It’s Time for NYC’s Real Estate Industry to Take Back the Narrative

Like an elite Navy Seal team toiling under the cover of darkness, members of the NY State Assembly reconvened on Tuesday, June 20, 2023, to wrap up some unfinished business. That unfinished business included passing several real estate-related matters that will impact owners and tenants alike albeit the impact will be immediate for the former and delayed for the latter.

One of the bills addresses legal rents for so-called “Frankenstein” apartments that involve either the merging or sub-dividing of rent-stabilized apartments. Rather than charging a “first rent,” owners must keep rents for any newly formed apartment(s) at the same aggregate amount previously being charged. Other bills passed are designed to further restrict landlords (i.e., impediments on de-regulating apartments through “substantial rehabilitation,” more cumbersome rules involving record retention/rent registration, and imposing a more punitive definition of fraud on property owners). All that’s left is for Governor Hochul to sign these into law and, if she does, no doubt lawsuits contesting these new laws will follow but the damage will be done. Though lawmakers say they are merely seeking to clarify the 2019 rent law and its application going forward, the policies seem vindictive and ultimately self-defeating, making the much-needed increase in affordable housing for millions of New Yorkers a pipedream. Expect the 60,000 rent-stabilized apartments currently being warehoused by owners to grow substantially. With onerous DHCR look-back periods and retention record requirements, tenants have been armed for battle and incentivized to question their current rents (even those they have been paying for years). Tenant-initiated lawsuits for fraud and overcharges will rise, arrears will climb, and deferred maintenance and much-needed building capex will be shelved. Chaos will ensue but at least Albany will have its Pyrrhic victory. 

We can blame those lawmakers in Albany pushing this through (and we should as it is short-sighted and bad policy) but like an erratic kite with no direction, legislators seem to move in whatever direction the current political winds take them. We know that and, so, to some extent, NYC’s real estate industry shares in some of the blame for these newly passed bills. The industry’s stakeholders have lost control of the narrative and failed to convince average New Yorkers of their importance and the value proposition they bring to the table. The focus should be on winning the hearts and minds of ordinary New Yorkers. Take back the narrative.