In April, a landlord group estimated that state law had rendered 20,000 rent-stabilized units uninhabitable. By May, city data showed nearly 43,000 potentially rentable apartments were vacant.
As The Real Deal reported this summer, landlords and tenant groups are split over who is to blame. What’s clear is there are about as many vacant, rent-stabilized apartments as New Yorkers sleeping in shelters on any given night.
The Community Housing Improvement Program and its landlord members have argued that a June 2019 state law made renting the warehoused units a money-losing proposition for owners. They say apartments often need substantial renovations following long tenancies, but the law does not allow them to recover those costs through rent increases.
One landlord estimated a single renovation could run $70,000 to $120,000. The rent law allows owners to recoup $15,000 in repair costs over 15 years, while base rents are often less than operating costs.
Most of the city’s stabilized units rent for well below market rate: The median stabilized monthly rent in 2020 was $1,280. So, landlords aren’t willing to finance repairs that won’t eventually pay for themselves.
“Many of the apartments that turned over during Covid had legal rents below $1,000 a month and the prior tenant was there for 50-plus years, so the apartment needs a ton of work,” said Zachary Kerry, whose portfolio spans 1,000 units in Brooklyn.
“Because I can’t reinvest into that apartment and capture the cost of that investment, it’s just impossible to re-rent that unit,” he added.
Tenant groups, including the Coalition to End Apartment Warehousing, claim landlords are inflating the cost of repairs to create false scarcity and pressure Albany to roll back the rent laws, or hoping to rent them at free-market rates by combining them with another unit or persuading the Supreme Court to rule the rent law unconstitutional.
A common refrain is that many warehoused units just need a fresh coat of paint and a new refrigerator, but owners say lead and asbestos removal and bringing an apartment up to code is often necessary and costs tens of thousands of dollars. Most of the city’s 858,000 rent-stabilized units are in pre-1974 buildings in Manhattan, Brooklyn and the Bronx.
But the City noted that the memo pegs the median rent for vacant units at $1,912, versus $1,280 for all rent-stabilized units, a sign that owners of unused units had a better shot at turning a profit than they let on.
However, that discrepancy could be rooted in the higher rents that 421a units fetch. Multifamily buildings constructed under the now-expired tax break had to set aside some or all units as rent-stabilized, at least until the 35-year benefit runs out.
The median rent for a 421a unit last year was $3,364.
Still, groups such as the Community Service Society insist that landlords are withholding stabilized housing in an act of political ransom, the City reported.
Both sides are asking the state to pass legislation next year to bring units back online, but tenant advocates don’t want a change that results in substantial rent increases.
This spring, CHIP asked the legislature for a rent reset once a tenant vacates an apartment. The group argued if owners could bump the rent to a market price, then keep the unit stabilized, it would be able to fund repairs and rent more units.
Meanwhile, Assemblymember Linda Rosenthal’s End Warehousing Act would fine landlords who hold apartments vacant for more than three months. That money would fund vouchers for homeless people. The bill has not gained traction.
City Councilmember Gale Brewer has proposed a bill that would require the registration and inspection of vacant units by the city’s Department of Housing Preservation and Development. The measure would make unit-level warehousing data available on the city’s Open Data portal.