The New York City real estate industry is reeling after state legislators announced a deal that will make sweeping changes to rent control regulation laws set to expire this weekend. Real estate leaders contend that the new laws, which Governor Andrew Cuomo has indicated that he intends to sign, will have a devastating impact on the industry.
Senate Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie announced earlier this week they had reached an agreement that would make sweeping changes to New York’s rent laws, including the elimination of a vacancy decontrol, a measure that allows landlords to deregulate an apartment unit once it reaches a certain threshold, which is currently $2,774.
The far-reaching deal shocked industry leaders and experts, who believe that the changes will drastically affect how owners operate their rent-regulated buildings.
“This bill is irresponsible on so many different levels,” Nelson Management Group President Robert Nelson told Multi-Housing News. “It feels like we were attacked.”
Nelson, whose firm has owned and managed thousands of rent-stabilized units in New York City over the past 30 years, said he was surprised “to say the least” about the rent reform deal. “A lot of us in the industry who are responsible owners, who try to do the right thing every day, kind of feel like we were put into a box with some of the bad actors in the industry.”
Included in the new laws are new limits in the increases owners are permitted for investing in major capital improvements (MCIs) to their properties. Increases will be reduced from 6 percent to 2 percent annually and charged for no more than 30 years. The amount landlords can spend in renovating individual units will also be capped.
Converting a rental property into a co-op or condominiums will become much more difficult, as well. Current law allows a building to be converted once 15 percent of the units are sold to residents or outside investors. The new law will require 51 percent of tenants who live in the building to agree to buy units in order for a conversion to take place.
“It might be better to leave our apartments vacant,” said Nelson.
Looking for alternatives
Influential organizations like the Real Estate Board of New York and the New York Building Congress strongly opposed the legislation, which they said would only worsen the city’s affordable housing crisis.
“These regulations would limit the ability to build new and renovate existing buildings, hurting hardworking, middle class New Yorkers throughout our city,” said Carlo Scissura, president & CEO of the NYBC, in a statement Thursday afternoon.
The rent-regulation reform is the latest in a series of efforts around the country to expand rent control. Last November, California voters rejected Proposition 10, a statewide ballot measure that would have made it easier for local jurisdictions to expand rent control. With strict new measures on the way to becoming reality in New York, some industry experts believe this could lead to more cities and states saying yes to regulations.
“People are looking at what’s happening out there and saying hey, maybe we can do it in our community as well,” said Doug Bibby, president of the National Multifamily Housing Council, who called the new legislation “very disappointing.”
He cited NMHC’s Housing Affordability Toolkit, a recently published study that aims to change the conversation on rent control, and Growing Homes Together, an online hub and resource center that focuses on solving the housing affordability crisis, as examples of real solutions.
“Our whole point with these is to say there is a better path and we need to change the conversation about this,” said Bibby.