov/portal/pdredge/pdr-edge-featd-article-062822.html (last visited Oct. 11, 2023)
[2] Official Website of the City of New York, https://www.nyc.gov/site/mayorspeu/programs/rent-stabilization.page#:~:text=Rent%20stabilization%20is%20a%20form,York%20City%20are%20rent%20stabilized (last visited Oct. 11, 2023)
[3] Id.
[4] 335-7 LLC v. City of N.Y., 524 F. Supp. 3d 316, 316 (S.D.N.Y. 2021)
[5] Id.
[6] Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 104 (1978)
[7] Id.
[8] 335-7 LLC, 524 F. Supp. 3d at 333.
[9] Id. at 316.
[10] 335-7 LLC v. City of N.Y, 524 F. Supp. 3d 316 (2d Cir. 2021) cert. pending.
[11] Id.
[12] Cea Weaver, There’s No Denying the Data: Rent Control Works, The Hill (Sept. 24, 2021) https://thehill.com/opinion/finance/573841-theres-no-denying-the-data-rent-control-works/.
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Official Website of the City of New York, https://www.nyc.gov/site/mayorspeu/programs/rent-stabilization.page#:~:text=Rent%20stabilization%20is%20a%20form,York%20City%20are%20rent%20stabilized (last visited Oct. 11, 2023)
[18] See id.
[19] National Fair Housing Alliance, New Report Analyzes 50 Years of the Fair Housing Act and Calls for Stronger Enforcement of Fair Housing Laws, https://nationalfairhousing.org/new-report-analyzes-50-years-of-the-fair-housing-act-and-calls-for-stronger-enforcement-of-fair-housing-laws/ (Last visited October 17, 2023) (indicating, among many challenges, is the government’s failure to vigorously enforce the policy).