New York City has a housing shortage. At the same time, tens of thousands of apartments sit vacant because New York’s Rent Stabilization Law (NYRSL) makes it economically unfeasible  for building owners to lease them. The NYRSL was originally enacted in the 1970s as an emergency measure but has been rolled over every three years since then and is still operating as an “emergency” law today. While rent control laws in most jurisdictions allow rents to reset to fair market value upon vacancy, the NYRSL caps rents even after apartments become empty—and in many cases caps the rent so low that building owners would lose money by putting the units back on the market. Not only does this hurt building owners it also prospective tenants who are shut out of these apartments. So while presented as a means to increase housing affordability, the NYRSL limits housing supply and makes it harder for New Yorkers to access housing. 

Pashko and Tony Lulgjuraj are brothers and business partners who own and operate an apartment building in New York City that contains vacant apartments that cannot feasibly be rented because of the NYRSL. Rent on these apartments is capped by law in the hundreds of dollars—for instance, one vacant two-bedroom unit in the building has its rent capped under $700 per month. Pashko and Tony would lose money for years if they rented these apartments. So the apartments sit empty, and they will remain empty indefinitely.

The NYRSL doesn’t just hurt Tony and Pashko. It hurts anyone who might want to rent these vacant apartments. In 2024, the Census Bureau released data showing that over 26,000 regulated apartments sit vacant and off the market. To put that number in perspective, new construction across the city added nearly 36,000 units that same year. In other words, freeing up these vacant apartments could add almost a year’s worth of construction to the housing supply. 

Apart from the obvious harm the NYRSL is causing building owners and potential tenants, it’s also unconstitutional. When government regulates property to the point where it can no longer be used, the government takes the property—violating the Takings Clause. The manner in which New York sets the rent for vacant apartments is also fundamentally arbitrary and violates equal protection and due process; among other things, these onerous restrictions only apply to buildings constructed before 1974, but that 1974 date has nothing to do with the appropriate rent for a vacant apartment in 2025.  

Importantly, while this lawsuit challenges the application of the NYRSL to vacant apartments, it does not challenge the law’s application to occupied apartments—and thus does not challenge provisions that protect existing tenants from rising rents. Instead, the lawsuit seeks to make more housing available, for the benefit of landlords and tenants alike.  

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New York is Forcing Apartments to Remain Vacant During a Housing Shortage 

Brothers Pashko and Tony Lulgjuraj have spent their lives working in building maintenance. After moving as children to the United States as ethnic Albanians from then Yugoslavia—brought by parents who came to the United States in search of the American Dream—they spent decades working in other people’s buildings (as a doorman and a building superintendent). Eventually, the brothers purchased an apartment building of their own in upper Manhattan. However, because of New York’s Rent Stabilization Law (NYRSL), multiple apartments in that building lie vacant and will remain vacant unless the law is changed.  

In most jurisdictions that have rent control laws, the law restricts the amount that owners can increase the rent on an existing tenant but allows owners to charge market rent when leasing a vacant apartment to a new incoming tenant. For instance, while some California cities have fairly restrictive rent control laws, the California state legislature passed a law in 1995 that prohibits cities from limiting the rent that landlords can charge for vacant apartments. That type of vacancy reset provides an important safety valve that helps to prevent rents from getting too far out of alignment with underlying market realities.  

The NYRSL, by contrast, strictly limits the rent that landlords can charge for vacant apartments. Even if an incoming tenant were willing to pay above what the NYRSL said, a landlord cannot rent an apartment for more than the rent allowed by law. And, after decades of regulation, the rent on some vacant apartments has become so low that they cannot possibly be rented.  

In Pashko and Tony’s building, for instance, the rent on one two-bedroom apartment is capped by law at approximately $700 per month. It can cost tens or even hundreds of thousands of dollars to get an apartment ready to go back on the market after a long-term tenancy, and Pashko and Tony would lose money for years if they put in all that work and then rented the apartment for just $700. As a result, that apartment will sit vacant indefinitely.  

Far from “stabilizing” any tenant’s rent, these caps restrict the housing supply by taking much-needed apartments out of the housing market. Data from the U.S. Census Bureau indicates that over 26,000 regulated apartments are vacant and off the housing market, and the true number of affected units may be even higher. That is close to a year’s worth of construction, and, even in a place as large as New York City, getting those apartments back onto the rental market would have a significant impact on the housing supply. 

