Court Opinion

ID: 9368646
Source: CourtListenerOpinion
Date Created: 2023-02-06 16:00:21.68449+00
Date Added: 2024-06-11T17:16:09.604672
License: Public Domain

20-3366
Community Housing Improvement Program v. City of New York

                                             In the
                    United States Court of Appeals
                                For the Second Circuit

                                       August Term 2021

                                         No. 20-3366-cv

         COMMUNITY HOUSING IMPROVEMENT PROGRAM; RENT
    STABILIZATION ASSOCIATION OF N.Y.C., INC.; CONSTANCE NUGENT-
    MILLER; MYACK ASSOCIATES, LLC; VERMYCK LLC; M&G MYACK LLC;
     CINDY REALTY LLC; DANIELLE REALTY LLC; FOREST REALTY, LLC,

                                                            Plaintiffs-Appellants,

    NEW YORK TENANTS AND NEIGHBORS; COMMUNITY VOICES HEARD;
                  COALITION FOR THE HOMELESS,

                                                                   Intervenors,

                                                 v.

      CITY OF NEW YORK; RENT GUIDELINES BOARD, DAVID REISS, ARPIT
     GUPTA, ALEX SCHWARZ, CHRISTIAN GONZALEZ-RIVERA, CHRISTINA
    DEROSE, ROBERT EHRLICH, CHRISTINA SMYTH, SHEILA GARCIA, ADÁN
                              SOLTREN, *

                                                            Defendants-Appellees.

*Several new members have been added to the Rent Guidelines Board since this case was
filed and have thus been automatically substituted for the former members as the
defendants in this case pursuant to Fed. R. App. P. 43(c)(2).
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Community Housing Improvement Program v. City of New York

                   Appeal from the United States District Court
                        for the Eastern District of New York
         No. 19 Civ. 4087 (ERK), Eric R. Komitee, District Judge, Presiding.
              (Argued February 16, 2022; Decided February 6, 2023)

       Before:         CALABRESI, PARKER, and CARNEY, Circuit Judges.

       Plaintiffs-Appellants, individuals who own apartment buildings in New
       York City subject to the relevant Rent Stabilization Law (RSL), appeal from
       a judgment of the United States District Court for the Eastern District of
       New York (Komitee, J.). The court dismissed the complaint pursuant to Rule
       12(b)(6). Plaintiffs-Appellants alleged that the RSL, as amended in 2019,
       effected, facially, an unconstitutional physical and regulatory taking. The
       District Court held that Plaintiffs-Appellants failed to state claims for
       violations of the Takings Clause. We AFFIRM.

                                       ANDREW J. PINCUS (Timothy Bishop (Chicago),
                                       Reginald R. Goeke (Washington D.C.), Robert
                                       William Hamburg (New York City), on the brief),
                                       Mayer Brown LLP, for Plaintiffs-Appellants.

                                       ESTER MURDUKHAYEVA, Deputy Solicitor General
                                       for the State of New York, Letitia James, Attorney
                                       General for the State of New York, Barbara D.
                                       Underwood, Solicitor General, Steven C. Wu,
                                       Deputy Solicitor General, Caroline A. Olsen,
                                       Assistant Solicitor General, Of Counsel, New York,
                                       N.Y., for Defendant-Appellee RuthAnne Visnauskas,

                                       CLAUDE S. PLATTON, Assistant Corporation Counsel
                                       for the City of New York, James E. Johnson,
                                       Corporation Counsel for the City of New York,
                                       Richard Dearing, Jesse A. Townsend, Of Counsel,

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                                       New York, N.Y., for Defendants-Appellees City of
                                       New York, Rent Guidelines Board, David Reiss, Arpit
                                       Gupta, Alex Schwarz, Christian Gonzalez-Rivera,
                                       Christina DeRose, Robert Ehrlich, Christina Smyth, ,
                                       Sheila Garcia, Adán Soltren, RuthAnne Visnauskas,

                                       CAITLIN J. HALLIGAN (Sean P. Baldwin, Michael
                                       Duke, Babak Ghafarzade, Sophie Lipman, on the
                                       brief, Selendy & Gay PLLC), for Intervenors.

BARRINGTON D. PARKER, Circuit Judge:

       The New York City Rent Stabilization Law (“RSL”) was first enacted in 1969

as part of a decades-long legislative effort to address the myriad problems

resulting from a chronic shortage of affordable housing in the City. The RSL is

designed to prevent excessive rent levels and to ensure that property owners can

earn a reasonable return by, among other things, capping rent increases and

limiting the legal grounds for evictions. Over time, however, the Legislature has

amended the law in response to changing political and economic conditions.

Sometimes the statute has provided stronger protections for tenants and at other

times for property owners. The RSL was most recently amended by the Housing

Stability and Tenant Protection Act of 2019 (“HSTPA”). The constitutionality of

this amendment and of the RSL as amended are the subject of this appeal.

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       The Appellants (the “Landlords”) are individual property owners and not-

for-profit trade associations whose members include managing agents and

property owners of both rent-stabilized and non-rent-stabilized properties. They

sued to invalidate the RSL and the HSTPA on the grounds that their provisions

are unconstitutional because they, facially, effect a physical as well as a regulatory

taking in violation of the Fifth Amendment. The Landlords further claim that the

RSL and New York City’s 2018 emergency declaration triggering rent stabilization

are irrational in violation of the Substantive Due Process Clause of the Fourteenth

Amendment. The United States District Court for the Eastern District of New York

(Komitee, J.) held that the RSL was constitutional and dismissed the Complaint.

See FED. R. CIV. P. 12(b)(6). This appeal followed.

                                       BACKGROUND

       In an entirely unregulated market, rent levels are governed solely by the law

of supply and demand. 1 See Brief for Nat’l Ass’n of Realtors as Amicus Curiae at 19.

