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Landlord-tenant tensions mount as NYC raises rent ceiling
Here’s a rundown of recent rent stabilization rulings
For the majority of America, annual rent increases are a typical part of life. But for over 2.4 million tenants living in approximately 1 million New York City apartments, a dedicated ‘Rent Guidelines Board’ plays a powerful role in shaping costs. Don’t forget: we’re talking about one of the most expensive cities in the world.
Known as ‘rent stabilization,’ the institution regulates roughly 50% of all rental units in New York City and is run by a committee of just nine people. On Tuesday, June 25, 2019, the board met before a boisterous group of landlords, developers and renters to cast their annual vote. The question was—To what extent can property owners up the rent?
NYC says: Put a cap on it
For folks living in rent-stabilized buildings, rent could increase by a maximum of 1.5% for one-year leases and 2.5% for two-year leases effective October 1, 2019. Per usual, the ruling caused quite the backlash among protesting renters.
Beyond New York City’s notoriously high cost of living, tenant advocates argue that officials are putting landlord profits before resident protections. However, history shows that this year’s ceiling hike is comparatively small. In fact, the majority of city landlords view the decision as an obvious disappointment.
NYC protections vs. profits
The conflict in numbers
- In the year 2017, median rent for a rent-stabilized unit was $1,269
- Tenants will now pay an average of $19 more for a 1-year lease
- For those signing a 2-year lease, rent will be roughly $31 more
- In 1980, Mayor Koch allowed raises up to 14% for 2-year leases
- Bloomberg averaged an annual increase of 3.25% for 1-year leases
- Today’s rent-stabilized tenants put 30% of their income toward housing
- Stats show that landlord operating costs rose by 5.5% this year
- Luckily, landlord income has grown faster than expenses for 13 years
- In 2019, landlords remain in the green with NOI growth at 0.4%
For more rent stabilization stats, visit The New York Times and NYC.gov
The decision runs deep
As New Yorkers continue to argue over the latest hike, they also turn their sights upstate to Albany. Beyond the microcosm of Manhattan and its surrounding boroughs, democratic lawmakers recently passed a series of changes that drastically favor tenants’ rights over landlords’—and the regulations go beyond city limits.
“The legislation in Albany is far-reaching,” say reporters at The New York Times. “While rent regulations are currently restricted largely to New York City and a few other localities, the new package would allow cities and towns statewide to fashion their own regulations, which are meant to keep apartments affordable by limiting rent increases.”
Some of the new changes block owners from deregulating their apartments via antiquated loopholes. For instance, landlords could once ‘escape’ rent stabilization when their rates reached a certain limit. According to the Rent Guidelines Board, the provision has freed over 150,000 units in the past 25 years. Consider that kaput.
Likewise, owners used to be able to raise monthly rent by as high as 20% once an apartment was vacated. The new deal eliminates this practice.
Lobbyists also tried to stop owners from collecting more rent after renovating or remodeling a building. Fortunately, Mayor De Blasio and Governor Cuomo did not agree. Instead, lawmakers intend to revise provisions related to construction, as improvements ultimately benefit the very tenants they champion.
An unexpected upside
For landlords and developers, the reforms are somewhat discouraging—but not crippling. Most agree that legislators’ aggressive crusade is futile, as stiff regulation still fails to address lack of affordable housing and is unlikely to improve current conditions for tenants. Politicians will have to find other solutions to the supposed crisis.
In reality, commercial real estate investors can still cash in. Rent stabilization comes with plenty of unforeseen benefits. Regardless of market conditions, affected landlords are almost always guaranteed full occupancy under these regulations. Not to mention, there are some rewarding tax benefits that go along with the gig.
As we await October 1st, keep alert for the latest NYC rental guidelines.
Everest says: You can please tenants and still turn a profit