Landlords try new approach to highlighting vacant units

Community Housing Improvement Program launches Twitter handle @NyVacant

Commercial real estate, politics, rent stabilization, Community Housing Improvement Program, Jay Martin
CHIP’s Jay Martin (Getty)

The previous attempt by New York’s most social media–savvy landlord group to solve the city’s vacant-apartment problem went as far as the Mets in the postseason.

But unlike the baseball team, the Community Housing Improvement Program does not have to wait till next year. It launched another campaign Tuesday.

CHIP’s new Twitter account @NyVacant promises to showcase a decrepit, empty, rent-stabilized unit daily until the New York state legislature passes a law to get them back on the market.

With more than 42,000 such units spread across the city, CHIP could feature a different one each day for the next 115 years.

Read more

Commercial
New York
Rent stabilization complaints piling up at agency
CHIP's Jay Martin (Photo Illustration by Steven Dilakian for The Real Deal with Getty Images)
Commercial
New York
Inflation crushing rent-stabilized landlords: report
Commercial
New York
Real estate lawyers: Proposed rent regs lack legal basis

In April the landlord group proposed a solution that had as much chance of becoming law as New York renaming the state Capitol to honor Donald Trump: CHIP asked that landlords be allowed a one-time rent increase of any amount when units become vacant, after which they would remain rent-stabilized.

The idea was that landlords would use the higher rent to pay for the renovations necessary to return the units to rentable condition. CHIP was trying to simplify the issue, but ignored that lawmakers intentionally abandoned that model when they reformed the rent stabilization law three years ago and have shown no appetite for bringing it back.

Sign Up for the undefined Newsletter

An unknown number of state legislators have told CHIP they are willing to introduce a bill to address the problem, which is that landlords can no longer recover enough money through rent increases to fund repairs and upgrades usually needed after long tenancies. But no lawmakers have publicly embraced the proposal by the group, which expects to unveil a draft bill after the November election or in January.

There has been talk of creating a tax credit to offset the cost of renovations, or a process like that used when rent-controlled apartments switch to rent stabilization. In those cases, landlords can choose an initial rent comparable to local rents, and the first tenant has 90 days to appeal it.

The landlord group’s first tweet on @NyVacant depicted a one-bedroom Jackson Heights apartment recently vacated by a tenant who had been there since 1983 and last paid $890 a month. It showed that with an estimated renovation cost of $85,000 and an initial rent of $973, and factoring in the average operating cost of $997 per month for units in pre-1974 buildings, the landlord would lose $94,720 over 30 years.

The second tweet showed a one-bedroom in Chinatown that last rented for $481 and, if renovated, could rent for $570. But the work would cost $135,000, resulting in a 30-year loss of $289,800, CHIP calculated.

The numbers are off, for several reasons. A bare-minimum renovation would likely cost less than $135,000. And a landlord does not save $997 a month in operating costs by leaving a given unit empty.

By the same token, operating costs might increase more than rents in the future, given the minimal increases typically allowed by the Rent Guidelines Board. CHIP’s calculations conservatively assume costs and rents will rise equally.

Still, the back-of-the-envelope math explains why many of those 42,000 units remain empty 40 months after the rent law was changed. A small number might be vacant because the landlord is waiting to combine them with units next door that become vacant, which does allow for a rent reset, although the state has proposed removing that incentive.

Some tenant advocates, including members of the legislature, believe landlords are forsaking profits to keep units empty as a means of pressuring lawmakers to allow a rent reset. (If so, it has been a costly bluff for landlords.) The tenants’ side would rather leave 42,000 of the nearly 1 million rent-stabilized units empty than revive landlords’ incentive to vacate apartments, which led to well-publicized examples of harassment.