What If The Supreme Court Kills Rent Control?
The Supreme Court is considering a case filed by James Harmon, a onetime Reagan Administration lawyer who owns a brownstone on West 76th street in Manhattan. One of his tenants, an executive recruiter named Nancy Wing Lombardi, has leased a one-bedroom apartment in the building since 1976. Since the apartment is rent-controlled, she pays $1000 a month, at least half what an unregulated apartment in the same neighborhood would cost. Harmon argues that laws limiting how much rent he can charge are an unconstitutional “taking” of his property. The court has not yet decided to take the case, but it has asked for additional briefing – “taking a harder look,” the Wall Street Journal reported, “than anyone expected.”
(MORE: Real Estate Trend: Wealthy Californians Demand Tons of Bathrooms)
Rent control has a long history. New York City adopted its law after World War I, when a shortage of housing and a glut of renters – including soldiers returning from the war – put extreme pressure on rents. Many other localities have rent control laws, including dozens in New York State and California. Along with New York City, some of the largest are San Francisco, Oakland, and Washington, D.C.
The Supreme Court has repeatedly upheld rent control, going back to 1921. In 1988, in Pannell v. San Jose, it ruled 6-2 that San Jose’s law did not violate the constitution – in an opinion written by the very conservative then-Chief Justice, William Rehnquist. In 1992, in Yee v. City of Escondido, the court unanimously rejected a claim that a rent control ordinance was an unconstitutional taking of property – just the issue Harmon is raising.
These rulings should settle the question. But rent control opponents clearly think they have a chance, given how pro-corporation the Court is today. Harmon’s challenge is attracting strong support from real estate interests and conservative groups like the CATO Institute. They argue that rent control unconstitutionally deprives landlords of the right to charge as much rent as they want. They like to point to extreme cases of people benefiting who do not need it – like the actress Faye Dunaway, who until recently had a $1,048.72 a month one-bedroom on the Upper East Side of Manhattan.
(MORE: Is the Supreme Court Going to Kill Affirmative Action?)
The anti-rent-control side has been making its case loudly in recent days. George Will, in a Washington Post column, attacked New York rent control laws as “foolish and unconstitutional.” Richard Epstein, a New York University Law School professor, argued in the Wall Street Journal that the Supreme Court should take the case and rewrite the law. There have been numerous sympathetic profiles of Harmon, emphasizing the hardship he has faced.
There has been far less media attention to the arguments for rent control, although there are strong ones. The fact is that government imposes all kinds of regulations on property that reduce the value that owners can extract. Some parts of Manhattan have zoning rules limiting buildings to less than 10 stories. People who own land in those zones are deprived of the fortune they could make from building 50-story buildings. Across the country, localities zone some property as residential – though owners could sell for much more if it were zoned for commercial use.
If the Supreme Court rules that rent control is an unconstitutional taking of property, it would put all sorts of zoning rules in danger. Once the court gets in the mindset that limits on the ability to get top-dollar from property is an unconstitutional “taking,” there is no telling where it would stop. Why should your next-door neighbor on a suburban block be prevented from unlocking the full value of his property by turning it into a fast food restaurant – or a skyscraper?
(LIST: Top 10 Most Expensive Cities)
The media has also been paying too little attention to the vast majority of beneficiaries of rent control – who are nothing like Faye Dunaway. Many are on limited incomes, and elderly, and they could be forced out of their homes – even their cities – if rent control is struck down. Liz Krueger, a New York State Senator, told the television station NY1, “the bottom line for New York City is absent the continuation of over a million units of affordable housing, we would have a homeless crisis beyond any of our comprehension.”
The Supreme Court’s most conservative justices have presented themselves as great respecters of precedent and opponents of “judicial activism” – of judges using the Constitution to strike down laws passed by the elected branches of government. If they are true to those principles, they should uphold rent control. But in reality, the animating force on the court in recent years has been expanding corporate rights. If the justices approach Harmon’s case from that perspective, rent control laws could well be in danger.
MORE: Learning to Love the Housing Bailout