This is still about the rent reforms out of Albany, but I want to take a step back to talk about what I see as a fundamental disagreement about housing in NYC. On one side we have Julia Salazar who thinks that housing should be completely de-commodified. I vehemently disagree with this. On the other side we have developers and landlords and the “industry” who think that everything becoming increasingly luxury is the end goal. I disagree with this just as strongly.
What I think these laws are doing, in an admittedly imperfect way, is creating the middle ground I believe in. I will continue to dig into this, but today: rent stabilization vs. luxury rentals.
Much of the pushback by my industry against the law changes is around charges to policy for rent stabilization. The rent stabilization laws have historically been updated every 4-5 years, but this new act is permanent. According to real estate professionals, it will likely be years before we are able to consider changing them again. It’s done; this is happening. And these changes are much more sweeping than usual, including the end of certain programs and an overhaul to how multi-family landlords will need to operate.
So what happened? Some things didn’t change: apartments that have rent stabilized status due to J-51 or 421-A tax abatements will still become free-market when the abatements expire. In layman’s terms, apartments in buildings that would not normally be rent stabilized (such as new construction) where the owners are receiving tax incentives for a certain period of years in exchange for following rent stabilization protocol, will still go free-market when these incentives end. But in buildings such as mine, which are rent stabilized due to policy, not tied to a temporary abatement, apartments can no longer be de-stabilized going forward. In the past, this was a common goal of landlords, and could happen through several avenues. “Luxury decontrol” happened if the tenant earned more than $200,000/year two years in a row, and decontrol also occurred when the legal rent on an apartment surpassed $2,700/mo. Landlords eagerly tried to hit this threshold through tenant turnover, where a “vacancy increase” of 20% was allowed to be added to the rent, plus unlimited and often unproven IAI’s (individual apartment improvements) that allowed for further increases—often $1,000-2,000/mo—during vacancies. In buildings where tenants were not moving out, landlords would do building-wide improvements, MCI’s (major capital improvements), and pass this expense on to tenants. Now, IAI’s and MCI’s have been capped and cannot be permanently added to the rent, expiring after a given period of years. What qualifies as each was clarified as landlords were doing a lot of unnecessary work to hit the threshold for decontrol. Vacancy increases are gone. And again, decontrol has been eliminated in many types of buildings.
The narrative against this has been two-fold. First, how will landlords ever afford to maintain their buildings? (This overlooks the fact that landlords will still be more than paid back for any money they put into the apartments, plus they get the normal rent from tenants, and they still get tax breaks from the city.) And what incentives do they have to make the building nicer if they can’t forever profit off it? Second, getting rid of “luxury decontrol” means that millionaires all over the city are living in these units and gaming the system. How dare someone earning too much to qualify for low income housing not pay market rent?
The more I’ve thought about these two arguments, the more intertwined I’ve realized they are. And that they are part of this complete disagreement about the city, where many of those in real estate just want prices to go up and up forever. But the opposite take, that everything should be stabilized and luxury has no place in Manhattan, is also wrong. My take? These laws could help protect tenants from bad landlords/gentrification and also protect the real estate industry from itself, while still allowing room for the luxury space and encouraging new growth and development. How? I’M SO GLAD YOU ASKED!
Manhattan and the surrounding parts of the outer boroughs cannot be allowed to turn into luxury-only zones. It would erode everything that makes New York a desirable and wonderful place to live, because it’s obviously not the weather keeping us here. A key to attaining this is rent stabilization and, to a lesser extent rent control. People who work service jobs, including at the places that cater to the 1-.01%, need to be able to get to their places of work, often in very expensive neighborhoods. With the MTA the way it is we are already pushing these limits. People who work all the jobs I’ve had before real estate (and honestly, real estate at this point still isn’t paying me much) need these apartments. We would have no one working in non-profits or the service industry or galleries or forming startups without rent stabilized housing. We would lose even more of the diversity that makes NYC so amazing. Rent stabilized apartments are not Section-8 housing. They can still be expensive. But tenants are guaranteed protections that allow them to stay in a unit even after the neighborhood becomes increasingly gentrified. Again, they are needed for the fabric of this city. Go ask Jane Jacobs!
