Landlords sue over New York City rent control

On the fringes of Manhattan, a two-bedroom apartment sits empty with a price tag of $700 a month. Nearby is an identical unit costing three times as much. The discrepancy is thanks to New York City’s complicated web of rent-control laws.

But the $700 apartment is off the market. It needs more than $100,000 in repairs—appliances, floor leveling, plumbing, light fixtures, countertops, cabinets, and more.

This is one of two vacant units belonging to Pashko Lulgjuraj and his brother, Tony, both ethnically Albanian immigrants from former Yugoslavia who now own six apartment buildings. What was once their dream has become a nightmare of legal battles and financial drain.

As of April 2024, nearly 50,000 NYC apartments were sitting empty—even as tenants complained about short supply and high rents. The problem, many landlords say, is a 2019 rent-control law that prohibits apartments from returning to market-rate rental prices even after tenants vacate.

Now, the Lulgjuraj brothers have joined a lawsuit challenging the rent-control law. They hope to prove that New York’s policy devalues their property and violates the 14th Amendment of the Constitution. While they pursue their case in court, City Mayor Zohran Mamdani is kicking off “Rental Ripoff” events highlighting renters’ concerns and complaints against private landlords like them.

“The folks in City Hall and the state capital are talking about these greedy landlords,” Pashko Lulgjuraj said. “I think many owners these days would be happy to be making zero, breaking even, instead of digging in their pocket and running in the red. And the politicians know this, but they don’t care.”

No place like home—if you can find one

Bringing vacant apartments like Lulgjuraj’s to market wouldn’t solve the city’s shortage of low-income housing, estimated at roughly 550,000 homes. But vacant apartments outnumber the new units added to the NYC market annually and could make a big bump in addressing the shortage.

Under New York law, most apartments aren’t traditionally rent-controlled, meaning that officials don’t numerically cap rent prices. Instead, city policies set up rent stabilization. Each year, the New York City Rent Guidelines Board convenes landlords and tenants to testify on market conditions. Armed with this information and expert statistics, the board sets the allowable percentage increase for rents citywide.

About half of NYC apartments are required to abide by these rates. This includes most apartments built before 1974, new buildings with more than six units, and those constructed with certain tax exemptions.

In 2019, the Housing Stability and Tenant Protection Act (HSTPA) ended a program that allowed stabilized apartments to raise rents upon vacancy. Under the old rules, once a tenant left the unit, landlords could add up to 20% to the baseline rent price. If the rent was already above a certain threshold, they could deregulate it altogether. With HSTPA, those financial relief valves were eliminated.

The result was that existing price discrepancies between apartments with high and low turnover rates became even worse. New renters who were lucky enough to find a unit occupied by a single, long-term tenant snagged locked-in rates that would be a bargain almost anywhere in the United States. Meanwhile, units right next door that had multiple tenants over the years could rent for thousands more per month.

The new rules weren’t such a bargain for landlords, who sometimes had to deal with major maintenance issues after long-term tenants vacated—and now would have a harder time recouping those costs.

“The rent laws of 2019 made it much more difficult to actually make a decent living, or even pay the bills, for that matter,” Lulgjuraj said. “Many people who have been in this business for generations, owning thousands and thousands of units, are throwing their hands into the air and just handing the keys to the lenders.”

Hope in a newsletter

About a year ago, Lulgjuraj and his brother heard of a lawsuit challenging HSTPA in an email from fellow Albanian American landlords. Institute for Justice, a civil rights law firm, is spearheading the lawsuit. For months, the Lulgjuraj brothers spoke to lawyers over the phone, building their case alongside other landlords and the nonprofit Small Property Owners of New York.

The suit does not challenge New York’s entire rent-control system, but instead narrowly focuses on the rule against raising rents after vacancy. The plaintiffs argue that New York City’s rent stabilization policies violate the 14th Amendment’s due process and equal protection clauses by making arbitrary regulations dependent on how long a tenant has lived in an apartment or what year the building was constructed.

The plaintiffs also claim the policies go against Supreme Court precedent in Lucas v. South Carolina Coastal Council, when justices interpreted the Fifth Amendment’s protection against government taking of private property to include when governmental regulation renders it valueless. Institute for Justice lawyers say the same precedent applies when landlords like Lulgjuraj and his brother can’t afford to rent out their apartments as a direct result of state laws.

The city hasn’t formally responded to the suit yet, but its lawyers said they intend to file a motion to dismiss the case, according to an Institute for Justice lawyer. This would start a back-and-forth of letters and arguments over whether the Institute for Justice has legal standing to challenge the law. A judge would then determine whether to toss the case, hear only certain arguments, or begin the process of evidence discovery.

If the judge greenlights the case, it will still likely be at least a year before the Lulgjuraj brothers appear in court. The lawsuit could drag on for years beyond that—especially if New York wins the first round.

“There have been other cases like this that have gone up on appeal, and a couple that the Supreme Court has at least shown some interest in in the last few years,” Institute for Justice lawyer McCarley Maddock said. “We like our chances. We think we brought really good claims.”

Rental ripoffs

The biggest landlord in New York is the city itself, which owns more than 170,000 apartments in 2,500 buildings. As of November, these apartments had over 600,000 open work orders. It would take more than $78 billion to complete necessary repairs on all the city-owned apartments, according to a report from the New York City public advocate.

Lulgjuraj and his brother are eligible for some cost recovery on their units. But that’s capped at $50,000 per apartment through rent increases over time—adding up to just 10% of the money the city wants to repair its own units.

Most New York City Housing Authority funding, about 70%, comes from the federal government. Twenty percent comes through tenant rents, and a tiny 5% comes from the city itself, according to the New York City Independent Budget Office.

On Thursday, Mayor Mamdani held the first of his so-called “Rental Ripoff” hearings, where New York tenants were given an open mic to air their landlord horror stories. Notably missing from the invitation—the city’s own public housing tenants.

Ahead of the meeting, Lulgjuraj said he didn’t plan to attend.

“There’s no reason for a building owner or a landlord to show up to these things,” he said, calling it a publicity stunt to demonize building owners. “I wouldn’t be welcomed, and I’d be seriously outnumbered.”

No plan B

Meanwhile, Lulgjuraj still has to pay the utility bill for the apartment that’s sitting empty.

“If I shut off the gas service … there’s a process to turn it back on from the local utility, and they have to run certain tests,” Lulgjuraj said. “And I would guess that because these buildings are old, it’s not going to pass these tests. So you’re looking at [up to] $30,000 to turn it back on.”

That unit has been vacant for seven years. Assuming zero property taxes and no state assistance, it would take Lulgjuraj and his brother roughly 12 years just to make back the money they’d have to spend to put it on the market—let alone to turn a profit.

“You can’t put 2 pounds of salami in a 1-pound bag,” Lulgjuraj said. If he’d known how bad things would get, he said, he and his brother would have already left the New York housing market. But now, at 64 years old, he can’t imagine starting over.

“There is no plan B, and we have no choice,” Lulgjuraj said. “We’re stuck here. There’s nowhere for us to go.”