Rent Stabilization Ass'n of New York City, Inc. v. Higgins

OPINION OF THE COURT

Essentially two challenges are mounted by appellant property owners to regulations promulgated by respondent Division of Housing and Community Renewal (DHCR) enlarging the class of "family members” entitled to succeed to a rent-regulated apartment on the death or departure of the tenant of record. As did the Appellate Division, we conclude first that the regulations are within the agency’s rule-making authority, and second that no unconstitutional "taking” was effected.

I.

We begin with the background of the challenged regulations. In response to what was found to be a severe housing shortage following World War II, the legislature enacted laws

and the tenant or permanent tenant. Although no single factor shall be solely determinative, evidence which is to be considered in determining whether such emotional and financial commitment and interdependence existed, may include, without limitation, such factors as listed below. In no event would evidence of a sexual relationship between such persons be required or considered.”

The specified relevant factors are (i) longevity of the relationship; (ii) whether the parties share household expenses; (iii) intermingling of finances; (iv) whether they engage in family-type activities; (v) whether they have formalized legal obligations toward each other; (vi) whether they hold themselves out as family members; (vii) whether they regularly perform family functions; and (viii) any other pattern of behavior that evidences an intention to create a long-term, emotionally committed relationship. The amendments extend noneviction protection uniformly to family members whether the tenant dies or vacates voluntarily, so long as the family member has resided in the apartment for two years (one year where the tenant is elderly or disabled), or has resided with the tenant from the inception of the tenancy or the commencement of the relationship.

As the grounds for its action, DHCR specified New York’s chronic low rental vacancy rate for affordable units, increasing homelessness and poverty, the AIDS epidemic and the rise in nontraditional families (including same-sex couples, de facto marriages, single parent households and other living arrangements no longer exceptional). The regulations, according to DHCR, were "intended to clarify a non-traditional family member’s right to remain in his or her home, particularly at a time when a significant percentage of these households may be vulnerable to the AIDS epidemic.” In extending the protection to all qualified family members regardless of the reason for the tenant’s permanent departure, DHCR claimed that it redressed a situation that in its experience had led to illogical and unjust results.

In releasing the regulations, DHCR stated that New York’s crisis in affordable housing posed an immediate threat requiring emergency regulations because, with tenants dying or vacating apartments daily, landlords and remaining occupants needed guidance and some measure of consistency in determining who would be permitted to remain in rent-regulated

Appellants sought a preliminary injunction and a declaration that the new regulations were unconstitutional and invalid, and Supreme Court temporarily restrained their implementation; the Appellate Division, however, deeming the TRO a preliminary injunction, reversed and vacated the restraint ( 164 AD2d 283 ). After Supreme Court granted respondents’ cross motions for a declaration that the regulations were within the proper exercise of DHCR’s authority, appellants sought a direct appeal to this Court, which we transferred to the Appellate Division on the ground that questions other than the constitutional validity of a statute were involved (see, CPLR 5601 [b] [2]). The Appellate Division upheld the regulations as a valid exercise of DHCR’s authority for the reasons set forth in its opinion vacating the preliminary injunction, adding that the regulations substantially advance a legitimate governmental interest under the most recent United States Supreme Court opinions addressing regulatory takings (see, Lucas v South Carolina Coastal Council, 505 US —, 112 S Ct 2886; Fee v Escondido, 503 US —, 112 S Ct 1522). Because a substantial constitutional question is directly presented, appeal to this Court lies as of right (see, CPLR 5601 [b] [1]).

We first address appellants’ assertion that DHCR was without authority to adopt the challenged regulations.

Appellants recognize that the legislature has provided DHCR a broad mandate to promulgate regulations in furtherance of the rent control and rent stabilization laws that will " 'inevitably require some changes in the legal relationship between landlords and tenants’ ” (see, Matter of Versailles Realty Co. v New York State Div. of Hous. & Community

Such circumstances are not present in this case. Rather, in defining the persons to be afforded noneviction protection in an ongoing housing crisis, DHCR has acted within its competence and authority (see, Matter of Consolidated Edison Co. v Department of Envtl. Conservation, 71 NY2d 186 , 191-192; Matter of Nicholas v Kahn, 47 NY2d 24 , 31).

Most significantly, DHCR has not acted on a clean slate— noneviction protection in rent-regulated housing was first created by the legislature in the rent control and rent stabilization laws (see, McKinney’s Uncons Laws of NY § 8585 [1] [Emergency Housing Rent Control Law § 5 (1)]; Administrative Code § 26-408 [a]; § 26-511 [c] [4]). This protection has in the past been enlarged by the agency, after which the legislature has voted to extend rent regulation without modifying those provisions.

