Rent Control Violates Property Rights: Why Occupy 76th Street Is Not Fair

OP/ED | 4/30/2012 @ 2:55PM

 

West 76th Street in New York City (Photo credit: Wikipedia)

West 76th Street in New York City (Photo credit: Wikipedia)

If James and Jeanne Harmon, residents of the Upper West Side of Manhattan, ever call 911 to report a home invasion, they probably shouldn’t expect the NYPD to respond.

Mr. and Mrs. Harmon are senior citizens and the owners of a five-story brownstone on West 76th Street.  They live in the first floor apartment and several unwanted tenants occupy the upstairs apartments.  Under New York’s Rent StabilizationLaw (RSL), Mr. and Mrs. Harmon are required to continue renting the apartments at vastly below-market rents.

The Harmons challenged the constitutionality of the RSL in federal court, claiming that the law violates the Fifth Amendment (“nor shall private property be taken for public use without just compensation”), the Contracts Clause (prohibiting States from “impairing the obligation of contracts”) among several others.  Having lost in lower courts, including a snide opinion from the U.S. Court of Appeals for the Second Circuit, the Harmons appealed to the U.S. Supreme Court.  Last week, the Justices refused to hear their case.  As a result, the Harmons will likely be forced to provide subsidized housing to their tenants (and their descendants) forever.

Beginning in the World War I era, and for much of the past century, New York City and State politicians have regularly certified that there is a “housing emergency” that calls for rent regulation.  Whether or not rent stabilization is a good economic policy (about which there is considerable debate) the case raises issues of fundamental economic liberty and fairness.  Indeed, Mr. Harmon points out that there are tens of thousands of vacant apartments in the city, and that his below-market rent is subsidizing the Long Islandvacation home of one of his tenants.

As Mr. Harmon’s petition to the Supreme Court pointed out, he and apartment owners like him are being singled out to bear the expense of a social program that ought to be borne by society as a whole.  Ironically, the Supreme Court had ruled in 1982 (in a case called Loretto v. Teleprompter Manhattan CATV Corp.) that the installation of a mere 1/2-inch diameter, 30-foot-long television cable and related junction boxes on the rooftop of a building on West 105th Street amounted to a “physical occupation” of property that required just compensation under the Fifth Amendment.  As Justice Thurgood Marshall wrote in the majority opinion, even though the Supreme Court had previously authorized State laws to “adjust” landlord-tenant relationships, including fire codes, anti-discrimination laws and even rent control, “In none of these cases, however, did the government authorize the permanent occupation of the landlord’s property by a third party.”

Thirty years and twenty-nine blocks later, it seems the Court has gotten quite comfortable with the physical occupation of property, not just by rooftop cables, but by living people.

It is increasingly shocking to read the disingenuous frivolity with which our courts dismiss issues of economic liberty, once considered fundamental American rights.  In rejecting the Harmons’ claim, the Court of Appeals merely asserted, contrary to the obvious reality, that the rental arrangements being forced upon them do not constitute a physical taking of their property that must be compensated.  Surreally, the Court cited the fact that the Harmons retain the right to demolish their building – which is also their own home – even though that desperate recourse would hardly provide “compensation” to the Harmons (and might not even be possible due to the building’s landmark status).  And under the law, the Harmons could evict their tenants if they had “immediate and compelling necessity” to use the apartments themselves.  (Although apparently they would be obligated to find them comparably-priced apartments in the same neighborhood.)

Christine Quinn, the New York City Council Speaker and potential mayoral candidate, said she was “pleased” with the decision and that “the City’s rent regulation system can proceed unfettered, as we continue to ensure affordable housing is available to New Yorkers.”  Mayor Michael Bloomberg recently recertified that there is a continuing housing “emergency” in New York, thereby allowing rent stabilization laws to continue in effect.

Governor Andrew Cuomo said that “rent regulations are very important to the tenants.”  No doubt.  And perhaps it is socially or economically desirable to limit rents for certain tenants.  People like Speaker Quinn (who reportedly lives in a rent-controlled apartment) and Mayor Bloomberg (who most definitely does not) may have the best of intentions to make housing more affordable to people of limited means in an expensive city.  But one is struck by how the fate of those bearing the cost of their policies never seems to cross their minds.

Keeping rents affordable and stable is a noble desire, even if it is highly debatable whether rent stabilization laws help or undermine that goal.  Certainly, forcing one class of people to pay for it is not fair or Constitutional.  Even if you are not a New York City building owner, remember, the next property or business that gets occupied may be your own.

Mr. Shuchman is a New York money manager.  He has written for The Wall Street Journal, Forbes, The Harvard Journal of Law and Public Policy and Reason.

 

Source: Forbes

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