Photo Credit: cityandstate.com
Recently, New York State passed rent reform legislation that would end high-rent/high-income deregulation. The new law includes other clauses that limit rent increases due to building and apartment improvements, limits rent hikes, and affords new protections for mobile-home and apartment residents statewide. Governor Andrew Cuomo signed the law officially on June 14, 2019.
Landlord groups are not happy about this new legislation, to say the least. They have filed a lawsuit in federal court, arguing that the new laws are in violation of their constitutional rights. The federal lawsuit alleges that the new rent laws approved in June violate the Fifth and Fourteenth Amendments of the Constitution, and therefore violate the constitutional rights of New York property owners.
Most relevant to our blog post, the landlords argue that the expanded rent-control laws violate the Fifth Amendment Takings Clause. As you know, it’s that clause that states that private property cannot “be taken for public use, without just compensation."
Leading the fight are the Community Housing Improvement Program and the Rent Stabilization Association, along with seven landlords. Named as defendants are the City of New York, its Rent Guidelines Board, and the State commissioner of Homes and Community Renewal (otherwise known as the DHCR). The lawsuit claims that the State’s new Rent Stabilization Laws violate due process rights by depriving rent-controlled landlords of property “without any rational relationship between that deprivation and a legitimate government interest.”
Landlord representatives argue that the new law will exacerbate a housing shortage and will not maintain diversity and solve part of the housing crisis. They also argue that because market-rate apartments will be more expensive, property owners will be deterred from making building wide and individual apartment improvements.
Democratic leaders who passed this legislation disagree. The Housing Stability and Tenant Protection Act of 2019 dramatically increased the price protections for the city’s stock of 1 million regulated apartments. The legislation included a provision that that does away with a 20% vacancy increase landlords, which landlords could add to the legal regulated rent of a rent regulated apartment, in order to eventually get that legal regulated rent to the market rent at which the apartment could legally be deregulated.
The legislation also removed the process of luxury decontrol, which is when a rent-regulated apartment could be de-regulated, and thereby receive a market rent, if the tenant's income exceeded certain thresholds.
This is a big blow to the real estate lobby, once a highly powerful group. Landlords are now asking for injunctive relief that would block the City and State from enforcing these new rent reform laws; and they argue that this a ruling barring enforcement of this law will help, rather than harm, tenants living in rent regulated buildings.
Declaratory and injunctive relief against future enforcement of the rent-stabilization scheme will not only halt the deprivation of the constitutional rights of property owners,” the lawsuit argues, “but will result in increased development of rental properties, better housing for a larger universe of renters, the amelioration of a constrained housing market, and will force New York City and state governments to adopt fairer and more efficient means of providing housing to those most in need.”
With all of the foreign investment in real estate and the dramatic changes reaching the boroughs, it will be interesting to see how this all turns out.