The challenged regulations " 'fill in the interstices’ ” of the legislative mandate (see, Versailles Realty, 76 NY2d, at 329) by redefining the protected class of people to include those who, in DHCR’s experience as sole administrator of residential rent regulation and adjudicator of eviction disputes, are most in need of protection against loss of their homes in a continuing housing emergency. Adjustment of the existing scheme in light of the agency’s technical competence is well within the proper rule-making function of this agency. Moreover, unlike the Public Health Council in Boreali, DHCR has not enacted categorical exemptions reflecting accommodations to special interest groups.

Finally, although appellants point to 27 bills introduced in the legislature between 1986 and 1989 relating to succession rights, the legislature has not sought to alter succession rights in the years following DHCR’s emergency and later permanent regulations (see also, Festa, 145 AD2d, at 63 ). Of particular significance is the fact that the legislature this year made substantial reforms in rent regulation, including deregulation of luxury units, without addressing noneviction protection (see, Rent Regulation Reform Act of 1993, L 1993, ch 253). We cannot agree with appellants that, in these circumstances, the failed bills alone warrant the conclusion that the agency has exceeded its mandate (see also, Boreali, 71 NY2d, at 11 ).

Thus, we reject appellants’ contention that DHCR acted beyond its authority.

This appeal does not put before us the question whether rent regulation itself constitutes a taking — a question that has excited recent scholarly interest (see, e.g., Radford, Regulatory Takings Law in the 1990’s: The Death of Rent Control?, 21 Sw U L Rev 1019 [1992]; Note, Bright Lines in the Big City: Seawall, Tenant Succession Rights, and the Jurisprudence of Takings, 91 Colum L Rev 609 [1991]; but see, Pennell v San Jose, 485 US 1 , 12, n 6; Block v Hirsh, 256 US 135 , 156; Loab Estates v Druhe, 300 NY 176 , 180). Appellants challenge only the recent family-succession amendments to the rent control and rent stabilization regulations. We note, further, that in this facial challenge, appellants bear the heavy burden of overcoming the presumption of constitutionality that attaches to the challenged enactments (see, e.g., de St. Aubin v Flacke, 68 NY2d 66 , 76; Loretto v Teleprompter Manhattan CATV Corp., 458 US 419 , 440). Appellants have failed to sustain that burden.

A. Physical Occupation

Governmental action that compels an owner to endure a permanent physical occupation of its property effects an unconstitutional taking per se (see, Yee, 503 US, at —, 112 S Ct, at 1526; Loretto, 458 US, at 434-435 ). Appellants claim that they are forced by the new regulations to accept strangers as tenants and that these tenancies, no longer restricted to blood- or-marriage relatives of the original tenant, will exist in perpetuity. Because the coresidency requirement in the case of a tenant who voluntarily vacates has been reduced to the shorter of two years (one year in the case of elderly or disabled tenants) or the inception of the tenancy or commencement of the relationship, appellants further complain that the new regulations make it easier to qualify for protection.

At the outset, we are unpersuaded by the argument that the new regulations have created perpetual tenancies. An

Nor does the fact that an owner must offer a renewal lease to a departed tenant’s newly defined family member — potentially a stranger to the owner — give rise to such a physical occupation (see, Yee, 503 US, at —, 112 S Ct, at 1528). In Seawall Assocs. v City of New York ( 74 NY2d 92 , 105, cert denied 493 US 976 ), we held that Local Law No. 9 of 1987, which required owners of single room occupancy housing accommodations to rehabilitate and rent out their units, forcing them "to subject their properties to a use which they neither planned nor desired,” constituted a physical taking per se. By contrast, in Yee, the Supreme Court held that requiring owners of mobile home parks to rent the "pad” beneath a mobile home at controlled rents to any purchaser of the mobile home did not constitute a physical occupation because the owners had "voluntarily open[ed] their property to occupation by others” and thus could not "assert a per se right to compensation based on their inability to exclude particular individuals” (Yee, 503 US, at —, 112 S Ct, at 1530).

