New York City

New York's Progressive Rent Regulations Having the Exact Same Negative Consequence That Skeptics Predicted

New York told landlords they couldn't pass along renovation costs, so landlords stopped doing renovations

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When the New York legislature passed major changes to the state's rent regulations in June 2019, critics warned the new law would reduce investment in, and renovations of, rental properties in New York City. Six months later, those predictions are bearing out.

Bloomberg reported this morning that sales of apartment buildings in the Big Apple fell by 36 percent in 2019, and that the money spent on those sales fell by 40 percent. The prices investors were paying for rent-stabilized units—where allowable rent increases are set by the government and usually capped at around 1 or 2 percent per year—fell by 7 percent.

"The fact that there's no correlation between the amount you put into a building and the amount of rent you can charge has completely shifted investment interest in rent-stabilized buildings," Shimon Shkury, president of the brokerage Ariel Property Advisors, told Bloomberg.

Shkury was referring to provisions of the state's 2019 rent regulations that make it much more difficult to pass along the costs of apartment renovations (such as adding a new oven) and major capital improvements (such as adding a new roof) to tenants.

That law also eliminated landlords' ability to "deregulate" (that is, charge market rates) for rent-stabilized apartments once rents reach certain levels. There are about a million rent-stabilized units in New York City.

In addition to a decline in sales, landlords are reportedly cutting back on the money that they're putting into the buildings that they do own.

According to a January survey conducted by the Community Housing Improvement Program (CHIP)—a trade association representing owners of rent-stabilized buildings in New York City—69 percent of building owners have cut their spending on apartment upgrades by more than 75 percent since the passage of the state's rent regulations. Another 11 percent of the landlords in the survey decreased investments in their properties by more than 50 percent.

The new law's limits on recouping the costs of renovating apartments mean it is often more financially feasible to leave old apartments vacant.

"A big majority of our housing stock of stabilized units have been occupied between 40 and 50 years. These units require up to $100,000 and sometimes more, to complete a gut rehabilitation. You don't need to be a genius to understand it makes no sense to invest that much only to get an $83.00 rent increase," one survey respondent told CHIP.

CHIP, alongside the Rent Stabilization Association, is suing state and city officials over the new regulations.

The Commercial Observer reports that the new rent laws are encouraging small- and mid-sized landlords to exit the market entirely, writing that "many property owners have woken up to a world where their buildings are worth 30 to 50 percent less than they were a year ago."

All of this conforms with predictions made by the Manhattan Institute's Howard Husock, who warned that limiting rent increases would lead to less maintenance and to deterioration of existing rental housing.

"The opposite of gentrification—call it shabbification—would emerge, as city housing stock becomes more and more degraded," Husock wrote last May. "Middle-class and working-class neighborhoods, where rents are often not that high (in some outer-borough neighborhoods, market rents are lower than permitted by law) would be at particular risk."

New York City does have serious housing affordability issues. But much of that can be blamed on the local leaders' failure to allow for enough new housing development to accommodate the city's growth. Rather than issuing market-destroying price regulations, the city authorities should help the city's tenants with zoning reforms that allow more housing construction. In other words, by letting markets work.

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New York City Rent control Housing Policy Regulation

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47 responses to “New York's Progressive Rent Regulations Having the Exact Same Negative Consequence That Skeptics Predicted

  1. HURRRRRRRRRRRRR just build more buildings in New York, there’s plenty of land DURRRRRRRRRRRRRRRRRRRRRRRRRRRR

    1. There is plenty of land. Or rather, obviously there’s not much, or probabklly any, empty land available for building new buildings. But there’s plenty of land with low houses, low rises, partially empty buildings, moderate height buildings, etc that could be developed into new buildings with more capacity.

      If it was profitable do so.

      If the government stopped interfering it would be profitable to add a large amount more capacity, and keep old buildings full and in better shape. But oh well.

