Collateral damage? Real estate sounds alarm on rent regs’ impact on condos, 421a
The change impact the tax break and rules around condo conversions
Changes to the rent regulation laws might’ve eventually driven some landlords to go condo or co-op. That is, if proposed legislation to renew the laws didn’t make such conversions more difficult.
Part of the rent bill changes rules around rental to condo conversions, specifically in relation to how many existing renters must buy into the building before a multifamily building can go condo. Under the new bill, eviction plans — which allow landlords to evict tenants if 51 percent of existing renters buy into their building — would be eliminated. Instead, landlords would have to turn to non-eviction plans (meaning that tenants either leave on their own or when their leases are up), which would require 51 percent of the tenants to purchase their units before the landlord could move forward with a condo conversion. The current law requires only 15 percent under such plans.
Attorney Alvin Schein said the measure will mean the “end condo conversions in existing buildings.”
“It’s a taking without just compensation,” he said. “I don’t see what the justifiable police power to do that is.”
Francis Greenburger, whose company Time Equities specializes in condo conversions, said eviction plans are rare but the changes to non-eviction plans will halt conversions and, as a result, reduce tax revenue collected in the city.
“It’s like whatever politicians who are driving the bus have amnesia,” Greenburger said. “The city’s vitality and the city’s finances are based on the real estate taxes.”
Greenburger called the broader changes to rent regulation reform, including the elimination of vacancy decontrol and the reform of programs that allow landlords to increase rents on regulated units through renovations, “a complete disaster.”
“They are taking the golden goose and strangling it,” he said.
Senate Housing Committee Chair Brian Kavanagh, a Democrat, said the changes to condo conversion rules means more tenants have a say in what happens in their building and will perhaps help curb conversions of rent stabilized buildings into condos.
Another consequence of the proposed changes to the rent laws is the impact on the tax break 421a, renamed Affordable New York in 2017. With the elimination of vacancy decontrol — a mechanism in which landlords can turn an apartment market-rate if the unit is vacant and the rent exceeds $2,775 — landlords can’t deregulate units in buildings receiving 421a until the tax break expires. When the state renewed and changed 421a in 2017, the ability to use vacancy decontrol in buildings receiving the tax break was added.
Kavanagh said the language could be changed sometime in the future, though not before Friday’s expected vote.
“It was not our intent to have market-rate units regulated by the bill that we’ve printed,” he said. “I will support correcting that if necessary.”
The real estate industry has long argued that 421a is essential to constructing rental housing in the city. Blaine Schwadel, of Rosenberg & Estis, noted that the change undermines the compromise the real estate industry reached with construction unions over wages paid on certain projects — $60 an hour for large projects south of 96th Street in Manhattan and $45 an hour for projects on the Brooklyn or Queens waterfronts — receiving 421a.
“What good is $60 an hour if no one’s building?” he said. “I think it’s going to change the calculation and possibly stop some projects from going forward.”