Justice And The Rent Laws

Supreme Court challenge will likely fail, but still nobody’s happy

One million apartments in New York City charge lower rent than they would on the free market. For millions of New Yorkers, it’s a fact of life—one that makes winners and losers out of both tenants and building owners, but one that they all live with.

Protesters shout as the Rent Guidelines Board approves a 3 percent rent increase in 2009.

Except for James Harmon. The owner of an Upper West Side townhouse with three market-rate tenants and three rentregulated ones, he has asked the U.S. Supreme Court to declare the city’s rent laws an unconstitutional seizure of his property.

He has been shot down in two lower courts. Lawyers scoff at his chances. Few on either side of the rent-regulation divide expect him to win a case that would shatter New York City’s housing market.

But one unnamed justice on the court has asked the city and state for arguments to defend the rent laws—providing the court a rare chance to review laws first put into place in the middle of World War II to address a housing emergency.

“After 70 years, maybe it’s not an emergency,” said Sherwin Belkin, a partner at Belkin Burden Wenig & Goldman who represents building owners, who contend rent regulations force them to subsidize below-market tenants by raising rents for everyone else.

“Even if there is an emergency, this doesn’t seem to do anything,” he said. “Maybe it’s a normal state of affairs in New York City, a place where people want to live.”

Yet for every story Belkin tells of tenants who break the law to hold onto a deal—like the man who dressed as a woman to occupy a rent-controlled apartment in her name—veteran tenant advocate Michael McKee tells of landlords who abuse the law to jack rents higher than allowed, threatening to drive longtime tenants out of their homes.

To McKee, rent regulations are New York City’s way of making sure a city of tenants is not entirely subject to the whims of a real estate industry with powerful friends in City Hall and Albany.

He contends that industry has stacked the deck at the Rent Guidelines Board, which studies a basket of financial information— but not building-by-building figures—to determine each year’s increase at an inevitably raucous public meeting.

“The method of setting rent adjustments is broken,” said McKee, the treasurer of Tenants PAC. “We take issue with the bias that’s built into the methodology, particularly the price index, which was deliberately selected so landlords wouldn’t have to open their books.”

The rent laws were renewed in Albany last year with modest victories for tenants, such as raising the rent at which apartments can max out of rent regulation to $2,500 from $2,000.

Tenant advocates don’t expect the Harmon case to succeed, and don’t have much sympathy for the claims of similarly situated landlords who they say are doing just fine. In a heavily regulated city, they say, any owner who bought or sold a regulated apartment building since 1943 knows the rules and factors them into the price.

Even the Rent Stabilization Association, the most prominent group representing the owners of rent-regulated buildings, doesn’t expect the court to toss the rules out.

But to keep New York City’s housing stock strong, RSA President Joseph Strasburg said owners are entitled to reforms like a means test, so what is effectively a housing subsidy is given to those who need it, not just those who got a lucky lease.

“Once you’re in the system, the property is not yours,” Strasburg said. “If you hit the lottery and you’re living in a rentstabilized apartment, you’re never going to leave.”

alisberg@cityandstateny.com