New York rent control lawsuit: Landlords Strike Back (Reports).

A coalition of landlords and building owners have filed a federal lawsuit, against New York City and a New York State official, seeking to strike down the state’s rent control laws, including a series of changes approved by the Legislature in June intended to boost tenant protections.

The groups claimed in the suit filed late Monday that the state’s Rent Stabilization Laws, and the city’s actions enforcing them, violate their due process rights and an unconstitutional taking of property.
The litigation was brought in the U.S. District Court of the Eastern District of New York by Community Housing Improvement Program, the Rent Stabilization Association of NYC, and individual property owners. They’re represented by Andrew Pincus, a partner at Mayer Brown in Washington, D.C.

“New York’s Rent Stabilization Law clearly violates the United States Constitution,” Pincus said. “The RSL ‘solution’ of forcing some property owners to subsidize housing costs for some tenants is arbitrary and irrational.”
A handful of state and local officials are targeted in the lawsuit. It was brought against New York City, the city’s rent guidelines board, members of that board, and RuthAnne Visnauskas, the commissioner of the state division of housing and community renewal.

Pincus said the suit is not aimed at members of the state Legislature because the rent laws in question are enforced by members of the executive branch of state and local governments, which are named in the litigation.

It was members of the Legislature, particularly in the state Assembly, who helped lead the charge in recent months to renew and expand the state’s rent laws. Those changes were signed into law in early June. Lawmakers and advocates have called them the strongest protections for tenants in state history.
They’re intended to create more affordable housing for low-income residents and prevent landlords from unduly raising rents and evicting tenants. But the litigation brought Tuesday argued that parts of the law viewed as beneficial to tenants will actually do more harm than good and should otherwise be ruled unconstitutional.

The lawsuit is composed of three main arguments on how the rent laws, both old and new, are alleged to violate different sections of the U.S. Constitution.

The first of those arguments is a claim that the rent laws violate the Due Process Clause of the 14th Amendment because they allegedly do not target relief to low-income populations, as lawmakers have claimed, and have been arbitrarily enforced.

They claimed that news reports and studies have shown “hundreds of thousands of stabilized units” are rented by New Yorkers who can afford to pay higher, market-rate rents. That’s prevented lower-income residents from moving into those units, the suit argued, which works against the purpose of the law.

The new rent laws passed in June also eliminated a section of the law that allowed for units to be removed from rent stabilization if the rent hit a certain amount, or if the tenant’s income was $200,000 of greater. Residents will now have no reason to move out of those units since they will no longer be deregulated, the suit said.

None of that would be possible without action from the New York City Council, which has continuously declared a housing emergency every three years for the past five decades. The Rent Stabilization Laws apply as a result of that declaration, the suit said.

It argued that the City Council has routinely renewed claims of a housing emergency without any meaningful support that one exists in New York City. That also contradicts the due process rights of landlords and building owners, Pincus said.

“[The law] does not in any way target its benefits to people with limited means and it is constraining rather than expanding the supply of apartments in New York,” Pincus said. “Irrational government action violates the Fourteenth Amendment’s Due Process Clause.”

The other two arguments in the lawsuit related to the Taking Clause of the Fifth Amendment, which requires that individuals be compensated when their property is taken for public use.

The first part of that argument claims the rent laws amount to a physical taking of property because landlords and property owners are deprived of their rights to exclude others from their buildings, and to possess, use and dispose of their property. In other words, they said the law prevents them from doing what they want with their property with no benefit in return.

“Physical occupation accomplished by regulation, as much as by direct seizure, violates the federal Constitution,” the lawsuit said.

Part of the new rent laws, for example, now require purchase agreements from more than half of those occupying a building for owners to convert them into cooperatives or condominiums. The previous law only required 15% or more of the units to allow such a conversion, which the suit claimed essentially gives tenants more power over a property than its owners.

The second part of the Taking Clause argument is over so-called regulatory taking, which alleges that the law imposes new restrictions on landlords without any reciprocal benefits. The suit claimed that buildings with predominantly rent-stabilized units are valued lower than buildings with market-rate units, for example.

The new rent laws passed in June also restrict how much landlords and building owners can pass on to tenants for the cost of certain improvements, even if they’re to comply with the city’s building and housing codes. They are only allowed to pass on $15,000 in improvements for individual apartments over a 15-year period.

That, coupled with slim rent increases approved by the city’s Rent Guidelines Board, have created a new, costly burden for property owners, the suit claimed.

“The RSL’s real-world effects are to take property without compensation, in violation of the federal Constitution’s Takings Clause,” Pincus said. “Recourse to federal court is the only way to reform the system and increase available housing for all New Yorkers.”

Visnauskas said in a statement that her agency will continue to enforce the state’s rent control laws, but declined to comment on the suit specifically.

“HCR has and will continue to both enforce the rent laws and investigate those who violate the law to protect tenants and the housing stock,” Visnauskas said. “HCR does not comment on pending litigation.”

Representatives for the New York City Law Department did not immediately respond to a request for comment on the lawsuit.

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