On January 3, New York legislators open up the 2024 session and there is a lot at stake. There is a pending showdown between developers, landlords, and real estate investors on the one side and tenant advocacy groups on the other. If Governor Hochul wants a deal allowing for multifamily development to resume, she may have to concede the passage of “good cause” eviction at the state level. Such a deal would be a Pyrrhic victory with tremendous cost to the greater housing sector in New York City.
What is Good Cause Eviction?
In most US communities, landlords can hike rents, evict tenants through the courts, or simply not renew leases. As a result, millions of Americans lose their homes each year or deal with threats of housing loss. And this is no small concern. Eviction can have serious and far-reaching harms for individuals and families, including immediate homelessness, housing instability, loss of belongings, financial hardship, and disruption of education. It is well-documented that the stress of losing one’s home can lead to anxiety, depression, and even suicide. But is good cause eviction the panacea to all these woes and should landlords be the ones subsidizing free market rents?
Generally speaking, “good cause” eviction legislation prohibits landlords from evicting tenants for reasons other than good or just cause i.e., being a nuisance, damaging property, or consistent non-payment of rent. Fair enough, but the controversy arises with legislative language that places limits on rent increases despite the free market status of the apartments. In states with “good cause” eviction, rent increases are either capped at a specified limit (e.g., 7%) or, in some cases, the language is more ambiguous disallowing “unconscionable” increases. The latter (applicable in NJ) lacks legislative bite and generally doesn’t curtail the number of evictions. In such jurisdictions, landlords tend to increase rents at their discretion without running afoul of the law. Tenants who can’t or won’t pay the increased rent are booted from their apartments.
Local Jurisdictions in NY Tried Good Cause Evictions Previously
In July 2021, lawmakers in the city of Albany approved “good cause” eviction at the local level, and other cities—Kingston, Newburgh, Poughkeepsie, and Beacon—followed suit a few months later. The laws capped rent increases at 5%, declaring anything in excess of that would be “unconscionable.” It didn’t last, however, as courts ruled these laws violated owners’ state property rights.
But the reprieve for landlords may be short-lived. The Democrats—who have a supermajority in New York State’s Senate and Assembly—are licking their chops as they want “good cause” at the state level and the circumstances may be just right for it to happen. Governor Hochul needs a win and pressure is mounting to jumpstart multifamily construction projects which seems to only be possible with a re-launch of the 421a tax benefits. NY State Senator, Brian Kavanagh, confirmed as much indicating that many of his colleagues are not willing to act on 421a without passing a version of “good cause” eviction. Sounds like quid pro quo but what will NY’s “good cause” eviction look like?
Good Cause Eviction is Catching on Across the Country
State-level “good cause” measures have been passed recently in California, Oregon, and Washington State. Legislators in Colorado, Connecticut, and Maryland have taken up the idea this year as well. “Good cause” has existed in New Jersey since 1974 but, as previously mentioned, it hasn’t had much impact on capping free market rents or in decreasing the number of evictions. In 2019, California passed AB1482, the Tenant Protection Act of 2019, which established statewide rent control. Specifically, rent increases are capped at 5% plus the change in the cost of living, or 10%, whichever is lower. To illustrate, in San Diego where the CPI increased by 4.1% from last year, landlords can increase rents in that county by 9.1% (i.e., 5% plus 4.1%). To the extent more stringent laws are already in place at the local level in California, then those laws trump AB1482.
New York is—perhaps unsurprisingly—looking to be more aggressive than California. Powerful Democrats, including Alexandria Ocasio-Cortez, Jerry Nadler, and Hakeem Jeffries, have named “good cause” eviction a top legislative priority. The bill, if passed, would bar rent increases that exceed 3% of the previous rental amount, or 1.5 times CPI, whichever is higher.
According to the Bureau of Labor Statistics, the CPI increased by 3.5% in New York. The way the math typically works, there would be little difference in the permitted rental increases in New York for free market and rent stabilized apartments. It is no wonder then that “good cause” eviction is often referred to as “universal rent control.” Unlike in California, New York would impose rental increases on new and future, as well as, old housing stock.
