In The News: Landlords Challenge Constitutionality of Rent Control
Spurred by recent changes in New York state law that offer tenants an unprecedented level of protection from rent hikes and destabilization efforts, some landlords have launched a lawsuit they hope will go all the way to the Supreme Court.
Battles over the law and its effects have been divisive. Landlords feel it has dismantled business models, made it difficult to justify investing in improvements, and believe it will ultimately make it harder to provide affordable housing in the state.
See also: In the News: Housing Stability and Tenant Protection Act of 2019 Signed Into Law.
The suit is being brought by the Rent Stabilization Association, Community Housing Improvement, and 7 other landlords.
Those who aren’t attempting a lawsuit have had a mixed response. Some are already selling buildings. Some simply state they won’t buy new buildings in New York, and are looking to diversify elsewhere. Others plan to stay the course, but say they will put a moratorium on luxury improvements.
Analysts in the industry note that those whose primary sources of revenue are tenants, and not investors, shouldn’t see much impact. They also note the new law has not stripped landlords of their ability to make a profit.
Those who are involved in the lawsuit claim rent control is a violation of the 5th and 14th amendments.
The 5th Amendment states that private property may not be taken for public use without just compensation.
The 14th Amendment states no citizen may be deprived of property without due process.
Past challenges to rent control laws have been overturned by the Supreme Court. But the landlords bringing the suit are counting, in part, on the fact that they would be putting their case in front of a more conservative, business-friendly court, should the Supreme Court decide to hear the case at all.
They may also find some support in the recent Knick v. Township of Scott, PA decision, which says a property owner whose 5th Amendment rights have been violated may bypass state courts and go straight to federal courts.
Until the matter is decided, those who buy or sell real estate in the Long Island area will need to carefully consider their strategies and what they hope to accomplish with their properties and portfolios. Determining how the new laws will impact the property is going to be a major part of doing your due diligence for the foreseeable future.
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