Rent Control is Unconstitutional and Kills Investment, Experts Say
If the Supreme Court decides to take up a big rent control case, a “serious constitutional challenge” against rent-control and “stabilization laws” then the judicial body will finally “make right a long-standing wrong,” an expert said on Wednesday.
New York University law professor, Richard Epstein, assessed the Harmon v. Kimmel case from the owners of a New York town house who had tenants living in their house paying rents at “only a fraction” of the value that their living space was worth.
James Harmon’s lawsuit has already been blown off by the Second Circuit Court of Appeals, and in an attempt to strike down New York’s rent-stabilization law he has filed petition for certiorari in the Supreme Court.
Epstein predicted that Harmon just might have a chance in light of the Constitution’s 5th Amendent.
“In broad and emphatic language, the Fifth Amendment to the Constitution provides that ‘no person shall be . . . deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.’ Rent control collides with the last prohibition, the ‘takings clause,’” Epstein said in his analysis.
Epstein said that all versions of rent-control laws share a single characteristic, that they permit a tenant to remain in possession of property even after the lease is expired at below-market rents. To top it all off, New York law gives the tenant a statutory right to pass on the right to live in the premises at a controlled rent to family members who have lived with them for two or more years.
He noted that the Second Circuit had recognized that the Harmons were entitled to just compensation when their property is subject to a “permanent physical occupation.”
However, with the Supreme Court ruling in Yee v. City of Escondido in 1993, the court had said that “government regulation of the rental relationship does not constitute a physical taking,” even though the Harmons hear footsteps every night above their bedroom, Epstein said.
Supreme Court decisions on rents have dated back as far as 1921 in Block v. Hirsh. The court ruled that once a landlord has let a tenant onto the property for a year, the tenant can extend the lease indefinitely. However, Epstein said that the court’s decision “undermined the most basic proposition of property law- namely, that property interests are defined by both space and time.”
Epstein said that rent control topples the traditional common law that “rightly treated the tenant who overstayed his lease as a trespasser who the landlord could evict at will.”
He added that the Supreme Court, in its duty to uphold the Constitution, must take up Harmon’s invitation and “make right a long-standing wrong”.
He said rent control and rent stabilization laws are hostile for the health of New York City because rent-controlled tenants on lifetime leases constantly drain the community by discouraging investment in rental real estate, thus forming a “persistent” and “inchoate” threat of subjecting future properties to rent control.