Saying that landlords will not be motivated to improve their buildings, well that means one of two things depending on who’s speaking. Some people are talking literally about maintenance, saying that landlords will no longer do any upkeep to their buildings if they can’t decontrol their apartments. But ALL landlords have to replace the roof when it begins to leak. They need to replace the boiler when it breaks. This is not some government conspiracy; it’s literally what being a landlord means. When you are considering purchasing a building to rent out you look at the potential expenses compared to the potential income. Your job is to maintain a building and people pay you monthly rent for your trouble. You still earn money. So to people who complain that these new laws will keep landlords from maintaining the building, that’s just misunderstanding what it means to be a landlord. This has always been a requirement, and if you weren’t doing it you’re a slumlord.
But let’s look at the second set of people, those who complain that these new laws and limits will keep landlords from making buildings significantly nicer in order to deregulate them and take them out of the stabilization system. They are essentially assuming that all tenants would want and benefit from a fancier building, ignoring the fact that many of them are probably cool with a pretty basic walk-up if it means they can remain in their home rather than being forced further into outer boroughs, having to pay broker and moving fees along the way. If my landlord had come in and tried to add a roof deck and raise the rent hundreds of dollars a month, I wouldn’t be into it, EVEN IF I got to keep my rent stabilized status (meaning I was guaranteed renewals and there were limits on annual increases). Yes, I love a roof deck, but I would prefer to keep a lower rent in my basic, bare bones apartment. That’s why I rented one and didn’t try to go to a fancier building. I also KNOW that they would have done a terrible job and that it wouldn’t be maintained, which was an additional problem with many MCI’s. People who make this argument are missing what rent stabilized apartments are actually for: people who want a safe but basic home with guaranteed renewals each year (read: stability, like the name).
These are often the same people who complain about the “millionaires in the rent stabilized apartments.” Yes, there are people who have benefited to an extreme degree from rent control and rent stabilization, and maybe they could technically afford to pay more. You always hear about that mythical West Village apartment fo $800. Or that $100/mo apartment in Brooklyn Heights with a crazy 90 year old living in it. These extremes do exist. But that’s not the majority. And what’s a good way to incentivize someone with money to move out of a rent stabilized place? Keep rent stabilized places super basic, so there is a REASON to move to the luxury place. Don’t make rent stabilized buildings luxury apartments. Then the people who should leave won’t, and the people who need stabilized units (like those on fixed income or again, people with less lucrative careers) will be priced out. I think these types of housing should serve different purposes, and these laws could help make that distinction clearer.
Another reason to avoid making EVERYTHING luxury? And that shows the need for these more basic types of apartments? And that actually would help the real estate industry? For years landlords have been giving major incentives (free months of rent, gift cards, gym memberships) in order to get tenants to move into luxury rental buildings that they couldn’t fill. Real estate publications have focused on this, asking what we can do to avoid the glut of luxury apartments no one wants. And I talk to people all the time who you would assume make enough to live in these buildings, but who do not. We’re talking CEO’s of start ups, COO’s of major companies, NY Times writers, engineers, doctors. So what happens if we continue to make everything fancier and fancier? We create a bubble that inevitably pops, driving rents down and causing landlords and developers to lose far more money. Or we have no one living in NYC who doesn’t do business development for a hedge fund. And as much as I love those people, NYC wouldn’t exist if that were the case.
So, to paraphrase my stance on housing: I don’t believe in a ceiling, but I do believe in a floor. And we need more of a floor than just Section 8 housing if we want to keep what makes this city special. Build all the luxury you want, but keep some basics for those of us who don’t want a lounge; we just want somewhere to come home at the end of the day.