Inside New York’s Landmark Deal to Protect Renters – CityLab

Democrats in New York’s state legislature reached a deal on Tuesday that will significantly expand and strengthen rent regulations and tenant protections, laws that are due to expire at the end of this week. Both legislative chambers will vote on the new package before it makes its way to Governor Andrew Cuomo’s desk.

Supporters hail these renter-friendly reforms as “universal rent control,” which will dramatically increase both the depth and reach of tenant protections in towns and cities across the state. The new law would see rent stabilization expand to counties well beyond New York City, put a statewide cap on broker fees and security deposits (at one month’s rent), and grant tenants new protections against eviction. The most significant—and hotly contested—policies will close loopholes that allow landlords to lift housing units out of rent-control restrictions.  

While the universal rent control package negotiated in Albany falls short of meeting their every demand, tenant advocates are declaring a tentative victory. “What we have is a historic opportunity to bring not only an increase in tenant protections, but for the first time in decades, to have the tenants be a part of setting the table for rentals across the state,” says New York State Senator Zellnor Myrie, a universal rent control supporter.

But critics worry that reformers may be at risk of overreaching, writing into law policies that will disincentivize landlords to maintain their properties, leading to disrepair.

For decades, rent reforms have been held at bay by the combined strength of New York City’s powerful real estate lobby and a rogue faction of Senate Democrats known as the Independent Democratic Conference. Many of these renegade senators, who crossed the aisle to caucus with state Republicans, were roundly routed in New York’s fall primary election—a defeat for Cuomo, who relied on this arrangement as a buttress against calls for action from more progressive factions within his party.

Myrie, a freshman senator from Brooklyn who unseated an incumbent from the Independent Democratic Conference, ran explicitly on changing New York rent laws. He is aligned with Housing Justice for All, a campaign led by the statewide tenant coalition, the Upstate-Downstate Housing Alliance, that helped to tilt the state senate toward the left. Myrie says that universal rent control is an answer to the political might of the real estate industry.

“When one side has been winning for decades, and we try to course correct, there are some folks who are going to view that as a major loss for landlords,” Myrie says. “But really, what we’re trying to do is rebalance what has been out of whack for a very long time.”

Lawmakers in Albany adopted several policies long sought by tenants, including the repeal of what’s known as the vacancy bonus, a provision that enables landlords to hike rents by 20 percent when a tenant leaves a rent-controlled apartment. The bill also zaps vacancy decontrol, a provision that lets landlords deregulate units when monthly rents rise above $2,775, and cements preferential rents over the entirety of a tenant’s lease.

“The New York State legislature has taken a tremendous step in righting the ship for tenants after many decades,” says Delsenia Glover, executive director of New York State Tenants & Neighbors, a grassroots tenant organization.

But legislators stopped short of scrapping a part of the code that allows landlords to raise rents when they renovate or invest in maintenance upgrades for buildings, a proposal that drew warnings from both Cuomo and New York Mayor Bill de Blasio. Instead, the cap on annual rent increases that landlords can charge for major building-wide capital improvements will be lowered from 6 percent to 2 percent, while charges for individual apartment improvements, or IAI, will be capped at $15,000 every 15 years.

Those restrictions may be so tight that they effectively constitute vacancy control, a situation in which even empty rental units are held below market rate. Howard Husock, vice president for research and publications at the conservative-leaning Manhattan Institute, warns that vacancy control will lead to the “shabbification” of rental housing.

“The idea that capital investments, major repairs, or upgradings may not be cause for a rent increase is probably the most significant departure in the bill, and the most risky one,” Husock says. “Historically, all over the world, one of the reasons that economists have been very concerned about rent regulation rests on the disincentive it provides for property owners to maintain their buildings.”

He adds, “If you can’t get a return on your investment, you’re less likely to make that investment.”

John Banks, the president for the Real Estate Board of New York, cast the rent reform package in near-apocalyptic terms, saying that the legislature was “consigning hundreds of thousands of tenants to buildings that [will] soon fall into disrepair.”

Critics of the bill also point to rent control as the culprit in striking imbalances across the city. Affluent white residents in tony New York neighborhoods such as the Upper West Side stand to gain the most from steeper rent regulations, according to an analysis of the “Manhattan Discount” by The Wall Street Journal. In working-class neighborhoods, the difference is likely to be minimal. In Manhattan, median regulated rents were 53 percent below median market-rate rents, whereas in Queens, the difference was under 9 percent. The report shows that the top quartile of income earners receive the biggest discount via rent control.

Husock notes that rent-regulated apartments are also under-occupied, with longer leases resulting in lower turnover for the whole New York City ecosystem. And he points to efforts to expand rent control beyond spendy NYC and its suburban counties as evidence for the bill’s ideological motivations: Much of the rest of the state faces starkly different housing challenges.

“It’s particularly darkly amusing that the legislature is extending the right to regulate rents to municipalities in upstate New York. These are some of the most derelict older cities in the country,” Husock says. “They need people to move in, at whatever price. Gentrification in Utica? If only!”

But under the expansion of the Emergency Tenant Protection Act, municipalities must also show vacancy rates under 5 percent before they can qualify for rent regulation, according to Politico. Many upstate cities won’t make the cut. In the Buffalo area, the rental vacancy rate was at 7.3 percent as of 2017, according to the U.S. Department of Housing and Urban Development. Rochester’s overall rental vacancy is also 7.3 percent, although parts of the city are facing surging demand as the market tightens. (The city’s own estimates paint a vacancy problem that is significantly worse.) Albany’s overall rental vacancy rate is 8.0 percent and climbing.

Some features sought by tenants did not make it into the final package, including a bill that would require landlords to show good cause before evicting a tenant as well as an effort to reregulate buildings that had been previously deregulated.

“Closing the loopholes, expanding ETPA, and eliminating the sunset clause, among other changes, is a great win,” Glover says, referring to the fact that current rent laws expire every four years. The new rent reforms, if they pass, will be permanent.  

Husock warns that the laws may come back to haunt lawmakers once the housing market slumps (and there’s evidence that this is already happening). Buildings with a large share of rent-controlled units could be punished under the new dispensation. Owners of apartment buildings in which the vast majority of the units are controlled may face hard choices: If they can’t raise rents, they won’t invest in upgrades, meaning the value of the building will fall. Lenders take a cool view on renewing notes on properties whose value or condition is deteriorating.

Lawmakers are still betting on rent regulation. And not just leftist newcomers: While in the past, Senate Majority Leader Andrea Stewart-Cousins has found herself in the crosshairs of tenants organizations, this week she crowed about a bill that she describes as “the strongest tenant protections in history.” Critics and supporters alike appear to agree about that superlative.

“We are going to have a really big win for the tenants of this state,” Myrie says. “And we are up against the clock.”