Stephen Hedlund

Laws built on the premise that "housing is a human right" come crashing into economic reality in New York City, and no-one has any clue just how bad this could get. Across the city, tens of thousands of units are now sitting empty, because the rents that landlords can charge on rent-regulated apartments sit far below the costs of operating or restoring units. I visited one of these apartments in the Bronx: a three bedroom apartment in a pretty nice neighbourhood with lots of transit-options that could easily fit a family of six. The operating expenses alone (heat, hot water, insurance, garbage collection) would likely be around $1200 / month. But the apartment also needs some work: the floors need to be re-done, walls repainted, the kitchen and bathroom haven’t been restored in decades and need re-doing. That’ll cost a minimum of $60,000 and far more likely exceed $100,000. Which would all make economic sense if the owner could charge a market rate of ~$3000 / month. But instead, the city and state has swooped in and capped the legal rents at $529. Landlords aren’t charities (and even non-profits must at least break even!), so the unit sits vacant. Which is a shame because there is no shortage of individuals and families who would consider the benefit of living there to be worth more than the price they pay. All across the city we are seeing this pattern repeated, apartments are being left empty because of a simple economic calculus. This increases the costs on other, market rate apartments, and makes it far harder to secure housing. Most alarmingly, after 2019, when the state enacted HSTPA — the law that eliminated their ability to reset rents after a unit became vacant — a lot of owners saw the value of their buildings fall precipitously, and therefore found themselves with assets whose values were worth less than the loans they had to repay. The rational thing to do in this case is to hand the keys back to the banks rather than absorbing a, say, $200,000, loss, resulting in the foreclosure of these buildings, which ultimately does nothing to help the tenants either as they fall into worse management. The situation is only going to get worse: maintenance is being deferred, units are falling into disrepair, landlords are abandoning their buildings entirely. It’s only been six years since HSTPA became law, but the city’s housing stock is already deterioriating. Politicians might point to landlords and call them “greedy”, but the situation is entirely their own doing — landlords are responding to the incentives they created. There is, thankfully, a simple solution: the state needs to amend HSTPA to restore the vacancy decontrol. Then, when a tenant enters into a lease on a rent-regulated apartment, their rents will be covered by rent-stabilization. But the incentive to renovate and maintain buildings would also be restored as landlords could recoup the costs after units become vacant. That’s the only way in which New York can stop its housing stock from (literally) falling apart. Latest article in @CityJournal linked below. #NewYorkCity #HousingMarket city-journal.org/article/vac…