"The harmful impact of this legislation will be profound for New York City’s economic future. There are many losers including small property owners, contractors as well as tenants. This legislation will keep rent lower for some, but also significantly diminish housing quality and lead to less tax revenue to pay for vital government services. It will worsen the City's housing crisis. The construction of future affordable units will slow, if not end altogether, the housing vacancy rate will worsen and nothing will have been done to make it easier for those who struggle to pay their rent. There was a path to responsible reform that could have protected tenants as well as owners, jobs and revenue, but Albany chose not to take it." – John H. Banks
What the NEw rent law means for landlords
Q: What parts of the legislation will be most impactful?
A: The changes dictating MCIs (Major Capital Improvements now capped at 2% from 6% and increases disappear after 30 years), IAIs (Individual Apartment Improvements now capped at $15K per 15 years and increases disappear after 30 years) and the 20% vacancy allowance (which was eliminated) will have the greatest impact on the multifamily housing industry for both landlords and tenants.
Q: What affect will that have on landlords in Bushwick?
A: For stabilized building owners, the rules have all changed. Property values will decline. Expenses will outpace rental income putting further downward pressure on building values over time. The overregulation (in my opinion) of stabilized units will put upward pressure on free market or non stabilized units and buildings causing both escalating rents and property values.
Q: What's my advice for affected landlords?
A: From conversations with affected landlords since legislation passed, there appears to be hope that the changes will be overturned or modified in a more conservative manner, so if you fall into that camp, you may want to wait before taking any sudden action such as selling. If you find yourself less inclined to wait, I advise stabilized property owners to consider alternative investments such as selling your existing building and buying in an opportunity zone, which qualifies an investor for attractive capital gains tax exemptions. For landlords who buy a stabilized property in an opportunity zone or decide to hold their stabilized building, I advise that they invest in building systems and materials which have a longer life expectancy or greater efficiency.
Click here to read the full Housing Stability and Tenant Protection Act of 2019 or here for a summary of the changes.