- REAL ESTATE EDUCATION
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Memorandum in Opposition to New York City Council Resolutions to Amend Rent Stabilization
Eight Resolutions Urging State Legislature to Amend Rent Stabilization
May 2, 2018
Overview: City Council passes eight resolutions urging New York State legislature to extend rent regulations to all rental units, including those presently unregulated, to end vacancy decontrol, and to eliminate the 20 percent vacancy allowance increase which would effectively end capital investment in all New York City’s rental housing.
The Real Estate Board of New York is a trade association with 17,000 property owners, builders, commercial and residential brokers and building managers and other professionals active in the real estate industry in New York. The eight rent regulated items on the agenda for the Committee on Housing and Buildings collectively are bad for rental building owners, harmful to renters and disastrous for the City of New York.
These bills would effectively turn off the source of private sector revenue, namely regular market based rent increases, which have been essential for operating and maintaining safe and habitable rental apartments. From experience, we know what can happen to rental apartment buildings that lack the revenue needed to finance essential capital repairs. This lack of capital investment can jeopardize the health and safety of the tenants, and is sadly evidenced in the New York City Housing Authority apartments.
Collectively these bills would return the city rental housing stock to the 1970s. At that time city and state enacted rent regulations had been in place for more than 20 years. New York City experienced an unprecedented surge in housing abandonment and demolition. The rate of housing demolition was so high that the city decided not to publish those statistics. From that period until the enactment of vacancy decontrol, there was an equally unprecedented increase in the conversion of rental housing to coops or condos. In the 12 years prior to the enactment of vacancy decontrol, there were more than 317,000 units approved for conversion, an average of more than 26,000 a year. In the 12 years following vacancy decontrol, the total units approved for conversion was less than 16,000, an annual average of 1,300.
The vacancy decontrol and the other provisions of the rent act of 1993 signaled that investing in New York rental housing was no longer a losing proposition. Owners and investors began to make capital investment in the city’s rental housing stock for two reasons. Market based rent increases provided owners and investors with the revenue to finance major building improvements and, if they wanted to receive a market based rent, the property had to have been operated and maintained to justify such a rent. In short, only owners who invested in their property could see and improvement in their rental income.
Similarly, the introduction of vacancy decontrol encouraged investment of new construction as the 1993 rent act quelled builder fears that government would mandate the inclusion of newly built market rate buildings the rent regulations. (One of the eight bills calls for extending rent regulation to all unregulated market rate apartments.) Since the mid-1990s new housing units constructed annually has approximately doubled compared to a similar time period.
The improvement in the quality of our rental housing stock has been dramatic since the period of abandonment, housing demolition and conversion that we saw from the mid-1970s to the earlier 1990s. According to the latest Housing and Vacancy Survey, the quality of our rental housing and neighborhoods is good with the lowest measured maintenance deficiencies ever recorded since conditions were first measured in 1991. Likewise, the 2018 RGB Income and Expense Report indicate a decline in distressed properties.
There is ample and overwhelming evidence that the provisions in the rent regulation law, many enacted in 1993 and which this Council asks to be undone, has improved and transformed the quality of our rental housing stock. These bills want to undo this progress and place our entire inventory of rental housing—regulated and unregulated—on the path that will lead us back to the housing conditions of the 1970s and to the present housing conditions at NYCHA.