Does the US Constitution apply on the Upper West Side? The Supreme Court may soon decide.
New York City and state regulate the rents of 982,000 apartments — half the city’s rental homes.
The rules are complicated, but for the most part, apartments are regulated until they’re vacant and lease for more than $2,500 a month. Until then, the government determines annual rent increases. With few exceptions, tenants can renew their leases forever and can hand down their apartments to their kids.
New York controls this “market” because, they say, there’s a housing “emergency.” The emergency is that everyone on the planet wants to live here, and only so many people fit. With a few gaps in time, this “emergency” dates back to just after World War I, when rents soared for returning veterans.
The system is terrible, economically and socially. Price controls limit supply and favor those who got there first. In 2011, someone moving into an unregulated Manhattan apartment paid an average $3,309, because of tight supply; the vacancy rate was less than 1%. In 2008, the last year for which the city has full data, an unregulated Manhattan apartment went for an average $2,500, nearly twice the $1,300 regulated rate.
Good luck getting one of those cheaper apartments. In 2008, 40% of rent-regulated tenants had lived in their apartments for a decade or more, compared to 17% of market-rate tenants.
Newcomers to the city — including poorer immigrants — find that housing is too limited and expensive. Even people who live in rent-regulated apartments are trapped. They might like to move, but they would face a huge rent hike.
Politicians don’t care. They renew “temporary” rent laws again and again. Some voters think the system helps them; some are just resigned.
Enter Jim Harmon. A West Point grad and a former homicide and terrorism prosecutor, Harmon owns a five-story brownstone on West 76th Street in Manhattan.
Harmon inherited the now-landmarked house from his parents and grandparents and hopes to pass it on to his children and grandchildren. “This is our home,” he says. “We’ve had the same phone number since 1953.”
Harmon and his family live in the building and rent out the other six apartments there. His brownstone is a mini-New York: Three of his apartments are market-rate, and three are regulated.
The regulated tenants, because they’ve now lived there a collective 101 years, pay little more than $1,100 on average, two-thirds below market rate.
Harmon thinks that the laws that govern what he can — or can’t — do with his own property are not constitutional.
New York wields vast power through its rent laws — yet the Supreme Court hasn’t considered rent control since the 1920s. Back then, it said New York’s postwar controls went “to the verge of the law” to meet a “temporary emergency.”
Harmon thinks it’s time for a rehearing. He sued New York state and NYC in federal court in 2008. Though two lower courts ruled against him, at least one Supreme Court justice — no one knows who — is interested. The court recently asked the city and state to respond to Harmon’s petition. If four justices desire, the Supremes could hear the case.
Harmon’s arguments are compelling. Consider: The Fifth Amendment says that nobody can be “deprived of . . . property without due process of law; nor shall private property be taken for public use without just compensation.”
Rent regulations deprive Harmon of his property. These laws aren’t like zoning laws, under which Harmon wouldn’t be able to build a munitions factory on his home, a perfectly reasonable restriction. Instead, Harmon can’t use much of his own property for any purpose. He’s a trespasser in his own brownstone. If he doesn’t want to renew a tenant’s lease, it’s tough luck. In fact, Harmon has spent $30,000 in fees trying — so far unsuccessfully — to vacate one apartment so that his grandchild can live there. Because tenants in the two other regulated apartments are (like Harmon) older than 62, if he wants “their” space, he has to find them similar apartments at the same or lower price in the same neighborhood.
The fact that Harmon must renew leases over and over is a violation, too, of the Constitution’s contracts clause. Rent regulation compels Harmon to sign his name to a piece of paper every year, whether he wants to or not.
What about due process, another constitutional protection? The Constitution holds that laws can’t be arbitrary or selective. But that’s the definition of rent regulation. The city has declared an emergency — but half of the city’s renters get no protection from that emergency.
Consider one of Harmon’s tenants, who bought a $320,000 second home on Long Island a decade ago, according to his court filing. If there’s a housing emergency, she’s contributing to it, because she’s got two houses. “It is all about luck,” Harmon argues. Even the city itself, in a 2008 survey, said that rents can follow an “illogical pattern.”
What about an illegal seizure without just compensation? New York says rent control is a public good. But yet the government doesn’t pay landlords for using their property. If the state took your property to build a subway station, it would have to pay you.
One would hope that the courts would come to the rescue. But even if Harmon gets his Supreme Court hearing, nothing is guaranteed.
Think back to 2005, to another landmark property-rights case, Kelo vs. City of New London. Justice Kennedy, often a swing vote, ruled that the Connecticut town could use eminent domain to seize private properties not for a public project but to hand them to other private parties. But Kennedy was half-hearted. Maybe he’d like to reconsider property protections.
Even then, New York wouldn’t necessarily have a free market. The Supremes could rule narrowly, telling New York to remedy its laws. Such a “solution” would take years and create chaos in the meantime.
The question remains: Why do New Yorkers put up with this?
We shouldn’t have to wait for the highest court in the land to do something that local and state officials could do themselves.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.