Such a market, however, can be unforgiving. It has little regard for the

consequences it produces, whether they are inadequate returns on investment,

1The history of rent stabilization discussed here constitutes a matter of public record of
which we are entitled to take judicial notice. See Caha v. United States, 152 U.S. 211, 222,
(1894). Since this history is not part of the underlying Complaint, it does not form the
basis of our Fed. R. 12(b)(6) analysis.
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Community Housing Improvement Program v. City of New York

exorbitant rents, housing shortages, deteriorating housing stock, or homelessness.

To address these problems, the City, State, and federal governments have, over

the past century, regulated the New York City rental market.

       The City’s first rent regulations were passed in response to severe housing

shortages around the time of World War I. 2 The war caused new construction to

fall and rents to soar. 3 In response, renters organized rent strikes, and escalating

confrontations between landlords and tenants ensued. 4 Ultimately, the State

Legislature stepped in and passed the City’s first rent control program in 1920,

which capped rent increases and prevented evictions without cause. 5 The regime,

which expired after ten years, was the subject of ongoing litigation. 6 The housing

2 Robert M. Fogelson, The Great Rent Wars: New York, 1917–1929 18 (2013).
3 Robert W. De Forest & Lawrence Veiller, The Tenement House Problem 369 (1903);
“Workmen Need Homes,” New York Times, June 9, 1918 at R92.
4 See e.g., Woman Accused of Calling Tenants in Apartment ‘Scabs,’” New York Times, July

18, 1919 at 6; “20,000 Organize for Rent Strike,” New York Times, April 24, 1920 at 1; “The
Threatened Rent Strike,” New York Times, April 28, 1920 at 10; “4,500 Bronx Tenants Go
on Rent ‘Strike,’” New York Times, Dec. 3, 1920 at 2.
5 See e.g., “Mayor Supports Rent Control Bill,” New York Times, Mar. 11, 1920 at 17; “1,800

Go To Albany for Rent Fight,” New York Times, Mar. 23, 1920 at 3; “Rent Laws in Practice,”
New York Times, April 9, 1920 at 12.
6 See, e.g., “Testing the Rent Laws,” New York Times, Oct. 21, 1920 at 11.

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Community Housing Improvement Program v. City of New York

problems responsible for the legislation and the litigation abated somewhat as a

consequence of a resurgence of housing construction in the mid-1920s. 7

       The next regime of rent control was enacted by the federal government. In

1942, President Franklin D. Roosevelt signed into law the Emergency Price Control

Act (EPCA). 8 The EPCA was passed in response to inflationary pressures brought

about in part by World War II and created a nationwide system of price controls.

The law froze New York City rents at 1943 levels for several years until Congress

allowed it to expire, replacing it with the Federal Housing and Rent Act of 1947.9

Under that statute, buildings constructed after February 1, 1947, were exempted

from controls while older buildings remained covered.

       A few years later, Congress passed the 1949 Federal Housing Act, which

permitted States to take control of rent regulation. 10 Then, in 1950, New York

created the Temporary State Housing Rent Commission, which regulated

landlord-tenant relationships—including over 2 million rental units in the City. 11

7  See e.g., “Building Revival Breaking Records,” New York Times, July 16, 1922 at R1.
“Housing Crisis Over, Surplus of Homes, Realty Men Argue,” New York Times, Oct. 18,
1923 at 1; Final Report of the Joint Legislative Committee on Housing, 1923 at Ch. 1-6.
8 See 56 Stat. 23 (repealed 1947).

9 Pub. L. No. 129, 80th Cong., 1st Sess. (June 30, 1946).

10 Pub. L. No. 171, 81st Cong., 1st Sess. (July 15, 1949).

11 Morton J. Schussheim, High Rent Housing and Rent Control in New York City (Apr.

1958).
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Those regulations touched upon, among other things, rent levels and legal

grounds for evictions.

       The City’s modern regime of rent regulations was introduced in 1969 by the

RSL. The RSL established the Rent Guidelines Board (“RGB”)—an official body

whose members represent the interests of landlords, tenants, and the public—

which was charged with setting the amounts by which rents could be increased. 12

In carrying out this function, the RGB was obligated to consider the economic

condition of the housing market, certain costs for which landlords were

responsible, the returns generated to landlords, the housing supply, and increases

to the cost of living. 13

       The RSL has been amended several times. In 1971, for example, the State

passed the Emergency Tenant Protection Act (“ETPA”), which permits the City to

renew the protections of the RSL when it declares a “housing emergency” based

upon a set of statutory criteria. N.Y. Unconsol. Law tit. 23 8623.a (McKinney).

Later, in the 1980s, tenants’ protections were extended to their successors. 14 In

12 23 N.Y. Unconsol. Laws § 26-510(a).
13 23 N.Y. Unconsol. Laws § 26-510(b).
14 9 NYCRR 2520.6 (1987).

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1993, the law was again amended to permit the deregulation of apartments that

either housed high-income tenants or became vacant. 15

          Recently, the RSL was amended by the HSTPA, 16 which was passed in

“response to an ongoing housing shortage crisis, as evidenced by an extremely

low vacancy rate” that caused tenants to “struggle to secure safe, affordable

housing” and municipalities to “struggle to protect their regulated housing stock.”

Sponsor’s Mem., 2019 N.Y. Laws ch. 36. The HSTPA limited landlords’ capacity to

charge excess rent attributed to major capital improvements and individual

apartment improvements. See 2019 N.Y. Laws ch. 36, Part K. The law repealed

vacancy decontrol and high-income decontrol, which had removed units from

regulation when the rent or tenant’s income reached a specified level. The law also

repealed certain vacancy and longevity increases, which had permitted landlords

to raise rents above the otherwise allowable amounts if a unit became vacant or if

a tenant had remained in place for an extended period. See id., Parts B & D. In

addition, the law limits landlords to recovering one rent-stabilized unit per

building for personal use upon a showing of necessity, with additional restrictions

15   See generally Roberts v. Tishman Speyer Props., 13 N.Y.3d 270, 279 (2009).
16   2019 N.Y. Laws ch. 36, available at https://perma.cc/TH4B5WNQ.
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Community Housing Improvement Program v. City of New York

when the affected tenant is a senior citizen or disabled. See id., Part I. These

amendments are the main subject of this appeal.

