By Shaynon Gramling
Licensed Real Estate Salesperson
The real estate industry in New York City has experienced a major overhaul during the past year. It all began with a proposed bill to add protections for tenants in the city. This was due to the fact that some landlords were abusing laws that allowed them to deregulate apartments, which led to the harassment of their tenants. The actions of these few landlords caused all landlords to look bad in the eyes of the general public, as well as to politicians. As a result, politicians began proposing bills with the intention of protecting tenants. However, this has been producing at least as many unintended consequences as fixes.
During the time leading up to the Tenant Protection Act of 2019, everyone had varying opinions regarding which proposals would actually turn into laws. When the act passed on June 14th of last year, most people, if not everyone involved in NYC real estate, were shocked to see how many of the proposed changes actually went into effect. The list of changes that would drastically impact the business plans of apartment building owners was so vast that many went into panic mode.
The objective of apartment building owners was to make a good return on their investments and to improve the quality of housing. In order to do this, they bought properties that were undermanaged and added value to them through renovations. The laws prior to June 14th allowed investors to make these renovations and cover their cost by raising rents to market-rate. This was a win-win situation because the average investor who did this would make a decent return and the average tenant would live in a nicer apartment. Now that there’s no way to increase rents enough to pay for these renovations, it’s not worth it for investors to put much money into doing so. Some landlords can no longer afford to. This hurts tenants because the number of available high-quality renovated apartments will decline. This lower supply and increased demand will, of course, lead to higher rents on nicer, free-market rent apartments.
Now that owners of rent-regulated apartments are suffering the most severe restrictions they’ve ever had to deal with; politicians are taking aim at free-market apartments. Mayor Bill de Blasio is urging state lawmakers to pass “universal renter protections” stating that tenants of the city’s 900,000 market-rate apartments need to be protected from dramatic rent increases and displacement. He’s calling for a cap of five to seven percent increases, versus the three percent that Senator Julia Salazar proposes in the “good cause” eviction bill. If that bill or anything similar passes, I’m afraid of how adverse the result will be.
There’s a tremendous amount to digest regarding the new rent laws and the additional proposed bills. I work with people who are affected by this law from every angle. I work with owners who are looking to either buy or sell apartment buildings, buyers and sellers of condos and co-ops, and tenants who are looking to rent the apartments that I’m hired by landlords to lease out. I see the impact of the new laws from each perspective and, in general, I don’t think anyone comes out a winner as a result.
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