      1. Good for Jersey City, where I live. Though New Jersey has plenty of it’s own issues to discourage growth.

    2. Have you heard of skyscrapers?

    3. Good thing up is a direction.

    4. Hurr durr to you, though. Free people can solve that problem…if government gets out of the way.

      Why do you think you can eat perfect 50¢ apples in the middle of winter?

      1. ” Free people can solve that problem…if government gets out of the way.”

        That must explain all that affordable housing, in states without rent controls, for the hoi polloi who do the actual work that creates the wealth in the first place:

        https://www.cnbc.com/2019/06/26/minimum-wage-workers-cannot-afford-2-bedroom-rental-anywhere-in-the-us.html
        Full-time minimum wage workers cannot afford a 2-bedroom rental anywhere in the US . . .

        1. And in New York, where they have rent controls? Or San Francisco, where they have rent controls? Or — but you get the idea

        2. Why exactly should a total fuck up human being, a single person working mind you, be able to afford a TWO bedroom apartment?

          In truth, perhaps they shouldn’t even be able to afford a 1 bedroom apartment. It’s called roommates. If you’re such a slacker that you make minimum wage past your early 20s, then maybe you just have to accept that you have to live with roommates… Or become a little more motivated.

    5. There is plenty of land to be developed. Restricted land use is one of the driving factors in real estate pricing in democrat run cities.

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  2. i suggest they build more houses in New York
    Travels

  3. “”Shkury was referring to provisions of the state’s 2019 rent regulations that make it much more difficult to pass along the costs of apartment renovations (such as adding a new oven) ”

    IIRC, they could add and extra $25 to the rent if they gave you a new oven or fridge. So in 10 years you end up paying $3,000 for a no frills appliance.

    1. Or, when the tenant moves out in year you’ve only recovered 300 dollars of a 600 dollar appliance you now have to replace again

      1. Kevin Smith has a clue how landlording actually works.

        TrickyVic does not.

        1. Mr. JD don’t know shit about TrickyVic.

      2. When the rent is increased due to renovations, the rent does not decrease.

        In NYC how do you figure the landlord is out $300?

        1. You are basing your assessment on the idea that someone spends 10 years in an apartment and doesn’t need any major renovations during that time. Last I checked leases are for 6 months or a year, and landlords do a lot more than just replacing an oven between tenants (and even that’s assuming the tenants were good and didn’t trash the place)

    2. Or, you could make a deal with your landlord: “I’ll buy my own stove, then you won’t have to raise my rent.”
      Or if you start thinking that way, you’ll realize that in 10 years you’ve just paid $120,000 for an apartment that you still don’t own and never will. That’ll throw a real depression on you.

  4. “many property owners have woken up to a world where their buildings are worth 30 to 50 percent less than they were a year ago.”

    And some of them will sell for a huge loss. It’s almost as if this were the original goal of the regulation. Then one day, after the right people own enough of the properties, that darned dumb law will finally be repealed and everyone will rejoice. Except for the landlords who sold for a huge loss.

    1. “after the right people own enough of the properties”

      You must mean only enormous Real Estate companies because small owners are dropping like flies. When enough properties drop in value, REITs will pick them up.

      We are getting a significantly less diverse ownership of NY real estate.

  5. “New York told landlords they couldn’t pass along renovation costs, so landlords stopped doing renovations”

    Now, how could anyone have foreseen that?

    1. Right! Only a someone with a PhD in economics could figure that out! Or anyone who has ever done business in the private sector. The NYC dictators who came up with these regulations must have taken that one of those great course at Harvard that they pay Pocahontas $400,000 a year to teach.

    2. The left comes up with harebrained ideas, that are obviously flawed.
      The right explains the flaws but are ignored, no matter how many times they have been proven correct.
      This is just another example.

  6. The City of Minneapolis is pulling similar shit.

    You cannot properly screan your tenants anymore. Convicted felons and previous evictions cannot be held against applicants.

    Please sign on to be a low income LL, we will give you a break on your property taxes. in exchange, we will dictate how much you can charge for rent and put limitations on the property when you go to sell it. if you are thinking about selling call us first we have a non-profit that would like to buy your building.

