Here’s the latest in a case we’ve been following.

In Hudson Valley Property Owners Ass’n v. City of Kingston, No. 59 (June 18, 2025), the New York Court of Appeals held that after a municipality declares a housing emergency allowing it to regulate the amount of rent, it has the power to order lessors to refund to tenants rent which exceeded the maximum allowed amount, even if those rents had been collected prior to the declaration of the emergency. 

At least that is how we read the opinion. Due to its somewhat unusual procedural posture, the court did not actually allow the city to nail property owners for retroactive “overcharges,” it merely rejected the owners’ claims that because the statute may allow it in particular cases, it isn’t facially unconstitutional.

This was a facial challenge by property owners to Kingston, New York’s declaration of a housing emergency during Co-19 under state law. Under a statute adopted in 1974, rent regulation is triggered by a locality’s declaration of a housing emergency, and the restrictions extend for the duration of the declared emergency. This statute applied to three other NYC-adjacent counties, but not the entire Empire State.

But in 2019, the state legislature changed that and allowed municipalities statewide to opt in the rent adjustment scheme created by the 1974 statute upon a declaration of emergency due to a housing vacancy rate of 5% or less. Almost immediately, Kingston tried to take advantage of its new powers under the statute but could not do so because its 2019 vacancy rate was 6.7% — too high to invoke emergency powers.

But then Co-19 came, and voila! the rate dropped below the magic 5%. Soon thereafter, the city adopted a resolution declaring a housing emergency, and invoked its powers under the 1974 statute to regulate rent on building containing six or more rental units. Eventually, the rent board which the city established determined that rents charged between 2022 and 2023 “be reduced by 15% from the initial legal regulated rent[.]” Slip op. at 5.

Yes, that’s right: the city had initially established X as the maximum legally-allowable increase, yet then determined that X-minus-15% was the number, and applied it retroactively. As we noted when the Appellate Division ok’d this outcome (“NY App Div: Inflation, Bah! Rent Gets Cheaper in Kingston!“), this issue was likely not over. 

It wasn’t, but the Court of Appeals (as you know, New York’s highest state court), affirmed. First, the court concluded the “emergency” passed rational basis review. And you know that means not-even-close is good enough:

When a plaintiff challenges an emergency declaration made pursuant to the ETPA, the key question is whether the vacancy rate finding rests a reasonably reliable and relevant measure of the municipality’s actual vacancy rate for the relevant class of housing accommodations. The burden of demonstrating that a finding does not meet this standard rests on the plaintiff.

The support for a municipality’s emergency declaration need not be unimpeachable, and it may be impossible for any set of data to perfectly capture the exact real-time vacancy rate of a class of housing accommodations (see e.g. Spring Valley, 100 AD2d at 98 [a municipality’s emergency declaration “may not be made on less than reasonable grounds,” but does not need to account for “information as to all of the buildings in the relevant classification”]). The mere fact that the data underlying an emergency declaration could be more thorough or comprehensive should not suffice, standing alone, to invalidate a declaration. On the other hand, if challenged, a municipality should be able to explain why a survey was reasonably likely to yield reliable and relevant results and should not ignore obvious flaws in survey design that would distort the results.

Slip op. at 8-9. In short, good enough for government work. 

Next, the court rejected the owners’ argument that “the fair market rent guideline has an impermissibly retroactive effect[.]” Slip op. at 11. The court saw the issue as whether lowering the rents nunc pro tunc “punishes property owners for past conduct.” Id. The court held that no, it does not violate the Due Process Clause:

  • No one has (yet) been forced to refund anything. Recall this is a facial challenge. All the owners are claiming here is that if upheld, the retroactive rent ruling “may lead to rent refunds for rents charged prior to the local effective date of Kingston’s housing emergency.” Slip op. at 12.
  • The court charged the owners with anticipating that they would be subject to a rent reduction once the legislature allowed the city to regulate rents if there was a housing emergency…even where no emergency existed, or had been declared. Slip op. at 13. Wow. 

Finally, the court rejected the argument that the statute does not allow a reduction in rent. Argument not preserved so rejected out of hand. 

Before you go, check out footnote 2, where the court noted:

To the extent that DHCR’s regulations and Kingston’s fair market rent guideline could be read to permit a refund for rent charged after HSTPA’s effective date under a lease commenced before that date, we need not consider the propriety of such a refund on this facial challenge. We note, however, that DHCR has stated to us that the fair market rent guideline is permissible as applied to “leases entered into on or after HSTPA’s effective date.”

Slip op. at 12 n.2. 

 

Hudson Valley Property Owners Association Inc. v. City of Kingston, No. 59 (N.Y. June 18, 2025)