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Supreme Court disappoints landlords, rejects rent-control challenge

This news story was published on April 24, 2012.
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By David G. Savage, Tribune Washington Bureau –

WASHINGTON — The Supreme Court on Monday rejected a constitutional challenge to New York City’s famed rent-control ordinance, a post-World War II housing measure that limits the rents of more than a million apartments.

The court’s action is a setback for property-rights activists, who had hoped a more conservative court would protect landlords and a free market in rentals. For decades, critics have said rent-control laws deny property owners the right to fully profit from their investment.

The justices, four of whom grew up in New York City, turned away an appeal from James and Jeanne Harmon, who own a five-story brownstone building on West 76th Street in Manhattan. The couple says they have no choice but to rent three apartments on the upper floors for less than half of their market value.

They also say that one of their tenants can pay a $1,500-a-month mortgage on a Long Island house because he pays only $951 a month to rent a unit in Harmon’s building.

In his appeal, James Harmon said the rent control law violated the Fifth Amendment, which says “private property (shall not) be taken for public use without just compensation.”

“Contrary to the popular myth, the Rent Stabilization Law is not targeted to help the needy,” James Harmon wrote, representing himself in his appeal to the high court. “A person could make millions of dollars annually and still qualify for a rent-stabilized apartment. It is all about luck, a racket in which property owners and market rate tenants always lose.”

He also noted that the former chairman of the House Ways and Means Committee, Rep. Charles Rangel, D-N.Y., had four rent-stabilized apartments in the city.

The rent-control ordinances were adopted as emergency housing measures after World War II. Harmon says the couple’s building is also subject to the city’s historic preservation laws, so they cannot demolish it or change its character. Nor can they move out their longtime tenants, who pay below-market rates.

For decades, critics have urged the justices to strike down rent-control measures as unconstitutional, but they have refused.

In the 1920s, the court upheld city zoning laws as reasonable regulations of property, even though they could be costly to land owners. In the past, the court has said a “taking” of private property is usually limited to situations where the owner loses all use of his land.

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3 Responses to Supreme Court disappoints landlords, rejects rent-control challenge

  1. Ryan Reply Report comment

    April 24, 2012 at 3:07 pm

    I would counter by suggesting the only way the uber-rich are going to be successful in owning all the land and having us all as servants is by continuing with exactly what they are doing today: imposing government controls to reinforce their cartel monopolies/oligopolies(in order to subvert the free market competition).

    The global conglomerates you see today (such as GE, Wells Fargo, JP Morgan, etc.) have not achieved this status through free-market capitalism; they have achieved it through crony-capitalism by lobbying government to impose more regulation and control to squeeze out competition.

    This is a very important distinction when blaming ‘capitalism’ to justify the expansion of government control.

  2. Observer Reply Report comment

    April 24, 2012 at 2:49 pm

    Landlords also get advantages from certain rent-stabilized buildings, where they get reductions in taxes.

    Rent control sets a mandatory minimum of upkeep and repair. If you fail to provide those services, the tenant can demand lower rent. Also, rent control is only for pre-1947 buildings, and only if a person has lived in the apartment since 1971 (or in some situations 1953). However, if a child who grew up in the apartment still lives there, it remains in rent control (that’s where a lot of games come in).

    Once an apartment is vacated, it is removed from the program.

  3. Ryan Reply Report comment

    April 24, 2012 at 9:28 am

    Rent controls benefit 3 groups:
    1) Those who can afford MORE but get away with spending less (upper middle class and the wealthy)

    2) Those who work in the rent-control bureaucracies created by the ordinance

    3) The politicians who get donations/kickbacks/votes from the two aforementioned groups.

    Not only do they not help the needy, they in fact hurt them. Especially in lower income rentals, the rent control gives the landlord absolutely no incentive to more than the absolute minimum for upkeep since he can receive no additional return on his investments. This leads to a situation of “regulate and evade” where the bureaucrats create new codes to force the landlord to upkeep, and the landlord finds any way imaginable to circumvent and cut costs.

    When the furnace goes out in the projects, it doesnt get fixed for a long time…