Category Archives: The Takings Clause

Powers ch 11, Short Course ch 11

Rent control and the takings clause

One of my favorite movies is, “You’ve Got Mail.”  And, in an example of how at some point the Supreme Court will handle an issue related to something that you never thought would happen in a million years, the movie features the following dialogue:

Store clerk 1: What if we have to fold?  I’ll never find another part time job and I won’t be able to pay rent and I’ll have to move to Brooklyn.

Store clerk 2: The joy of rent control.  Six rooms for $450 a month.

Store clerk 2: We know.  You’ve told us a million times.  I can’t believe you’re bringing it up at a time like this.  It’s like bragging because you’re tall.[1]

Aside from presaging dialogue that one might expect in the new television hit, “Girls,” the reference left folks who do not live in New York in the dark.  What the heck was this deal where someone could rent a large apartment in New York for such a paltry sum?  Enter the practice of rent control and stabilization.

New York has had a program of rent stabilization and control since at least 1969.  Apartment demand is so strong in New York that rents would likely reach a level where many tenants would be priced out of the market.  Thus, regulations were passed to protect tenants from large rent increases.  Under rent stabilization, rent increases are held to levels set by the New York City Rent Guidelines Board; in addition, tenants’ ability to renew their leases is protected under the regulations.  The regulations have been justified as necessary because of New York’s housing shortage and to prevent landlords from “rent profiteering.”

The policy of rent stabilization was recently challenged by the Harmons, who own a brownstone near Central Park.  The Harmons live in the building and rent out the other units.  Three of the units are covered by rent stabilization regulations.  Because the effect of the regulations is to limit the amount of rent the Harmons can charge to well below the market rate, the Harmons challenged the rent stabilization regulations as an unconstitutional “taking” prohibited by the Fifth Amendment.  The Harmons’ claim is that the rent control regulations amount to a physical taking; that is, forcing the owners to charge below market rents “force[s the Harmons] to take strangers into [their] home at [their] expense for life.”[2] The Harmons’ case was dismissed by both the district and appeals courts.  The Supreme Court relisted the case in late April, indicating that there was some interest in hearing the case, but then denied cert a week later, leaving the appeals court decision as the final word.  Since rent stabilization applies to about one million apartments in the city, the decision was met with some relief.

The appeals court ruling noted that the Harmons knew about the rental regulations when they bought the building.  In addition, the Court noted that the regulations did not deprive the owners of all control of their property; they would still be able to evict a bad tenant, reclaim apartments for their personal use, or even demolish the building to convert the property for another use.

That the Harmons decided to appeal the case to the Court after losing at the lower levels suggests that they were hoping that the Supreme Court might be more sympathetic to property rights.   Certainly, this might seem to be the case after the Supreme Court’s decision earlier this year in favor of the Sacketts, a couple who challenged the EPA’s regulations of construction on their property.   Thinking about why the Court decided to forego this case can highlight several approaches to the Court’s decisionmaking.

One approach would be to look at the popularity of rent control in New York.  The Big Apple is expensive— Kiplinger rated it the city with the most expensive cost of living in the US in June 2011.[3]  A big part of that expense is the cost of housing.  Rent controls cover many of the city’s rental units and Mayor Bloomberg certified the existence of an emergency housing shortage in the city in March; the certification is based on a vacancy rate of less than five percent.  Moreover, the Court has a precedent to rely on—the case of Yee v. Escondido[4] saw a unanimous Court upholding mobile home lease regulations against a takings challenge.   Finally, the regulations in Harmon seem to be much like the even more intrusive state regulations that were imposed to alleviate a problem of access to property ownership in Hawaii Housing Authority v. Midkiff. [5]

One could also argue that not only are there good legal and policy bases for the Court’s refusal to hear this case.  There are good political ones as well.  Many New Yorkers were likely relieved to know that rent controls would continue to be in place, allowing them some predictability in rent amounts and rent increases they can expect—it’s a policy that is likely to be popular with many New Yorkers eking out a living in a very expensive city.


[1] Excerpt from the script of “You’ve Got Mail,” by Nora Ephron and Delia Ephron, revised 2/2/1998;posted on http://www.dailyscript.com/scripts/Youve_got_mail.html, accessed 5/5/2012.

[2] Quoted in Adam Liptak, “US Supreme Court Declines to Hear Suite Challenging the Rent Stabilization Law,” New York Times, April 23 2012; http://www.nytimes.com/2012/04/24/us/supreme-court-declines-to-hear-rent-control-challenge.html?_r=1&ref=rentcontrolandstabilization accessed April 30 2012.

[3] “Ten US Cities With Most Expensive Cost of Living,” http://www.kiplinger.com/slideshow/cities-with-most-expensive-cost-of-living-2011/2.html, accessed 5/21/2012.

[4] 503 US 519 (1992).

[5] 467 US 229 (1984); found in Epstein and Walker, pp. 662-665.

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