Landlords sue over rent freeze on New York City stabilized units

New York City Mayor Zohran Mamdani ran and won on bringing affordability and stronger rent stabilization to the city’s residents. Landlords are having none of it.

They sued in Staten Island court over a recent rent freeze, claiming the decision process was rigged.

The lawsuit comes nearly a month after the Rent Guidelines Board froze rents on roughly 1 million rent-stabilized units across the city for up to two years. Mamdani celebrated the freeze as a victory for the tenants he promised to help in his affordability platform.

Landlords are asking the court to annul the freeze, declare the board’s decision unlawful and send the matter back for a new determination that weighs the statutory factors they say were ignored. They’ve also requested expedited discovery and an evidentiary hearing to examine how the board reached its decision.

This latest lawsuit emerges as a broadside just as Mamdani’s administration seeks to show success on the housing supply front. In addition to promising strict rent stabilization, he has been cutting red tape and executing on zoning changes from the previous administration to accelerate housing construction.

Another legal round on rent stabilization

This new lawsuit is the second one filed on rent stabilization since voters elected Mamdani last November. The first, filed in federal court, targets a 2019 statewide law that closed a loophole allowed landlords to remove units from stabilization if they made substantial renovations. Landlords have struggled with higher construction costs like everyone else.

Landlords have chosen to leave units empty rather than renovating them for new tenants. Estimates of the number of empty units run as high as 100,000.

“Today’s housing shortage is driving rents up for market-rate housing, and revenue-challenged landlords cannot make improvements that would benefit stabilized tenants,” Scott Mollen, a partner with New York law firm Heckel, said in a statement to HousingWire TBD.

Mollen, who isn’t part of either lawsuit, said recent sales of stabilized apartment buildings at prices 30% to 50% below what sellers originally paid present the clearest evidence that many landlords are losing money. He added that loan portfolios have also sold below face value, wiping out landlord equity.

On the latest lawsuit, Mollen said former Mayor Ed Koch’s administration never pressured him or the Rent Guidelines Board, which he chaired, to reach a particular conclusion.

“The results were based on objective financial analyses, as required by the law,” he said.

A rigged process

The new lawsuit alleges that the board ran a “sham process” designed to deliver on Mamdani’s campaign promise rather than reach an independent, data-driven decision. It follows the board’s 7-1 vote last month to freeze rents on both one-year and two-year leases for rent-stabilized apartments. Those units make up roughly 41% of the city’s housing stock.

Landlords argue Mamdani packed the board with loyalists after taking office. They say he spent city money mobilizing tenant advocates through a newly created Office of Mass Engagement. The office received a $53 million annual budget, according to the lawsuit.

They also say the mayor’s office briefed the board on the “true cost of living” in the city, a move they claim compromised the board’s independence.

Longtime board member Christina Smyth resigned hours before the final vote. The landlords’ lawyers made her resignation letter a central theme of the lawsuit.

“This rebuilt board was required to deliver a rent freeze,” Smyth wrote in the letter, according to the lawsuit. “Everything since has been theater. The hearings, the reports, the public comment, the data. None of it was ever going to change the result.”

Board’s own data disputed

The lawsuit alleges the board manipulated its own data to justify the freeze. Its Price Index of Operating Costs showed landlord expenses rose 5.3% over the past year, with continued increases projected in fuel, insurance and utilities, yet the board still voted for a 0% increase.

Landlords also claim the board inflated income figures by blending revenue from unregulated, market-rate units with stabilized-apartment income, obscuring financial distress in fully rent-stabilized buildings. They say the board also ignored debt-service data showing 32% of surveyed rent-stabilized mortgages had insufficient income to cover payments, nearly triple the prior rate.

The earlier federal lawsuit, filed last November, doesn’t challenge stabilization for existing tenants directly. But it argues that the state’s 2019 law loophole crackdown is unconstitutional. Landlords want to be able to recover renovation costs through rent increases.

Together, the two cases show landlords contesting rent regulation on multiple fronts as Mamdani moves to make good on his affordability platform.