New Yorkers’ exodus could unravel rent regulation

End of rent emergency possible, but not likely, experts say

TRD New York /
Jun.June 02, 2020 08:30 AM
(iStock)

(iStock)

Rent stabilization has been a dominant force in the city’s real estate for generations, and was cemented in place by the state legislature a year ago. But if the exodus of New Yorkers continues, it could bump the housing vacancy rate up and trigger the end of the controversial policy.

However, it would first have to clear some serious political hurdles.

Since 1974, rent stabilization has depended on a housing emergency, defined in part by an apartment vacancy rate below 5 percent. In 2017 there were 79,000 available rental units in New York City, or 3.63 percent of the total, as determined by the Department of Housing Preservation and Development’s most recent official survey.

The vacancy rate has long been well below the threshold. But reports of New Yorkers leaving town and scenes of an emptied-out city have led some to ponder whether the housing emergency might end.

“If there is a flight from the city … it is not out of the realm of possibility that the vacancy rate can go above the requisite threshold, thereby undermining the statutory basis for rent regulation,” said landlord lawyer Sherwin Belkin, a partner at Belkin Burden Goldman.

On the tenants’ side, Ellen Davidson, a staff attorney at Legal Aid, agreed that it is “theoretically” possible. But, she noted, not before 2022, when the next Housing and Vacancy Survey is expected to be released.

The survey is taken every three years, but is pushed back a year when it coincides with a decennial census, as it does this year.

But what if many of the 420,000 people who left the city between March 1 and May 1 don’t return? If two-thirds left rentals, approximating the city’s average, that’s about 280,000 people.

The key metric on which the rent stabilization law hinges is the percentage of active rental units that are empty. The 3.63 percent in 2017 was some 30,000 units short of the 5 percent mark — housing for roughly 70,000 people. So about 1 in 4 of renters who escaped would have to not return — and their apartments would have to be empty and available when the survey is done next year.

That’s a high bar. Clearly, the spring exodus by itself will not be enough.

What about vacant units not on the market, perhaps because they are being renovated? There were 245,000 in 2017. But they do not count in the calculation.

Even if the vacancy rate were to exceed 5 percent, the rent stabilization law has an escape hatch: State legislators could raise the 5 percent limit — or eliminate the threshold altogether — perhaps citing the economic fallout of Covid-19 as a rationale.

“There’s a good legal argument that what has happened in New York City is the definition of an emergency, and that the laws should be renewed even without the vacancy rate being below 5 percent,” said Davidson.

Real estate attorney Michael Dabah, a founding partner at Stein Adler Dabah Zelkowitz, agreed that elected officials are unlikely to allow their landmark legislation to be dismantled.

“I’m not inclined to believe all that much will change,” said Dabah. “Such a quick reversal strikes me as highly unlikely in the face of the fairly recent shift in momentum.”


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