Landlords offer to re-open 20K warehoused apartments*
*If Albany allows a vacancy reset on rents
Landlords have a deal for Albany.
They would fix up and return 20,000 rent-stabilized apartments to the market. In return, lawmakers would give them a way to pay for it — by allowing for a vacancy “reset” on rents.
The Community Housing Improvement Program, which made the pitch Tuesday, says the 20,000 units sit vacant because the 2019 rent law severely limited the rent increases needed to fix them up. An exodus of renters during the pandemic contributed to that total.
The Housing Stability and Tenant Protection Act nixed the 20 percent rent bump allowed when tenants vacate a rent-stabilized apartment, and curtailed rent increases to pay for renovations.
CHIP said because stabilized renters can cling to a below-market-rate unit for decades, by the time they leave it’s often in bad shape. A basic renovation can cost $75,000 or $100,000, owners said.
rnrn“All those vacant units, it’s a black hole.”rnrn
But under the 2019 law, only $15,000 in improvements to an apartment can be recovered via rent increases every 15 years, which works out to $89 per month on top of rent that is often around $1,000. Rather than make an investment guaranteed to lose money, landlords mothball the unit and wait for Albany to change the law.
CHIP said allowing landlords to set a new first rent after a tenant vacates would give owners the ability to fund renovations and put units back on the market. The group also wants to set a new initial rent for vacant units, rather than be limited to the 20 percent increase provided by the old rent law.
“We’re not asking to deregulate these units,” said Jay Martin, executive director of CHIP. “We’re simply asking for the ability of an owner to reset the rent to market rate after a vacancy.”
So-called vacancy bonuses are a common feature in rent control laws elsewhere because they are seen as necessary to maintain the housing stock. But in New York it led to some landlords harassing tenants into leaving, prompting lawmakers to eliminate it in 2019.
To draw lawmakers’ attention to the issue, CHIP launched the site Vacancy NYC and a cross-platform social media campaign to engage “a new type of audience that is increasingly savvy, politically engaged and among the most impacted when it comes to finding affordable housing in New York City.”
Two months ago, rising rents broke records as vacancies fell to their lowest level for any February since 2008. Brokers say workers’ expectation to be back at their desks this spring has driven the demand.
Meanwhile, tenants who snagged multi-month concessions a year ago have been hit with rent hikes as high as $1,000.
Daniel Mishin, CEO of short-term affordable rental company June Homes, said he has seen an influx of Gen Z tenants looking to stay in the city by snagging the firm’s short-stay deals. Mishkin sees the city’s warehoused inventory as an untapped market that would improve affordability.
“All those vacant units, it’s a black hole,” said Mishin. “This is housing that could really help New Yorkers, you know?”
A report by the Rent Guidelines Board last week revealed that in the year after the rent law passed, the city’s stabilized housing stock deteriorated. In 2020, distressed properties — meaning their operating and maintenance costs exceeded their gross income — made up 6.5 percent of the rent-stabilized housing stock, up 1 percentage point from the previous year.
CHIP estimates that, on average, an owner renting a unit for less than $1,500 a month is losing money on operating costs.
If the state gives owners reason to bring the 20,000 warehoused units back online, it would make a small dent in the city’s housing supply needs. A January report by the Real Estate Board of New York found the city needed at least 560,000 more apartments by 2030 to meet demand. Current pipelines will supply just 14 percent of that.
Albany has shown no interest in undoing the major provisions of the rent law, so CHIP’s effort is unlikely to lead to legislation passing before the legislature adjourns for the year in June. But it could start a conversation that gains traction over time. Some investors have purchased rent-stabilized buildings on the hunch that the legislative pendulum may swing the other way.
To date, lawmakers have favored a stick over carrot approach to bringing warehoused apartments online. Two years ago, Assembly member Linda Rosenthal introduced a bill that would penalize landlords who kept units vacant for more than three months. Owners could ask for fees to be waived for uninhabitable apartments.
Correction: This article has been revised to reflect that 20,000 stabilized units, not 200,000, sit vacant and that on average, landlords renting stabilized apartments for less than $1,500 a month are losing money on operating costs. It has also been updated to clarify that CHIP is asking for a vacancy “reset” that would allow owners to set a new first rent.