Matter of Kerr v. Urstadt, 33 N.Y.2d 137 (1973)

A state law requiring state approval for more stringent local rent control regulations does not violate home rule provisions, nor is it an unlawful delegation of legislative authority if the state commissioner’s discretion is guided by the objective of transitioning to a free housing market.

Summary

This case concerns the constitutionality of a New York State law giving the State Housing Commissioner the power to approve any new rent control regulations by New York City that are “more stringent or restrictive” than existing ones. The City passed Amendment 33 to its Rent Regulations, which the Commissioner disapproved. The Court of Appeals held that the state law was constitutional because it was general legislation and did not violate home rule provisions. Further, it found the law did not represent an unlawful delegation of authority because the Commissioner’s discretion was adequately guided by the overall policy of transitioning to a free housing market to encourage investment in housing maintenance.

Facts

In 1970, New York City adopted Local Law 30, making major changes to its rent control laws, including the Maximum Base Rent (MBR) system. In 1971, the state legislature enacted Chapter 1012, requiring the State Housing Commissioner’s approval for any new city rent control regulations that were more stringent or restrictive than existing ones. Amendment 33 to the City’s Rent Regulations, effective in 1972, amended the provisions for “hardship” adjustments based on net annual return, but the State Housing Commissioner withheld approval. The amendment stated that “hardship” adjustments shall be apportioned to individual apartments in the same manner as the building-wide MBR is distributed to individual apartments. It further stated that each controlled unit should bear not more than that portion of the increase as is properly attributable to it whether or not the amount so attributed shall be fully collectible.

Procedural History

In Matter of Kerr v. Urstadt, Special Term declared chapter 1012 constitutional and vacated the commissioner’s determination as arbitrary. The Appellate Division modified by reversing the part of the judgment that vacated the commissioner’s determination. In Matter of 241 East 22nd Street Corp. v. City Rent Agency, Special Term dismissed a petition to compel the City Rent Agency to process hardship applications under prior regulations. The Appellate Division reversed. The Court of Appeals consolidated the appeals, and affirmed the Appellate Division decisions in both cases.

Issue(s)

1. Whether chapter 1012 of the Laws of 1971, giving the State Housing Commissioner approval power over more stringent local rent control regulations, violates the home rule provisions of the State Constitution and constitutes an unlawful delegation of legislative authority.
2. Whether the State Housing Commissioner’s determination that Amendment 33 was more stringent and restrictive, and his withholding of approval, were reasonable.

Holding

1. No, because Chapter 1012 is general legislation applicable to cities of 1,000,000 or more and does not offend the home rule provisions of the State Constitution. Also, the law does not confer unbridled discretion upon the State Housing Commissioner so as to constitute an unlawful delegation of legislative authority.
2. Yes, because Amendment 33 barred or limited the collectibility of a warranted rent increase without compensating the landlord, making it more restrictive than prior regulations.

Court’s Reasoning

The court found that Chapter 1012 was general legislation, applicable to any city of the State having a population of one million inhabitants or more, and therefore, did not violate the home rule provisions of the State Constitution. It stated, “By its terms, it is general, even though there might be but one city to which it could apply.” The court also reasoned that rent control is primarily a matter of State concern.

Regarding the unlawful delegation of authority claim, the court acknowledged that the Local Emergency Rent Control Act states that “the transition from regulation to a normal market of free bargaining between landlord and tenant…[is] the objective of state policy.” The court reasoned that Chapter 1012 facilitates that policy by removing the threat of stricter controls and encouraging owner investment. While recognizing that the standard for guiding the commissioner’s discretion was broad, the court deferred to the strong presumption of constitutionality and the complexity of rent controls.

The court also determined that the Commissioner acted reasonably in withholding approval of Amendment 33. Since 1951, rent control laws had provided for hardship increases where the property was not earning its statutorily prescribed return, subject to a 15% limitation. Amendment 33 changed this by allowing the hardship increase for any one year to be apportioned only against those apartments that have not yet reached their individual MBR. The court noted, “The effect is, of course, that the owner-landlord may be deprived of an increase, to which he is entitled, without any provision for compensating him for the loss.” Therefore, the Commissioner could reasonably withhold his approval.