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Opinion

Opinion

NYC rent control is illegal taking

February 17, 2012

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James and Jeanne Harmon reside in and supposedly own a five-story brownstone on Manhattan’s Upper West Side, a building that has been in their family since 1949. But they have, so to speak, houseguests who have overstayed their welcome by, in cumulative years, more than a century. They are the tenants — the same tenants — who have been living in the three of the Harmons’ six apartments that are rent controlled.

The Harmons want the Supreme Court to rule that their home has been effectively, and unconstitutionally, taken from them by notably foolish laws that advance no legitimate state interest. The court should.

This “taking” has been accomplished by rent-control laws that cover almost 1 million — approximately half — of the city’s rental apartments. Such laws have existed, with several intervals of sanity, since the “emergency” declared because returning soldiers faced housing shortages caused by a building slowdown during World War I.

Most tenants in rent-controlled units can renew their leases forever. Tenants can bequeath their rent-controlled apartments — they have, essentially, a property right to their landlord’s property — to their children, or to a friend who lives with them for two years. This is not satire; it is the virtue of caring, as understood by liberal government.    

The tenants in the Harmons’ three rent-controlled units are paying an average 59 percent below market rates. The Harmons would like to reclaim one apartment for a grandchild, but because occupants of two of the units are over 62, the Harmons would have to find the displaced tenant a comparable apartment, at the same or lower rent, in the same neighborhood.  

In addition to rent control’s random dispersal of benefits — remember, half of the Harmons’ apartments are uncontrolled — it is destructive because it discourages construction of new apartments and maintenance of existing ones. Thus it creates the “emergency” it supposedly cures.

It exemplifies what the late New York Sen. Pat Moynihan called “iatrogenic government.” In medicine, an iatrogenic illness is induced inadvertently by a physician’s treatment.  

Rent control is unconstitutional because it is an egregious and uncompensated physical occupation of property. The Constitution says private property shall not “be taken for public use, without just compensation.” The Harmons get no compensation for being coerced into privatized welfare: The state shows compassion to tenants — many of whom are not needy; one of the Harmons’ entitled tenants owns a home on Long Island — by compelling landlords to subsidize them.

A property right in a physical thing is a right to possess, use and dispose of this thing. Because government-compelled possession of property by a third party is an unambiguous taking, the Harmons’ property right has been nullified.

John Locke, an intellectual source of American freedom, said property rights, which he defined to include rights to “lives, liberties and estates,” exist prior to, and independent of, government, and their preservation is “the great and chief end” for which governments are founded. Property rights provide a sphere of personal sovereignty, a zone of privacy into which government should be able to intrude only with difficulty and only so far. Because they are the basis of individual independence, America’s Founders considered property rights the foundation of all other liberties, including self-government — the governance of one’s self.

The Harmons’ case illustrates government’s steady and no longer stealthy desire to transform property from a fundamental right into an attenuated, conditional privilege. Government would like the right to be contingent on whatever agenda it has for ameliorating “emergencies” it causes.  

The Supreme Court’s worst decision of this century, the 2005 Kelo ruling, held that government may take private property for the spurious “public use” of giving it to a third party that will pay the government higher taxes than the original owner would. The Harmons’ case is an occasion for the court to begin making amends for Kelo.

In the 1920s, even Justice Oliver Wendell Holmes, who was excessively permissive regarding what governments could legislate, said rent-control laws were on the “verge” of being unconstitutional. Surely a substantial regulation — which a physical occupation is — of real property violates the Fifth Amendment’s Takings Clause if it does not substantially advance legitimate state interests. The court also has held that a regulation of real property violates the Takings and Due Process clauses if it serves no “public use” or is “arbitrary.”

Are the arbitrary distribution of unmerited benefits and the cultivation of an entitlement mentality among renters a “public use”? If not, rent control is unconstitutional.

— George Will is a columnist for Washington Post Writers Group. His email is georgewill@washpost.com.

Comments

cato_the_elder 2 years, 10 months ago

"The Supreme Court’s worst decision of this century, the 2005 Kelo ruling, held that government may take private property for the spurious “public use” of giving it to a third party that will pay the government higher taxes than the original owner would."

