NYC Landlords Sue Rent Guidelines Board Over Rent Freeze

Following the city’s rent freeze decision in June, it was very much expected that angry New York City landlords — now burdened with even more maintenance costs and increased upkeep on rent-stabilized apartments — would take legal action to overturn the vote. And now it’s a reality.

A group of five small landlords who own rent-stabilized apartments in the city filed a lawsuit Wednesday in a New York state court against the city’s Rent Guidelines Board (RGB) over its 7-1 vote last month to freeze rents for both one- and two-year leases on rent-stabilized apartments in the city.

The landlords — using the LLC Kenilworth Holdings — claim in the suit that the RGB went through a “sham process” before the vote, and that Mayor Zohran Mamdani influenced the outcome of the decision. The suit also claims that the mayor appointed RGB members “predisposed to delivering a freeze,” and that the RGB “ignored evidence of soaring landlord costs and manipulated the data to understate the impact of these costs.”

Additionally, the landlords wrote in the suit that the RGB disregarded petitioners who showed that “they and similarly situated landlords cannot survive a rent freeze.”

“The RGB failed to meet its legal mandate of setting rent adjustments based on its own data and research, which strongly justified a rent increase,” said Ann Korchak, board president of Small Property Owners of New York (SPONY), whose members are plaintiffs in the lawsuit. “The rent freeze was illegal. The process was illegal and stacked against small owners of rent-stabilized properties. We are hopeful the court will address this injustice.”

It’s the first time the city’s real estate industry has challenged the legal basis for the rent freeze, and the first time it has legally challenged Mamdani since he took office.

“Zohran Mamdani promised to deliver a rent freeze during his campaign and then he went to extraordinary lengths as a new mayor to guarantee it,” Randy Mastro, a lawyer for the landlord group, told the Wall Street Journal, which first reported the news. “This is a perversion of the process.”

Spokespeople for the mayor’s office and the RGB did not immediately respond to Commercial Observer’s requests for comment.

The lawsuit also cites the resignation of Christina Smyth, a landlord representative and a member of the RGB since 2022. Smyth left her seat on the board just hours before the RGB’s rent freeze vote on June 25, and issued a resignation letter accusing the board of ignoring the law and voting to appease Mamdani’s agenda.

“This year’s [Rent Guidelines Board] order was decided last year on the campaign trail,” Smyth wrote in her letter at the time. “Everything since has been theater. The hearings, the reports, the public comment, the data. None of it was ever going to change the result.”

While the vote was a win for Mamdani, who spent his mayoral campaign promising a rent freeze and more affordable housing, it was a sure sign that legal action would follow, as the decision sent the city’s landlords into uncharted territory. The vote impacted roughly 1 million apartments across five boroughs, or 40 percent of the city’s rental housing stock. 

And the landlord group that filed the lawsuit isn’t alone, as the vote led pretty much the entire industry to conclude that the rent freeze was a foregone conclusion.

“This is a decision that was predetermined based on the mayor’s wishes, as he built the board to deliver what his wishes were,” Kenny Burgos, CEO of the New York Apartment Association (NYAA), told CO in June.

Also, while the NYAA isn’t a party to this litigation, Burgos told CO Wednesday that he does believe it “raises questions that have been spoken about for months,” specifically whether “this year’s process weighed the board’s own evidence, and whether a body required by law to be independent and fact-driven functioned that way.”

He added that the data also hasn’t changed since June 25, when the vote occurred. Rent-stabilized buildings in the five boroughs are still losing money.

“Whatever happens in court, the underlying problem remains: Thousands of stabilized buildings cannot cover their costs, and the housing New Yorkers depend on is deteriorating as a result,” Burgos said. “The administration has itself acknowledged that some buildings need bigger interventions. We agree, and we remain ready to work with City Hall on real solutions, like capital and lending programs for distressed buildings, expense relief, and a rent-setting process everyone can trust.”

Isabelle Durso can be reached at idurso@commercialobserver.com.