High Stakes in Housing – Overview of How Rent Regulations Impact Housing Affordability in the Five Burroughs

An issue that has plagued the Five Burroughs for years is whether it is possible to provide sufficient housing for working class New Yorkers and permits available for lower-income and moderate-income New Yorkers to secure quality, affordable housing. Just over two-thirds of New York City’s 3 million housing units are rentals, and 46 percent of those—some 960,000—are rent stabilized.

Collectively, they are home to 2.3 million New Yorkers. Among the poorest 40 percent of city residents, nearly half, live in some form of rent-stabilized housing. Despite the prevalence of rent-stabilized housing, there has been a trend of spiking rent prices to the point that it is becoming extremely difficult for someone of modest means to actually live in New York City.

Change May Be on the Horizon

The rent stabilization laws in New York are up for review and renewal in June 2019. This presents an opportunity for glaring loopholes to be closed or amended by the General Assembly. Examples of problematic loopholes include: vacancy decontrol, vacancy bonuses, preferential rent, and major capital improvements. Tenants advocates have asserted that these loopholes have contribute to the loss of rent-stabilized apartments in New York City, according to Curbed.

Vacancy Decontrol Loophole

Vacancy decontrol enables a landlord to hike the monthly rental rate upon lease renewal for a rent-stabilized apartment based upon the tenant’s annual income. This loophole is available to a landlord who rents out units for at least $2,000 per month. If a tenant makes $250,000 a year or more per year, the hike in rent is allowed upon lease renewal. This issue is exacerbated by another loophole allowing a landlord to increase rent even more if they make modest improvements to the building and claiming large repair expenses. In many instances, the objective of the landlord is to get the monthly rent rate over $2,733.

Why? Because once that threshold is passed, the unit becomes permanently deregulated. Affordable housing advocates have highlighted the fact that this practice is big reason why there has been a net loss of close to 150,000 rent-regulated units in Brooklyn since 1994.

Preferential Rent Hikes

Another concerning practice is where landlords who have offered rent below the legal minimum to suddenly spike the rent up to a market rate when a tenant is up for lease renewal. There is a bill working its way through the State Assembly that would place a cap on this type of increase without ending the practice in its entirety.

Push Back from Landlords

Reforms to rent regulations are not going to occur without a fight. The Rent Stabilization Association (RSA), which represents landlords, assert that monthly rent increases are not some concerted effort to deter middle-class people from living in New York. Instead, the rental hikes are a reflection of the actual cost of maintaining real estate in NYC. Members of the RSA also highlight the fact that keeping rent prices artificially low only encourages them to avoid performing routine maintenance to keep the buildings in livable condition.

They argue that it is much better to have well-maintained rental units at higher prices than letting the units deteriorate.

Housing to Remain Hot-Button Issue in Brooklyn

One of the major concerns with Amazon building its HQ2 facility in Long Island City was a massive spike in rent prices and a lack of affordable housing for current, and new, tenants. The backlash from the local community is one of the reasons why Amazon opted to cancel the New York HQ2 project.

This highlights the fact that affordable housing is going to be a hot-button issue in NYC for the foreseeable future.