Good: Sweeping reforms set to become law will give thousands of stretched New York families who struggle to pay the rent the chance to breathe a bit easier.
Bad: Over time, the overhaul may so severely distort incentives for landlords and builders that it’ll come back to hurt the very people it’s designed to help.
This is because, in the name of safeguarding the city’s current stock of affordable housing, new laws will extend rigid protections to countless people who don’t need them. Meantime, they are likely to put some small-building landlords in a tight vise, accelerating the deterioration of aging housing stock in need of constant, costly upkeep.
It could’ve been worse. Progressives driving the bus were pressing to totally eliminate landlords’ ability to raise rents to recoup the cost of making building-wide and apartment-specific improvements; instead, they reformed both, as we urged.
Though you can bet a bridge that the drastic adjustment, driving down the allowed annual increase from 6% to 2%, will slow such investments to something close to a screeching halt.
Vacancy decontrol — whereby apartments changing hands exit oversight when they exceed a set threshold, now $2,775 a month — needed repair. A small number of unscrupulous building owners rushed to that relatively low threshold to remove a unit from regulations.
But vacancy decontrol’s total elimination will produce economic perversities. Apartments will see increases regulated by the Rent Guidelines Board even when they creep up to cost, say, $7,500 a month, even when they’re inhabited by billionaires. Meantime, the Legislature shredded rather than strengthening a little-used rule to ensure wealthy folks’ apartments don’t stay regulated. Why?
Preferential rents, whereby building owners choosing to charge below the legal threshold maintain the freedom to hike rents in the next lease, are also getting upended. The rent being charged becomes the new legal rent for that tenant. For the next tenant, it can go back up.
The biggest risk is that regulated units will now be so powerfully constrained, developers will have no incentive to produce more of them, especially with the cost of housing production in this city being what it is.
The biggest risk is that developers will have no financial incentive to produce more affordable units, leaving a growing city hanging.
Gov. Cuomo, up against a June 15 deadline, pledged to sign what the Assembly and Senate agreed to. The towel’s thrown in.