How Strong Is the Legal Case Against Rent Control?


Writing at Time magazine, Yale Law School lecturer Adam Cohen takes notice of New York City landlord James Harmon's legal challenge to the city's rent stabilization law. As Cohen sees it, rent control and rent stabilization are both perfectly constitutional, but he still worries that Harmon may attract five sympathetic votes from the Supreme Court. He writes:

The Supreme Court has repeatedly upheld rent control, going back to 1921. In 1988, in Pannell v. San Jose, it ruled 6-2 that San Jose's law did not violate the Constitution — in an opinion written by the very conservative then Chief Justice William Rehnquist. In 1992, in Yee v. City of Escondido, the court unanimously rejected a claim that a rent-control ordinance was an unconstitutional taking of property — just the issue Harmon is raising.

These rulings should settle the question. But rent-control opponents clearly think they have a chance, given how pro-corporation the court is today…. They argue that rent control unconstitutionally deprives landlords of the right to charge as much rent as they want. They like to point to extreme cases of people benefiting who do not need it — like the actress Faye Dunaway, who until recently had a $1,048.72-a-month one-bedroom on the Upper East Side of Manhattan

Cohen is wrong to suggest that the constitutional argument about rent control is simply about letting landlords charge "as much rent as they want." In fact, it's a question about the meaning of the Fifth Amendment's Takings Clause, which reads, "nor shall private property be taken for public use without just compensation." In 2010 the Supreme Court held that the Fifth Amendment's just compensation requirement is triggered "when a state regulation forces a property owner to submit to a permanent physical occupation." That's the issue in this case. Does the city's rent stabilization law amount to a permanent physical occupation of James Harmon's property?

There's strong evidence that it does. Not only do Harmon's rent stabilized tenants get to occupy their apartments for life and even get to name their own successors to the leases (family members must live two years in the apartment to qualify), New York law prevents Harmon from putting the property to any other lawful use. For one thing, his building is landmarked, which means he can't evict his tenants and tear the structure down. Also, his land is zoned residential, so even if the landmark law didn't apply, he would still be forbidden from starting over with a grocery store or some other land use. Finally, even if he wanted to demolish only the rent-stabilized apartments, he would still be required to pay his evicted tenants a $5,000 stipend and provide them with "an equivalent or superior housing accommodation at the same or lower regulated rent in a closely proximate area to the building." That last requirement is of course preposterous. As I noted in my recent column on the case, there are no rent stabilized one-bedroom apartments available for $1,000 a month at or near West 76th Street and Central Park West. Harmon would never be able to lawfully relocate those tenants. In short, the evidence says he is being forced "to submit to a permanent physical occupation of his property."