       This regulatory regime has all along been the subject of sharp

disagreements: landlords believed that their investment returns were too low and

that they retained too little control over their properties while tenants believed that

their rents were too high. Landlords in particular have consistently contended the

regulations impeded their ability collect sufficient rents to fund required

maintenance and improvements and to generate reasonable investment returns.

Landlords have consistently contended that the RSL has failed to achieve its stated

goal of increasing the availability of housing to low- and moderate-income

residents. 17

       The Appellees, on the other hand, contend that the RSL did not go far

enough to enable people of modest incomes to live in the City.18 They further

contend that in enacting the RSL, New York’s elected representatives were well

aware of the role that rent stabilized housing played in increasing the supply of

apartments for low- and moderate-income residents and reducing community

17 See, e.g., Brief for Nat’l Apt. Ass’n and Nat’l Multifamily Hous. Council as Amicus Curiae
23.
18 See, e.g., Brief for Nat’l Hous. Law Project et al. as Amicus Curiae 12.

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Community Housing Improvement Program v. City of New York

disruption resulting from frequent turnover, tenant dislocation, and eviction.

These RSL protections, they argue, enable families to establish long-term homes

and, in turn, allow neighborhoods to flourish. 19

       The City contends that the vast majority of those who benefit from rent

stabilization are low- and middle-income people. In 2016, the median income for

rent stabilized households was $44,560, one third lower than the median income

for private, non-regulated households. 20 Of the city’s 946,000 rent stabilized

apartments, 189,000 units (20%) were occupied by families living below the

poverty line. And more than 600,000 units (64%) were occupied by families who

qualify under HUD classifications as low-income, very low-income, or extremely

low-income. Eliminating rent stabilization, the Appellees contend, would

undoubtedly result in a surge of homelessness. It would also result in a dynamic

whereby large swaths of essential workers who help maintain our vibrant City,

19 The Appellees argue that “[i]f the rent-regulated housing stock in New York continues
to diminish, the homeless population will grow to unimagined levels . . . [and the]
elimination of the rent laws would lead to a wave of evictions and homelessness unseen
in New York since the Great Depression.” Testimony of The Coalition for the Homeless
before the NY State Assembly Committee on Housing, January 2011, available at
https://www.coalitionforthehomeless.org/wp-
content/uploads/2014/07/TestimonyRentRegulationJan202011.pdf.
20 N.Y.C. Dep’t of Hous. Pres. & Dev., Sociodemographics of Rent Stabilized Tenants 4

(2018), available at
https://www1.nyc.gov/assets/hpd/downloads/pdfs/services/rent-regulation-memo-
1.pdf
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Community Housing Improvement Program v. City of New York

including police officers, teachers, healthcare workers, and emergency service

personnel, would be unable to afford to live here.21 See generally Brief of District

Council 37 as Amicus Curiae. Who has the better of these arguments is not an issue

on this appeal.

       Throughout its life, this regulatory regime has been the subject of continual

attention in the State and City Legislatures. This is hardly surprising. Striking an

appropriate balance between the sharply diverging interests of landlords and

tenants involves negotiation and compromise over a very long list of complicated

and difficult questions. Resolving such questions is a quintessential function of a

legislature. At the end of the day, it is highly probable—indeed, virtually certain—

that no interested party will be entirely satisfied by what the legislature does.

       Rent regulation in the City has also been the subject of decades of litigation.

Property owners have challenged New York rent control and stabilization

regulations on a host of grounds, contending that it violates the Takings Clause,

21The City also argues that while sudden rent increases of any size can be difficult to
absorb for tenants across income levels, even a minimal increase can be catastrophic for
low-income tenants. In recent years, approximately 175,000 households in rent stabilized
housing were unable to afford even a $25 increase in their monthly rent. The State and
City Legislatures determined that the RSL helps guard against the dislocation of
hundreds of thousands of New Yorkers. See Oksana Mironova, Testimony: NYC Needs a
Rent     Freeze,   Cmty.      Serv.    Soc’y    (May     5,   2020),     available     at
https://www.cssny.org/news/entry/testimony-nyc-rgb-rent-freeze.
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the Contracts Clause, the Equal Protection Clause, and the Due Process Clause. See

Harmon v. Markus, 412 F. App’x 420 (2d Cir. 2011); W. 95 Hous. Corp v. N.Y.C. Dep’t

of Hous. Pres. & Dev., 31 F. App’x 19 (2d Cir. 2002); Fed. Home Loan Mortg. Corp. v.

New York State Div. of Hous. & Cmty. Renewal, 83 F.3d 45 (2d Cir. 1996); Rent

Stabilization Ass’n of City of New York v. Dinkins, 5 F.3d 591 (2d Cir. 1993); Greystone

Hotel Co. v. City of New York, 13 F. Supp. 2d 524 (S.D.N.Y. 1998); Silberman v.

Biderman, 735 F. Supp. 1138 (E.D.N.Y. 1990); Tonwal Realties, Inc. v. Beame, 406 F.

Supp. 363 (S.D.N.Y. 1976); Somerset-Wilshire Apts., Inc. v. Lindsay, 304 F.Supp. 273

(S.D.N.Y. 1969); Rent Stabilization Ass’n of New York City, Inc. v. Higgins, 83 N.Y.2d

156 (1993); Teeval Co. v. Stern, 301 N.Y. 34 (1950). Each of these challenges failed.

                                     PROCEDURAL HISTORY

       After the passage of the HSTPA, the Landlords sued the Appellees in the

United States District Court for the Eastern District of New York. They alleged that

the newly amended RSL effected, facially, a physical as well as a regulatory taking

and that it violated the Fourteenth Amendment’s Due Process Clause. While the

Landlords initially raised facial and as-applied claims, the latter were abandoned.

