Supreme Court Could Consider Rent Control Constitutionality
- Details
- Category: Latest News
The three new justices appointed to the Supreme Court during the Trump administration have already made a big impact on the country’s legal landscape. In just their first term, the Court overturned Roe v. Wade in their controversial Dobbs decision while also favoring gun access over restrictions, and religious over individual rights in other cases.
Consider these decisions just the opening volley. There is little doubt much more lies ahead. One intriguing possibility not yet on the Court’s docket, but possibly coming soon, is a case challenging the constitutionality of rent control that got filed in New York State and is currently winding its way through the federal court system. If this case does end up in front of the US Supreme Court – as seems likely – the outcome may be very different from what has unfolded thus far.
The housing “emergency” that was used as the pretext for implementation of rent control in the 1920s has curiously persisted to the present day, at least according to the proponents of rent control in New York who have kept it going for a century.
The Supreme Court first weighed in on Rent Control in 1921 in the Block v. Hirsch case which challenged the constitutionality of an emergency rent control measure enacted in Washington D.C. following the end of World War I. This case was narrowly decided in favor of rent control on a 5-4 vote, largely on the argument that there was a true emergency in housing following the Great War. However, just a few years later, with the Chastleton Corp. v. Sinclair case in 1924, the court overruled the earlier decision, finding that the emergency had passed.
New York City also enacted rent control in the 1920s under “emergency” provisions. Unlike the D.C. experience, these laws were never overturned and the housing “emergency” that was used as the pretext for implementation of rent control in the 1920's has curiously persisted to the present day, at least according to the proponents of rent control in New York who have kept it going for a century. Even worse for housing providers, new legislation in New York state, passed in 2019, expanded both the reach and scope of rent control across the entire state. A spring 2022 article in this Newsletter provides a more in-depth analysis of this turn of events.
As a quick review (if you don’t feel like re-reading the entire article), the 2019 election cycle in New York State brought super-majority Democratic control to both statehouses and returned a Democrat to the governor’s office, bringing the entire state government under Democratic control. Before 2019, the New York Senate had been Republican-controlled for decades, acting as a check on Democratic initiatives and ambitions.
Seeing their opportunity, the powerful tenant’s lobby used this shift in control to push through both a state-wide expansion of rent control (or, more accurately, rent stabilization) and a series of changes to the underlying legislation that had the cumulative effect of making it even more financially ruinous than previously, and even more restrictive in what it allowed housing providers to do with their own properties. At its worst, this new legislation literally made keeping some rent stabilized units empty – a better economic option than complying with the costly repair requirements, draconian rent restrictions and inadequate cost recovery provisions that the 2019 legislation put into effect.
This is just the kind of legislative overreach that the Supreme Court, with its new 6-3 conservative majority, might not be so eager to uphold. While no challenge to this legislation has yet made it to the Supreme Court, a recent opinion column in The Hill makes it sound like it’s just a matter of time before it does.
This is just the kind of legislative overreach that the Supreme Court, with its new 6-3 conservative majority, might not be so eager to uphold.
The rent control challenge will soon go to the Second Circuit Court of Appeals, one of 13 regional courts that is the last stop for legal challenges before the Supreme Court itself can intervene. If the plaintiffs lose this case, an appeal to the Supreme Court of the United States is certain to be made. If the Supreme Court agrees to hear the case, that in itself is an indication that rent control may be on shaky ground.
Assuming the case does end up at the Supreme Court level, and recognizing that the current court’s “pro-business” worldview seems greatly at odds with the whole notion of rent control, it seems likely that the current legal challenge to rent control could prevail at some level. There are few, if any, housing providers who are not hoping against hope that this comes to pass.
It seems likely that the current legal challenge to rent control could prevail at some level.
So, keep your eyes on the current court challenges. Rent control has much better odds of surviving the Second Circuit Court of Appeals challenge, given that this court represents New York State, Connecticut and Vermont and has traditionally been one of the more liberal courts in the Circuit Court system. But, as we have all come to know, the US Supreme Court is a very different story.
Assuming the Supreme Court does agree to hear this case, a range of outcomes is possible. The court could throw out rent control entirely if it determines that it constitutes an unconstitutional “taking” of private property rights. The court could uphold rent control, but put limits on its scope or require sunset provisions on any “emergency” justification that has been used to keep it alive. It could even uphold rent control entirely as lower courts have done.
Odds are good that rent control would not survive a Supreme Court challenge in its current form. As the Court’s recent Dobbs decision shows, the possibility that Rent Control could be thrown out entirely seems entirely possible.
Odds are good that rent control would not survive a Supreme Court challenge in its current form.
This will be a story of intense interest to both tenants in states where rent control currently exists (such as New York, California and Oregon) or has been proposed (such as Illinois), and housing providers across the country. There are few threats that instill as much fear in the hearts of housing providers as the prospect of rent control coming to town, or being ratcheted up from current levels. The prospect that the Supreme Court could put the genie back in the bottle – or at least limit its worst excesses – is almost too good to be true.
This is a story that bears watching. Its ultimate resolution will have a profound, nationwide impact on the multifamily industry.
