A Landlord’s Uphill Fight to Ease Rent Regulations: The “Madison Group”

By Craig Mordoh, Esq.

On July 11, 2012, representatives from various residential rental property owner groups from across the nation met at the distinguished Cato Institute to begin the process of formulating a strategy to place a constitutional challenge to rent control land – rent stabilization laws before the United States Supreme Court.

This effort is the brainchild of James Harmon, a former prosecuting attorney who gained some recent notoriety in the landlord community by mounting a one-man challenge to the New York Rent Stabilization Law that almost made it to the U.S. Supreme Court.

After an unsuccessful two-year battle to evict a tenant, who could well afford to live anywhere, Jim decided to challenge the constitutionality of the rent law itself. Making a sympathetic plaintiff, Jim received much favorable press coverage and the assistance of many prominent amici curiae; however, after a number of good signs that the Supreme Court might decide to hear his case, the court ultimately chose not to.

Beaten, but not defeated, Jim decided to try and find a way to challenge not just the New York Law, but rent control laws everywhere.  Currently rent control in some form exists in relatively few places, New York, New Jersey, Maryland, Washington D.C. and California. Many other states have laws or court’s rulings prohibiting rent control. In one famous instance, the voters of the State of Massachusetts voted to eliminate rent control throughout the state. Amazingly, the elimination of rent control in that state created no upheaval in the tenant community and improved the housing stock in those cities that now had a newly-created free market.

The first step in Jim’s plan was to find the commonalities in each of the laws. For instance, not every law has a state-wide enabling legislation, but every law limits the right to evict tenants.

Other potential areas of inquiry include:

What does a new-construction exemption say about the need for rent control and its effect on the housing market?

Does the emergency situation which formed the rationale for every rent control law still exist after all these years?

If yes, does it still create a lawful basis for rent control and what does its existence say about the efficiency of rent control?

Must an owner have the right to   recapture their property?

Once the commonalities are identified, chose the one susceptible to the strongest legal challenge and the file that single-issue Federal lawsuit in each of the rent control localities. This would result in rent control challenge in five different federal circuits. It is anticipated that the appellate level would require a review by the Supreme Court.

I attended this meeting on behalf of the California Apartment Law Information Foundation as well as the Apartment Associations of Greater Los Angeles. In addition, there were representatives of the National Apartment Association, the Institute for Justice, New York University School of Law and representatives from local owner’s groups from all of the affected jurisdictions.

The attendees were dunned the “Madison Group” in honor of James Madison, our fourth President, who stated “commercial shackles are generally unjust, oppressive, and impolitic.” This may be the most concise, yet accurate, description of rent control ever.

Following the meeting, the enthusiasm of the participants was high and a follow-up national teleconference was scheduled for September. CALIF and AAGLA will continue to participate in this effort and provide periodic reports to this magazine.

Mordoh is Senior Attorney of the California Apartment Law Information Foundation (CALIF). Since its inception, CALIF has pursued its dual goals of providing an informational base for landlords and tenants on the workings of landlord-tenant law in California and challenging state and local municipalities when they take actions that infringe upon the constitutionally guaranteed property and civil rights of California residents. CALIF is qualified to receive tax-deductible contributions under IRC Section 501(c)(3).

 

Source:  Apartment Association of Greater Los Angeles

Grand Jury criticizes Berkeley Rent Stabilization Board

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June 26, 2012 9:27 am by Frances Dinkelspiel

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Berkeley voters passed a rent stabilization law in 1980, and the law now covers 19,000 rental units in the city. Photo: Tracey Taylor

 

A highly critical report by the Alameda County Grand Jury has found that the Berkeley Rent Stabilization Board is a “self-sustaining bureaucracy that operates without effective oversight and accountability.”

This rent board pays Jay Kelekian, its director, $183,000 a year to oversee a $4 million budget and manage just 21 employees – which is more than the city Berkeley pays its director of public works, who oversees 326 employees and has a $90 million annual budget, according to the report.

“The executive director makes an exorbitant salary that comprises nearly 5% of the entire budget of the agency,” according to the report. “The Grand Jury finds this unacceptable and concludes the board needs to reprioritize services and to reduce costs, not only in its administration but in services to the citizens of Berkeley.”

The rent board also pays its board members an “excessive” $500 a month and provides health benefits, according to the report. BRSB also spends $50,000 a year on a Sacramento lobbyist.

The Berkeley Rent Stabilization Board is able to pay its administrators so handsomely because it imposes some of the highest rental registration fees in the state, according to the report. Berkeley assesses landlords $194 per rental unit, compared to Oakland’s assessment of $30 per unit, and San Francisco’s $25 per unit assessment. While Santa Monica assesses landlords $156 per rental unit, it also permits landlords to recoup those costs from tenants by levying a $13 monthly fee. Berkeley, in contrast, does not allow landlords to recoup their costs, according to the report. Property owners can only assess tenants $4 a month for a total of $48. Continue reading

Supreme Court won’t hear New York City rent case

Thomas Reuters

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. Continue reading

High Court Denies Certiorari in Rent Stabilization Case

By Brendan Pierson Contact All Articles

New York Law Journal

April 24, 2012

 

The U.S. Supreme Court announced on April 23 that it will not hear a lawsuit challenging the constitutionality of New York City’s rent-stabilization law.

The case, Harmon v. Kimmel, 11-496, was filed against the city in 2008 by James Harmon and his wife, Jeanne. The couple owns an Upper West Side brownstone with six apartments, of which three are rent stabilized. The Harmons argued that the 1969 rent-stabilization law, intended to respond to a housing shortage, was an unconstitutional taking of their property.