Therefore, the only claims that remain are facial challenges. A companion case, 74

Pinehurst LLC v. New York, addresses as-applied claims brought by other landlords.

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An opinion deciding that case also issues today. The defendants moved under

Rule 12(b)(6) to dismiss the Complaint, and Judge Komitee granted the motion in

a thorough and well-reasoned opinion. The court held that a physical taking

occurs when there is a deprivation of the “entire bundle of property rights” in the

property interest in question. That bundle includes the “rights to possess, use and

dispose of [the property].” Community Housing Improvement Program v. City of New

York, 492 F. Supp. 3d 33, 43 (E.D.N.Y. 2020). The court reasoned that because the

RSL restricts only the plaintiffs’ right to use the property—but not to possess or

dispose of it—the claims failed to make out a physical taking.

       The court next turned to the substantial difficulties associated with facial

regulatory takings challenges. It observed that the Landlords were unable to

identify a case where a facial challenge to rent-control-related legislation had

succeeded. The court acknowledged the possibility that the RSL could effect an as-

applied regulatory taking, but noted that “it is unlikely that [it] will be identified

in the context of a facial challenge.” Id. at 45.

       Next, applying factors set forth in Penn Central Transp. Co. v. City of New

York, 438 U.S. 104, 124 (1978)—economic impact, interference with investment-

backed expectations, and character of the governmental action—the court

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Community Housing Improvement Program v. City of New York

dismissed the facial regulatory takings claim. It reasoned that the Landlords had

not demonstrated that the RSL was unconstitutional in all of its applications. This

appeal followed. We review de novo the district court’s dismissal for failure to state

a claim under Fed. R. Civ. P. 12(b)(6).

                                         DISCUSSION

                                                  I

                                                 A

       The Landlords have leveled a facial challenge to the RSL. To prevail on a

facial challenge, the plaintiff must “establish that no set of circumstances exists

under which the [challenged] Act would be valid.” United States v. Salerno, 481

U.S. 739, 745 (1987). In other words, the plaintiff must show that the statute “is

unconstitutional in all of its applications.” Wash. State Grange v. Wash. State Rep.

Party, 552 U.S. 442, 449 (2008). Facial challenges to the RSL have regularly fallen

short of this high bar. See, e.g., Rent Stabilization Ass’n v. Dinkins, 5 F.3d at 595; W.

95 Hous. Corp., 31 F. App’x at 21. The Landlords suggest, however, that this is no

longer the correct standard to apply to the facial challenges they bring. They

contend that, instead of applying Salerno’s well-established standard, this Court

should utilize one of two more lenient approaches to striking down statutes on a

facial challenge. We disagree.
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       They first argue that because “‘[t]he proper focus of the constitutional

inquiry is the group for whom the law is a restriction, not the group for whom the

law is irrelevant,’” the facial challenge should focus on the law’s effect on only

those landlords who wish not to comply with its strictures. Appellants’ Br. at 35

(quoting City of Los Angeles v. Patel, 576 U.S. 409, 418 (2015)). A close reading of

Patel makes clear that, when the Supreme Court referenced “the group for whom

the law is a restriction,” it meant those to whom the law actually applies, not those

for whom it has no plausible application—that is, those for whom the law is

“irrelevant.” Patel, 576 U.S. at 419.

       In Patel, the Supreme Court considered a facial challenge to a statute

authorizing certain warrantless searches. Id. at 417. In response to the challenge,

the City cited situations in which a warrant was not required under already

established law: that is, “situations where police are responding to an emergency,

where the subject of the search consents to the intrusion, and where police are

acting under a court-ordered warrant.” Id. at 417–18. It argued that those situations

showed that a warrantless search was permissible in some circumstances, and so

the   new      law    permitting       certain    warrantless   searches   could   not   be

“unconstitutional in all of its applications,” as Salerno required. Id. The Court

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rejected this argument, reasoning that when faced with exigent circumstances or

a court-ordered warrant, “the subject of the search must permit it to proceed

irrespective of whether it is authorized by statute.” Id. at 418–19. The Court

distinguished the City’s examples as “irrelevant to our analysis because they do

not involve actual applications of the statute.” Id. at 419. Thus, by defining the

focus of a facial challenge as resting on its effect on those “for whom the law is a

restriction,” the Supreme Court merely clarified that facial challenges to a statute

must establish its unconstitutionality in all “applications of the statute in which it

actually authorizes or prohibits conduct.” Id. at 418 (emphasis added). The Court’s

decision in Patel, therefore, only clarified the scope of Salerno’s standard for facial

challenges. It did not reject or relax the Salerno standard.

       As a separate basis for avoiding the rigors of Salerno, the Landlords rely on

United States v. Stevens, 559 U.S. 460 (2010), arguing that to succeed on their facial

challenge, they need only establish either “‘that no set of circumstances exists

under which [the statute] would be valid, or that the statute lacks any plainly

legitimate sweep.’” Appellants’ Br. at 35 (quoting Stevens, 559 U.S. at 472)

(emphasis in brief). The Landlords contend that, in its use of the phrase “plainly

legitimate sweep,” the Stevens Court held that a facial challenge in any legal

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domain can succeed by meeting either one of these two standards. Again, we are

not persuaded.

       In Stevens, a criminal defendant challenged the statute of his conviction—

criminalizing the creation, sale, or possession of depictions of animal cruelty—as

facially invalid under the First Amendment. 559 U.S. at 464–65, 467. But in

assessing the challenge, the Supreme Court stated that the choice between the two

standards under discussion (valid in “no set of circumstances” or “lacking any

plainly legitimate sweep”) was “a matter of dispute that we need not and do not

address.” Id. at 472. Thus, it did no more than recognize that “[i]n the First

Amendment context,” it has determined that “a law may be invalidated as

overbroad if ‘a substantial number of its applications are unconstitutional, judged

in relation to the statute’s plainly legitimate sweep.’” Id. at 472 (quoting Wash. State

Grange, 552 U.S. at 449 n.6).