Perhaps not the worst, but certainly in the top 5.

jhawkinsf 2 years, 10 months ago

The result of rent control laws in San Francisco during the years I lived there was that many landlords simply removed their rentals from the marketplace. Many "in-law" units were taken off the market. The number of available rentals went down, prices went up. The poor were squeezed out. It's just another example of government trying to manipulate the marketplace to help one group, only to find out that their very actions have unintended and frequently the opposite consequence.

jafs 2 years, 10 months ago

And what did they do with their rentals instead of renting them out?

jhawkinsf 2 years, 10 months ago

It was called an "Ellis Act". Simply, they took the rental off the market, but they were allowed to occupy the unit themselves or allow a family member to move in. Additionally, the numbers of units that became "owner", in cooperative arrangements also went up, though that too was limited by city rules. That, too, decreased the number of units available for rental. The net result was that the number of African-Americans in San Francisco declined at a time when their numbers just outside the city limits that did not have rent control went up. A typically poor, disenfranchised group bore the brunt of rent control. One side effect of this "Ellis Act" was that landlords were permitted to take the property off the market for two years, then put it back on the market at the going rate. But the economics created by the extremely high rates was that it made more sense to do that than have a tenant in the unit paying a artificially low rate that rent control dictated.

jafs 2 years, 10 months ago

That's interesting, but it's clearly the law that allowed them to do that that created that situation, not the rent control laws.

jhawkinsf 2 years, 10 months ago

The "Ellis Act" was implemented because what was happening was that people were buying homes that the previous owners had as rentals, and then were not allowed to move into the very homes they bought for themselves. Imagine buying a home in a very expensive city like San Francisco and having to spend years on someone's couch as the eviction process goes forward. In San Francisco, the rent control laws were so onerous for landlords and so favorable to renters, that the process did indeed take multiple years. It became common practice for a home owner to pay renters to leave, sometimes up to $100,000, just for the privilege of occupying the home you just bought. And because the eviction process was so onerous, few entered the business of renting. Large homes that previously had been split into two apartments remained single family. Who do you think gets squeezed out in that situation? The little guy, for sure.
The law of unintended consequences.

jafs 2 years, 10 months ago

There are obvious fixes to that that would be less extreme.

For example, the eviction process could be made simpler and quicker.

Or, there could be legislation that allows tenants to remain until the end of their lease if the property is sold.

Why do you think that somebody should be able to buy a house that has a tenant with an existing lease, and then kick them out? If they don't want a house with a tenant, they should buy one without one.

jhawkinsf 2 years, 10 months ago

A lease is a contract that must be honored. That was not what I was talking about. I recall a funny statement that was made by a person seeking a seat on the Board of Supervisors (the city legislature). He said: "only in San Francisco can an openly gay, Jewish man whose main issue is transgender rights be the conservative in the race". This just highlights the fact that San Francisco is progressives on steroids. If you think Kansas and Brownback are on the extreme, think of the other extreme. There was no desire to moderate rent control. If nothing else, ever greater limits were put on landlords. An older person could never be evicted, regardless of lease. If a renter reaches a certain age (65 I think), then lives to be 95, they get to stay there for thirty years under rent control. If a person was ill, the same. For the rest of their lives. They could bring "comfort" pets with them, "comfort" dogs, cats, snakes, etc. Basically, all the laws and all the rules were in favor of renters. The reaction of landlords was to take the property off the market, to the benefit of no one. Lose/lose.

jafs 2 years, 10 months ago

And yet, this "Ellis act" was clearly in the landlord's favor, and it was what resulted in the loss of rentals, according to your own posts.

Instead of passing that, they could have simply modified rent control a bit, which would have been a better solution, in my view, based on what you've posted.

jhawkinsf 2 years, 10 months ago

I would disagree with your assessment that the Ellis Act favors a landlord. It gives the landlord the chance to occupy their own property.
It would be like me giving you a cup of air. The air is not mine to give and you have plenty already.
The city is giving the property owner permission to occupy their own property. I always was under the assumption that once I bought a property, I didn't need permission from the government to live on my property. Apparently in S.F., one does. But in so doing, they've created an artificial market, one that is clearly working against those it was intended to benefit.

jafs 2 years, 10 months ago

Of course it is.

