The Housing Stability and Tenant Protection Act of 2019
Legislation passed this week has dramatically reshaped the multifamily landscape in New York with sweeping benefits to rent-stabilized Tenants at a high cost to Landlords and investors.
The rewriting of the rent regulations which impacts nearly 1m apartments in New York City intends to preserve affordable housing by taking away the rules that Landlords use to remove these units from being regulated.
Some broad strokes that might impact you:
- Security Deposits are limited to one month across all apartment rentals both stabilized and not.
-If you're rent stabilized now and your household income is above $200,000 your apartment can no longer be deregulated.
-The “vacancy bonus” was eliminated which once allowed a property owner to raise rents as much as 20% each time a rent stabilized unit became vacant.
-The bill lowers the rent increase cap on Major Capital Improvements — items like boilers and new roofs - from six percent to two percent in New York City. The new rules limit the term of the increases to 30 years.
-Individual Apartment Improvements limited to $15,000 cap that can be expended on no more than three separate IAIs within a 15-year period.
The response breaks into two camps:
Joseph Strasburg, president of the Rent Stabilization Association, which represents 25,000 owners: “This is a dark day for tenants and New York City’s affordable rental housing stock. The same irrational Albany lawmakers who ran Amazon out of town have lit the fuse that will run the city’s housing stock into the ground and bring back the bad old days of the 1970s when prohibitive laws in tandem with high property taxes forced landlords to abandon their properties and New York became the poster child of urban blight,”
State Senator Zellnor Myrie: “This bill is the strongest package of tenant protections New York has seen in almost a century. For decades, our communities have lost hundreds of thousands of rent regulated units, but with this legislation, we are putting power back in the hands of tenants. We are taking a historic step forward in the fight for housing as a human right, and I am proud to have stood with colleagues, advocates, and, most importantly, tenants, to lead this fight."
My Take
Investors have the means of deploying their capital in a lot of different ways and purchasing complex multifamily real estate in New York City is just one of them. The reduction of incentives for Owners to buy or improve these assets creates a risky environment where income levels may not be high enough to maintain buildings properly. It won't happen tomorrow but long-term I can see how some of these buildings will fall into disrepair.
Understanding this I predict many owners of these buildings - especially newer owners that carry mortgages - will face financial difficulty and act quickly to convert them to co-ops with low buy-ins from current Tenants. This is a wonderful opportunity for rent stabilized Tenants to become shareholders in their buildings. But with a flood of new inventory available expect condominium prices to come down further. And for the current rental supply's market prices to increase due to reduced affordable housing supply.
Would love to hear your thoughts on the new legislation and I'm always available as a real estate resource to you and your network.
Best,
Corey
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