Landlords Sue NYC Over New Rent Caps on a Million Apartments

Erik Larson and Henry Goldman

(Bloomberg) -- New York City’s rent-stabilization law is under attack after a group of real-estate trade groups and landlords sued to overturn regulations that cover more than 1 million apartments.

The decades-old law that limits rent increases violates the U.S. Constitution by placing an unfair burden on property owners, particularly those who own pre-1974 buildings with six or more units, according to the suit, filed Monday in federal court in Brooklyn.

The state legislature, now under full Democratic control, adopted sweeping tenant protections in June that further cap rent increases and restrict landlords’ ability to evict residents. The massive rewrite of the rent rules, which cover about 2.4 million residents, aimed to preserve affordable housing by eliminating tools landlords used to remove units from regulation. The package also abolished a “vacancy bonus” that allowed property owners to raise rents 20% when a tenant left.

The plaintiffs say the update further eroded their rights and that the law’s “irrationality and arbitrariness” and “web of restrictions override core rights of property owners.”

Read More: NYC Tenants Get a Rent-Law Blessing That Landlords See as Curse

The landlords claim the rules have morphed over the years so that they benefit too many higher earners, while renters who make less than $35,000 a year account for just 38% of rent-stabilized renters. The breakdown is about the same for unregulated apartments, the groups claim, suggesting the law isn’t much different from the unregulated market.

The trade groups claim that 22% of rent-stabilized tenants make more than $100,000 a year and that married couples without children are over-represented in rent-stabilized apartments despite being less likely to suffer rental hardship than couples with children.

The city said the suit threatens ordinary New Yorkers.

“Dismantling rent stabilization would be a devastating blow to everyday New Yorkers who are working hard to call this great city home,” Jane Meyer, the mayor’s deputy press secretary, said in a statement. She said the city would review the suit and continue to “fight to protect affordability, prevent harassment and keep this a city for everyone.”

Supreme Court Snub

Tenants-rights groups argued the changes were needed to counter decades of abuse by some landlords and a shrinking supply of affordable housing. Tens of thousands of apartments have been removed from rent-stabilized status, sending rents higher as neighborhoods are gentrified. The effort won support from Governor Andrew Cuomo, a third-term Democrat, as well as New York City mayor and 2020 presidential candidate Bill de Blasio.

The U.S. Supreme Court rejected a challenge to the city’s rent-stabilization system in 2012, turning away an appeal from landlords who said the city had violated their constitutional rights by limiting rents on three one-bedroom apartments in their Upper West Side brownstone. The state of New York defended the statute, citing previous Supreme Court decisions that judges “should not sit as super-legislatures reviewing matters of economic policy, but should ask only whether a legislature’s policy judgments are rational.”

Among the plaintiffs is the Rent Stabilization Association, which represents 25,000 landlords. When the law was amended, the landlords said it would cause buildings to fall into disrepair because owners wouldn’t be able to afford to maintain them.

The case is Community Housing Improvement Program v. City of New York, 19-cv-4087, U.S. District Court, Eastern District of New York (Brooklyn).

(Updates with second paragraph under Supreme Court Snub)

--With assistance from Gerald Porter Jr..

To contact the reporters on this story: Erik Larson in New York at elarson4@bloomberg.net;Henry Goldman in New York at hgoldman@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey

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