It allows landlords to take rent-controlled rental properties off of the market, and then reintroduce them at non rent-controlled rates.

If the problem was that it was too hard to evict (which is of course a somewhat subjective judgment to make), then simply making it a bit easier would have sufficed to fix the problem.

By the way, if you weren't talking about evicting tenants who had a lease, what evictions were you referring to?

jhawkinsf 2 years, 10 months ago

As far as I know, all leases are binding contracts. A person cannot be evicted if there is a new owner, whether in a rent controlled market or not.
I believe my next comment is generally true, but not being a lawyer, I'm not 100% sure. At the end of a lease's specified time, say a year, if no action is taken to have a new lease, then tenancy becomes month to month. In San Francisco, an eviction of a person on a month to month could take years, during which time the renters frequently chose not to pay rent. If the renter claimed a disability, eviction became virtually impossible.
You saying changing the process would be like asking the Kansas legislature to pass a pro-abortion bill. It just ain't gonna happen. So people take their property off the market, using an Ellis Act. The reality is that while they might put the property back on the market at the market rate, they frequently don't, having had such bad experiences with being a landlord. So they either occupy the property, have a relative occupy or sell it to someone who lives in it and does not intend to rent it out at all. The unit is taken off the market, to the detriment of the people who rent control was intended to benefit. With that unit, and many more off the market, renters have to go to nearby communities (that are not rent controlled) and then commute into the city.

jafs 2 years, 10 months ago

I'm not at all sure that's true - the contract is between current owners and tenants - when properties change hands, the new owners aren't party to the original rental contract.

What would bind them to it?

If changing the eviction rules a little bit was so impossible, how did the "Ellis Act" get passed?

pace 2 years, 10 months ago

You can't get out of your lease just because the property has been sold. If you sell a property you must disclose any liens or leases bound to the property. You seem to think contract or lease has no meaning if you don't want it to. NOT true.

jafs 2 years, 10 months ago

Really?

Do you have a source for that? My understanding is that a lease is a contract between a specific owner and a specific tenant.

pace 2 years, 10 months ago

I hear you , again, you wish for me to look up sources for you, spoon feed you easily researched information. Grow up. Look it up.

jafs 2 years, 10 months ago

Ok.

I'll remember your attitude, and adjust my feelings about you accordingly.

And, you better never ask me for a citation or source either.

jafs 2 years, 10 months ago

Almost the very first source I found supports my understanding and contradicts yours.

A new owner has the right to terminate an existing lease between previous owners and tenants - they're required to give 30 days notice to the tenant.

Any more insults you'd like to throw in my direction?

pace 2 years, 10 months ago

I don't like spoon feeding people basic information. Do not worry that I will act all helpless and plea for you to cite your source. I don't want to. If i am interested or see a statement I think is incorrect. I look it up. If you wish to be accurate you might try digging a little deeper. What ever site said a buyer has no responsibility is on pretty rough ground. . Transferability of lease in most cases goes with the property. Some exceptions, exclusion due to foreclosure is one. Usually the seller has either addressed the issue in the lease or the buyer makes the contract of purchase requiring the seller to address the issue assigning liability to the seller.
But no, as a tenant you don't get to break your lease unless the new owner somehow breaks theirs, like by not attending to repairs or substantial environmental change.

The new owner must honor the leases if you buy property. You can choose not to renew afterwards, but buying the property does NOT cancel out existing leases. Leases in some cases can be bought out , in almost all if the two parties are agreed.

jafs 2 years, 10 months ago

Again, the almost first site I found contradicts that idea.

Since you don't provide a source, and I've looked it up, I conclude that you are incorrect.

If you'd like to provide a source, I will look at it, and analyze why it may differ from the one I found.

pace 2 years, 10 months ago

This is why I didn't want to be your daddy, You don't think, you believe, You have an opinion, if I give you sources, then You refute the source. I don't have any problem with your faith that one side has to comply with a lease and the other doesn't . My thought is, It is contrary to contract law and to most states tenant landlord law. I think in most cases the new owner must honor existing leases. You don't. Go get huffy with someone else.

jafs 2 years, 10 months ago

Oh well, you're apparently one more person with whom it's impossible to have a civil conversation.