Southern District Judge Barbara Jones (See Profile) dismissed the case in February 2010, and Judges Amalya Kearse (See Profile), Robert Sack (See Profile) and Robert Katzmann (See Profile) of the U.S. Court of Appeals for the Second Circuit affirmed the dismissal in March 2011. The Supreme Court’s refusal to hear an appeal marks the end of the case.

“We are pleased that the Supreme Court will allow the existing court rulings dismissing this case to stand,” Alan Krams, senior counsel in the Appeals Division of the Corporation Counsel’s office, said in a press release. “Rent regulation in New York City has a long history, and the Court properly left it to elected state and city officials to decide its future.”

James Harmon said in an e-mail that the Harmon family was disappointed in the court’s denial of cert. “We still believe that the Constitution does not allow the government to force us to take strangers into our home at our expense for life. Even our grandchildren have been barred from living with us. That is not our America.”

“We are deeply disappointed that the United States Supreme Court did not accept what we believe to be relevant and legitimate property rights concerns of all New York City rent-regulated property owners, who have endured 70 years of rent regulation in one form or another,” Joseph Strasburg, president of the Rent Stabilization Association, which filed an amicus brief on the Harmons’ side, said in a press release.

 

Source: New York Law Journal.

NYC Rent Control: US Supreme Court Won’t Hear Harmon V. Kimmel

WASHINGTON — The Supreme Court won’t hear an appeal that seeks to end rent stabilization laws in New York City.

The high court on Monday refused to hear an appeal from James and Jeanne Harmon, who have lost earlier court attempts to get rent stabilization laws thrown out.

The Harmons' building in the Upper West Side.

The Harmons inherited a building with three rent-controlled apartments near Central Park on Manhattan’s Upper West Side. The Harmons say rent stabilization laws forces them to rent the apartments at rents 59 percent below market rate. They argue that by giving the tenants lifetime tenure with succession rights, the government has illegally taken their property.

A federal judge and the 2nd U.S. Circuit Court of Appeals in New York City threw out their lawsuit. The high court refused to review that decision.

 

Source: The Huffington Post.

Supreme Court Won’t Hear Challenge to New York Rent Control Regulations

 

Posted Apr 23, 2012 9:12 AM CDT
By Debra Cassens Weiss

 

The U.S. Supreme Court has refused to hear a challenge to New York’s rent control regulations.

A plaintiff in the Fifth Amendment case was James Harmon, a former prosecutor who runs a corporate investigations firm. The high court denied cert today, SCOTUSblog reports.

Harmon inherited his New York brownstone in the 1990s. One of his tenants who pays $1,000 in monthly rent also owns a home near the shore in Southampton.

 

Source: ABA Journal.

The Supreme Court Denies Certiorari in Challenge to NYC’s Rent-Control Law

 

Posted by Trevor Burrus

Today, the Supreme Court declined to review Harmon v. Kimmel, a case challenging New York City’s rent control law. For a case that merely had the possibility of getting to the high court,Harmon has received a surprising amount of attention. A lot of this attention is due to the persistence of Mr. Harmon, who has admirably been fighting this important battle on behalf of thousands of similarly situated landlords who are forced to subsidize cheap rents, often for tenants who can easily afford to pay the market price. According to the Wall Street Journal, one of the Harmons’ rent-controlled tenants even “owns a second home near the shore in Southampton, where she spends weekends gardening and playing tennis.”

As I said in January in a Reason.tv video, rent control is something that nearly every economist can agree on: it lowers the amount of housing, it lowers the quality of housing, it raises the total costs of finding and securing housing, and it doesn’t even guarantee that those who need cheaper housing will get it. Nevertheless, it seems as if rent control will remain as much a part ofNew York City’s culture as Broadway theatre and pizza.

In addition to the ill-effects of rent control on a housing market, perhaps the most pernicious aspect is that it allows lawmakers to force the costs of subsidizing others onto private individuals. New York Citycould certainly create a program in which tax dollars are used to directly subsidize the rents of those in need by giving money either to the tenant or to the landlord. The city could also provide more state-built, low-income housing. Either program could achieve the goals of rent control without many of the accompanying negative effects (although, of course, both programs would have many horrible problems of their own).

Such taxpayer-funded programs, however, would not serve the immediate goals of many city politicians: to provide benefits seemingly without cost. In a way, rent-control laws are a lot like the individual mandate of Obamacare currently under challenge in the Supreme Court. Both allow lawmakers to use regulatory requirements in lieu of raising taxes to pay for a program (I discussed how this works in Obamacare here). Rent-control laws permit lawmakers to avoid the political accountability of taxpayer-funded, on-budget subsidization by forcing individual property owners to subsidize tenants in the name of the “public good.” Whatever the merits of such a proposal, innocent landlords such as the Harmons should not be forced to become pawns in lawmakers’ attempts to avoid losing the next election.

It is unfortunate that the Court will not hear the case, but I applaud Mr. Harmon for bringing much-needed attention to an important issue.

Does the End of Rent Control Start Today? Supreme Court Will Decide Whether or Not to Hear UWS Suit

The RENT | April 16, 2012 | 9:45am
By Kim Velsey

Decision time. Will the Supreme Court hear the rent control case? (IslesPunkFan, flickr)

Forget sweet nothings and exclusive party invitations. The two words most New Yorkers long to hear are “rent controlled.” But like so many (impossible?) dreams, this, too, may soon be dead.

The Supreme Court could decide today whether or not to hear a case brought by former federal prosecutor James D. Harmon Jr., the owner of a five-story townhouse on West 76th Street. Mr. Harmon, who grew up in the brownstone and now lives there with his wife Jeanne, inherited the building and its three rent-controlled tenants from his grandfather. He argues that New York City’s rent laws violate the Constitution by taking his property without just compensation.

Continue reading