• Home

February 8, 2023

A federal appeals court decided on Monday that the tenant-friendly adjustments made to New York City’s rent stability laws in 2019 were constitutional, rejecting two complaints from landlords.

The New York City Rent Stabilization Law amendments were upheld by the US Court of Appeals for the Second Circuit on the grounds that they adhered to due process and the Fifth Amendment’s takings clause, which demands that the government pay fair market value when seizing property for a public purpose.

Writing for the appeals court, Judge Barrington D. Parker highlighted the US Supreme Court’s “long line of consistent authority,” which has regularly maintained rent stabilization and rent control systems against related claims over the last century.

Despite the fact that “the caselaw is extraordinarily clear that legislators enjoy considerable jurisdiction to regulate land use,” Parker stated, “we acknowledge that many economists believe that rent control legislation is an ineffective approach of ensuring a supply of affordable housing.”

In a statement to Bloomberg Law late on Monday, a spokesman of the landlord groups stated that they intend to appeal the case to the US Supreme Court. According to the statement, the groups “always acknowledged” that their claims were unlikely based on Second Circuit precedent.

The spokesperson stated that numerous decisions by the US Supreme Court “undermine those earlier Second Circuit opinions and clearly signal that regulations like this burden property owners in an unlawful manner.” “We always expected the Supreme Court to rule on these matters and look forward to advancing the case,”

According to landlord organizations, restrictive rent rules like New York’s result in the production of less housing rather than more.

Regulatory or Physical Taking?

The landlord groups presiding over the parallel cases made broad attacks on the statute in one and narrower claims that the statute is unconstitutional in light of the situation in the other, but the appeals court rejected these broad-based arguments.

The court determined that the rent rule does not represent either a typical “physical take,” which occurs when the government strips an owner of all of their rights over a piece of property or a “regulatory taking,” which involves excessive property use limitations.

That justification holds true for both eviction restrictions and laws requiring landlords to permit tenants to transfer their leases to family members in certain situations, according to Parker. He draws attention to the fact that both provisions must first meet a number of conditions in order to be effective.

The judge stated in his ruling that it is “clearly established” that a tenancy’s termination restrictions have no impact on taking as long as an eviction is a possibility.

Beyond Disagreement

The court agreed that diminished return expectations “may be reasonably aggrieved” by landlords who made their investments prior to the modifications. Any property owner, however, “could not fairly expect” any particular set of rules to persist indefinitely, Parker asserted, “given the RSL’s ever-changing requirements.”

Additionally, he rejected the claims of due process, asserting that rent stabilization regulations—regardless of their wisdom—have a direct connection to the issues that legislators sought to address, such as homelessness, transience, and the eviction of low-income residents, including vital workers.

Even when, as in this case, they may clash partially with the judgments of some experts, a rational foundation review is not a method for judges to question legislative judgment, Parker said. “There is no question that neighborhood stability and continuity are legitimate justifications for passing legislation.”

Judges Susan L. Carney and Guido Calabresi join the opinions. The decisions support the decision made by Judge Eric R. Komitee of the US District Court for the Eastern District of New York.

Both the state and New York City have their own legal counsel. The landlords had representation by Covington & Burling LLP in one case and Mayer Brown LLP in the other.