    Those are the tactics the city of lakes are using. God damn commie mofo’s.

  7. If you can legislate maximum rents surely you can legislate minimum renovations. New ovens and roofs for everybody!

    1. What about the basic dignity of the doles?
      They should have mandated jacuzzi tubs, marble countertops, and $40,000 commercial ranges!

    2. You can legislate minimum renovations …

      But that’s when everybody bails on owning any regulated apartment buildings. AND it will be a huge barrier to entry for any small sized owners.

  8. Gee, I wonder what will happen when all the new clean energy upgrades are required by law?

    1. The landlord will get screwed.

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  11. Every single progressive policy implemented in these big coastal cities has backfired spectacularly.

  12. Given the current makeup of the Supreme Court, it may be a good time to challenge whether these regulations amount to a “taking” of property without just compensation in violation of the Fifth Amendment.

    1. YES. They need to do that type of thing on a lot of issues post haste.

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  14. “When the New York legislature passed major changes to the state’s rent regulations in June 2019, critics warned the new law would reduce investment in … rental properties in New York City . . . The new law’s limits on recouping the costs of renovating apartments mean it is often more financially feasible to leave old apartments vacant. . . the new rent laws are encouraging small- and mid-sized landlords to exit the market entirely . . .”

    That must explain all that affordable housing, in states without rent controls, for the hoi polloi who do the actual work that creates the wealth in the first place:

    https://www.cnbc.com/2019/06/26/minimum-wage-workers-cannot-afford-2-bedroom-rental-anywhere-in-the-us.html
    Full-time minimum wage workers cannot afford a 2-bedroom rental anywhere in the US . . .

    That also Mighty White and Kreeeeeeshchaaan of you to conveniently pretend to forget to mention that this isn’t a function of rent controls, but a function of 38+ years of trickle-down/supply-side Satanomics, aka Conmanitalism pretending to be Capitalism, waging its genocidal war on shared prosperity and the middle class.

    Getting economic advice from Conservatives is like getting babysitting advice from pedos or getting dating advice from serial rapists.

    1. Just curious as to why it has to be a 2 bedroom apartment? Why can’t it be a studio apartment? Because starting out at minimum wage also isn’t living the life of luxury in a 2 bedroom apartment.

      1. Because he’s a retarded communist fucktard. That’s why.

    2. “Full-time minimum wage workers cannot afford a 2-bedroom rental anywhere in the US . .”

      There are easy solutions: rent a one bedroom or a studio and develop skills that allow you to earn more than minimum wage. The lowest I ever earned as an adult was twice minimum wage.

      Additionally, rent control makes it harder for low income earners to find any apartment.

  15. “. . . “The fact that there’s no correlation between the amount you put into a building and the amount of rent you can charge has completely shifted investment interest in rent-stabilized buildings,” Shimon Shkury, president of the brokerage Ariel Property Advisors, told Bloomberg … apartment renovations (such as adding a new oven) and major capital improvements (such as adding a new roof) to tenants.”

    Replacing the oven and fixing the roof are not “investments” – that just is the bare minimum required for “maintenance.”

    1. “Replacing the oven and fixing the roof are not “investments” – that just is the bare minimum required for “maintenance.””

      Then buy your own place and pay for it yourself.

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  17. Wow, these comments are definitely from people who do not live in NYC.
    The idea that the avg. NYC landlord is now losing money is ridiculous. Even “middle class” landlords have seen the value of their property skyrocket while middle class tenants income has stayed flat.
    This article is fucking ridiculous.

    1. PrinceNYC, you are hopelessly out of touch. Just another liberal blind to reality and ignorant, ignoring or blind to any and all FACTS that do not comport to your miserable, naive “world views”!

  18. When LIBERALS gain control of anything, you can count on it FAILING! Irrational, mindless, ideologues are convinced they can repeal the laws of economics, and prove to be WRONG EVERY TIME.

    Their “Good Intentions” ALWAYS end up producing TERRIBLE RESULTS!

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