UPDATE - Blackstone Changing Its Tone

While Blackstone was sitting on its high horse and withholding apartments from the market, it came out that they had actually received $200 million in interest free loans from the government, on the condition they used the funds to renovate StuyTown/Peter Cooper Village. Their temper tantrum potentially violated the terms of this loan, so the government decided it was going to investigate. Upon hearing that, Blackstone quietly reversed policy and is now renovating and putting these units back on the market.

There are a few takeaways from this:

1. Companies like Blackstone often get benefits (interest free loans, massive development opportunities) that individuals do not. But when they don’t get their way they act like children. And I’m glad that, in this case, the company was reprimanded the same way a child would be, rather than accommodated.
   

2. This reversal was not as publicized as the news they were withholding the apartments, which points to my argument this was largely a PR move. Come on, guys, spread the word!
   

3. I’m tired of the rhetoric that landlords can “never increase rents again” that is the base of their whole complaint. Rents go up in rent stabilized apartments, the same way they do in free market apartments. The difference is that they all go up by the same amount, which for 2019/2020 is 1.5%. Yes, that’s a small increase, but it’s in keeping with plenty of free market apartments. And I have a whole lot to say about this idea of “prices always increase every year” — it’s part of why sellers have been so unrealistic since the pricing peak of 2016.

4. Just going to leave this WSJ quote here: “Growing rents and a gradual conversion of more rent-regulated units to market rates has brought the net operating income of the property up each year since 2006. With about 45% of the complex’s residents still paying the regulated rents – down from 71% in 2006 – income is above $200 million a year”
   

And the last takeaway is that I clearly had an impact here (jk jk, trust I know that no one listens to me). No, the last takeaway is that these things do matter, and people are paying attention. Which is good, because it makes me feel like I’m not just screaming into the void. 

xo

Anna

Blackstone, Stuy Town, and "we told you so" PR

I’ll keep this short (for me) and sweet. 

Blackstone, owners of Stuytown, are keeping rent stabilized apartments vacant when tenants move out rather than re-listing them and getting new tenants in their stead. They claim this is tied to their bottom line: since they cannot de-regulate these apartments, they cannot afford to put people in them who could stay at low rents long-term. It is a financial concern, of course, but I believe it’s primary goal is strategic. 20-50 rental apartments do not affect Blackstone’s bottom line, short or long term. They are the largest alternative investment firm IN THE WORLD. Even if every single apartment in StuyTown never changed hands again, they are 1. already earning money on the rents as they are, even if they have dot do occasional repairs, and 2. are a giant company. 

What holding these apartments vacant really does is back up the landlord lobby’s claim that the passage of rent reform would hurt tenants because it would deplete housing stock and do exactly this. But make no mistake: they are CHOOSING to make this a reality. It isn’t inevitable. And they are feeding it to the media to bolster their cause, hopefully making it easier to overturn these reforms and go even further the other direction. Landlords and investors fully admit their goal (overturning reform) in real estate publications, but I have a feeling that the message to the general public will be “look at how these reforms are actually hurting tenants, just like we said they would” instead of a more honest “we are choosing to withhold these apartments from the market, which is hurting tenants, just like we said the reforms would.” 

Or, to put it simply: “Some [landlords] are going to close their apartments for 10 to 15 years in hopes that things go their way.” Some landlords are basically throwing temper tantrums and yelling MNYREGA (anyone get this?). And you wonder why people don’t like real estate developers…

Again, I will be the first to admit the rent laws did some foolish things, but they didn’t in and of themselves hurt tenants. They aimed, imperfectly, to protect tenants. Tenants are being hurt by the industry’s pushback against the reforms.

Some landlords are refusing to follow the new laws, choosing to “interpret” things differently (which, Albany, is your fault for using such bizarre and unhelpful language in the bill). Others are wringing their hands — loudly, to anyone who will listen — over how they’ll just NEVER be able to renovate again. But the biggest commonality, and what I think best supports my theory, is that while historically landlords have tried to hide their shady behavior, they are putting this front and center. They are admitting the shortcuts they are taking and acting like it’s because they are just so, so poor and cannot handle the new laws. They absolutely can afford to continue to do business, despite these changes (more on that later) but again, their bad behavior furthers their cause. It’s a really, really stupid catch 22.

Again, yes, this is 100% related to the new laws. But it’s not the fault of the laws nor of tenants. This is an active choice by a company to make the housing crisis worse in order to get its way. 

I also want to point out that despite the fact that the real estate industry acts like getting someone into a rent stabilized apartments is a life sentence, MORE THAN 50 apartments have become vacant in ONE complex since June 15th. I was actually shocked by this, because I kind of believed what they were selling. But clearly there is plenty of turnover, even when the units are stabilized. You may not get your same vacancy

So while I agree that there are issues with the law, and I will include the elimination of luxury decontrol in there, do not for one second blame this on anyone but landlords. 

I see you, Blackstone. Props to your PR machine, but unfortunately for you I can smell the bullshit. 

xo

Anna