The difference — dispositive here — between requiring an owner to accept a purported stranger as a tenant and compelling the owner to rent out single room occupancy accommodations is in the owner’s voluntary acquiescence in the use of its property for rental housing (see, Yee, 503 US, at —, 112 S Ct, at 1531; Federal Communications Commn. v Florida Power Corp., 480 US 245 , 252-253; see also, Seawall, 74 NY2d, at 105). As we noted in Seawall, "[i]t is the forced occupation^] * * * not the identities of the new tenants or the terms of the leases, which deprives the owners of their possessory interests and results in physical takings” (Seawall, 74 NY2d, at 106). Indeed, once a property owner decides to rent to tenants, the antidiscrimination laws eliminate an owner’s unfettered discretion in rejecting tenants (see, Yee, 503 US, at —, 112 S Ct, at 1530; see also, Atlanta Motel v United States, 379 US 241 ; Manheim, Tenant Eviction Protection and the Takings Clause, 1989 Wis L Rev 925 , 997-998).

Because the challenged regulations may require the owner-lessor to accept a new occupant but not a new use of its rent-regulated property, we conclude that appellants have failed to establish their claim that, facially, a permanent physical occupation of appellants’ property has been effected.

B. Regulatory Taking

As an alternative facial challenge, appellants urge that the regulations effect an impermissible regulatory taking, which occurs when governmental action forces some people alone to bear burdens that, in fairness, ought to be borne by society at large (see, Seawall, 74 NY2d, at 107). Regulation of private property constitutes an unconstitutional taking if it denies an owner economically viable use of the property (a per se regulatory taking), or if it does not substantially advance legitimate State interests (Seawall, 74 NY2d, at 107; Lucas, 505 US, at —, 112 S Ct, at 2893; Nollan v California Coastal Comma., 483 US 825 , 834).

Appellants claim, first, that the new regulations deprive them of both the benefit of rental increases that occur upon vacancy and the reversionary interest in their property. However, a regulation effects a per se regulatory taking only in the relatively rare situation where "the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave [the] property economically idle” (Lucas, 505 US, at —, 112 S Ct, at 2895). Here, the regulations do not affect the owner’s right to receive the regulated rents, unchallenged as a reasonable return. Moreover, because the tenancies are not perpetual (as discussed above), the owners are not deprived of their reversionary interest (compare, 520 E. 81st St. Assocs. v Lenox

V.

Appellants’ miscellaneous points are without merit. DHCR has complied with the State Administrative Procedure Act: appellants do not dispute that DHCR filed the proposed regulations with the Secretary of State, submitted a notice of adoption for publication in the State Register, issued appropriate regulatory impact statements and other analyses and held a public hearing (see, State Administrative Procedure Act §§202, 202-a). Nor do we agree that the regulations are impermissibly vague. The factors to be considered in determining the existence of a qualifying relationship are objective, detailed and specific, and provide ample guidance in identifying the commencement of the relationship despite the absence of a marriage certificate or other legal document. Appellants’ remaining contentions are without merit.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

(concurring). Chief Judge Kaye’s opinion of the Court cogently distinguishes respondents’ regulations, challenged on this record, from the respective constitutional limitations on governmental actions found to have been violated in Boreali v Axelrod ( 71 NY2d 1 ) and Seawall Assocs. v City of New York ( 74 NY2d 92 , cert denied 493 US 976 ). I therefore concur and join fully in her opinion. Because I perceive significant practical and governance concerns that merit close attention as an outgrowth of this decision, I add these observations.

In the distribution and delegation of governmental powers, it is quite momentous that any administrative agency should possess the potent public policy power to extend the dura

In a similar cautionary frame of thought with respect to ensuing judicial branch responsibilities, I also believe that as-applied controversies under the challenged regulations, in contradistinction to the facial challenge of this case, will be profound (Seawall Assocs. v City of New York, 74 NY2d 92 , supra). Diminution of alienation and value of affected properties, examined under an as-applied microscope, are bound to seriously affect many people, landlords and tenants alike, and the availability of sufficient, appropriate and affordable dwelling places. It would seem that as-applied challenges will inevitably compel courts to examine tenancy sequences in potentially long and somewhat indefinite time lines and relationships. This will be complicated by the substantial administrative, quasi-adjudicative tasks necessarily implicated. It is virtually certain that long, successive successorships to rent-stabilized leaseholds will not be just theoretical possibilities because, markets being markets, they are likely to bloom as perennials, becoming functionally transformed into perpetual stakeholds. The Legislature should satisfy itself, as the courts will have to, that unwarranted de facto results from administrative quasi-judicial determinations do not constitute the functional equivalent of divestitures from landowners of reversionary rights to their properties without just compensation and due process.

Order affirmed, with costs.