The Real Deal New York

Rent freeze is “abysmal economics”: OPINION

"A shriveled job market is not a crisis that the city’s rent rules were ever meant to address."

June 15, 2014 03:00PM

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From left: Rent Stabilization Association President Joseph Strasburg, a tenant rally in New York and Mayor Bill de Blasio

From left: Rent Stabilization Association President Joseph Strasburg, a tenant rally in New York and Mayor Bill de Blasio

WEEKENDEDITION Bill de Blasio is gearing up for a battle with the Rent Guidelines Board over a rent freeze on New York’s 1 million rent-stabilized apartments. And now landlords who are against the measure have found an ally in the slumlord-shaming pages of the New York Daily News. A recent editorial in the Daily News describes de Blasio’s plan to freeze rents as “perfect politics — and abysmal economics.”

Despite the fact that the majority of rent-stabilized tenants spend more than one-third of their modest incomes on rent, the paper argues that the city’s rent rules were never meant to address a dismal job market.

Instead, the Rent Guidelines Board must assess the costs landlords bear in running their buildings.

“Approved rent hikes have recently hovered around 3 percent annually, far behind the pace of fuel, tax and utility costs. As one example, real estate taxes, usually the biggest cost for landlords, increased 5 percent in the last year,” the editorial reads.

The board is currently weighing an increase between zero and 3 percent for one-year leases and of 0.5 percent to 4.5 percent for two-year leases.

“They only need look at the city’s crumbling public housing projects to see what happens when a landlord gets too little money coming in to keep buildings from falling apart,” the paper writes. [NYDN] Christopher Cameron

  • DTNYC

    First of all, SLUMLORDS should be shamed! What is your problem with the Daily News doing that? Secondly, just because fuel goes up 5% doesn’t means rents should. Landlords are doing quite well. The are no vacant buildings. Prices for rental buildings are still rising. If they were such bad investments, prices would be dropping. I’m not advocating a rent freeze; a small rise is warranted, but that is all. I don’t feel sorry for the landlords. If it’s so bad, they should sell.

    • rent reg tenants are abusive

      Your schadenfreude is showing. Landlords are doing badly if they follow the rules.

      • DTNYC

        Indeed, it is reflected by dropping prices of rental buildings………NOT! If they were bad investments, prices for these buildings would be dropping. They are not. Not a week goes by without an announcement of another portfolio of buildings begin sold for record prices. Again, I’m not advocating for a freeze, but not should there be anything but a slight increase.

        • TRUTH AGAIN

          You’re clearly not someone with financial means or an education in finance. What will happen in 20 years when these buildings need $10M of repairs? No land lord will pay it, they’d rather default. Leaving a mess for the city. Don’t believe me? Well than, get into the real estate industry and start looking at the 1000′s of buildings this already has happened to. Can start with violations at the DHCR. Leave the big boy stuff to the non laymen.

          • DTNYC

            More histrionics! Prices today are at all time highs. PERIOD. If you are correct, we will see prices come down, but for now, investors clearly think it is a good business. p.s. I am NOT advocating for a freeze. Landlords are just crying to get the most that they can and I’m calling BS. I do the same for tenants who think there should never be an increase. That’s just not feasible. This year’s raises should be minimal.

          • Teflon Expat

            Prices are high. But the values will drop beginning this year because a future buyer will have to assume no to very low rent increases. Essentially, this Mayor is Taking without just compensation. Do you know what a Taking is?

          • DTNYC

            Once again, I REPEAT, I am NOT advocating for a freeze. But I have NO sympathy for the chicken little landlords. You bought rent stabilized units. You knew what you were buying. A small increase is perfectly fine.

          • Teflon Expat

            Yes, its true. The buyers knew they were buying into the pseudo-parental care of a brood of parasitic tenants. Numbers like rent aside, the real consequence is the overall political mood. This mayor and his cronies only benefit when the small landlord gives up, can’t invest and forfeits the property to the City and eventually into the hands of the tenants.

          • ben

            “What will happen in 20 years when these buildings need $10M of repairs?”

