Rent-stabilization remains in NYC after U.S. Supreme Court declines review

Takings Clause at the heart of rent-stabilization legal battle

February 22, 2024 Robert Abruzzese, Courthouse Editor

Nearly half of New York City's apartments are rent stabilized, primarily located in buildings with six or more units constructed before 1974, offering tenants additional protections and rights.
Photo: Lore Croghan/Brooklyn Eagle

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The U.S. Supreme Court opted not to review two significant cases last week, 74 Pinehurst v. New York and 335-7 LLC v. New York, thereby leaving New York City’s long-standing rent stabilization system intact.

Rent stabilization in New York City ensures affordability for nearly half of the city’s apartments, primarily in pre-1974 buildings with six or more units, offering tenants significant protections and rights.

The rent stabilization framework, which currently applies to around one million homes — 44 percent of all rental properties in the city — has been a subject of contention. It sets annual rent increase limits and mandates lease renewals by landlords, a regulation set by a board under the mayor’s purview.

The 2019 amendments to this system, intended to bolster tenant protections, have particularly drawn criticism from property owners. These changes restrict landlords from reclaiming more than one rent stabilized apartment for personal use and allow courts to delay evictions even after lease violations.

The landlords’ challenge centered on the argument that the rent stabilization laws constitute a “taking” of property without just compensation, violating the Fifth Amendment. They contended that these regulations severely limit their control over their properties and have led to a significant devaluation of their real estate assets. However, lower courts have consistently rebuffed these claims, a stance now underscored by the Supreme Court’s refusal to hear the cases.

When the government action renders a property valueless or significantly impairs its use, it may constitute a “regulatory taking.” Regulatory takings occur when government regulations limit the use of private property to such a degree that the regulation effectively deprives the owner of all or most of the economic use or value of the property, even though the property has not been formally expropriated.

In such cases, the U.S. Supreme Court has held that the property owner may be entitled to just compensation under the Takings Clause of the Fifth Amendment, as the regulatory action is akin to a physical appropriation of the property. The determination of whether a regulatory action constitutes a taking involves a complex legal analysis that considers the regulation’s economic impact on the property, its interference with reasonable investment-backed expectations, and the character of the government action.

Justice Clarence Thomas, in a two-page statement, acknowledged the critical nature of the constitutionality of such regulatory regimes but noted the unsuitability of these particular cases for Supreme Court review. Thomas pointed out the need for more detailed analysis and specific instances of how New York City’s regulations have impacted landlords to consider the constitutionality effectively.