New York state, as you might already know, regulates the rent an owner of residential property may charge to a tenant. Under a statute adopted in 1974, regulation is triggered by a locality's declaration of a housing emergency, and the restrictions extend for the duration of the declared emergency. Most famously -- or infamously -- New York City has declared a housing emergency under the statute since that time, and indeed has considered housing an "emergency" for over a century. The 1974 statute also applied to three other NYC-adjacent counties, but not the entire Empire State.
Well, in 2019 the legislature changed that, and "allowed municipalities statewide to opt in to the rent adjustment scheme created by the [1974 Emergency statute] upon a declaration of emergency due to a housing vacancy rate of 5% or less[.]"
In 2019, Kingston was thwarted when it determined its vacancy rate was 6.7% -- too high to invoke emergency powers. But then Co-19 came, and voila! the rate dropped below the magic 5%. Soon thereafter, the city adopted a resolution declaring a housing emergency, and invoked its powers under the 1974 statute to regulate rent on building containing six or more rental units.
The statute requires the formation of a Board to administer the law and determine the rents in the regulated units. The city did so, and the Board came up with this:
On November 9, 2022, following a series of public meetings and hearings, the Board voted to adopt an annual rent adjustment guideline and a fair market rent guideline for the properties subject to the emergency declaration. The fair market rent guideline provided that a tenant could file a fair market rent appeal with respondent Division of Housing and Community Renewal (hereinafter DHCR) to seek a refund if his or her rent increased by more than 16% between January 1, 2019 and July 30, 2022; the adjustment guideline, in turn, required that rent charged for one- and two-year leases commencing between August 1, 2022 and September 30, 2023 be reduced by 15% from the base rate.
Read that again. Max rent increase of 16% over base rate between 2019 and 2022. Check. And then a 15% rent reduction from base rate between 2022 and 2023.Who knew that with inflation and the cost of seemingly everything rising, that rent in Kingston is getting cheaper. Like magic!
An association of property owners sued. They challenged the city's claim that the 5% threshold was met, and also whether the city had the authority to lower existing rents. The Supreme Court (this is New York, so "Supreme Court" means a trial court, dun dun), concluded that indeed, the city had met the very low legal bar for showing that as a matter of fact, Kingston was experiencing a vacancy rate below 5%, but also that the city lacked the authority under the 1974 statute to lower rents. Both sides appealed.
In Hudson Valley Property Owners Ass'n Inc. v. City of Kingston, No. CV-23-0327 (Mar. 21, 2024), the Appellate Division did the city a solid: it affirmed the declaration of emergency, but on the city's appeal, reversed and concluded that nothing in the term "adjustment" of rent in the 1975 statute did not mean only an upwards adjustment of rent, but could include lowering rents.
We're not going to get into the first issue too deeply, which the court viewed as a factual challenge. Yes, the studies and other data supporting the finding the 5% threshold was satisfied might be a bit off here and there, but as we know, the courts generally don't hold the government to very high standards in this area (or anywhere else in NY law), because the city was acting in good faith. Or at least there was no proof it wasn't. Slip op. at 6. The flaws the property owners pointed to were "perceived" and not actual flaws, and the resulting studies were "adequate." And as we know, that's enough to satisfy a court when the government is involved.
On the more interesting issue of whether "adjustment" means only an upwards adjustment of rent, the court had this to say:
Nothing in the applicable statutory language explicitly requires that the Board adjust the rent upward rather than downward as petitioners claim, and petitioners' argument as to why such a requirement should be implied is less than compelling.
Slip op. at 7. That's it. Exactly why that is so, the court does not really explain.
And a blanket downwards "adjustment" was just fine, and no individualized determinations were necessary: if you don't like how this works on your property, property owner, you can appeal.
As we've always thought, facial claims are tough. But find a situation in which a downwards adjustment (or even an inadequate upwards adjustment) forces a property owner to operate in the red (and the owner has the resources, financial and emotional, to push it), or where an owner who wants to exit the rental market and is prohibited from doing so by the law, and you've likely got a different case.
Hudson Valley Property Owners Ass'n Inc. v. City of Kingston, No. CV-23-0327 (N.Y.A.D. Mar. 21, 2024)
