The newest challenge to New York’s rent-stabilization law is, on its face, a narrow dispute over a handful of long-vacant apartments. But the attorneys who filed the complaint say they’ve got a specific audience in mind: the U.S. Supreme Court.
The nonprofit libertarian Institute for Justice says it crafted the lawsuit to offer the court the kind of clean, concrete dispute that could allow the justices to revisit the constitutional limits of rent regulation. Whether this complaint will make it that far remains to be seen; it was only filed in November, and these cases move slowly.
But its arrival reflects a growing sense among legal scholars and rent regulation advocates that the court could upend decades of established law about how the government can regulate private property, in the same way the court has done with abortion, voting access and executive power.
The lawsuit was filed by a group called Small Property Owners of New York and three New York City building owners. The building owners say they each have at least one apartment that has sat empty for years because it requires major repairs, but the state law that governs rent stabilization limits how much they can increase rent on a vacant apartment to recoup those costs. They argue this amounts to an unconstitutional taking, and they’re asking a federal court to halt enforcement of the vacancy-rent caps. A ruling in their favor could reshape how stabilized apartments are priced when they turn over.
On a recent afternoon, brothers Tony and Pashko Lulgjuraj led the way to an unmarked unit 35 in their Hudson Heights apartment building.
“ As soon as you open the door, it kind of hits you, that old, damp apartment smell,” Tony said. “This place needs some work.”
The brothers gave a brief tour of the small, two-bedroom, one-bathroom apartment, which sits on the building’s corner and gets light from two sides. But the problems are obvious. The floors slope, the bedrooms lack basic electrical wiring and the kitchenette would need to be replaced entirely.
The apartment has been vacant for six years, ever since a tenant who lived there for four decades moved out. Contractors told the brothers that the only safe path forward was a full gut renovation.
To level the floor, they’d have to punch out the walls. They need to fix the plumbing and electrical and pay for lead abatement. They say the estimates they received were around $100,000 for the project — but the legal regulated rent is roughly $700 a month. The suit says the law would limit a rent increase to $347 per month following major improvements. That math, the brothers said, doesn’t pencil out. The apartment directly below, with the same floorplan, rents for $2,595 a month, according to the brothers.
“ Your break-even is so many years down the line,” Pashko said. “It just doesn't make sense to put that kind of money in. It sounds maybe crazy to say, but we're losing less money by leaving it vacant, which is nuts when you think about it.”
Recent changes were meant to address this problem. A 2019 state law capped how much landlords could spend on renovations and pass along in rent, allowing them to recoup up to $15,000 worth of work every 15 years. In 2022, lawmakers loosened those limits slightly — raising the allowable renovation amount to $30,000, or up to $50,000 in certain cases. City programs that offer help with the cost of renovations come with “ a bunch of hoops to jump through,” Tony said. “It didn’t make sense.”
The lawsuit cites the 2023 New York City Housing and Vacancy Survey, which found that 26,310 rent-stabilized apartments were “vacant but unavailable for rent.” What percentage of those vacancies are due specifically to onerous repair costs is unclear, and the suit doesn’t make an estimate.
Instead, the lawsuit primarily highlights the Lulgjuraj brothers’ two apartments and those of the two other landlords, going into granular details about repair needs, projected costs and rental rates for comparable units.
Those details are there for Justice Clarence Thomas, said Suranjan Sen, an attorney with Institute for Justice.
About a year-and-a-half ago, he said, there was a big push to challenge aspects of New York’s “rent-stabilization regime” at the Supreme Court. For a time, it looked like the justices might take up the issue. A case known as 74 Pinehurst, which challenged rules on terminating a tenancy at the end of a fixed lease, sat on the docket for an unusually long time.
The court passed on it in the end, but Thomas wrote that the “constitutionality of regimes like New York City’s is an important and pressing question.” He implied future challenges should be more specific about landlords’ circumstances and injuries.
The Institute for Justice obliged. Following Thomas’ statement, the law firm decided the time was right "for our involvement,” Sen said. “We hope that through this case we can offer the court a workable solution that will result not in anybody being cast out on the street or being denied access to housing, but, in fact, it will result in tens of thousands of more units almost immediately being available in the market.”
The complaint lays out a number of arguments against the vacancy-repair caps, though legal experts Gothamist spoke to say the one that seems the most promising casts these sorts of caps as an unconstitutional “taking” by the government. Under this view, if the state is effectively requiring landlords to provide below-market housing for the public good, it should pay them, just as it would have to pay a homeowner if it were to seize a house under eminent domain. The suit asks that in addition to striking down those limits, the court award the landlords compensation if the restrictions are found to constitute a taking.
The city hasn’t formally responded to the suit yet, but City Hall spokesperson Liz Garcia said by email that “for over 50 years, rent-stabilization laws have kept rents affordable for millions of New York families, and state and federal courts have repeatedly upheld these laws, including as recently as last year.”
As narrow as the facts and demands in the case are, if the court grants review, the scope of its ruling is entirely up to the justices. Even a case designed to be modest could become a vehicle for a much broader decision about property rights — potentially calling into question the legal foundation that allows governments to regulate rent in the first place. With more than 1 million rent-stabilized apartments, the largest stock of any U.S. city, New York is a prime battleground for regulation disputes.
But crafting a case with the court in mind doesn’t mean it will actually get there.
Roderick Hills, a professor at NYU School of Law, said the specific details about these landlords’ cases that might make the case attractive could also damn it. He questions whether the justices want to adopt a doctrine that would “require them to investigate the cost of each regulation and compare it to the profit margin and reasonable expenses of a landowner.” That sort of detail is generally reserved for lower courts.
Regardless, Hills said, “ I think that the court really wants to kill rent control.” The growing sense, even among some liberal pundits, that “rent control really is not a great way to solve a housing problem” could embolden them, he added.
What’s more, he said, striking down aspects of rent regulation — such as the limits on rent increases after vacancy that were added in 2019 — could appeal to the court’s conservative majority by avoiding the bitter cultural and political fights surrounding other issues.
“Striking down rent control is a way for the court to feel its conservative oats without pissing everybody off,” Hills said.
Leah Goodridge, a tenants rights attorney, served as a member of the city’s Rent Guidelines Board between 2018 and 2021. She remembers sitting at her desk when she heard for the first time she’d been sued as a member of the board — much as the board and its current members are listed as defendants in this case.
Goodridge didn’t take it particularly seriously at the time, she said. “I thought this is New York City. We’ve had rent stabilization for decades. It’s not going anywhere.”
As time passed and more suits came, though, she began to understand the lawsuits were aiming for the Supreme Court.
“ And it was a thought for us that, you know, with the right court makeup and the right politics, this could happen,” Goodridge said. “And now here we are. Here we are.”
