What Cuomo's New Rent Control Laws Could Cause:

[Prosay]

Will things get THiS bad?  Probably not, but you never know.  What you read in the story below is what generally happened to the landlords in the 1970s, creating the "Fort Apache" and "War Years" days:

wsj.com
Opinion | How to Kill a Housing Market
Joshua Stein
5-6 minutes

New York Gov. Andrew Cuomo signed a law in June expanding the state’s damaging and counterproductive rent regulations. Driven by tenant-rights activists who want to keep rents low for the minority of New Yorkers who live in rent-stabilized apartments, the law targets what activists call a “loophole” allowing property owners to raise rents—potentially to market levels—when they make major capital improvements to their buildings or to individual apartments.

In response to the new law, New York property owners immediately began making decisions that, when played out across tens of thousands of apartments, will add up to a disaster for everyone—not only landlords.

I spoke with one of those landlords over breakfast not long ago. He owns a medium-size portfolio of older buildings in middle- and lower-middle-class New York neighborhoods. Among his properties is a large building in northern Manhattan. For more than 40 years, one of the building’s apartments—a two-bedroom—was occupied by a tenant paying about $800 a month. That barely covered the apartment’s share of the building’s operating costs and ever-rising taxes, water, and sewer charges. The apartment would be worth about $1,800 a month on the free market, if offered in good condition.

The tenant recently died. After four decades of wear and tear, the apartment needs some work. Long-term tenants of this type typically don’t let owners into their apartments to do nonemergency repairs. They don’t like the disruption.

Before the new law, the vacancy would have entitled my friend the landlord to a “vacancy-bonus increase” of about 20% a month, about $160. Then for every $15,000 spent on improvements, he could have raised the rent permanently by an additional $250 a month. That’s a good return on incremental investment.

A bathroom upgrade costs about $10,000 and a kitchen about $15,000. My friend could have invested another $10,000 or so to repair damage, replace doors and finishes, and upgrade electrical circuits. Those investments could have brought the rent to about $1,700. The apartment’s next tenant could have moved into an improved, not fancy, two-bedroom with a somewhat below-market lease, still protected from increases by rent stabilization.

The new law ensures that won’t happen. It gives property owners no vacancy-bonus increase. For every $15,000 my friend spends on improvements, he can raise the rent by only $83.33 a month. Even that shrunken rent increase will go away after 30 years. If he makes any investment in the apartment exceeding $15,000 in any 15-year period, it will be money he isn’t legally allowed to recoup. He won’t be allowed to raise the rent further. Whoever lucks into that apartment will pay only about $900 a month, half the market rate.

My landlord friend could rent the two-bedroom to a family willing to accept the apartment nearly as is. But if one family member leaves, another would have a “right of succession” and be entitled to stay at the same rent. So a string of family members would probably stay there forever at around $900 a month, the rent rising ever so gradually over time while the building’s maintenance costs and tax bills rise faster. Eventually, the new tenants will almost certainly complain about the apartment’s subpar condition, which will require the time and attention of building management and city agencies.

Here come the unintended consequences: My friend now says he won’t invest a penny in the apartment, because doing so makes no economic sense. Instead, he plans to hold it vacant and wait for better days. Maybe Albany will figure out it made a huge mistake and reverse course. Maybe the courts will recognize that rent regulation represents a taking of private property without compensation and violates the Constitution. Maybe my landlord friend will accumulate adjacent vacant apartments and combine or reconfigure them (**A loosing proposition, BTW....!)

For now, though, a perfectly good Manhattan apartment stays empty.

If other property owners see things the way my friend does—and simple arithmetic suggests they will—New York’s new rent-regulation law will decrease rather than increase the number of affordable apartments available in the city. Tens of thousands of New Yorkers would gladly rent my friend’s two-bedroom for $1,700 a month. Mr. Cuomo and the Democrats who run Albany won’t let them.

As building values drop, producing loan defaults and foreclosures, real-estate tax revenue will also plummet. Construction workers will feel the squeeze too, as property owners elect not to invest in their buildings. But the true victims will be those who rent (or want to) in unregulated buildings, who will find it harder than ever to find an affordable apartment.

Mr. Stein is a commercial real estate attorney whose clients include owners of rent-regulated buildings.

[Prosay]

nydailynews.com
Why we’re fighting rent laws in court
Jay Martin, Joseph Strasburg

4-5 minutes

Martin is the executive director of the Community Housing Improvement Program. Strasburg is the president of the Rent Stabilization Association.

One of the miracles of New York is the strong backbone of community small building owners have built across the city over the past few decades. These are people who live in the communities where they own buildings. They know their tenants by their first name. They shop in local stores. They are the anchors of their neighborhoods.

Our organizations’ decision to go to court over New York’s Rent Stabilization Law (RSL) was to protect these small property owners whose very survival and financial lives are in jeopardy because of a regulatory scheme that, while being unlawful and inefficient, has also actually been exacerbating the affordable housing crisis for decades.

The RSL was enacted in 1969 to help address a housing emergency and has been reauthorized and revised every two years since. By definition, an emergency can’t last for 50 years, making the premise of the law faulty to being with.

Further, despite continued reauthorizations, including this June’s expansion of the law, the RSL has never in over a half century addressed the problem it was enacted to fix.

The law is supposed to provide affordable housing to those who can’t afford it, help with New York City’s housing crisis and promote socioeconomic and racial diversity in the city.