       We understand Stevens, then, not as rejecting Salerno’s demanding

standards for facial challenges generally, but as reinforcing the principles that (i)

Salerno provides the prevailing standard for facial challenges to statutes outside

the context of the First Amendment, and (ii) a different, more challenge-friendly

standard has developed in the context of statutes affecting First Amendment

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rights. Neither Stevens nor any other case the Landlords cite has applied this

relaxed standard outside of the First Amendment context, nor supports its

extension beyond that setting. Indeed, in observing that “[f]acial challenges are

disfavored for several reasons,” the Supreme Court reminded us that “facial

challenges threaten to short circuit the democratic process by preventing laws

embodying the will of the people from being implemented in a manner consistent

with the Constitution.” Wash. State Grange, 552 U.S. at 451. Especially where, as

here in the rent stabilization context, the regulatory regime at issue has both

persisted and been adjusted over time, reflecting finely tuned, legislative

judgments, we must exercise caution in entertaining facial challenges. Neither

Patel nor Stevens, thus, lower the high bar the Landlords must satisfy to assert a

facial challenge.

                                                 B

       The Takings Clause of the Fifth Amendment provides that “private

property [shall not] be taken for public use, without just compensation.” U.S.

Const. amends. V, XIV, § 1. That requirement applies to all physical appropriations

of property by the government. See Horne v. Dep’t of Agriculture, 576 U.S. 350, 360

(2015). When the government effects a physical appropriation of private property

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for itself or another—whether by law, regulation, or another means—a per se

physical taking has occurred. Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2071

(2021). Examples of physical takings include using eminent domain to condemn

property, see United States v. General Motors Corp., 323 U.S. 373, 374–75 (1945);

taking possession of property without taking title to it, see United States v. Pewee

Coal Co., 341 U.S. 114, 115–17 (1951); and occupying property by, for example,

building a dam that causes recurring flooding, see United States v. Cress, 243 U.S.

316, 327–28 (1917).

       The Supreme Court has, over the years, considered various Takings Clause

challenges to government actions. See e.g., Griggs v. Allegheny Cnty., Pa., 369 U.S.

84 (1962); Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987); Arkansas Game &

Fish Comm’n v. United States, 568 U.S. 23 (2012). In Loretto v. Teleprompter Manhattan

CATV Corp., 458 U.S. 419 (1982), the Supreme Court considered a statute requiring

landlords to permit cable companies to install equipment on the landlords’

properties. The Court held that such a mandatory invasion amounted to a

permanent physical occupation by a third party—the cable companies—of the

landlords’ properties and was therefore a per se physical taking. In addition, the

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Court concluded that such a physical occupation deprived landlords of the entire

“bundle of rights” associated with owning property. Id. at 435.

        A decade later, in Yee v. City of Escondido, 503 U.S. 519 (1992), the Court

declined to apply to this logic to rent-control laws and rejected a Takings Clause

challenge. Yee involved a mobile-home rent control ordinance that set rent at

below-market rates. The Court held that the ordinance—even considered in

conjunction with other state laws effectively permitting tenants to remain at will—

was not a physical taking. It reasoned that the statutes did not facially require

landlords to rent their properties in perpetuity because evictions were permitted

in some conditions, id. at 528, and because the “tenants were invited by petitioners,

not forced upon them by the government,” id. The Court further noted that States

have wide latitude to regulate the landlord-tenant relationship, such as by placing

“ceilings on the rents the landowner can charge or requiring the landowner to

accept tenants he does not like.” Id. at 529 (cleaned up).

       In Horne, in contrast, the Court found that a physical taking had occurred.

In that case the Court considered a challenge to a Department of Agriculture

marketing order requiring raisin growers to hand over a percentage of their crop

to the government. 576 U.S. at 350. The Court held that the statute effected a

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physical taking because raisins are physically transferred from the growers to the

government and title is passed, thereby depriving owners of the entire bundle of

rights to their property. Id. at 361. The Court also held that the government cannot

condition a party’s permission to engage in interstate commerce on complying

with a regulation that effects a physical taking. Id. at 364–67.

       Most recently, in Cedar Point the Court evaluated a regulation granting labor

organizations the “right to take access” to an agricultural employer’s property for

up to 120 days a year to solicit support for unionization. 141 S. Ct. at 2069. The

Court held that because the regulation granted a right to invade the grower’s

property it amounted to a per se physical taking. Id. at 2072. Cedar Point, however,

emphasized that “[l]imitations on how a business generally open to the public may

treat individuals … are readily distinguishable from regulations granting a right

to invade property closed to the public.” Id. at 2076–77.

       Our court has also considered various Takings Clause challenges to

regulations, including some to earlier versions of New York’s RSL. See, e.g.,

Southview Assocs., Ltd. v. Bongartz, 980 F.2d 84, 94–95 (2d Cir. 1992) (finding that

denying a land use permit did not constitute a physical taking); Fed. Home Loan

Mortg. Corp., 83 F.3d at 48 (finding application of rent stabilization laws to a

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previously exempt building did not violate the Takings Clause); Harmon, 412 F.

App’x at 422 (holding City’s rent stabilization law did not effect a permanent

physical occupation of a landlords’ property in violation of Takings Clause).

                                              B

       Applying these principles, we conclude that no provision of the RSL effects,

facially, a physical occupation of the Landlords’ properties. In Cedar Point, the

Court held that the government may effect a physical occupation of property by

granting a third party the right to invade “property closed to the public.” 141 S.

