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RSA: 'rent laws unconstitutional.' (Rent Stabilization Association in lawsuit against New York City, New York State enforcement of rent control law) (Review and Forecast, Section III)

The Rent Stabilization Association is eagerly awaiting a positive decision in a Federal lawsuit challenging the constitutionality of the Rent Stabilization Law and its application by the New York City Rent Guidelines Board (RGB) and the State Division of Housing and Community Renewal (DHCR). The lawsuit is patterned on successful string of cases in California which ultimately resulted in a 28 percent across-the-board rent increase in Berkeley. A similar action in New York would result in rent increases of more than 22 percent.

The lawsuit, RSA vs. Drinking was initiated in June 1991 and was fully submitted to the U.S. Southern District Court, Judge Louis Stanton presiding, in March 1992.

The lawsuit was prompted by the downward spiral in rent guidelines issued by the Dinkins-appointed Guidelines Board, highlighting 20 years of inadequate rent increases. The lawsuit challenges the constitutionality of the Rent Stabilization Law because it does not assure that owners will receive a just and reasonable rate of return on their property. Instead, the law permits the RGB to set rent guidelines without guidance or assurance that such rates will not e confiscatory.

The lawsuit also alleges that the Rent Guidelines Board has followed a methodology for determining rent increases which has denied many owners a fair and reasonable return. Because the Board has failed to adequately compensate owners for the effects of inflation on net operating income, the Board's guidelines have become confiscatory.

In addition, the lawsuit alleges, the hardship provisions of the law, and their administration by DHCR, fail to provide an escape valve from the confiscatory effects of Rent Guideline Board actions.

RSA's lawsuit has raised important constitutional issues. For example, while the lawsuit contends that a rent regulation law must permit owners to receive a fair and reasonable return on their property in order to pass constitutional muster, the state, it its response, maintains that such a law is not unconstitutional unless it deprives owners of all economically viable use of their property. The RSA lawsuit also contends that it is sufficient to demonstrate that the economic rights of one owner are necessarily deprived by the action of law, whereas the stage argues it must be demonstrated that there are no case in which the law can be applied in a constitutional manner.

Most incredibly, the New York State Attorney General has argued, in defending this case, that property owners have no constitutional right to a rent increase.

The lawsuit asks the court to order the Rent guidelines Board to provide rent increases which will provide a just and reasonable return and to declare the hardship provisions insufficient. The RSA is hoping for a favorable ruling on this case in the Federal Court before this year's rent guidelines are voted, but is prepared to fight this case all the way to the U.S. Supreme Court.

This Federal constitutional attack on rent regulations is only one of several lawsuits currently being sponsored by the RSA to attack rent regulations. The RSA is also supporting three lawsuits by small property owners which raise constitutional issues and which will be fought to the Supreme Court if necessary.
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Author:Gilbert, John J.
Publication:Real Estate Weekly
Date:Jun 24, 1992
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