On April 18, 2024, a group of New York property managers (Petitioners) asked the Supreme Court of the United States (SCOTUS) to review the constitutionality of a “specific set of amendments” to New York’s rent control regime. In G-Max Management, Inc, et al., v. State of New York, the Petitioners challenge New York City’s rent stabilization law and the Housing Stability and Tenant Protection Act of 2019 (HSTPA) under the Takings Clause of the Constitution’s Fifth Amendment.
Background
The Petitioners originally filed suit in the Southern District of New York on January 23, 2020, alleging, among other things, that the State of New York effected a physical and regulatory taking of their property under the HSTPA. The District Court dismissed the complaint on both physical and regulatory taking grounds.
The Court held that there was no physical taking because the Petitioners entered the rental housing market voluntarily and could exit the market at any time. The Court also held that a regulatory taking had not occurred because the Petitioners did not show that every owner of a rent-stabilized property suffered adverse economic impact under the HSTPA.
The Petitioners appealed the District Court’s decision to the Second Circuit Court of Appeals. The Second Circuit affirmed the lower court’s decision that no physical or regulatory taking had occurred, citing the same legal theories that the District Court outlined in its opinion.
On April 18, 2024, the property managers filed a petition asking SCOTUS to review the case.
Petitioners Respond, Request SCOTUS Review
The Petitioners are asking SCOTUS to provide guidance on whether rent regulations like the HSTPA constitute a taking under the Constitution. Specifically, they want to know: (1) whether the regulatory limitations in the HSTPA effect a physical taking and (2) whether the Court should overrule, or clarify, the standard for determining when a regulatory taking occurs. SCOTUS will consider whether to grant the request for review based on legal precedent, procedural history, and the factual record.
In the past, SCOTUS has found that local governments have broad authority to regulate rental housing conditions and to promote general welfare and public interest through comprehensive regulatory regimes. However, the Petitioners argue that the HSTPA imposes significant limitations on their property rights. Under the HSTPA, absent a specific exception, residents have the right to renew their leases continually and can pass that right on to a wide range of successors. The HSTPA also restricts the circumstances under which property owners can reclaim units for personal use. Finally, the HSTPA no longer requires that the city classify an ongoing housing “emergency” to justify rent control. The cumulative effect is that property owners are deprived of fundamental rights in violation of the Taking Clause.
Further, the Petitioners argue that the HSTPA “transforms a temporary rent regulation system into a permanent expropriation of vast swaths of private real estate, without just compensation, in the name of affordable housing.” While the Second Circuit found that the HSTPA was not an “unconditional” impediment to owners exercising their rights, an opinion from SCOTUS here would further direct lower courts on how to handle takings claims in rent control cases.
SCOTUS has recently denied petitions in several similar Rent Control cases. But the Petitioners believe that their case is a better vehicle for the Court to analyze the HSTPA. When denying the prior petitions, Justice Clarence Thomas noted that the constitutionality of Rent Control is “an important and pressing question” that should be addressed in “an appropriate future case.” He emphasized that the petitions were denied, in part, because the claims were “too ‘generalized’ to facilitate proper review” and did not provide a clear understanding of “how New York City regulations coordinate to completely bar landlords from evicting tenants.” But the Petitioners in G-Max Management are challenging specific amendments to New York’s rent control law, rather than the entire regulatory regime. The Petitioners also allege that they have been prevented from exiting the rental housing market and from removing specific residents from rent-stabilized units due to specific provisions of the HSTPA. These petitioners have suffered particular financial injuries and therefore argue this case is ripe for further review.
NAA’s Take
The National Apartment Association (NAA) believes that rent control policies distort the housing market by acting as a deterrent and disincentive to develop rental housing and expedites the deterioration of existing housing stock. While done under the guise of preserving affordable housing, the policy hurts the very community it purports to help by limiting accessibility and affordability.
NAA continues to advocate on behalf of its members and encourage policymakers to implement effective policy solutions to help resolve the nation’s housing affordability issues. We will also continue to monitor this case and will report on whether SCOTUS decides to grant the Petitioners' request for review.