One-Party Control in Albany and Rent Stabilization

NEW YORK CITY—Regardless of your personal political leanings, total one-party control is never beneficial for achieving balanced outcomes. With rent stabilization laws up for renewal this summer, and one-party control in Albany following the recent midterm elections, property owners face potential challenges in the horizon.

Given the current economic and regulatory environment, and even if the state legislature only passes half of the regulations they claim to be bringing to the floor, the scales will be further skewed against property owners.

These new regulations are a direct response to the actions of a few irresponsible owners. The removal or reductions of rent increases from major capital improvements and individual apartment improvements, combined with the removal of vacancy decontrol, will disproportionately hit smaller and mid-size property owners, largely through no fault of their own. At the same time, New York City is raising taxes and water rates, thus forcing owners with rent-stabilized units to make increasingly hard choices just to cover all of the expenses. In some cases, not all of the expenses will be met and things will begin to slip through the cracks.

If expenses continue to increase at a rate faster than the income, the first thing property owners will be forced to cut is the budget for repairs and maintenance, causing buildings to degrade and fall into disrepair. The more the government continues to artificially cap incomes for owners without capping the expense increases they are simultaneously imposing, the worse this situation will become.

This problem will impact tenants as much as owners, if not more so, a fact that appears to be lost on the people that write the rules. There is a growing demand for quality housing that is affordable, and it’s important to make sure that the housing stock meets both of those criteria, not just affordability at the cost of quality.

The continued growth and rigidity of the housing regulations will pressure owners to look for ways to cut corners, something that will disproportionately harm smaller owners. This also has the potential unintended consequence of encouraging owners to look for ways to get out of assets that are weighing them down financially, whether that means offloading buildings to the banks or worse.

The City of New York is not in the business of managing real estate and NYCHA serves as a prime example of why the city doesn’t need to be given more buildings to manage. While “The Bronx is burning” is a relic of the past, it’s not out of the question that desperate owners will take desperate measures. The regulatory environment must have balance to save quality and affordable housing. There needs to be encouragement for owners, especially smaller ones, most of whom are honest people, from unnecessary suffering which will directly impact the lives of tenants that the government ultimately wants to serve.

Ben Tapper is a senior managing director at Lee & Associates NYC. The views expressed in this commentary are the author’s own and not those of ALM’s real estate media group.