Court Dismisses Landlords’ Lawsuit Against Rent Freeze

By: Kenny Schaeffer
Published: April 2017

On March 28, before a packed courtroom in Manhattan, State Supreme Court Justice Debra James dismissed a lawsuit brought by a landlord trade group seeking to overturn the rent freeze currently in effect for one-year renewals of rent-stabilized leases.

 The Rent Stabilization Association had filed the suit, an Article 78 petition contesting the legality of a government action, last July, nine days after the city Rent Guidelines Board voted to freeze rents for the second year in a row. It claimed that the RGB’s action was “arbitrary and capricious and contrary to law” because the board had considered “tenant affordability” in making its decision.

In dismissing the case as having no merit, Judge James pointed out that the RGB has considered tenant affordability for decades, and that it is a necessary and proper factor in enforcing the Rent Stabilization Law. The RSA suit had alleged that the law “does not mention affordability.” The Rent Stabilization Law’s opening section, called “Findings and Declaration of Emergency,” points to “sharp increases in rent levels in many instances” and states that “preventive action… is necessary in order to prevent exactions of unjust, unreasonable, and oppressive rents and rental agreements, and to forestall profiteering, speculation, and other disruptive practices tending to produce threats to the public health, safety, and general welfare.”

Met Council is part of the Rent Justice Coalition, which joined the lawsuit as an amicus, or friend of board’s action. “The very reason the Rent Stabilization Law was passed was to protect tenants from ‘oppressive rents,’ so the idea that the RGB is barred from considering the affordability crisis that continues to plague tenants in New York City is ludicrous,” said Met Council director Ava Farkas. “We applaud Justice James’ refusal to be persuaded by that absurd argument.”

This Is What Democracy Looks Like

The lawsuit claimed that the RGB had been unfairly influenced by Mayor Bill de Blasio. Under the law, the mayor appoints all nine members, with two representing owners, two representing tenants, and the other five, including the chair, representing the public. Once appointed, the members serve for fixed terms, except for the chair, who serves at the mayor’s pleasure. For the 20 years before de Blasio took office, mayors Rudolph Giuliani and Michael Bloomberg had appointed public members who openly disdained the concept of rent stabilization, despite taking an oath to uphold it.

The RSA petition pointed out that, as a candidate in 2013, de Blasio had said he believed a rent freeze was warranted, and promised to appoint “pro-stabilization board members.”

After being elected with over 70 percent of the vote, de Blasio kept his word by appointing public members to the RGB who were able to look at tenants’ worsening ability to afford apartments while owners’ profits soared to record levels, and draw the obvious conclusion. When the board voted to freeze rents on one-year lease renewals in June 2015, the first time since its creation in 1969 that it had not authorized a rent increase, RSA president Joseph Strasburg complained to the New York Times that it was the result of the mayor “keeping a campaign promise.”

What Do We Need? Rollback!

Met Council and our allies in the Rent Justice Coalition have called for a substantial rent rollback to undo decades of unjustified increases, rather than freezing rents at their present unaffordable levels.

The RGB’s 2017 staff reports show that a rollback is needed more than ever. On March 30, its staff released the Income and Expense Study, which looks at how landlords are doing. On the first page, under “What’s New,” the report points out that in the most recent year for which data is available, owners’ “net operating income” (or profit after the expense of running the building) grew by a whopping 10.8 percent, the 11th consecutive year profits have increased.

Meanwhile, the Income and Affordability Study, which looks at how tenants are doing, shows that the median rent-to-income ratio is 32 percent. That means that more than half of the city’s one million stabilized households are paying more for rent than the federal hardship level, 30 percent of their income. Among households with incomes between $50,000 and $75,000 a year, 41 percent are paying more than that. But those who make less than $50,000, about half the city’s residents, are overwhelmingly rent-burdened. Among households with incomes from $35,000-50,000, 79 percent are paying above the federal hardship level; between $20,000-35,000, it’s 82 percent, and below $20,000, 88 percent.

Owners have enjoyed record profits based on unwarranted rent increases for decades, while more and more tenants have been pushed over the edge. Just freezing rents at their current levels will only ensure that this continues for another year. New York City tenants need relief in 2017—a rent rollback to more affordable levels.

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