The Big Picture
A group of housing providers have filed a lawsuit against New York City’s Rent Guidelines Board (RGB) because of its recent decision to implement a zero percent rent increase for both one-year and two-year rent-stabilized lease renewals effective October 1, 2026. The complaint’s core allegations include that the rent freeze was the result of a sham process with a predetermined outcome, that the RGB was not acting as an independent agency and that the RGB manipulated data to the detriment of housing providers. In recent years, housing providers and industry groups have unsuccessfully challenged RGB rate decisions, most recently in 2016 when the RGB established a rent freeze for one-year leases.
Background
The RGB is a local body with a mandate in both state and local law to investigate conditions within the residential real estate industry and to establish fair rent adjustments for rent stabilized units, which total almost a million units.
Section 26-510 also outlines the guidelines given to the RGB. When considering rate adjustments, the RGB must consider: 1) the economic condition of the residential real estate industry in the affected area, including such factors as i) real estate taxes and sewer and water rates; ii) gross operating maintenance costs; iii) costs and availability of financing; and iv) over-all supply of housing accommodations and over-all vacancy rates; 2) relevant data from the current and projected cost of living indices for the affected area; and 3) any other relevant data that is made available. Rent adjustments may not be based on the current rental cost of a unit or on the amount of time that has elapsed since another rent increase was authorized.
On June 25, 2026, the RGB voted seven to one to implement this new zero percent rent increase, running through September 30, 2027. This was the first time that the RGB had approved a freeze covering two-year renewal leases, as earlier freezes had only applied to one-year agreements.
Previous Rent Challenges to RGB Decisions Unsuccessful
This is not the first time that housing providers and industry groups have challenged a decision from the RGB. In recent years, the Rent Stabilization Association of NYC, Inc. (RSA) unsuccessfully challenged the RGB’s rent adjustments in 2005 and again in 2016. In these cases, the judge was not tasked with determining the appropriateness of the rent freeze or making its own independent determination, but whether the board followed its legal duties and had a “rational basis” for the decision it made. To prove a “rational basis,” the RGB is only required to show that the government action in question is rationally related to a legitimate government interest. The “rational basis” test is the lowest level of judicial scrutiny, making it the easiest standard for a law to survive a challenge.
The Complaint
On July 22, 2026, a group of LLCs that own rent-stabilized housing, filed a civil lawsuit against New York City’s RGB in Richmond County Supreme Court. The complaint outlined several causes of action: 1) that the rent freeze was the result of a sham process with a predetermined outcome; 2) that the RGB was not truly independent from Mayor Zohran Mamdani’s administration; and 3) that the RGB manipulated data to the detriment of housing providers and failed to rationally weigh the required statutory factors.
In arguing that the rent freeze was the result of a sham process with a predetermined outcome, the housing providers cited statements made by RGB property owner representative Christina Smyth, who had resigned prior to the RGB’s June 25, 2026, vote. Ms. Smyth has accused the RGB of working toward a result that had already been decided and disregarding data showing rising costs and falling income. In addition, the complaint noted public statements from Mayor Mamdani, who expressed that he would only appoint members who “understand that landlords are doing just fine.” The complaint also cited the statements of multiple members prior to their board appointments to argue that they arrived at the 2026 process with a fixed view on the outcome.
In arguing that the RGB was not truly independent from Mayor Mamdani’s administration, the housing providers began by citing a recent Freedom of Information Law (“FOIL”) response from the Mamdani administration. The response noted that the Mamdani administration considers the RGB to be an arm of the city government, not an independent agency. The complaint also noted that Mayor Mamdani created the Office of Mass Engagement, with an annual budget of $53 million, using it to mobilize public support for the freeze at board hearings.
In arguing that the RGB manipulated data to the detriment of housing providers and failed to rationally weigh the required statutory factors, the housing providers argued that the determination is not rationally supported by the data it reviewed. The complaint cited the board’s own data from the 2026 Price Index of Operating Costs, which found that operating costs for housing providers were rising across every component: a 11.0% rise in fuel costs, a 10.5% increase in insurance costs, a 6.0% increase in maintenance costs, 5.6% increase in utility costs, a 4.8% increase in administrative costs, a 3.0% increase in labor costs and a 2.6% increase in taxes. The complaint also noted that the Board inflated income figures to calculate Net Operating Income (NOI) and ignored other data points. The complaint also argued that the Board’s metrics were skewed to understate the actual cost of running a building and overstating net-operating income by factoring in units that can adjust rental income based on market demand.
What’s Next
While recent challenges to RGB decisions have been unsuccessful, the plaintiff housing providers in this case are taking a different approach compared to the unsuccessful legal challenge to the rate decisions in 2016. Instead of arguing about the weight of a particular factor, the housing providers in this case have focused their complaint on arguing that the outcome was predetermined and the board failed to properly weigh the evidence.
The first hearing in this matter is currently scheduled before Judge Ralph Prozio on September 2, 2026. NAA’s Legal Affairs team will continue to monitor this case and provide additional updates as they become available.
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