Federal Appeals Court Finds No Fifth Amendment Taking or Due Process Violation by HSTPA Amendments to RSL

Landlords sued the City of New York, the DHCR, and the NYC Rent Guidelines Board in federal court soon after the Housing Stability and Tenant Protection Act of 2019 (HSTPA) was enacted to amend the Rent Stabilization Law (RSL). Among other things, they claimed that the HSTPA amendments, facially and as applied, resulted in physical and regulatory takings of property in violation of the Fifth Amendment of the U.S. Constitution, as well as the 14th Amendment due process clause. While many of the other issues raised by landlords in this case were related to, and dismissed with, issues raised in the case of CHIP v. City of New York before the U.S. District Court (EDNY), the appeals court (2nd Circuit) addressed separately in this case the Pinehurst landlords' appeal of the lower court's ruling that no physical or regulatory taking under the Fifth Amendment had occurred and that the RSL didn't violate due process. 

The 2nd Circuit found that, because the landlords may yet succeed in evicting current tenants, the court could not say that the RSL compelled a landlord over objection to rent its property or to refrain forever from terminating a tenancy. Also, without allegations that the RSL compelled a physical invasion of any of the properties that landlords argued raised an as-applied claim, the landlords failed to plead an as-applied physical taking. In addition, landlords didn't claim that they had sought any of the hardship exemptions available under the RSL and they couldn't show that the RSL thwarted their reasonable, investment-backed expectations. Landlords' due process challenge failed because neighborhood continuity and stability were valid grounds for enacting a law. Finally, to the extent that landlords sought money damages from the city, sovereign immunity barred their Fifth Amendment takings claims.

74 Pinehurst LLC v. New York: 59 F.4th 557 (US Ct App 2d Cir; 2/6/23; Parker, CJ)