Roll back 2019 rent changes

New York real estate lobby pushes to roll back 2019 rent changes with new data

Real estate groups contend the 2019 laws have had a “disastrous” impact on rent-regulated housing.

By JANAKI CHADHA

Five years after Albany Democrats overhauled the state’s rent-stabilization laws, real estate executives are looking to weaken the reforms — bolstered by data they commissioned that validates their case.

New findings from a survey of 781 property owners and managers covering about 242,000 units contend the 2019 changes led to disinvestment and substantial vacancies in rent-stabilized housing. A significant share of respondents said it is “economically infeasible” to invest in needed upgrades to their buildings. The study, obtained by POLITICO, was conducted by consulting firm HR&A Advisors on behalf of the Real Estate Board of New York and the Rent Stabilization Association. While the findings are unsurprising, real estate leaders are using them to fuel their argument against the 5-year-old legislative changes.

The issue is now entering the early stages of negotiations in Albany, amid broader discussions around a wide-ranging deal to tackle an acute housing shortage.

Tenant activists and progressive lawmakers are already pushing back on any attempt to reverse the reforms, which starts out as a tall order in the Democratic-led state Legislature.

“This data indicates that the 2019 rent law changes are having increasingly negative impacts on rent-stabilized apartments and tenants,” James Whelan, president of REBNY, said in a statement. “State lawmakers should follow the data and advance policies that facilitate the rehabilitation of dilapidated apartments in a manner that results in quality affordable housing without recreating the dynamics of vacancy decontrol.”

Real estate groups argue the 5-year-old changes — which eliminated or significantly curtailed avenues to raise rents on the city’s roughly 1 million rent-regulated apartments — have left landlords unable to rehab apartments and rerent them when long-term tenants move out.

The idea — called “self serving” by a leading tenant activist — has gained traction among some moderate Democrats: A bill introduced last year by state Sen. Leroy Comrie and Assemblymember Kenny Burgos would allow rent-stabilized landlords to reset rents at vacancy to facilitate renovations. The current law allows only very limited increases if an owner is making an apartment or building improvement.

Some prominent legislators see Comrie’s introduction as a non-starter and question the industry’s claims.

“They’re saying, let’s turn the rent-regulation system on its head because we have many units that are in dire disrepair — I don’t buy that,” said Assemblymember Linda Rosenthal, chair of the body’s housing committee. “Many of my colleagues oppose that vehemently, so I don’t think it will gain much traction, and it shouldn’t. This is not the time to be trying to undo tenant protections.”

The survey found that for owners with small portfolios that are primarily rent-stabilized — those under 11 units — 25 percent of their apartments are currently vacant.

That statistic is in stark contrast to a city-issued survey that found a vacancy rate of just 1.4 percent in 2023 across rental housing more broadly.

There are also fewer total vacant apartments than there were in 2018, but longer-term vacancies — defined as three years or more — have increased, the REBNY-commissioned survey found. And nearly one-third of respondents cited “economic infeasibility” of unit improvements after a long tenancy as a reason for continued vacancies.

RSA supports the bill introduced by Comrie and Burgos. REBNY is not pushing that specific legislation but said it agrees with its general goals, and sees it as one potential approach.

“There’s no way to adjust rent at vacancy anymore in the rent-stabilized universe,” Basha Gerhards, senior vice president of planning at REBNY, said in reference to landlords’ reported drop in operating income. “So do we allow some form of rent reset in exchange for the apartments being improved and the violations being cleared? It’s a question we are posing.”

State lawmakers are under pressure to take action on housing issues this year as the city struggles with the lowest rental vacancy rate in 50 years and residential construction slows amidst the absence of a key multi-family housing tax break.

The rent reforms approved in 2019 — on the heels of Democrats winning a sizable majority in the state Senate — sent shockwaves through the real estate industry and sounded a death knell for its longstanding hold on the state capitol under Senate Republicans.

After Democrats took control of the chamber, they eliminated “vacancy decontrol” — a mechanism that allowed units to leave the rent-stabilization program when they reached a certain threshold and became vacant. They additionally got rid of a provision that permitted landlords to raise rents by 20 percent when apartments became vacant, and significantly restricted rent increases attached to building and apartment improvements.

Those provisions had led to the loss of tens of thousands of rent-regulated apartments before the 2019 reforms went into effect.

The survey found owners still need to make those upgrades — things like replacing boilers or kitchen appliances — but are pursuing fewer improvements since they no longer pencil out financially. For example, RSA members filed 763 individual apartment improvements in 2023, down from 3,311 in 2019. For individual apartment improvements, the maximum landlords can spend on renovations that would be eligible for a rent increase calculation is $15,000 over 15 years.

“Whether it’s big systems like rewiring or plumbing, or bringing [units] up to code, complying to lead paint regulations — that’s well over $15,000 for an apartment, so there’s just no incentive,” said Frank Ricci, an executive vice president at RSA.

The city’s Department of Housing Preservation and Development estimated last year there are only 2,500 low-cost apartments that are both in need of repairs and have been vacant for a year or more. The agency says that figure is significantly lower now, based on the latest housing and vacancy survey, though it has not yet released a specific number, according to Gothamist. Ricci argued smaller buildings are under-surveyed by the city survey.

“By and large, there are just not that many vacant rent-stabilized apartments in New York City right now,” said Cea Weaver, campaign coordinator for the Housing Justice for All coalition, pointing to HPD’s data. “It’s very politically convenient and self-serving to say, oh we’re in trouble because of the [2019 reforms.] But it’s like no, you’re in trouble because you speculated on buildings that are 100 years old and a pandemic happened and other costs changed.”

Weaver and other progressive activists said they’re nonetheless taking the push very seriously — and reject any attempts to include it in a broader housing agreement, even if that deal includes a longstanding priority known as “good cause” eviction. That measure would effectively limit rent hikes in market-rate apartments.

“For the left, we know what rollbacks have felt like — we experienced that in the bail reform fight,” said Jasmine Gripper, co-director of the Working Families Party. “We’ve been communicating to elected leaders that this is a non-starter.”