The U.S. Supreme Court declined to hear a case challenging New York state’s Rent Stabilization Law, legislation that limits some apartment landlords’ ability to raise rents and includes other measures favored by tenants.

The decision significantly limits property owners’ remaining options to challenge a law, passed in 1969 and most recently amended in 2019, that they’ve described as "draconian" at a time when they’re getting squeezed by high interest rates and inflation.

Without giving a reason, the highest U.S. court denied the petition filed in May by the Community Housing Improvement Program and the Rent Stabilization Association of N.Y.C., groups representing tens of thousands of the city’s rent-stabilized property owners, and some individual property owners. The case was filed after lower courts dismissed their complaint first filed in July 2019 with the Eastern District of New York.

“Since the time of our filing in July of 2019 foreclosures have accelerated and the law’s punitive effects have dramatically worsened,” Jay Martin, executive director of the Community Housing Improvement Program, said in an emailed statement to CoStar News on Monday. “While we were hopeful a broad facial challenge would have delivered the most relief to the most owners as quickly as possible, we remain convinced that the law is irrational and vulnerable to more specific challenges. One way or another this law must go down, its current form is destroying New York’s housing.”

Even though the Supreme Court denied its “broad-based challenge,” it doesn't mean more specific cases can't be brought before the Supreme Court in the future, a spokesperson for the CHIP told CoStar News, without elaborating.

The trade groups argue in the petition that the Rent Stabilization Law is the “nation’s most stringent rental housing regulation” that governs 1 million New York apartments. They said the law “appropriates owners’ right to” occupy their property, change its use or simply leave it vacant when a tenant’s lease expires.

“Absent unlawful acts, tenants and their broadly-defined ‘successors’ are entitled to lease renewals in perpetuity,” according to the complaint.

They also argued that the law “imposes the public burden of providing affordable housing on a subset of rental property owners, by setting maximum rent levels based in part on tenant ability to pay.”

“While we are disappointed that the U.S. Supreme Court has declined to hear our facial challenge to New York’s “perpetual emergency” Rent Stabilization Law, we are not deterred from ongoing education and advocacy to provide relief for both tenants and property owners,” RSA said in a tweet on Monday.

New York’s nine-member Rent Guidelines Board, made up of those including both tenant and owner representatives, in June approved a rent increase of at least 3% for rent-stabilized apartments in one of the world’s most expensive markets. Tenants have argued economic pressures made it more difficult for them to pay rent, while owners said they were burdened with mounting costs they couldn’t help offset without more rent hikes.

In 2021, there were a little over 1 million rent-stabilized units in New York, representing just 28% of the city’s overall housing stock and 44% of its rental units, according to a survey by the Department of Housing Preservation and Development and conducted by the U.S. Census Bureau.

Among rent-stabilized units, the median monthly rent was $1,400, according to the study that said stabilization generally applies to units in buildings built before 1974 with six or more units. In contrast, the apartment market asking rent per unit in New York has increased to a record high of $3,070 on average, according to CoStar data.

As competing interests on both sides escalate, some states have allowed at least some form of local rent regulation. That has led some multifamily developers and investors to pause or scale back in markets with strict rent-control laws, arguing that caps on rent increases crimp the bottom line too much to warrant investing.

“The denial is another disappointing chapter for property owners operating within a system that is unsustainable in its status quo,” Zachary Rothken, an attorney with Rosenberg & Estis, told CoStar News in an emailed statement. “New York’s rent stabilization laws were instituted at a very different time to address a very different problem. They have been pushed, exploited and abused to the limit and neither the legislature nor the courts can continue to ignore the problem. Bad laws and disregard for property rights are not good for anyone. They're not good for landlords, they're not good for tenants, and they're not good for the economy. Until a realistic solution is on the table, we will continue to see litigation.”

New York’s case is closely followed elsewhere in the country that’s also faced with similar issues.

Currently, 33 states preempt local governments from adopting rent regulation laws, while California, the District of Columbia, Maine, Maryland, Minnesota, New Jersey, New York and Oregon have rent-control policies in place at the state or local level, the National Apartment Association said on its website.

According to a study published last year by New York University’s Furman Center for Real Estate and Urban Policy, the New York Rent Guidelines board’s decision on rent is “far more determinative of the long-term economic health of buildings with rent regulated apartments” because of the 2019 state Legislature’s passing of the Housing Stability and Tenant Protection Act, or HSTPA.

That act limits or does away with building owners’ ability to raise rents in situations such as when they need to help recover costs of investing in major overhauls, according to the study. It said buildings without any significant source of income other than from rent-stabilized apartments are “at particular risk” in the wake of the act.

The National Association of Realtors, National Apartment Association, National Association of Home Builders and Mortgage Bankers Association have joined forces to file an amicus brief supporting plaintiffs in this and the other separate but related legal case calling for the Supreme Court to hear the challenge to the New York Rent Stabilization Law, contending it infringes on property rights by limiting apartment rent increases.