WASHINGTON, April 23 (Reuters) – The U.S. Supreme Court on Monday refused to hear a constitutional challenge to a New York City rent stabilization law and regulations that control rent increases and evictions for nearly 1 million apartments.
The justices turned down an appeal by a couple, James and Jeanne Harmon, who own and live in a small brownstone building in Manhattan. They claimed three tenants in their building pay government-set rents at 59 percent below market value.
The couple sued in 2008, claiming the rent stabilization law violated their constitutional rights by taking their property without just compensation. They also claimed the law violated the Due Process Clause, the Equal Protection Clause and the Contracts Clause of the U.S. Constitution.
Tenants rights lawyers in New York said that although the chances of the law being overturned were very slim, declaring it unconstitutional would have had drastic effects on New York renters.
“I think that the rent-regulated tenants are breathing a huge sigh of relief,” said Stephen Dobkin, of housing law firm Collins, Dobkin & Miller. “This would have had a cataclysmic impact on New York.”
The Harmon lawsuit was dismissed by a federal judge. The 2nd U.S. Circuit Court of Appeals, in a six-page ruling by summary order, agreed and rejected the various arguments by the Harmons on the grounds they were without merit.
James Harmon, a lawyer who also is the counsel of record in the case, appealed to the Supreme Court after the lower court losses.
Harmon cited statistics that about half of the city’s total 2 million rental units are subject to rent stabilization, which has generally lowered rents for one-bedroom apartments at 36 percent below market value in Manhattan. The estimated annual costs to property owners has been $2.6 billion, he said.
Mitchell Posilkin, general counsel for the Rent Stabilization Association, which represents building owners, said he was “disappointed in the outcome.” Posilkin said that reforming New York rent stabilization rules through legislative means would be tough given local support for it.
The rent stabilization regulatory scheme is different from those involving rent control, a more stringent system that applies only to a small, dwindling number of units in New York City.
The city and state defended the rent stabilization law. The state adopted its first rent-control law in 1946 in response to the housing shortage after World War Two. In 1962, the Legislature gave New York City the power to enact its own rent regulations.
The city adopted the prevailing rent regulation scheme with a rent stabilization law in 1969. It followed up with a related law in 2006 and 2009.
The laws and regulations set the level of rent increases for apartments and establish permissible grounds for landlords to withdraw regulated apartments from the rental market and to evict tenants.
City attorneys told the Supreme Court the restrictions do not constitute a physical taking of property requiring compensation. They said the Supreme Court in 1992 upheld even more restrictive rent controls and tenant renewal rights in a California case involving mobile-home parks.
The New York law represented a “rational legislative effort to address a serious shortage of rental housing” and does not violate the Harmons’ due process rights, the attorneys said.
Tenants’ rights attorney James Fishman, of Fishman & Mallon, said that in three or four cases he was involved in, the landlords had slowed ongoing deals with tenants to “wait and see if maybe the Supreme Court is going to grant cert.”
The theory, Fishman said, was that if cert was granted, this was probably a good sign for the landlords. But that was a “long-shot in the first place.”
The Supreme Court rejected the appeal by the Harmons without any comment in a brief order.
The Supreme Court case is James and Jeanne Harmon v. Jonathan Kimmel, No. 11-496.
(Adds comments from New York attorneys)
(Reporting by James Vicini in Washington and Basil Katz in New York)