59 F.4th 540
2d Cir.2023Background
- New York’s Rent Stabilization Law (RSL) — enacted 1969 and amended over decades — regulates rents, lease renewals, evictions, and related landlord-tenant rules in roughly one million units in NYC.
- The Housing Stability and Tenant Protection Act of 2019 (HSTPA) made key changes: limited recoveries for major capital and individual apartment improvements, repealed vacancy/high-income decontrol and certain vacancy/longevity increases, and restricted reclaiming units for personal use.
- Plaintiffs (individual building owners and trade associations) brought a facial challenge in federal court alleging the RSL/HSTPA effects (1) a per se physical taking and (2) a regulatory taking under the Fifth Amendment, and (3) violates substantive due process.
- The District Court dismissed under Fed. R. Civ. P. 12(b)(6), holding plaintiffs failed to state Takings and Due Process claims on a facial basis.
- The Second Circuit reviewed de novo and affirmed: it applied the ordinary Salerno standard for facial challenges, found no facial physical taking, rejected a facial regulatory-taking claim under Penn Central, and rejected the Due Process claim under rational-basis review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard for facial challenge | Salerno is too strict; courts should apply Patel/Stevens adjustments (lesser standard) | Salerno governs non–First Amendment facial attacks; Patel/Stevens do not relax Salerno here | Salerno standard applies; Patel/Stevens do not lower the facial-challenge bar outside First Amendment context |
| Physical taking (per se) | RSL forces landlords to retain tenants, offer renewal leases, accept successors, and restrict evictions — a permanent physical occupation | RSL regulates landlord-tenant relations; owners voluntarily rent; statutes do not compel third‑party invasions or eliminate eviction routes | No facial physical taking; RSL is regulation of use, not a compelled physical invasion or deprivation of the entire bundle of property rights |
| Regulatory taking (Penn Central balancing) | RSL imposes severe economic harm, frustrates investment‑backed expectations, and functions like a burden without reciprocal benefit | Even if there are economic impacts, plaintiffs cannot show RSL is unconstitutional in all applications; Penn Central factors weigh against a facial taking | Facial regulatory-taking claim fails: plaintiffs did not plausibly allege the Penn Central factors on a classwide basis (economic impact, investment expectations, character) |
| Substantive due process | RSL is irrational and not related to legitimate housing/stability goals; it harms supply and discriminates in favor of tenants | RSL is rationally related to legitimate public interests (housing stability, preventing displacement); due process cannot replace Takings analysis | Due process claim fails under rational-basis review; the RSL is rationally related to legitimate government interests and the Due Process Clause cannot supplant the Takings Clause |
Key Cases Cited
- United States v. Salerno, 481 U.S. 739 (facial-challenge standard)
- City of Los Angeles v. Patel, 576 U.S. 409 (clarifies scope of facial challenge as to applications of statute)
- United States v. Stevens, 559 U.S. 460 (discusses overbreadth standard in First Amendment context)
- Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (multi-factor regulatory-takings balancing test)
- Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (per se physical occupation taking)
- Yee v. City of Escondido, 503 U.S. 519 (rent-control regulation not a per se physical taking)
- Horne v. Department of Agriculture, 576 U.S. 350 (physical taking via compelled transfer of personal property)
- Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (regulation granting third‑party right of access can be a per se physical taking)
- Concrete Pipe & Products of California v. Construction Laborers Pension Trust, 508 U.S. 602 (diminution in value alone insufficient for taking)
- Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470 (character of government action and public purpose weigh against finding a taking)