It achieves exactly none of those goals and prevents construction of new apartments and the improvement of existing apartments. Worse, it does not in any way target its relief to low-income populations.

“Landlord” has become an epithet in the pitched political battles being fought in our hyper-partisan era. But the simple fact is that there are thousands of small building owners across the city struggling to get by. Owners who are trying to provide quality affordable housing to their tenants, but are facing financial devastation because of a fatally flawed regulatory system that is easily exploitable.

Take the case of one of our members who inherited tenants in two one-bedroom rent-stabilized apartments when he bought the building. The two tenants in two separate apartments are middle to upper-class professionals. They also happen to be married and recently bought an apartment together that cost well over a million dollars. Now they claim their child was raised in both apartments and should be able to lay claim to both.

The owner will never be able to recover the money he spent to bring his building up to code because of these two apartments. Worse, the modest rents barely cover the property taxes. And with no abatements, the taxes and operating costs will soon exceed the rents. In most situations, the costs will be borne by the other tenants in the buildings — their own neighbors. It’s a precarious situation for everyone, one that’s echoed across the five boroughs.

Stories like this from thousands of small owners across the city are why we went to court. Owning a building in New York is already extremely costly: taxes, water and sewer, and routine maintenance. People don’t realize that many owners are struggling just to get by.

Countless smaller property owners, many of whom speak English as a second language, often work day jobs to cover their costs and return to their buildings each night to sweep halls, maintain boilers, collect garbage, shovel sidewalks — all the work required to take care of their tenants.

It’s time to fix a broken system — time to remove the barriers preventing landlords from running their businesses. Tenants deserve access to the high-quality, affordable apartments that the RSL is keeping from them. We filed suit to halt the deprivation of the constitutional rights of small property owners, and force reform that will result in increased development of rental properties and alleviate New York’s constrained housing market.

Our leaders have failed everyone. Our lawsuit is the only way to guarantee that the city and state adopt a fair and efficient means of providing housing to those most in need.

[terry33]

Pro say, you’re always posting pro landlord articles. Why? Are You or your family landlords?
I my experience in nyc, landlords, even of high class buildings are thieves and schmucks. They always fit the stereotype of being greedy, sneaky scumbags.

As for you lamenting the end of the old apt decontrol law, are you aware that law guaranteed owners a 20% return a year, FOREVER, on money invested to improve each apt?
for example, that would be $3000 extra a year for each $15K invested. A guaranteed 20% a year? Do you realize how terrific that is? The best hedge funds on earth don’t make those kinds of returns.

Fvck landlords.

[Prosay]

That's because, in your limited understanding of business, especially in NYC, and, more than likely, never knew the small landlords in the city, nor, even more likely, didn't experience what happened FOR THE SAME REASONS MENTIONED HERE in the Bronx circa 1970s, you think that EVERY landlord is the equivalent to, or the same as, Donald Trump.  That is not so.

There was a term which was used in those "Fort Apache" days in the Bronx: "The Work is Moving Up..." and the genesis of that was that you could actually see the "work" moving, from the 40 Pct, into the 42 and 41 Pcts. (long before the Cross Bronx Expressway was built, BTW), and then west into the 48 and 44. Landlords would show up at serious crimes and fires from their homes in what was then better neighborhoods of the Bronx (Throgg's Neck, Arthur Ave., Riverdale, and what is now the 49 Pct....NOT 5th Ave and 57th St) , and talking to them, and listening to them yell at their complaining "tenants" saying, "Yeah, I come down From Astor Ave. and throw my garbage in the air shafts and back yards, I pull out the plumbing, I plug in all my electrical appliances and burn out fuses and wiring...."  For many of those landlords, that building and a couple of others were their only source of family income, all literally going up in flames. Fire insurance companies had stopped writing policies already.

They'd tell you, out of desperation, that this was the "last time" they were coming down to their building, not just for fires, but FOR GOOD.  They'd walk away from it rather than have to continue with the bullshit from the government-subsidized tenants and the Lindsay Administration, and the continued loss of money.

Then, the next time you had a run into one of those shithouses, there were signs posted, "This property is under the control of the City of New York."

You don't have to be "pro-landlord" to see history repeating itself.  And all the political "chemistry" seems to be the same today.

BTW...that "20% profit" was guaranteed to those landlords in those pictures above by the city during rent-control hearings too. Unfortunately, what the rent control board didn't tell the landlords was that they may have to dip into that "profit" to pay for the damages and emergency repairs over and above the normal "wear and tear" their buildings would have over the years, damage and emergency repairs which were a daily occurrence.

With all that said, we need only look at how the city's Housing Authority, despite having a LOT more resources than private landlords, CANNOT keep up with "damage and emergency repairs" themselves, dealing with the same kind of "tenants."

[terry33]

Typical long-winded blabbing. But, of course, you never got around to answering the question. So you or your family DOES own rental property or you work for a landlord. Explains everything.

[Prosay]

Interesting reply on your part, Terry, to which I answer the same way I did for someone else on Sept.25:

lerant.proboards.com/post/135032/thread

Can you contribute something contrary to what I wrote above?  Even from personal knowledge?

No?

Well, then, badmouth the poster.

Just like the Stalinists are doing to Trump.

[Pressure Point Cop]

Who cares about what Prosay has or doesn’t have.

Let’s talk about Little Mario.

Cuomo doesn’t do anything unless there is a payoff for him. I’m sure that both Fredo and he are very heavily invested in real estate.

I’m sure that his idea is to drive RE value down and then go all in.