Freeing The New York City Housing Market

In November, IJ launched an ambitious case: a constitutional challenge to a core aspect of New York’s rent stabilization law. Many others have tried (and failed). IJ, however, is poised to succeed—in part because our case uniquely focuses on vacant apartments.

Stabilization restricts rents for apartments in buildings that were constructed in New York City before 1974 (approximately half of all apartments in the city). A governmental board decides the annual percentage by which landlords may increase the rent for mandatory renewal leases. Constitutional challenges against stabilization or rent control have historically attacked one of these (or related) aspects of the law—that is, a landlord has been prevented from evicting or raising the rent on an existing tenant.

IJ’s case is fundamentally different. We are not challenging any aspect of the law that protects existing tenants from eviction or unforeseeable upswings in rent. Instead, we are challenging only the restriction on rent for vacant apartments. 

For decades, New York allowed the rent on stabilized apartments to increase upon vacancy to account for the cost of any improvements needed before the unit could be rented to a new tenant. But in 2019, the state legislature amended the law to prohibit virtually all vacancy increases. As a result, the rents for thousands of vacant apartments are now permanently capped at low and bizarrely disparate rates. 

These caps have nothing to do with the apartment’s condition or location, or the incoming tenant’s ability to pay. Instead, the cap reflects the apartment’s history of prior tenant turnover. Our clients Pashko and Tony Lulgjuraj own a building with two essentially identical vacant apartments—mirrored floor plans within the same building—yet rent for one is capped at $700, while rent for the other is capped at $2,500.

Consider how absurd this scheme would be in any other industry. It would be bad enough for the government to set the price of milk. Now imagine the government tells one farmer that he can sell milk for $X and another farmer that he can sell milk for $Y. Or even more analogous, imagine the government randomly set different milk prices according to the particular cow. This scheme would prove largely unworkable, and it would result in select farmers bearing disproportionate costs. That is how rent stabilization works in the absence of vacancy increases.

This scheme is not only incoherent; it also restricts New York City housing by rendering many vacant apartments unviable and thus keeping them off the market. It simply doesn’t make economic sense for a landlord to rent a unit at a price that makes it impossible for them to recoup their costs. A victory for IJ would result in potentially 100,000 of these “zombie” apartments being added to the city’s housing market.

That makes this challenge similar to other IJ cases that, ultimately, are about adding to the housing supply. You should be able to live in a “tiny” home, stay in an RV on your own land, or obtain a building permit free from extortionate conditions. These kinds of property restrictions, like rent caps on vacant apartments, contribute to housing scarcity and skyrocketing prices. 

As our cases show, the solution is simple: Get government out of the way.

Suranjan Sen is an IJ attorney.