The Potential Impact of Good Cause Eviction
Landlord groups largely argue “good cause” eviction rules will slow down much needed new construction and hurt developers’ ability to get financing to complete their projects. Many in this camp also point out that there are already “incredibly strong tenant protections” in place and, if anything, the state should look to expand housing vouchers and legal representation for low income New Yorkers.
Supporters of “good cause” protections say the concerns of the real estate industry are nothing more than fear-mongering. Peter Hepburn, a sociologist at Rutgers University-Newark and an analyst at Princeton’s Eviction Lab, pointed to a “thriving rental market in New Jersey,” noting that “it has not collapsed by any stretch of the imagination.” That’s probably true but an incomplete assessment at best. New Jersey doesn’t cap free market rental increases the way New York is proposing to do. It is reasonable to believe that the rental caps proposed under the NY version of the law will have a chilling effect on construction projects and the ability to finance them. Land values will inevitably fall prompting owners to wait for a better legislative backdrop before selling or developing the land.
New York Senator Julia Salazar, who is leading the charge for “good cause” legislation in New York, said she would be concerned “if ‘good cause’ were in fact [an] impediment [to building]” noting New Jersey and Oregon as cases in point. But this is political theater of course with a heavy dose of hocus pocus and misdirection. New Jersey isn’t an appropriate comparison and Oregon only recently passed “just cause” eviction legislation in 2019 (and later updated the rules in 2023). The impact of Oregon’s law on new construction is simply too early to assess. Salazar claims that opposition to her bill is largely from those “who want to exploit the need people have to be housed.” That’s an outlandish claim that defies logic: developers are itching, practically begging, to build in New York. But not at an economic loss.
The horse trade of resurrecting 421a in exchange for “good cause” eviction is a bad one. Tax incentives alone won’t convince owners to build projects that are economically doomed the moment they are completed. Maybe the result of such a bargain is a city dotted with an overwhelming number of housing blocks reminiscent of the architectural pizazz of your 1970s run-of-the-mill NYC housing project.
Conclusion
Make no mistake: the “good cause” rules proposed by New York would be a full embrace of “universal rent control” across the state, including New York City. The rental landscape would include approximately one million apartments regulated under the HSTPA rules enacted in 2019 and the remaining two million free market units under “good cause” eviction at approximately 3%-5% annual rental increases. In other words, rent stabilization and “good cause” eviction would be a distinction without a difference.
New York City is not Poughkeepsie, Salem (Oregon), or Newark. The city’s economy is larger than that of South Korea and Australia and getting this wrong could prove devastating. The housing shortage, despite Julia Salazar’s assured proclamations, would be exacerbated and you can expect the dilapidated state of many rent stabilized buildings to further play out across free market properties. The incentive to maintain and upkeep rent stabilized buildings evaporated the moment HSTPA became law and anyone in the commercial real estate space knows this.
Website Sources: Cohen, R. M. (2023, May 1). The fight for “good cause” housing laws to prevent renter evictions. Vox. https://www.vox.com/policy/2023/5/1/23697209/landlords-tenants-good-cause-just-cause-eviction-housing Effect of “Just Cause” Eviction Ordinances on Eviction in Four California Cities. (n.d.). Journal of Public and International Affairs. https://jpia.princeton.edu/news/effect-just-cause-eviction-ordinances-eviction-four-california-cities Good Cause Eviction Bill That Would Impact Hotels Being Pushed Through New York Legislature | Insights | Holland & Knight. (n.d.). https://www.hklaw.com/en/insights/publications/2023/04/good-cause-eviction-bill-that-would-impact-hotels-being-pushed-through Chang, C. (2023, March 30). Good-Cause Eviction Keeps Dying in Court. Curbed. https://www.curbed.com/2023/03/good-cause-eviction-new-york-courts-losing.html Consumer Price Index, New York-Newark-Jersey City — November 2023 : Northeast Information Office : U.S. Bureau of Labor Statistics. (2023, December 12). https://www.bls.gov/regions/northeast/news-release/consumerpriceindex_newyork.htm#:~:text=Over%20the%20last%2012%20months,4.0%20percent%20over%20the%20year
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