U.S. Supreme Court Denies Certiorari in New York City Rent Control Challenge—What Does This Mean for Rent Control Laws?
In 2019, New York City’s rent stabilization-law was amended and passed by the Housing Stability and Tenant Protection Act of 2019 (“HSTPA”) in response to an “ongoing housing shortage crisis,” according to the law’s sponsors. See Sponsor’s Mem., 2019 N.Y. Laws ch. 36. The newly amended law limits landlords’ ability to charge additional rent in relation to major capital improvements and individual apartment improvements, including a repeal of vacancy decontrol and high-income decontrol, which allowed landlords to raise rents if units became vacant or if a tenant had remained in a particular unit for an extended period. See 2019 N.Y. Laws ch. 36, Part K; See also Id., Parts B & D.
In July 2019, landlord groups comprised of the Rent Stabilization Association and the Community Housing Improvement Program filed a federal lawsuit facially challenging New York City’s newly amended rent- stabilization law. They argued that the Housing Stability and Tenant Protection Act of 2019 violated the Fifth Amendment’s takings clause (as applied to the states by virtue of the Fourteenth Amendment’s due process clause) and that the law deprives owners of free use of their properties while also failing to remedy the City’s housing shortage.
Following disagreements from lower federal courts, these landlord groups filed a petition asking the United States Supreme Court to consider their challenges to New York’s rent-stabilization laws. In their Petition, they argue that while affordable housing can be properly pursued through subsidies and tax abatement, the City and State take an approach that is characterized as an unconstitutional taking. In their filings, the landlord groups contend that the amended law “confers a much more extensive right to physically invade” given the fact that rent stabilized tenants are ensured lease renewals, and landlords’ ability to reclaim a unit are limited. Under the amended rent stabilized-law, owners and landlords can only reclaim a single unit should they intend on using as a primary residence and “an immediate and compelling necessity.” In other words, the petitioners claim the law limits landlords to recovering one rent-stabilized unit per building for personal use upon a showing of necessity, with additional restrictions where the tenant is a senior citizen or disabled. See Sponsor’s Mem., 2019 N.Y. Laws ch. 36 Part I. This essentially restricts landlords and owners from occupying the apartments or otherwise de-listing the properties from the market. Summarily, their petition argued that the Second Circuit took an erroneous view that the takings clause is applied in a context different than what is presented.
The case was first brought before the District Court of the Eastern District of New York and then appealed to the Second Circuit, both of which ruled against the petitioners. The District Court found that physical taking occurs when there is a deprivation of the “entire bundle of property rights” in the property interest in question. That bundle includes the “rights to possess, use and dispose of the property.” See Community Housing Improvement Program v. City of New York, 492 F. Supp. 3d 33, 43 (E.D.N.Y. 2020). The District Court reasoned that because the newly amended law restricts only the Landlords’ right to use the property— but not to possess or dispose of it—the claims failed to show a physical taking in violation of the Fifth and Fourteenth Amendments.
In its holding, the District Court examined the difficulties associated with facial regulatory takings challenges and found that the Landlords were unable to present a case where a facial challenge to rent control related law was successful and dismissed the claims on the ground that Landlords had not demonstrated that the newly amended law was unconstitutional in all its applications. The Second Circuit Court of Appeals affirmed the District Court’s dismissal of the case.
The Judges of the Second Circuit deciding the case wrote:
[T]he [Rent Stabilization Law] “regulates land use rather than effecting a physical occupation.” The case law is exceptionally clear that legislatures enjoy broad authority to regulate land use without running afoul of the Fifth Amendment’s bar on physical takings.
[Cmty. Hous. Improvement Program v. City of N.Y., 59 F.4th 540, 552 (2d Cir. 2023) (internal citations omitted).]
The Takings Clause of the Fifth Amendment states “Nor shall private property be taken for public use, without just compensation.” This provision is applicable to the states by virtue of the Fourteenth Amendment Due Process Clause.
For now, this means that the rent leveling and stabilization laws in New York City remain in effect and are considered constitutional. While this does not prevent the law from being challenged through other avenues or future changes to rent stabilization from being challenged, the Supreme Court’s decision does slow the momentum of any group’s intent on fighting rent control in the Second Circuit (i.e., New York, Vermont, and Connecticut).
Challenges in other states, though (e.g., New Jersey, Pennsylvania, and Delaware are part of the Third Circuit), are not bound by the decisions of the Second Circuit. While there is never a guarantee, the Supreme Court often hears cases when two different Circuits rule differently on identical issues (often called a “Circuit split”). While there have been other challenges to rent control laws in other circuits (e.g., Heights Apartments, LLC v. Walz, 30 F.4th 720 (8th Cir. 2022)), none have been so contradictory that the Supreme Court has needed to step in (thus far). So, while the issue is settled for now in New York, fights against rent control may live on.
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