NYC rent control may go to Supreme Court
The landlord is arguing that the city's rent-stabilization laws are unconstitutional. In his building, one tenant is paying about $1,000 a month and another is paying $2,650 for similar apartments.
If you don't live in New York City, this may sound unbelievable: You can live in an apartment for half or less of the market rate, forever, and if you die, you can leave the apartment — with its low rent — to your children.
The rent-stabilization laws that New York City enacted in response to a housing shortage after World War I are facing a new challenge, in a case that may go to the Supreme Court.
James and Jeanne Harmon inherited a five story townhouse in Manhattan's Upper West Side. The building has six one-bedroom apartments, in addition to their unit. Three are rented for market rate. Three, considered "rent-stabilized" are rented for 59% less, according to a case filed by the Harmons in federal court.
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James Harmon is arguing that New York's rent-control laws represent a "taking" and are unconstitutional. He has lost his case in two lower courts, but the U.S. Supreme Court is considering whether to accept his appeal.
"The issue is whether the Constitution allows the government to force someone to take strangers into their home and to subsidize them for the rest of their lives," James Harmon told The New York Daily News.
The tenant who is mentioned most often in the case is an executive recruiter who owns a house in Southampton. She has lived in the building since 1976 and pays about $1,000 a month. The tenant next door pays $2,650 a month, according to a story in The Wall Street Journal.
James Harmon's grandparents bought the home in 1949 and he grew up there. After Harmon and his brother inherited the house in 1994, he took out a $1.5 million mortgage to buy his brother's share, The New York Times reported. James and Jeanne Harmon moved back into the building in 2002.
Rent-control laws are rare in the United States. Only a few cities have such laws, and none on the scale of New York.
New York Attorney General Eric Schneiderman is defending the case, arguing that the rent-stabilization laws are constitutional and that the case does not deserve Supreme Court review. He writes in his brief:
By regulating evictions and the pace of rent increases, the [rent-stabilization law] protects tenants, particularly the elderly and disabled, from dislocation, and limits the disruption to neighborhoods and communities that would result from dramatic changes in rental rates and rapid turnover of tenants year to year.
You can read more about the legal arguments at The Wall Street Journal's Metropolis blog.
The fact that the Supreme Court is considering the case has surprised legal observers.
"I thought this was a well-settled question of law for the better part of the century," Andrew Scherer of Columbia University, an expert on landlord-tenant laws, said to The Wall Street Journal.
What do you think of rent control? Should the Supreme Court take this case?
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I have a couple of opinions depending on the situation:
1. You rent a place for which you have no ownership. The landlord should be able to set the rents as he/she sees fit. You do not like the rent you move on.
2. Mobile Home Parks (lease land). You own the mobile home and rent the land. In this case there needs to be provision to tame runaway rents. Recommend increases cannot exceed 5% plus any proven increases in expenses such as taxes and capital improvements. The issue here is the renters own their homes and cannot reasonably be expected to move them if they do not like the land lease terms. Another provision I would like to see is if the park gets sold off, the land owner must reimburse homeowners for their home.
yourkarma,
Rent control and rent stablized programs were created so that everyone could afford housing.
No, they were created so that the lucky/privileged few could get premium housing on the cheap.
If the programs are abolished, only the very wealthy will be able to afford to live in NYC.
So what's the problem with that? It's some of the most desirable real estate in the country. Should we force the owners in Westchester to rent out their homes for $500/mo, too?
This will force illegal apartments, or nearly 5 million New Yorkers to move where housing is sustainable.
Isn't that how it should be?
Inventory will affect the market, and property owners will go bankrupt.
Huh? Fair (i.e., higher) rent will bankrupt the owners?
UpsetInWA,
I believe that removing rent control would, indeed, be fair to everyone. If one person is willing to pay $2000/mo for an apartment and another is willing to pay $2100/mo, then shouldn't the apartment go to the person wanting it more? And if someone thinks an apartment is worth $2500/mo, why shouldn't the owner be allowed to collect the rent?
You mention your son. I don't blame you for hoping they get to continue to pay low rent, but how is that fair to the people who DON'T get to rent that apartment on the cheap? That is, all the rest of the people in NY who might want to live in a highly desirable location. How is that fair to the landlord - i.e., the rightful owner of the rent?
That's the problem with price controls - they're basically unfair to everyone. Even those who profit from it - they get MORE than they deserve.
Mr. think_people_think,
I challenge you to think. Do you own a house? Suppose your mortgage payment is $1000/mo and the government tells you you have to rent it out for $500/mo. Are you OK with that?
Or suppose your house is worth, say $200,000 and that the usual rent for such a house is say, $1000/mo. Now, suppose the government says that the rent can only be $500/mo. Well, guess what. Your house is no longer worth $200,000. It's only worth $100K. Are you OK with that?
If so, then put your money where your mouth is and buy a $200K apartment in NY City and rent it out for $500/mo. Enjoy your government mandated poverty.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.
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