In a surprise move, the New York Court of Appeals, the state's highest court, has overturned a New York City ordinance requiring owners of single-room-occupancy hotels to maintain the units for rental purposes. "It's a remarkable decision, especially given the history of New York courts," says R.S. Radford, a Pacific Legal Foundation attorney who filed a friend-of-the-court brief urging that the law be overturned. "New York courts have historically been very hostile to property rights. It's not just a victory, it's an overwhelming decision."

The New York ordinance essentially required owners of these buildings to operate them only as SROs. Under the law, an owner could not refuse to rent rooms and could not close the hotel unless he paid the city $45,000 for each unit taken off the market.

"A developer who bought an old dilapidated building whose last official use was as an SRO would have been required to refurbish the building and operate it as an SRO," explains Radford.

The city argued that the ordinance was needed to keep New York's homeless population from growing. But the court, agreeing with Radford's brief, ruled that the law violated the Fifth Amendment's takings clause. In Seawall Associates v. City of New York, it concluded that "the nexus between obligations placed on SRO property owners and the alleviation of the highly complex social problem of homelessness is indirect at best and conjectural. Such a tenuous connection between means and ends cannot justify singling out this group of property owners to bear costs required by the law toward the cure of the homeless problem."

Nor did the court accept the city's argument that the law's buyout provision made the law constitutionally acceptable. The court held that "if the initial act amounts to an unlawful taking, then permitting the owners to avoid the illegal confiscation by paying a 'ransom' cannot make it lawful."