New York’s Rental Caps on Vacant Apartments Are Selective and Arbitrary 

It’s not surprising that these rental caps are keeping vacant units off the market, as the caps are not tied to any relevant metric (such as unit condition, square footage, or profitability). In fact, the way New York sets the rent for vacant apartments is fundamentally arbitrary. 

For starters, the NYRSL only applies to apartments in buildings constructed before 1974—an arbitrary date that has nothing obvious to do with how much a landlord should be able to charge for an apartment in 2025. New York law restricts landlords’ ability to raise the rent on existing tenants in both pre- and post-1974 buildings. But New York law only restricts the rent for vacant apartments in pre-1974 buildings.  

Moreover, the rental cap for any given vacant apartment in New York City is a product of that apartment’s unique regulatory history. New York has repeatedly amended the NYRSL over the past fifty years—allowing landlords to raise the rent on some units, at some times, under some circumstances, but restricting rents at other times, in other circumstances—and each apartment’s rent today is a product of how those provisions applied over that entire time. Again, take Pashko and Tony’s building as an example: Directly below the apartment with a legal rent of $700 per month, there is another apartment with an identical floorplan and a legal rent of about $2,500 per month. The difference is an accident of history, but it means that one apartment can be rented and the other cannot.  

As a result, New York is regulating apartments off the market for no real legitimate reason. Some apartments can be rented, and some cannot, and the difference is fundamentally accidental and arbitrary. 

The Legal Claims 

Pashko and Tony—joined by several other small-scale landlords, as well as the Small Property Owners of New York (SPONY)—are suing in federal court to challenge the application of the NYRSL to vacant apartments. They are bringing three kinds of constitutional claims. 

First, New York’s rental cap on vacant apartments violates the U.S. Constitution’s Takings Clause. In a case called Lucas v. South Carolina Coastal Commission, the U.S. Supreme Court held that government violates the Takings Clause when it regulates property so aggressively that the property can no longer be used. And that is exactly what New York has done to these vacant apartments. Moreover, history shows that the ability to set a price is part of what it means to own property, and New York has taken building owners’ property by restricting their ability to set the price of their vacant apartments.  

Second, New York’s rental cap on vacant apartments violates the U.S. Constitution’s Due Process Clause. The Due Process Clause protects against arbitrary restrictions on liberty and property, and it’s difficult to imagine a system more arbitrary than this one. Identical vacant apartments with the very same floorplan, in the very same building, are subject to wildly different rental caps based merely on how the unit was rented in the past—to tenants who no longer occupy the unit. It makes no sense to limit how much a landlord can charge for a vacant apartment today, in 2025, based on a random half-century of regulatory history.  

Third, New York’s rental cap on vacant apartments violates the U.S. Constitution’s Equal Protection Clause. New York discriminates between the owners of buildings built before and after 1974, even though that 1974 date has no logical connection to the appropriate rent that should be charged for a vacant apartment in 2025. The 1974 date was put into place when the NYRSL was first enacted in the 1970s as a three-year “emergency” measure—on the theory that developers would stop building new buildings if those buildings would be subject to rent stabilization. But even though the NYRSL has been repeatedly extended and amended in the intervening half-century, that 1974 date has remained in place. Today, there is no rational reason why owners of pre-1974 buildings should be singled out for more onerous regulation.   

About the Institute for Justice 

The Institute for Justice (“IJ”) is the nation’s premier defender of property rights. At no charge to its clients, IJ defends the rights of homeowners against eminent domain abuse, as in Kelo v. City of New London and DeVillier v. Texas; uncompensated property destruction, as in Baker v. City of McKinney; abusive fines and fees against homeowners, as in Ficken v. City of Dunedin; and against regulations that restrict the housing supply, as in Tiny House Hand Up v. City of Calhoun. 

IJ is headquartered in Arlington, Virginia. It has state offices in Texas, Florida, Washington State, and Arizona. For more on IJ’s work touching not only on property rights, but also on economic liberty, educational choice, police accountability, and free speech, visit www.staging.ij.org.