These days, being a property owner in New York feels like a daily routine of holding our breath, anticipating the next wave of unsettling news. When the Housing Stability and Tenant Protection Act of 2019 (HSTPA) was passed, landlords tried to warn legislators of the consequences that the bill might have on the housing stock. Fast forward five years since the law was implemented: the housing situation in New York state has deteriorated further and more affordable housing units are remaining unoccupied as the state’s oldest housing stock continues to plummet in value.
The initial creators of rent stabilization in the 1970s understood the importance of providing reasonable incentives to reinvest in older buildings to prevent deterioration. Unfortunately, HSTPA has overlooked this historical lesson. The goal was to maintain rents at a stable and affordable level for individuals and families while promoting maintenance in the buildings. The intention was not to keep rents as low as possible, sometimes falling below operating costs.
Throughout the initial three decades of rent stabilization, the most reliable indicator for determining the maximum allowable rent has been the Consumer Price Index (CPI), which reflects inflation. The Rent Guidelines Board consistently implemented increases within +/- 10% of the CPI for 1-year leases, enabling property owners to manage escalating expenses such as insurance, taxes, and maintenance. Additionally, two programs were introduced: one for significant capital improvements like roof repairs or boiler replacements, and another for renovating individual apartments following the departure of a long-term tenant or a particularly disruptive one. These programs facilitated gradual rent increases to fund necessary repairs over time.
Between the passage of HSTPA and the past decade of low rent increases, the landscape now looks completely different.
HSTPA has had a significant impact on affordable housing, especially in regulated apartments. In my Yonkers building, after occupants lived there for 40 years or more, certain apartments have rents below the operating cost, making them unsuitable for renting. Currently, I have a few vacant units that have legal regulated rents in the $700 to $800 range. This is not only well below market rate, or even the median rent-stabilized apartment of its size, it’s below what it costs to operate it – including insurance which has increased by 70% without any major claims for 25 years, property taxes that keep going up, staff, etc. Landlords have been subsidizing very low-rent units for years. A reset on vacancy rates is required to bring them to a more reasonable level, alongside renovating the apartments.
While these apartments could be refurbished and offered at an affordable rate to help address the housing shortage, HSTPA hinders this option as its current approach discourages investing in individual apartments. How do empty, run-down units benefit tenants seeking quality, safe, and affordable housing? Furthermore, how does this situation affect landlords who could at least see a return on their investment but are now forced to watch their buildings deteriorate due to the lack of incentives to do otherwise?
Aging rent-stabilized buildings need essential infrastructure investments to maintain housing quality. It is crucial to safeguard both our aging buildings and the housing quality for tenants. Due to budget constraints, property owners are postponing Major Capital Improvements (MCIs). Instead of replacements, temporary fixes on boilers and roofs are being done. Electrical systems remain outdated, building-wide plumbing systems are left unchanged, and old windows are not replaced beyond their recommended lifespan. These are just a few examples of the tough decisions landlords face, not out of greed or indifference but due to financial constraints imposed by HSTPA.
Owners of rent-stabilized properties face a tough challenge when it comes to refinancing their mortgages. Even if we secure a loan from a willing bank, we will encounter considerably higher interest rates, posing a major issue for those struggling to meet debt obligations.
Preventing a recurrence of the mass abandonment of regulated multi-unit housing seen in the 1960s and 1970s due to overly strict rent regulations is crucial.
There needs to be a solution for the long-haul. We invest locally, raise our families alongside our tenants, and contribute to our communities as much as we gain from them. However, since HSTPA, it appears that the state has turned its back on us. Despite providing some of the most affordable housing in New York, we are now seen as the antagonists. How many more studies, like the one by The Building and Realty Institute highlighting the unintended consequences of HSTPA on both tenants and landlords, must be published before changes are made to the rent law? If lawmakers don’t act, the tenants whom they aimed to safeguard with HSTPA may end up with fewer housing choices, worsening the housing shortage even further.
