In April the U.S. Supreme Court declined to hear a constitutional challenge to New York City’s rent stabilization law. Landlords James and Jeanne Harmon argued that the law violates the Takings Clause of the Fifth Amendment: “nor shall private property be taken for public use without just compensation.” Although this clause is typically associated with eminent domain cases, the Supreme Court has held that “it is a taking when a state regulation forces a property owner to submit to a permanent physical occupation.”
New York’s rent regulations seem to fit the bill. The Harmons’ rent-regulated tenants pay government-set rates that are 59 percent below market, and they get to occupy their apartments for life. They can even name their own relatives as lease successors (who must live in the apartment for two years to qualify). Furthermore, the Harmons’ Upper West Side brownstone has been designated a landmark, meaning they may not tear it down, and the land is zoned for residential uses, so they are forbidden to start over with a grocery store or some other business. For all practical purposes, the Harmons face “a permanent physical occupation.”
Because the Harmons previously lost at the U.S. Court of Appeals for the 2nd Circuit, which upheld the law as a legitimate exercise of state regulatory power, New York’s rent stabilization scheme remains in place.