Ct. at 2077. 22 That has not occurred here. Rather, the Landlords voluntarily invited

third parties to use their properties, and as the Court explained in Cedar Point,

regulations concerning such properties are “readily distinguishable” from those

compelling invasions of properties closed to the public. Id. As the Supreme Court

made pellucid in Yee, when, as here, “a landowner decides to rent his land to

tenants” the States “have broad power to regulate housing conditions in general

and the landlord-tenant relationship in particular without paying compensation

22We reject Appellants’ reliance on the Supreme Court’s per curiam opinion in Pakdel v.
City and County of San Francisco, 141 S. Ct. 2226 (2021). There, the district court had ruled
on the merits of physical takings claims prior to the Supreme Court’s ruling in Cedar Point
Nursery, and therefore the Court in remanding the case merely stated that the Ninth
Circuit “may give further consideration to these claims in light of [the] recent decision in
Cedar Point Nursery v. Hassid.” 141 S. Ct. at 2229 n. 1. That directive is of no moment here.
                                                  22
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Community Housing Improvement Program v. City of New York

for all economic injuries that such regulation entails.” 503 U.S. at 528–29; see also

Loretto, 458 U.S. at 440 (“This Court has consistently affirmed that States have

broad power to regulate housing conditions in general and the landlord-tenant

relationship in particular without paying compensation for all economic injuries

that such regulation entails.”); Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398

(1934); Edgar A. Levy Leasing Co. v. Siegel, 258 U.S. 242 (1922). The numerous cases

that affirm the validity of rent control statutes are the necessary result of this long

line of consistent authority. See, e.g., Bowles v. Willingham, 321 U.S. 503 (1944); Block

v. Hirsh, 256 U.S. 135 (1921).

       Nor does the RSL compel the Landlords “to refrain in perpetuity from

terminating a tenancy.” Yee, 503 U.S. at 528. The statute sets forth several grounds

on which a landlord may terminate a lease. These include failing to pay rent,

creating a nuisance, violating provisions of the lease, or using the property for

illegal purposes. 9 NYCRR § 2524.3. It is well settled that limitations on the

termination of a tenancy do not effect a taking so long as there is a possible route

to an eviction. Cf. Yee, 503 U.S. at 528 (concluding that a statute requiring that

evictions be given with 6- or 12-months’ notice is not a compelled physical

invasion in violation of the Takings Clause); Harmon, 412 F. App’x at 422 (finding

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New York’s rental stabilization law at the time did not give rise to a physical taking

partially because the landlords retained the right to “evict an unsatisfactory

tenant”); Higgins, 83 N.Y.2d at 172 (family succession amendments to rent control

and rent stabilization regulations did not effect unconstitutional taking where

owner’s right to evict unsatisfactory tenant was not altered); Elmsford Apartment

Assocs., LLC v. Cuomo, 469 F. Supp. 3d 148, 163 (S.D.N.Y. 2020) (finding that a

temporary halt on evictions did not amount to a physical taking). 23

       All in all, as with previous versions, the RSL “regulates land use rather than

effecting a physical occupation.” W. 95 Hous. Corp., 31 F. App’x at 21. The caselaw

is exceptionally clear that legislatures enjoy broad authority to regulate land use

without running afoul of the Fifth Amendment’s bar on physical takings. See Yee,

503 U.S. at 527.

                                                 C

       The Landlords contend that the RSL effects, facially, a physical taking

because it requires them to offer tenants renewal leases, interferes with their ability

to evict tenants and reclaim units for personal use, and allows tenancies to be

23Because we conclude that the Landlords have not been deprived of their right to
exclude, we agree with the District Court that they have not been deprived of their “entire
bundle of rights” in their properties.
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Community Housing Improvement Program v. City of New York

transferred to successors. These provisions, according to the Landlords, amount to

a permanent physical occupation compelled by the government.

        We disagree. None of these provisions involve unconditional requirements

imposed by the legislature. Landlords, instead, must adhere to these provisions

only when certain conditions are met. Consider, for example, the statute’s

successorship provisions. No tenant enjoys an unfettered right to transfer tenancy

rights to a successor. Instead, the successor must meet a host of requirements, such

as, for example, being a member of the tenant’s family who has already lived in

the apartment for two years. What is more, even assuming arguendo that the

successorship provisions do unconditionally require landlords to rent to uninvited

successors, that would deprive the Landlords only of the ability to decide who their

incoming tenants are. That limitation, as the Supreme Court has recognized, has

“nothing to do with whether [a law or regulation] causes a physical taking.” Id. at

530–31.

       Furthermore, none of the caselaw on which the Landlords rely lends any

appreciable support to their contention that the RSL effects, facially, a physical

taking. The Landlords’ reliance on Loretto, Horne, and Cedar Point, their main

authority, is misplaced for a common reason: None of them concerns a statute that

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Community Housing Improvement Program v. City of New York

regulates the landlord-tenant relationship, and none restricts—much less

upends—the State’s longstanding authority to regulate that relationship. 24

       Moreover, Yee, the only case on which the Landlords rely that does involve

a statute regulating the landlord-tenant relationship, confirms our conclusion. Yee,

as noted, involved a facial challenge to rent control statutes that limited owners’

ability to terminate tenancies where the initial tenant had transferred her rights to

another. 503 U.S. at 523–24. Like the Landlords here, the petitioners argued that

the law effectively forced property owners to rent the property out to these

individuals and prevented owners from changing the use of their property. The

Court upheld the law because it merely limited—but did not bar—an owners’

ability to do both of these things. Id. at 527–28. The same is true here.

                                                      II

       The Landlords also mount a facial regulatory taking challenge to the RSL.

Legislation effects a regulatory taking when it goes “too far” in restricting a

landowner’s ability to use his own property. Horne, 576 U.S. at 360; Yee, 503 U.S. at

24Nor is the Landlords’ position supported by their reliance on Horne for the proposition
that the “voluntary participation in the market [cannot] excuse or absolve the government
of liability for a taking.” Like the District Court, we reject Appellants’ claims not because
we conclude that they have acquiesced in a physical taking, but because “no physical
taking has occurred in the first place.”

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Community Housing Improvement Program v. City of New York

529; Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). In determining

whether a use restriction effects a taking, we apply the balancing test set out in

Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978), a case involving a

challenge to New York City’s historical preservation law, N.Y.C. Admin. Code, ch.

