Whatever happens to the housing market now, New York's booming real estate market of 2000 to 2007 means that many more households in New York City cannot afford their homes. Indeed, the explosive rise in the housing market has spurred some hedge and equity funds to speculate on rental buildings that are subject to rent regulation in the hopes that continuing rise in market rents, along with capital improvements and apartment turnover, will make it possible to deregulate many of the homes in those buildings. This has happened even though some of the complexes are at risk of default and even foreclosure. The sale of Stuyvesant Town and Peter Cooper Village was emblematic of housing built for the middle class being marketed to those in much higher income brackets.
As New Yorkers look to the election of a new State Senate and watch with horror as the financial crisis continues to unfold, many housing advocates are pushing for substantial re-regulation of the New York City's rental housing. Of course landlord groups, girding for a possible Democratic takeover of the State Senate, are pushing back.
Republicans in the State Senate have traditionally resisted regulation of the rental market and fought rent stabilization and other similar measures. If the State Senate switches to Democratic control, the Democrats, who tend to support some kind of rent control, would hold both houses of the legislature and the governor's office. Advocates see this as their best chance in decades to strengthen controls.
Where Things Stand
What is the current state of the rental situation in New York City -- and what would happen if the law remains as is? Data available from the New York Housing and Vacancy Survey and information on trends provide some indication.
Various programs that provided some degree of affordability for rental housing in New York undeniably are eroding.
- Vacant rental apartments regulated under the Emergency Tenant Protection Act of 1974, as amended, can now be deregulated if their rents reach $2,000 per month. This provision, which really came into play in the 1990s, can include rent increases (usually 15 percent) for vacancies, for major capital improvements of the building and for substantial renovations of the apartment.
- Apartments where the open market rent would exceed $2,000 and which are occupied by households with incomes above $175,000 also can be deregulated. Indeed, Rep. Charles Rangel could be forced to pay market rent, if his landlord pressed the issue.
- Rental apartments in complexes that converted to co-op or condominium ownership also are vulnerable. The current tenant has rights, but as soon as he or she moves out, the apartment reverts to the sponsor, who then can sell the unit as a co-op or condominium.
- When tax abatement expire, rent subsidies for resident of middle-income Mitchell-Lama rentals and co-ops will run out, possibly driving the cost up to market rates, or at least to rent regulated levels.
- Many apartments that were under the former rent control system have moved to rent regulation, which has less stringent requirements.
- Various tax abatements to encourage renovations and new construction, such as J-51 and 421A, also have expired. When in effect, some of these tax breaks require continued rent regulation.
A Dwindling Pool
The deregulation of apartments continues. Looking at all regulated apartments, including those constructed before 1974 and regulated by the 1974 tenant protection act, those under rent control and Mitchell-Lama rentals, the Housing and Vacancy Survey estimates 1,166,911 apartments were regulated in 2002. By 2005, that figure had declined to 1,132,472 -- a loss of 34,439 apartments. Of the apartments still regulated in 2005, some 109,254 rented for $1,500 or more, putting them in striking distance of deregulation. Of these apartments, 38,927 already were above $2,000 per month. In short, the loss of another 100,000 apartments to rent stabilization was just a matter of time in 2005.
Until data from 2008 Housing and Vacancy Survey is released next spring, no one can reliably estimate the continuing loss of regulated apartments. However, the rent level that triggers removal of a vacant unit from rent stabilization continues to be $2,000, and turnover is widely estimated at about 6 percent per year. Furthermore, many apartments that are stabilized above $1,500 in 2005 could, with proper renovation and capital improvement, see their rents immediately increase to above $2,000. Overall, one could expect that another 50,000 units probably have been lost in the three years since the last Housing and Vacancy Survey.
When the State Legislature comes back into session, after the election of 2008, it will up to the Assembly, the Senate and the governor, to revisit the fate of rent stabilization in New York City. Without some sort of intervention, the end of rent regulation in New York City will be just a matter of time. As it continues to be phased out, the composition of many neighborhoods in New York City, especially in the more desirable areas, becomes more and more segregated with respect to income.
Andrew A. Beveridge has taught sociology at Queens College since 1981, done demographic analyses for the New York Times since 1993, and been in charge of Gotham Gazette's demographics topic page since 2000. The opinions expressed are his alone.Â