Propmodo Daily

By Franco Faraudo · Feb. 21, 2024

Greetings!

If you own a building but can’t raise rent and can’t evict tenants, do you really own it? That’s the question that has been pitched to the Supreme Court in a petition to weigh in on two ongoing rent control lawsuits. Yesterday, the court decided to deny the petition. Today, we dig into why.

Here we go!

Supreme Court Punts on Controversial Rent Control Law

In 2019, New York's then Governor, Andrew Cuomo, signed the Housing Stability and Tenant Protection Act. This bill, meant to help low-income New Yorkers deal with spiraling rental prices, had some of the strictest renter protection laws in the nation. Effectively rent protected units would keep "preferential rent" status when leases expired or even when tenants left. Laws in the bill also made it much harder to evict tenants paying preferential rent, and almost impossible for buildings to lose their regulated status.

Almost immediately, lawsuits were filed by real estate industry groups to try to overturn the regulation. Two of these cases, 74 Pinehurst v. New York and 335-7 LLC v. City of New York were adjudicated in favor of the state, saying that these laws did not represent a "de facto taking" as the lawsuits had claimed.

The issue made it all the way to the Supreme Court, but yesterday, the petition was denied. This statement from Justice Thomas explained why: "The petitioners' complaints primarily contain generalized allegations about their circumstances and injuries. But, to evaluate their as-applied challenges, we must consider whether specific New York City regulations prevent petitioners from evicting actual tenants for particular reasons. Similarly, petitioners' facial challenges require a clear understanding of how New York City regulations coordinate to completely bar landlords from evicting tenants."

In the mind of the Justices, "the pleadings do not facilitate such understanding." While the petition might not have been sufficient, the door was left open for the court to weigh in on these laws, "the constitutionality of regimes like New York City's is an important and pressing question," the statement read.

The law is seen by many in real estate as too broadly written and too punitive to the owners of rent-controlled buildings. A recent NYU study has shown that the law might not have even been effective at reducing evictions, either. The study showed that eviction filings did drop in the city in the months after the law passed but quickly returned to previous levels. The reason that researchers gave for this bounce back: "The drop in eviction filing rates may be due in part to landlords' attorneys adjusting to the new regulations, including longer predicate notice periods."

With cities unable to rein in rental housing prices, these types of rent stabilization laws have become more popular. The Supreme Court might have declined to rule on this issue for now, but they left the door open for revisiting it later. The battle over rent control is far from over and could end up being argued by nine politically divided Justices.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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