8–A, § 205–1.0 et seq. (1976). 25

       Penn Central instructs courts to engage in a flexible, “ad hoc, factual

inquir[y]” focused on “several factors that have particular significance.” 438 U.S.

at 124. Three of them are: (1) “the economic impact of the regulation on the

claimant,” (2) “the extent to which the regulation has interfered with distinct

investment-backed expectations,” and (3) “the character of the governmental

action.” Id. The Landlords assert that, taken together, these factors support their

characterization of the RSL as a facial regulatory taking. We disagree.

25We are unpersuaded by the Landlords’ argument that the appropriate standard under
which to determine whether a taking has occurred comes from a dissent in Pennell v. City
of San Jose, 485 U.S. 1 (1988). As we have noted, “Justice Scalia’s [Pennell] dissent was just
that; a majority of the Supreme Court has yet to adopt Justice Scalia’s reasoning.” Garelick
v. Sullivan, 987 F.2d 913, 918 (2d Cir. 1993). This dissent, we have pointed out, is “in
tension (if not conflict) with well established Fifth Amendment doctrine granting
government broad power to determine the proper subjects of and purposes for regulatory
schemes.” Id. Accordingly, we decline to employ a test that has never been adopted by
the Supreme Court.
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Community Housing Improvement Program v. City of New York

       As to the economic impact of the regulation, the Landlords contend that the

RSL has a direct and substantial negative economic impact on rent-stabilized

properties in New York City because stabilized rents are on average 25% lower

than market rents and permissible rent increases are outpaced by increases in

operating costs. In short, the Landlords contend that the RSL forces property

owners to choose between making losing investments or letting their properties

deteriorate. They allege that rent-stabilized properties are worth 25% to 50% less

than similar properties with market-rate units.

       The RSL may well have an appreciable economic impact on the profitability

of some buildings subject to its provisions. When permissible rent increases are

outpaced by operating cost increases, the result may be a reduction or, in some

cases, the elimination of net operating income. We acknowledge that some

property owners may be legitimately aggrieved by the diminished value of their

rent-stabilized properties as compared with their market-rate units. Furthermore,

we understand that many economists argue that rent control laws are an inefficient

way of ensuring a supply of affordable housing. But while legislative judgments

may take into account these varying policy perspectives, we are bound to follow

the standard set forth for a facial regulatory taking under Penn Central. Appellants

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Community Housing Improvement Program v. City of New York

have simply not plausibly alleged that every owner of a rent-stabilized property

has suffered an adverse economic impact that would support their facial

regulatory takings claims. Thus, Appellants did not plausibly allege the economic

impact factor on a facial basis, and this factor thus weighs against the conclusion

that the RSL effects a regulatory taking on its face.

       Instead of alleging that every landlord has suffered an adverse economic

impact, the Landlords principally rely on data purporting to show the average

economic effects of the RSL. But these effects do not establish that the RSL can

never be applied constitutionally, which is the requirement for a facial challenge.

As the Supreme Court stated in Concrete Pipe & Prods. of Cal., the “mere diminution

in the value of property, however serious, is insufficient to demonstrate a taking.”

Concrete Pipe & Prods. of Cal. v. Constr. Laborers Pension Tr., 508 U.S. 602, 645 (1993);

see also Park Ave. Tower Assocs. v. City of New York, 746 F.2d 135, 139–40 (2d Cir.

1984) (collecting cases rejecting takings claims where property value declined by

75% to 90%). We therefore conclude that the economic impact factor of the Penn

Central analysis does not support the Landlords.

       With respect to the Landlords’ investment-backed expectations, once again,

we can assume arguendo that some property owners may have had their

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Community Housing Improvement Program v. City of New York

investment-backed expectations thwarted by the current iteration of the RSL.

Thus, we may assume some property owners may not have expected, for example,

that the 2019 RSL would eliminate the possibility of preferential rent increases or

sunset provisions. However, the Landlords have failed to establish that the RSL

interferes with every property owner’s investment-backed expectations, which is

required on a facial challenge, because such expectations can be assessed only on

a case-by-case basis.

       Different landlords, who purchased properties at different times and under

different RSL regimes, will necessarily have a range of differing expectations.

Some may have been aggrieved by various provisions of the RSL, while others

may not have been and, indeed, others may have seen the profitability of their

investments rise. It is therefore impracticable to assess a class of owners’

expectations without analysis on an individualized basis. Moreover, we must

consider the reasonableness of alleged investment-backed expectations vis-à-vis

those who can “demonstrate that they bought their property in reliance on a state

of affairs that did not include the challenged regulatory regime.” Allen v. Cuomo,

100 F.3d 253, 262 (2d Cir. 1996) (internal quotation marks omitted). We cannot

make that analysis on a groupwide basis in a case where, as here, the challenged

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Community Housing Improvement Program v. City of New York

statute has been in place for half a century, and most, if not all, current landlords

purchased their properties knowing they would be subject to the RSL. Given the

RSL’s ever-changing requirements, no property owner could reasonably expect

the continuation of any particular combination of RSL provisions. As the New

York Court of Appeals has noted, “no party doing business in a regulated

environment like the New York City rental market can expect the RSL to remain

static.” Matter of Regina Metro. Co., LLC v. New York State Div. of Hous. & Cmty.

Renewal, 35 N.Y.3d 332, 369 (2020). Accordingly, we conclude that the investment-

backed expectations factor does not support the contention that the RSL has

effected, facially, a regulatory taking.

       Turning to the character of the taking, a regulatory taking “may more

readily be found when the interference with property can be characterized as a

physical invasion by government.” Penn Central, 438 U.S. at 124. The Landlords

argue that the RSL constitutes a physical invasion because it burdens property

owners with non-removable tenants and, in so doing, eliminates landlords’ rights

to determine the use of their property or to use it themselves. They contend that

the RSL confers a local public assistance benefit on tenants that is inappropriately

funded by a subset of New York City building owners rather than the government.