I asked you for a source, and you told me to "look it up" - I did so, and the very first source I found contradicted your statements.

Then, you continued to claim you are correct, but provided no sources.

Now, you are shifting your claim to "I think in most cases", but including more insulting nonsense.

I guess I'll have to put you in the same category as Liberty One from now on.

pace 2 years, 10 months ago

If the category is one where I don't take responsibility for your basic education, put me there. I did not shift but clarified. which of course you don't understand the difference. You probably want someone to show you a road to the dictionary. You were wrong, a new owner must honor most leases, there are exceptions. but exceptions are not the rule. Now you are hysterical and it is all my fault. Too bad. If you want to converse, I am in, if you want to whine and posture, then I have the time to make fun of you. Your choice.

just_another_bozo_on_this_bus 2 years, 10 months ago

"A new owner has the right to terminate an existing lease between previous owners and tenants - they're required to give 30 days notice to the tenant."

I think that's only in commercial leases, and only if it's specifically written into the lease agreement. If there is nothing in the lease allowing for the cancellation of the lease agreement, I suspect that any new owner would have to respect the existing agreement.

I believe that in states that have a Landlord-Tenant act, in residential leases any transfer of ownership of the property must respect leases in force at the time of the sale. But I suppose in some states it's possible that cancellation clauses may be included in the lease in case of transfer of ownership.

jafs 2 years, 10 months ago

That's an interesting set of beliefs - do you have any sources for them?

As I said, I looked it up, found a site almost immediately which contradicts all of that, and says that a new owner is not required to honor existing leases.

Nothing on that site specified commercial property.

just_another_bozo_on_this_bus 2 years, 10 months ago

The laws on this vary from state to state. But as I stated, when it comes to residential leases, most states have some version of Landlord-Tenant act, and it's pretty common that when ownership is transferred, leases go with the sale.

With commercial leases, the lease is essentially the law, and some landlords may choose to include a cancellation clause. But doing so may make the property harder to rent.

jafs 2 years, 10 months ago

The source I found immediately was e.how money.

It states quite clearly that new owners have the right to terminate existing leases, with 30 days notice.

Interestingly, I checked out some other sites and they say the opposite, that leases convey with the property and are binding on new owners.

So, as far as I can tell, it's not clear yet to me which is correct.

It may vary from state to state, of course, as well.

pace 2 years, 10 months ago

omg, out of curiosity I went to the site and looked at what they said. No, they did not say an owner did not have to honor a lease,
http://www.ehow.com/info_8552746_lease-transfer-buy-property-renter.html

just_another_bozo_on_this_bus 2 years, 10 months ago

Sure, rent control is extremely problematic. But you're nuts if you think that letting the "free market" determine rent would lead to anything but a mass exodus of working class folks out of city centers.

jafs 2 years, 10 months ago

Unless they've changed the rules about rent controlled apartments in NYC, Will is wrong about a couple of things.

Parents can't "bequeath" their apartment to their children, unless the children have been living there for a couple of years, and I don't think they can give it to "friends".

My father lived in a rent controlled apartment in NYC, and we were unable to keep it, since none of the children had lived there in the last few years of his life.

It's possible, of course, that they've changed the rules - that was a while ago.

booyalab 2 years, 10 months ago

Rent control is one of many socially progressive causes that purports to help the poor, but ends up being far worse to them. It's just sad.

jafs 2 years, 10 months ago

That's really not true.

It's helpful to those that have rent controlled apartments.

However, it does make non rent controlled apartments much more expensive than they would be without it (probably).

booyalab 2 years, 10 months ago

The big cities with the tightest rent control laws are NYC and SF. They also have the highest average rent. That is because luxury apartments are exempted from the laws. So apartment builders shift their resources from building affordable apartments to unaffordable ones.

just_another_bozo_on_this_bus 2 years, 10 months ago

All real estate in NYC and SF is expensive, not just apartments.

Orwell 2 years, 10 months ago

Shorter George Will: "My rich friends aren't rich enough yet."

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