New York City’s rent-related laws have once again survived judicial scrutiny, and evaded Supreme Court review. In 74 Pinehurst LLC v. New York, a group of New York City landlords (“Petitioners”) filed suit in the District Court for the Eastern District of New York against the City and State of New York, the State Division of Housing and Community Renewal, New York City’s Rent Guidelines Board, and multiple state and New York City officials (“Respondents”), seeking a declaration that New York City’s Rent Stabilization Law, as amended in 2019 (“RSL”), violates the Fifth and Fourteenth Amendments of the United States Constitution. Respondents moved to dismiss, which the Eastern District Court granted. On appeal, the Court of Appeals for the Second Circuit affirmed the motion to dismiss, and on February 20, 2024, the Supreme Court denied Petitioners’ petition for certiorari, declining to review the RSL.
The RSL, first enacted in 1969, was amended by New York State’s Housing Stability and Tenant Protection Act of 2019, imposing restrictions on certain landlords through limitations on rent increases, greater hurdles in the eviction process, and limiting rent-stabilized landlords’ ability to deregulate their apartments. The RSL is among the oldest rent stabilization laws in the United States, and its most significant feature is its establishment of the Rent Guidelines Board, a 9-member board which sets the maximum amount by which landlords may legally raise rents for rent-stabilized apartments. Rent stabilized apartments now comprise 28% of New York City’s housing stock, and 44% of all rentals, rendering the ramifications of the Rent Guidelines Board’s determinations, and other regulations specific to rent stabilized apartments, broad and impactful.[1]
The 2019 amendments to the RSL added more controversial features beyond the initial rent-stabilizing function. Among those are limitations imposed on landlords’ rights to evict or decline to renew the leases of rent stabilized tenants. The amendments to the RSL grant rent-stabilized tenants the right to automatically renew their leases, and landlords may only terminate or opt not to renew leases under limited circumstances.[2] These amendments have since given rise to multiple legal challenges, most notably by the Community Housing Improvement Program, the Rent Stabilization Association of New York City, and many New York City landlords, culminating in a February 2023 certiorari denial.[3] The Petitioners in 74 Pinehurst met the same result, adding this most recent challenge to the RSL to a list of similarly ill-fated attempts.
The most recent challenge levied against the RSL was raised under the “Takings Clause” of the Fifth Amendment, with Petitioners contending the RSL’s restrictions on termination or non-renewal of leases constitute a “physical taking,” and further, landlords are effectively deprived of the beneficial use of their property due to the diminution in value rent-stabilized buildings have suffered after the 2019 amendments, constituting a “regulatory taking.”
In its affirmation of the District Court’s dismissal, the Second Circuit disagreed with Petitioners’ contention that they were coerced into renewing leases, and rejected the “physical takings” argument. Because Petitioners had not used all possible avenues in attempting to evict tenants or electing not to renew their leases, it was, in the Second Circuit’s view, not sufficiently proven Petitioners could not do so. Similarly, the Second Circuit held the landlords had not yet availed themselves of every possible mechanism to legally remove tenants, and had accordingly failed to prove the RSL affected a “physical taking.”
Further, the Second Circuit flatly rejected Petitioners’ allegation of a “regulatory taking” due to the diminution of their properties’ values. The Second Circuit reiterated that economic harm, especially in the form of lost profits or lost returns, is not relevant to the determination of a regulatory taking. Petitioners’ Fourteenth Amendment claim was similarly disposed of, with the Second Circuit holding that claims of government takings are appropriately analyzed under the Fifth Amendment, not the more abstract notion of “substantive due process.” Even if Petitioners had been able to challenge the RSL under the Fourteenth Amendment, the Second Circuit concluded the RSL is rationally related to a legitimate government interest, and Petitioners’ challenge would fail under the applicable standard of review.
In explaining the Court’s decision to deny certiorari, Justice Thomas indicated Petitioners’ generalized allegations of harm were ill-suited for the Court to decide the constitutionality of the RSL. However, he did not foreclose the possibility of future review, even suggesting the Court should grant certiorari to a future challenger of the RSL to “address this important question.” While the matter appears to be settled for the time being, Justice Thomas’s statement indicates at least one Justice’s eagerness to review the RSL “in an appropriate future case.”
The Second Circuit’s ruling confirms the RSL and its 2019 amendments are not going anywhere at the present time and will continue to govern the approximately one million apartments currently within its purview. However, Justice Thomas’s intimations of a willingness to review the RSL under the appropriate circumstances suggest the possibility of an eventual Supreme Court review. If the recent past is any indication, the RSL will face continued opposition from New York City’s landlords and is likely to again be challenged in court. One of these prospective challengers may indeed present the “appropriate future case” Justice Thomas highlights as the proper conduit for Supreme Court review, and elicit a definitive ruling on the RSL from the nation’s highest court.
FOOTNOTES
[1] See Ilaria Parogni and Mihir Zaveri. What to Know About Rent-Stabilized Apartments in NYC, The New York Times, June 22, 2023, accessible here: What to Know About Rent-Stabilized Apartments in NYC.
[2] Fact Sheet accessible at Lease Renewal in Rent Stabilized Apartments.