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       We are not persuaded. The Supreme Court has instructed that in analyzing

the “character” of the governmental action, courts should focus on the extent to

which a regulation was “enacted solely for the benefit of private parties” as

opposed to a legislative desire to serve “important public interests.” Keystone

Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 485–86 (1987). The character of

the government action in Penn Central, for example, cut against a finding of a

taking because the law was part of a “comprehensive plan to preserve structures

of historic or aesthetic interest” and applied to hundreds of sites. 438 U.S. at 132.

In reaching this conclusion, the Court relied on the “judgment of the New York

City Council that the preservation of landmarks benefits all New York citizens and

all structures, both economically and by improving the quality of life in the city as

a whole.” Id. at 134.

       Here too, the RSL is part of a comprehensive regulatory regime that governs

nearly one million units. Like the broad public interests at issue in Penn Central,

here, the legislature has determined that the RSL is necessary to prevent “serious

threats to the public health, safety and general welfare.” N.Y.C. Admin. Code § 26-

501. No one can seriously contend that these are not important public interests and

courts are not in the business of second-guessing legislative determinations such

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as this one. The fact that the RSL affects landlords unevenly is of no moment

because, as the Penn Central Court noted, “[l]egislation designed to promote the

general welfare commonly burdens some more than others.” 438 U.S. at 133.

Accordingly, the character of the regulation does not support the conclusion that

the RSL effects a regulatory taking.

       Finally, the Landlords urge this Court to consider two additional, less

commonly cited Penn Central factors that, they argue, tend to show that the RSL

results in a regulatory taking: noxious use and a lack of a reciprocal advantage.

Even assuming for the sake of argument that these factors apply, the claims fail.

       First, the Landlords assert that because the RSL does not address a safety

issue or “noxious use” of a property, this factor supports the conclusion that a

regulatory taking has occurred. This argument relies on a logical fallacy that

because noxious use laws typically do not constitute takings, the RSL must be a

taking because it does not govern noxious use. We have never held that only

regulations of noxious uses can survive takings challenges. Merely because the

existence of noxious use regulation can overcome a takings challenge does not

mean that, conversely, the lack of noxious use regulation supports a takings

challenge. Accordingly, this factor does not support the Landlords’ takings claim.

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        The Landlords’ reliance on the “reciprocity of advantage” factor fares no

better. Citing Justice Rehnquist’s dissent in Penn Central, they argue that the RSL

effects a regulatory taking because the Fifth Amendment prohibits the placing of

an inordinate share of a public burden on a private individual. With this argument,

the Landlords urge us to read a dissent as providing us with governing law. We

can’t do that. As the legislature has found, the RSL provides reciprocity of

advantage: the RSL results in significant state- and citywide benefits—including

to landlords—by preventing tenant dislocation and preserving neighborhood

stability. Although what specific value a particular landlord receives from these

benefits may be hard to quantify, that difficulty does not render the RSL a taking.

As the Court said in Keystone Bituminous Coal Ass’n, “[t]he Takings Clause has

never been read to require the States or the courts to calculate whether a specific

individual has suffered burdens under this generic rule in excess of the benefits

received.” 480 U.S. at 491 n.21. Accordingly, a supposed lack of a reciprocal

advantage does not render the RSL a regulatory taking.

                                                 III

       Finally, the Landlords contend that they have plausibly alleged that the RSL

and the 2018 City Council emergency declaration violate the Due Process Clause

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Community Housing Improvement Program v. City of New York

of the Fourteenth Amendment. Again, we disagree. The Landlords argue that the

RSL is not “rationally related” to alleviating the housing shortage, securing

housing for low-income residents, addressing rent profiteering, or promoting

neighborhood stability. To the contrary, the Landlords say, the law reduces the

housing supply, secures housing for the wealthy, increases rent for uncontrolled

units, and discriminates in favor of tenants over owners. Supporting their view,

the Landlords, as we have seen, point to various economists who argue that the

RSL, in several respects, causes more harm than good.

       But as the Supreme Court has noted, the Due Process Clause cannot “do the

work of the Takings Clause” because “where a particular Amendment provides

an explicit textual source of constitutional protection against a particular sort of

government behavior, that Amendment, not the more generalized notion of

substantive due process, must be the guide for analyzing these claims.” Stop the

Beach Renourishment, Inc. v. Fla. Dep’t of Envtl. Prot., 560 U.S. 702, 720–21 (2010)

(cleaned up); see Albright v. Oliver, 510 U.S. 266, 273 (1994); Harmon, 412 F. App’x

at 423. In any event, as the Court has noted, the liberties protected by due process

“do not include economic liberties.” Stop the Beach, 560 U.S. at 721.

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       Furthermore, even if a due process challenge were available, Appellants’

arguments would still fail. In evaluating a due process challenge, we would

conduct a rational-basis review, see Pennell, 485 U.S. at 11–12, which requires a law

to be “rationally related to legitimate government interests,” Washington v.

Glucksberg, 521 U.S. 702, 728 (1997). A rational basis review is not a mechanism for

judges to second guess legislative judgment even when, as here, they may conflict

in part with the opinions of some experts. See, e.g., F.C.C. v. Breach Communications,

Inc., 508 U.S. 307, 313–14 (1993) (“Where there are plausible reasons for Congress’

action, our inquiry is at an end.”) (internal quotation marks omitted). Rather, it is

a deferential standard that allows a law to survive if any of its justifications is valid.

See Preseault v. I.C.C., 494 U.S. 1, 18 (1990). Here, the RSL was primarily enacted to

permit low- and moderate-income people to reside in New York City when they

otherwise could not afford to do so. See N.Y.C. Admin. Code § 26-501. It is beyond

dispute that neighborhood continuity and stability are valid bases for enacting a

law. See Nordlinger v. Hahn, 505 U.S. 1, 12 (1992). Appellants’ Due Process challenge

thus fails.

                                        CONCLUSION

       For these reasons, we AFFIRM the judgment of the District Court.

                                                 36