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.

By Teresa at MSN Real Estate Mar 7, 2012 1:34PM

House for rent in the middle of winter (© David Joel/Getty Images)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?

Tags: rentals
 
35Comments
Mar 7, 2012 8:37PM
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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.   

Mar 7, 2012 7:20PM
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you people   give a  brack  A.R.M.E  forcess   get it   for peopl how has s.s.i  all  you  care

           a bout  money  not  helping   peopl ...  if   you   quit   giving  job  to  border    peply

 

Mar 7, 2012 6:58PM
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The original rent control had a good intention when people were in need and not as many were looking for long term entitlements. As people figured out the loopholes it became a nightmare. Then those with money and influence found they could take advantage of it and it went ballistic. It should be phased out. There should be no passing down to family members or sold to others. It should just end with no continuing legacy agreements. When a person moves or dies then the rent should return to a fair market value. This is what is required by the IRS for those that rent to others. Trust me, if the IRS decides you aren't charging enough for your rental property then they do an audit you won't forget. The other side of the IRS issue is those that receive a benefit such as a lower rent that is considered too low they may be subject to taxes based on the difference.  Attrition may take years but it is a fair compromise. For the owners there should be a compensation in taxes to overcome the negative rent value by providing a tax credit for the difference between the control and the IRS fair market value. This should be provided by the entity that establishes and/or controls rent control properties. Eventually the commission that oversees rental control would be phased out also thereby reducing a department and the associated money required to run it. Any new entitlement(s) for housing could be handled by DHS, Urban Housing department, Section 8, etc as they should be and are handling now. Rent control has run it's course and should be phased out as those that have it move on with no new tenants moving in to replace them and continuing this waste. People have no incentive to improve their situation if they are given something and those that get it and are able to afford to pay fair market rent shouldn't be allowed to use it.
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Well Hell, if they were not controlled by the law now, I can only believe that the good ole President would find another billion or two from the working class who do pay federal taxes!!! You know, The demander and thief would cry out how the people who smoke crack and lived in another country before walking in the open door we call the border and the people who get up around noon, only on the day the check he gives them comes, otherwise its more like 3 pm when the have to pee so bad the get up, pee and head straight for the couch to watch Dr Phil. I own 2 apartments in each of my 2 apartment houses I worked my **** off to buy. I am a commercial Pilot and also a Equine Dentist,and do my own work on the homes. The section 8 people I have rent them paid for guys like myself, not only have my tax money pay for the crack heads who I rent to but also the get heat paid for food stamps wick program and I sure there is more but the ones I listed are the only 1"s I can say I know for sure. But 1 27 yr old said she got depressed over her fail marriage, so at 27 she wont work another day in her life she told me. Oh yeah she also gets a check from us for $871.00 along with the house and food stamps and wick and heat. So I can only say to the people who own the rentals, sell them because In the greatest country in the world Your a no good rich Bastard if you have worked hard to do it yourself not ask for the governments help and paid for things the way I was thought to me by my parents, Just look at the pigs living on trust funds and paid by Unions and our own government to say they are the 99% MY **** to that
Mar 7, 2012 6:40PM
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when these landlords bought these properties they were already rent controlled so the price reflected that so it can't represent a taking because they have what they bought they knew what they were buying and by doing so entered into a legal contract the buildings would have cost 30 or 40% more when they bought it so abolishing rent control would be a gift to the owners in rental income and the sale price should they sell it Besides there was probably compensation to the original owner  and certainly tax breaks If you buy a car with a big dent you can't go back and make the seller fix it its your dented car
Mar 7, 2012 6:20PM
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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?

 

Mar 7, 2012 6:03PM
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If rent control is found to be unconstitutional, the person paying $2k for his UWS apartment will now spend more than $4k for the same space.  Rent control and rent stablized programs were created so that everyone could afford housing.  Housing laws in many states limit how many people can live in so many rooms (ex. 1B limited to 2 people). If the programs are abolished, only the very wealthy will be able to afford to live in NYC.  This will force illegal apartments, or nearly 5 million New Yorkers to move where housing is sustainable.  Inventory will affect the market, and property owners will go bankrupt.
Mar 7, 2012 5:59PM
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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.

Mar 7, 2012 5:52PM
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I think that if they end rent control then the market will set the new rates.  I would hope that the result of this would be fair to everyone.  Where one is paying 2600 and one 1000 that the new rate will be 1800 per each.  Yes it will be hard on some but that is fair to the owner.  I don't know how New York works but at some time you need to be able to adjust the rates - new owners, change in costs of ownership etc.  Of course, my son and his wife live in NY and I hope they get to keep paying low rent.  It is the only way they can afford to work and live in the city.  They are part of the 99%. 
Mar 7, 2012 5:15PM
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Rent control, like property taxes, is evil.  Socialism at it's finest.
Mar 7, 2012 5:14PM
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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.

Mar 7, 2012 4:54PM
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After rulings like Citizens United it's pretty clear that the conservative judges think that America is only for the rich and everybody else is SOL. Get ready for Millions of people being forced to leave NYC if the Supreme Court overrules this and their rent doubles overnight.  How dare we make this a country for EVERYBODY and not just the privileged few...
Mar 7, 2012 4:39PM
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It's a travesty of basic property rights and economic freedom that rent control was ever allowed.  Ever.
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