New York City is heading toward a major legal showdown targeting the state’s long-standing rent-stabilization laws. This lawsuit—centered on a small number of seemingly vacant apartments—is strategically designed to draw the attention of the U.S. Supreme Court, potentially leading to a historic ruling that could reshape property rights and rental markets nationwide. The attorneys behind the lawsuit believe it represents a clear opportunity for the Court to revisit the constitutional boundaries of government intervention in private rental property, an area of law that has gone largely unchallenged for decades.
At the heart of the dispute are New York’s rent-stabilization regulations, specifically those that cap rent increases on vacant units, even when those units require extensive repairs. A group known as “Small Property Owners of New York,” along with three individual building owners, filed a federal lawsuit arguing that these limitations amount to an unconstitutional “taking” of their property. They contend that by restricting their ability to recover the high costs of major renovations, the state is effectively forcing them to provide below-market housing without fair compensation.
Landlords Say Renovation Caps Make Units Impossible to Restore
One major example highlighted in the lawsuit involves brothers Tony and Bashko Lulgjuraj, who own a residential building in Hudson Heights. They describe a two-bedroom unit that has remained vacant for six years since a long-term tenant moved out. The apartment urgently needs a full overhaul—structural repairs, plumbing and electrical work, and lead removal—at an estimated cost of around $100,000. Yet under current rent-stabilization rules, the allowed rent increase after such substantial improvements would be only about $347 per month, on a unit whose current rent is roughly $700.
The brothers emphasize the financial impossibility of this situation, noting that a comparable, well-maintained apartment in their building rents for $2,595 monthly. They openly admit that they “lose less money by leaving it vacant,” an outcome they say the current regulations perversely incentivize.
Recent legislative adjustments in New York have attempted to address the issue. The state’s 2019 law capped the amount landlords could recoup from renovation expenses at $15,000 over 15 years through limited rent increases. This cap was moderately expanded in 2022, raising the recoverable amount to $30,000—or up to $50,000 in certain cases. Despite these changes, property owners like the Lulgjuraj brothers argue that the current programs and restrictions are still insufficient to justify major investments needed to restore severely deteriorated units.
The lawsuit strategically cites data from New York City’s 2023 Housing and Vacancy Survey, which identified 26,310 rent-stabilized apartments as “vacant but unavailable for rent.” Although the suit does not specify how many of these vacancies stem directly from high repair costs, the detailed accounts provided by the Lulgjuraj brothers and other property owners paint a clear picture of the negative financial incentives at play.
Attorneys from the libertarian nonprofit Institute for Justice openly acknowledge that they crafted the complaint with a specific target in mind: Supreme Court Justice Clarence Thomas. They point to Thomas’s prior written remarks after the Court declined to hear an earlier rent-regulation case (74 Pinehurst).
Lawsuit Aims Directly at Justice Thomas as Rent Laws Face Supreme Court Test
In that instance, Justice Thomas noted that “the constitutionality of schemes like New York City’s is an important and pressing question,” suggesting that future challenges should provide more specific details about landlord circumstances and financial harms. The Institute for Justice believes this new lawsuit—with its extensive documentation—directly responds to that signal, and they hope it will lead to a ruling that could make “tens of thousands of additional units available on the market almost immediately.”
Legal scholars who reviewed the complaint suggest that its most compelling argument centers on the concept of an unconstitutional “taking.” This theory asserts that if the state effectively requires landlords to provide below-market housing for public benefit, it must compensate them fairly—similar to how a homeowner must be compensated when their property is seized for public use through eminent domain. The lawsuit seeks not only to overturn vacancy-related rent caps but also to secure monetary compensation for landlords if the restrictions are deemed unlawful takings.
City Hall has not yet issued an official response. However, a spokesperson said via email that “for more than 50 years, rent-stabilization laws have kept rents affordable for millions of New York families, and state and federal courts have upheld these laws repeatedly, including last year.” This underscores the city’s commitment to defending the current framework.
Legal scholars are watching the case closely. Roderick Hills, a law professor, predicts that while the Court may hesitate to dive into the granular details of individual renovation costs, there is a growing sense—even among some liberal commentators—that “rent control is not a great way to solve the housing problem.” This shift in perception may appeal to the Court’s conservative majority. Hills notes that striking down specific aspects of rent regulation, such as the 2019 vacancy-related limits, could attract the Court’s interest by avoiding the cultural and political flashpoints seen in other high-profile cases. Meanwhile, tenant-rights attorney Leah Goodridge—who previously served on the city’s Rent Guidelines Board—recalls initially dismissing such lawsuits but now sees a genuine possibility of Supreme Court intervention, remarking: “And here we are. Here we are.”