New York state has enacted the Housing Stability and Tenant Projection Act of 2019, providing for sweeping changes to rent and landlord/tenant laws with the stated purpose of protecting tenants while imposing new obligations and restrictions on landlords.

The provisions of the Act relating to landlord/tenant relations provide residential tenants with a number of new protections that will affect landlords statewide; such as limits on the amounts of security deposits, restrictions and prohibitions as to certain fees, and the criminalization of self-help remedies. These changes also make it more difficult for landlords to evict their tenants: restricting some of the grounds for evictions, imposing additional or stronger procedural restrictions and requirements and limiting the types of rent recoverable in those proceedings.

The Act also contains significant changes relating to the regulation of rents that could be applicable to municipalities throughout the state. Previously, rent regulations generally only impacted New York City, Westchester County and Nassau County. Under the Act, any city, town and village in the state may now have the option of adopting those regulations. Now a municipality can, by act of its governing body, declare a “public emergency requiring the regulation of residential rents for all or any class or classes of housing accommodations” after finding vacancy rates “not in excess of” 5 percent. Regulatory oversight will be exercised by a county Rent Guidelines Board consisting of nine members appointed by the state commissioner of housing and community renewal, based upon recommendations by the local elected governing bodies of municipalities that have chosen to exercise this option.

Before a municipality decides to jump into the water of rent regulation, however, it may be wise to await the outcome of a federal lawsuit filed on July 15th in the Eastern District of New York by Community Housing Improvement Program, the Rent Stabilization Association of NYC and certain individual property owners against the City of New York, the Rent Guidelines Board and its members and the state commissioner of housing and community renewal (all charged with the authority to enforce the rent laws in question).

The suit seeks to strike down provisions of the Act as a violation of due process rights and an unconstitutional taking of property. As reported in an article by Dan M. Clark in today's New York Law Journal entitled “Landlords File Federal Lawsuit Challenging NY’s Rent Control Laws," the plaintiffs allege three main complaints in their suit. First, they assert that the rent laws violate the 14th Amendment Due Process Clause because they, in fact, do not target relief to low-income populations, as lawmakers claim, and are (and have been) arbitrarily enforced. The remaining two grounds are based upon the “Taking Clause” of the 5th Amendment that requires compensation when property is taken for public use. The plaintiffs allege that the rent laws constitute a “physical taking” because landlords and property owners are deprived of their right “to exclude others from their buildings, and to possess, use and dispose of their property. In other words, the law prevents them from doing what they want with their property with no benefit in return.”

Plaintiffs’ second “takings” argument asserts that the Act constitutes a regulatory taking because “the law imposes new restrictions on landlords without any reciprocal benefits. The suit claimed that buildings with predominantly rent-stabilized units are valued lower than buildings with market-rate units.” Coupled with restrictions as to how much landlords can pass on to tenants for the cost of capital improvements (including those required by law) and limits on the amount of annual rent increases, the plaintiffs’ counsel states that the “ ‘real-world effects are to take property without compensation’ ” in violation of the federal constitution. Localities that choose to exercise the local option for rent regulation under the Act may find themselves the subject of similar claims -- at least until these issues have been resolved by the courts in this and any other litigation that may be commenced.