The Supreme Court may decide next month if it will hear a challenge to New York City’s strict rent control laws.

A victory by landlords—assuming the justices agree to hear the case—could set off a chain reaction nationwide, inviting legal challenges to the many rent control laws in place in jurisdictions across the United States.

It could also present problems for those advocating for more such laws, or more restrictive rent control laws, throughout the country.

A case in point is California, where in November 2024, residents are scheduled to vote on whether to repeal the Costa Hawkins Rental Housing Act, which blocks cities and counties from imposing annual rent caps on apartment and single-family dwellings constructed after 1995. California already has a Tenant Protection Act, which limits annual rent hikes to 10 percent or 5 percent plus the Consumer Price Index.

On the other hand, property rights advocates say New York’s rent restrictions are hurting landlords and the rental housing market.

A 2022 report by the American Institute for Economic Research said that year regulators only allowed a paltry rent increase, which, when combined with inflation, was effectively a reduction in rent payments received by property owners.

“Despite inflation raging at a 40-year high of 8.6%, they decided on an increase of 3.25%. In real terms, this is a rent *reduction* of 5.35% (3.25% minus 8.6%), assuming the costs of maintaining the building rise in line with inflation,” the report said.

“This is a tragedy on multiple levels. Owners of New York rental property must face the challenge of operating a building as costs such as labor, supplies, and taxes (yes, taxes are never capped) rise at a much faster rate than the rents the landlord can legally charge.”

The court is scheduled to consider the petition (pdf) in Community Housing Improvement Program v. City of New York (court file 22-1095) at the justices’ conference on Sept. 26. If at least four of the nine justices vote to grant the petition, oral arguments will be scheduled. Oral arguments would likely take place in the following months with a decision likely to follow by June 2024.

Big Apple landlords are dissatisfied with New York’s Rent Stabilization Law (RSL), which has been around since 1969. The law regulates all apartments located in buildings built prior to 1974 with six or more units. Owners of rent-stabilized apartments are not allowed to boost rents above a limit determined every year by a city-wide oversight board. These landlords are generally required to extend a tenant’s lease except in certain situations, such as when a tenant falls behind in paying rent.

The New York State Legislature has amended the law over the years, responding to pressure from tenants, who say that rents are too high, and landlords, who say that rising maintenance costs have exceeded their ability to raise rents. An amendment to the statute in 2019 imposed conditions on landlords’ ability to remove rent-stabilized units from the market for personal use and rescinded exceptions to the rent-increase limits for wealthy or longstanding tenants, according to a SCOTUSblog summary.

The Community Housing Improvement Program (CHIP), the Rent Stabilization Association of NYC (RSA), and individual property owners, first sued in 2019, contesting the constitutionality of what they argued was a burdensome regulatory scheme. They say the RSL has hurt owners and tenants alike and has been holding New York City’s housing market back for decades.

The U.S. District Court for the Eastern District of New York dismissed the lawsuit. The parties appealed to the U.S. Court of Appeals for the 2nd Circuit, which affirmed the dismissal in February 2023.

The petitioners are seeking declaratory and injunctive relief in order to protect the constitutional rights of property owners in the hope of forcing state and city governments to focus on policy solutions that improve housing affordability and augment housing inventory.

The RSL is “the nation’s most stringent rental housing regulation, governing one million New York City apartments. It appropriates owners’ right to exclude and other property rights by, upon the expiration of a tenant’s lease, preventing owners from occupying their property, changing its use, or simply leaving it vacant,” the petition states.

“Absent unlawful acts, tenants and their broadly-defined ‘successors’ are entitled to lease renewals in perpetuity. The RSL also imposes the public burden of providing affordable housing on a subset of rental property owners, by setting maximum rent levels based in part on tenant ability to pay. New York’s high court held that this subsidization scheme is a ‘public assistance benefit,’ ‘conferred by the government’ through regulations ‘applied to private owners of real property.’”

The attorney for the city, Richard Paul Dearing of the New York City Law Department, and for the state, New York Solicitor General Barbara Underwood, did not reply to a request for comment as of press time.

But the city filed a brief (pdf) with the Supreme Court urging it not to take up the property owners’ appeal.

The landlords and the two advocacy groups “seek to massively unsettle the City’s residential rental market as it has existed for over fifty years by challenging the entire RSL on its face as a taking of private property. Applying this Court’s settled precedent, the U.S. Court of Appeals for the Second Circuit rebuffed the attempt. The Court should deny further review.”

The state filed a brief (pdf) saying the petitioners shouldn’t be complaining about the RSL because the state legislature has granted them accommodations in the past.

“Landlords have repeatedly taken their cause to the Legislature with varying degrees of success. Petitioners’ displeasure with the most recent legislative amendments does not present a concern of constitutional magnitude warranting this Court’s intervention,” the state said.

“Petitioners must instead, as in the past, seek recourse through the political process,” it said.

CHIP and RSA said the law hurts landlords and needs to be curtailed.

“With thousands of property owners unfairly impacted by the RSL, the urgent need for the Court’s intervention is indisputable,” the groups told The Epoch Times in an emailed statement.

“Let’s also be clear: if the Supreme Court takes this case, and agrees with us, the reality is that the sky will not fall. The only result will be what we have always advocated: a more rational system that works fairly for tenants and property owners alike.”

This article by Matthew Vadum appeared Aug. 25, 2023, in The Epoch Times.