            The landlords will do them, just as they do them now. Why? Because then they can file for major capital improvements increases, bringing the rents of every rent regulated apartment in the building up by up to 15% a year (for RC tenants) and 6% a year (for RS tenants). Or they will use their vast hoards of cash reserves to just do the repairs without filing for an MCI. But most do.

          • Char4Dew

            I believe you are mistaken. My building is an example: there are tents who are Sr. citizens paying from 8-12 hundred. maybe 20% of the building) However there are many paying from $5500-18,000.K I do not feel r for the landlord at all. If he needs to do repairs he sure can and should.

    • SO TRUE

      You’re uneducated. Look up risk-adjusted returns. People invest based upon a level or return and risk. Reduce the return and increase the risk, and then what? Investment will fall, and that will hurt even more people. Plus, many land lords are mom-and-pop former Dr. or Lawyers who went to school for 6-8 years, paid their dues (and taxes), and now want to retire off their rental investment income. This should be allowed. Retirement from one person shouldn’t be taken away because another didn’t have as much. Equal opportunity, not outcomes. Rent stabilization does nothing for equal opportunity.

      • Daniel

        You sound completely ignorant. No one held a gun to your/their heads making them invest in rent controlled housing! They knew exactly what they were getting into.

        • Teflon Expat

          Not exactly. Unless someone could have seen a vote buying socialist Mayor in office who thinks lowering the value of *certain* buildings is justice.

  • I dare you

    if there is no rent increase, landlords will donate so much money to republican senate candidates around the state that BDB and Cuomo will wish they’d never heard the words “rent freeze”

  • FlipoutNYC

    I don’t see why the go’vt get involved to control the rent increase if they don’t subsidize the rent. Who wants to invest money in the building with negative profits? I see where the mayor is heading. He will get more votes from these tenants later for the second term.

    • HughGass

      The government DOES subsidize the rent by way of receiving lower property taxes. If units in a building were priced fair market, and not at government set price controls, the buildings would be assessed higher.

      • FlipOutNYC

        I don’t think so. If you look up one rent stabilized apartment, you will see the property tax is same as other non regulated apartment.

    • ben

      Rent regulation is not applied by whole building, it’s applied by unit. There are many ways that a unit can become deregulated and as a result, any building built before 1971 (those subject to the law) are typically a mixture of regulated and market units. Most landlords own anywhere from a half dozen to dozens and dozens of buildings, and in my building rents vary from around $800-$2000 (stabilized) and around $1800-$2800 (market). The only people with very very low rents have the senior citizen’s rent increase exemption, which means they are over the age of 65 and make less than $40,000 or so a year, and those tenents’ rents ARE subsidized, and what they pay out of pocket is based upon their incomes.

    • Char4Dew

      Regulated leases came in during the depression. It saved NY and now it can save it from becoming Billionaire row. I rather see a down to earth successful person than a bunch of Billionaires who buy but don’t even live in it much of the time, its just portfolio fodder.

  • Da Truth

    Oh lord, get a grip everyone. This is pure poltics. De Blasio says zero, the landlords cry five percent, and they ultimately meet somewhere in the middle. The same thing happens every year with the city budget. De Blasio is using clever scare tactics to bully the landlords. He KNOWS zero is impossible and will never fly, but it’s a useful battle cry

  • Da Truth

    for when he runs for reelection: “Remember when I lobbied for a ZERO PERCENT INCREASE”?

  • Da Truth

    De Blasio is simply paving the road for reelection with ideas he KNOWS will never pan out, but many will love him for trying. Never trust a politician, no matter how “progressive” he claims to be. Touche Mr. Mayor.

  • Char4Dew

    I am not a Republican, and since Bush I actually despise what they stand for. While rent freeze sound great. I would be far more upset if the Republicans gain any ground in NYS.
    NY belongs to the Dems. and I wish for it to stay that way.

  • Char4Dew

    YES it is the Billionaire developer with a large portfolio that does not feel the tax. It is the owner of a couple of buildings that does feel the tax.

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