After several unsuccessful attempts to overturn New York’s rent-stabilization law, a new lawsuit has been filed with a different focus. The Small Property Owners of New York (SPONY) and several individual landlords are challenging the application of rent caps on vacant apartments, arguing that this violates the Fifth Amendment’s takings clause by reducing the value of their leaseholds.
The complaint claims that limiting rents on vacant units results “either in a complete taking (by making it economically impossible to rent the leasehold) or a partial taking of the leasehold’s value.” Attorneys representing the landlords assert that, unlike prior legal efforts, this suit does not affect current tenants and is instead aimed at regulations applied only when an apartment is unoccupied.
“We’re not challenging the government’s ability to protect existing tenants,” said Robert Johnson, an attorney with the Institute for Justice, which is representing plaintiffs pro bono. “When an apartment is vacant, there is no tenant to protect, and it doesn’t help anybody to have these units sit off the market.”
Filed in federal court in Manhattan this week, the lawsuit seeks to prevent enforcement of rent stabilization rules on vacant apartments and requests compensation for income lost due to those restrictions. Defendants named include New York City, its Rent Guidelines Board, New York State, and its Division of Homes and Community Renewal.
This legal action follows other challenges against state rent laws in recent years from groups such as the Rent Stabilization Association and Community Housing Improvement Program—now merged as the New York Apartment Association—as well as other plaintiffs who unsuccessfully petitioned the U.S. Supreme Court.
“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,” a City Hall spokesperson stated.
Ellen Davidson from Legal Aid Society—which intervened in previous cases on behalf of tenants—said this latest suit revisits earlier arguments but narrows its scope. “It’s the same thing with new wrapping paper,” she said.
The complaint also alleges violations under other constitutional clauses: privileges and immunities (“protects their right to take, hold, and dispose of property”) and equal protection (“because owners of some vacant apartments are free to rent at market rates while others are subject to crushing limitations”).
Ann Korchak, SPONY board president, commented: “Keeping apartments empty is not the business model of small property owners.” She explained that without higher rents enabling renovations after vacancy, owners often keep units off-market.
Among properties described in court filings are two vacant apartments at 81 Cabrini Boulevard owned by brothers Pashko and Tony Lulgjuraj through RPN Management. The lawsuit states one unit’s regulated rent is $710 per month while an identical stabilized unit below rents for $2,595; another vacant unit has a legal rent of $860 compared with $3,000 for a similar apartment above. Renovating each would cost more than $100,000 according to estimates provided by ownership.
Other plaintiffs include entities tied to Bipin Mathew (1819 Cornelia Street in Ridgewood) and Ilan Rabinovitch (135 West 78th Street), both small residential buildings.
Prior to passage of 2019’s Housing Stability and Tenant Protection Act (HSTPA), landlords had more options for raising rents or deregulating stabilized units upon vacancy if certain thresholds were met. Davidson noted that restoring those pre-2019 provisions could incentivize pushing out long-term tenants: “Our experience with pre-2019 rules is that anyone who lived in their apartment for more than 10 years had a target on their back,” she said.
While landlord groups have advocated legislative changes allowing one-time resets for long-vacant units’ rents—and lawmakers did increase allowable post-renovation increases last year—these measures fall short according to property owners’ associations.
Plaintiff Pashko Lulgjuraj expressed hope about SPONY’s targeted approach: “We’re not looking to bring down rent stabilization as we know it,” he said. “This is very narrow, very focused.”
