Enough Apartments in NYC To Go Around But NY State Legislators Can’t Seem to Get It Right

Good intentions can often produce bad outcomes and, in NYC, we are beginning to see the unwanted ill effects of the June 2019 Housing Stability and Tenant Protection Act (HSTPA).  The law—noble enough in its pursuit to preserve affordable housing—has proven to be an unmitigated disaster.  In June 2019, we at Invictus Property Advisors wrote an article setting out ten (10) key takeaways from what was then newly enacted legislation.  Two items of concern flagged by us were units falling into disrepair and landlords keeping rent stabilized units vacant after tenants departed, describing the latter as a “perverse and unintended consequence of the new rent laws.”  Three years on, many of our gloomy prognostications came to pass, much of it detailed in the Real Deal article.

Of note:

• The cost to gut renovate an apartment vs. allowable rent increases: $60,000-$120,000 vs. $89 increases per month
• The monthly operating costs per unit vs. median monthly rent for a stabilized apartment: $1,548 vs. $1,422
• The number of homeless New Yorkers vs. number of vacant apartments: 60,000 homeless (of which 15,000 are children) vs. 43,000 vacant stabilized units
• The percentage of affordable units (i.e., under $1,500 per month): less than 1% of the housing stock, the lowest in three decades
• The percentage of NY state legislators voluntarily accepting lower pay to share in the pain: zero  

The numbers don’t lie: this law has resulted in disincentives to renovate and rent up very much needed affordable apartments.  A shameful reality is that there are even enough vacant units to house two thirds of NYC’s homeless.  But rather than embrace widely understood market forces and basic economics, legislators blame landlords for creating artificial scarcity (i.e., keeping stabilized units off the market to drive free market rents higher) or painting apartment walls with “gold” paint presumably to inflate renovation costs.  The response from state assembly member Linda Rosenthal (who holds a B.A. in history) was to introduce a bill charging a “warehousing fee” or a penalty on landlords for failing to place tenants in rent stabilized apartments starting three months after a unit becomes vacant.  Unlikely to pass and arguably unconstitutional but demonizing landlords plays well in liberal circles and masks the lack of a real plan.  Ms. Rosenthal and legislators of her ilk are outside their core competence on this issue and should bring experts into the mix—history will treat her well if she does.   

Suzannah Cavanaugh, Sasha Jones. “Vacant, Rent-Stabilized and Locked up: NYC’s Ghost Apartments.” The Real Deal, 1 Sept. 2022, therealdeal.com/magazine/national-july-2022/that-empty-feeling/.