New York Landlords Call Rent Control Laws An 'Illegal Taking' In New Federal Lawsuit

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New York landlords are attacking rent regulations in a new federal lawsuit, claiming that capping what they can charge tenants in rent is equivalent to an illegal taking of property.

Last month, housing advocates in New York celebrated sweeping new laws that established rent control permanently and extended tenant protections beyond just New York City, allowing cities throughout New York to opt into rent stabilization programs, which limit how much rent can be increased.

In New York City, those rent caps affect about 1 million apartments, and landlord groups say the regulations not only deprive them of income, but the rules also violate their constitutional rights.

The Community Housing Improvement Program, a trade group that represents 4,000 building owners, joined other landlord plaintiffs in the lawsuit arguing that rent stabilization laws "effect a physical taking of property in violation of the Constitution's Takings Clause," according to the suit, citing a clause of the Fifth Amendment.

The suit, filed in U.S. District Court in Brooklyn this week, is not asking for monetary damages, but instead seeks to have New York's new rent stabilization laws thrown out.

"The Rent Stabilization Laws, among other things, deprive property owners of a reasonable market return on their investment, devalue their properties, and upset their investment-backed expectations," wrote lawyer Reginald Goeke, who is representing the building owners and landlords.

The suit says those who benefit the most from the rent rules are not cash-strapped, but rather, affluent residents in Manhattan. Because of this, the suit argues, the rent laws "cannot be justified" on the grounds that the regulations help stabilize the cost of living for low-income families.

According to the suit, the laws also encourage tenants to stay in their apartments for a long time, even when a family may need more space. As a consequence, rent stabilized units have low turnover and keep vacancy rates low, which usually means housing costs go up, the suit argues. Taken together, the rent laws are "arbitrary and irrational," the suit contends.

Courts have upheld rent stabilization laws in New York in recent years and the U.S. Supreme Court has affirmed the government's right to regulate rent going back to 1921, when the controls were put in place to combat the rising cost of housing.

Yet landlord advocacy groups argue the new court challenge may still have a chance of dismantling rent stabilization laws because, as they see it, the latest batch of New York rent rules are more extreme than past regulations.

Mike McKee, a tenant organizer with TenantsPAC, doesn't think so. He said the plaintiffs in the case are trying to defeat renter protections with an old argument that has a bad track record.

"They have a very weak argument. They have lost in court with this case for almost a hundred years," McKee told NPR. "These arguments haven't won again, again and again. It's not going to win this time either."

McKee said landlord complaints that the laws will crimp earnings have been overstated. "They're still going to make a profit, they just won't make as much as fast," McKee said.

Among the reforms in the the tenants' rights bill signed last month was a measure that eliminated a landlord's ability to take a unit out of stabilization based on a tenant's income. Such a change was necessary, McKee said, since thousands of rent stabilized units have been taken out of stabilization over the years.

McKee's opposition to the lawsuit is joined by New York Attorney General Letitia James, who said in a statement that her office is committed to defending the state's rent stabilization laws.

James said the tenant protections are "a critical step in reforming the state's broken rent regulation system — a system that bad-acting landlords have manipulated and controlled for far too long."

Rent control laws exist in cities around the country, including in New Jersey, California, Maryland and Washington, D.C. Earlier this year, Oregon became the first state to institute rent control statewide.