Landlords are now going to be so poor, they won’t be able to afford the rent, just like their tenants.
Well, not really. But the real estate industry did get slammed last month by monumental rent regulation reforms in Albany, with state legislators passing an incredible series of changes, curbing how landlords in the city can increase rents on stabilized apartments.
The votes marked the first time in decades that major reforms have been enacted, hugely tilting rent regulations in favor of tenants.
In this month’s cover story, reporters Georgia Kromrei and Kathryn Brenzel break down the fallout — looking at the property owners whose bottom lines will be hit the hardest (namely, those whose business models are built on deregulating apartments), whether landlords will curtail renovations to units (probably) and how likely it will be that investors move their money to other cities (possibly some).
Democratic Socialist state Sen. Julia Salazar campaigned on universal rent control and joined the growing number of elected officials, including state Sen. Michael Gianaris, who vowed to reject donations from the real estate industry.
While the more extreme provisions of universal rent control weren’t passed, Salazar recently told The Real Deal that she has no plans to stop pushing for further radical changes to the rent laws. That includes the so-called “good cause” eviction bill that would prevent tenants in nearly any market-rate apartment from being evicted for not paying an “unconscionable” increase in rent.
“Could it have been worse?” one real estate lobbyist said. “Yes, rents could’ve been socialized.”
In the end, the score was Socialists 1, Capitalists 0. It could’ve also been a horror movie titled “The Last Revenge of Cynthia Nixon,” after the actress who ran for governor as a nightmare candidate for the real estate industry. Though Nixon didn’t win, the coalition of tenant advocates who backed her proved to be the force behind getting an abridged version of the platform that was signed into law.
Of course, beyond the political rhetoric (there was tons of it), there are the real dollars involved. For example, a $1,300-a-month rent-stabilized apartment shows how the numbers pencil out for a landlord trying to raise rents. As noted by reporter Kevin Sun, “under the old rules, our hypothetical landlord could deregulate an average apartment in three years and [after renovations] start asking for market rents of more than $3,000. Under the new rules, the rent is stuck at $1,619.”
Not small potatoes — and one wonders whether the politicians making decisions understand such economics. On the flip side, as one tenant advocate pointed out, “rent-regulated tenants want apartments that are safe, decent and habitable. They don’t need granite countertops and stainless steel appliances.”
Brokers and banks have also been hit, as we detail in stories this month. And the passage of the laws may have toppled John Banks, head of the Real Estate Board of New York, whose departure from the powerful trade group probably would have been our lead story in a normal month. Banks claimed he had already planned to retire.
Elsewhere in the issue, and at the opposite end of the economic spectrum, we take a look at how there are many billionaires buying insanely priced apartments, even amid a general slowdown in the luxury residential market. And following Jeff Bezos’ purchase of an $80 million home last month at 212 Fifth Avenue, we examine that new development and the future next-door neighbors of the world’s richest man.
Finally, don’t miss our ranking of top residential brokers, looking at closed deals in Manhattan, Brooklyn and Queens, which follows our ranking of listing agents last month. This is the first time we’ve covered all three boroughs, as more high-end brokers are branching out geographically. Turns out even high-end buyers can feel squeezed — and agents are adjusting.
“It was getting hard to sell a two-bedroom facing a brick wall in Manhattan for $5 million,” said Ryan Serhant, who ranked near the top of the list. “I might as well sell five $1 million apartments in Brooklyn.”
Enjoy the issue and the summer!