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NYC rent board weighs landlord costs and rent increases
By
David Brand
Published Mar 30, 2023
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By
David Brand
Published Mar 30, 2023
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Average landlord costs are up and revenue is down across New York City’s 1 million rent-stabilized apartments, according to the panel that sets rent increases — kicking off the heated annual debate over rent levels on Thursday.
A report compiled by staff at the Rent Guidelines Board found that average costs rose and profits decreased for owners of buildings with rent-stabilized units, driven mainly by dramatic changes in areas of Manhattan south of Harlem.
The yearly “Income and Expense” study analyzes the amount of money that landlords spend and earn on buildings that include rent-stabilized apartments and informs decision-making by the nine-member panel of mayoral appointees.
The board also weighs input from New Yorkers who testify at a series of public hearings to determine a percentage increase, or occasional freeze, on legal regulated rents. Last year, the board raised rents by 3.25%, the largest hike since 2013. Under Mayor Bill de Blasio, the board voted to freeze rents three times.
This year’s analysis relies on data reported by landlords of around 15,000 buildings with more than 600,000 units from 2021, the second year of the pandemic.
The report found that owners earned an average of $1,667 per apartment per month while spending an average of $1,091 on operating costs, including taxes, insurance and labor. That left about $576 in profit per apartment every month — lower than the previous year. Landlord groups say a big chunk of that revenue goes to mortgages.
Costs and incomes varied significantly across New York City. The largest decrease in profits occurred in so-called “Core Manhattan” south of West 110th Street and East 96th Street, which experienced an exodus of wealthier renters during the pandemic, who left behind empty units through much of 2021.
Citywide, rents averaged $1,495 per month. The price ranged from $2,356 per month in “Core Manhattan” to $1,041 in Staten Island.
The board found that income outpaced expenses in about 91% of buildings across New York City, with the remainder considered “distressed” — the highest number of underwater properties since the fallout of the financial crisis in 2009. Nearly 60% of the distressed properties are in Manhattan, where some large rent-stabilized landlords have begun defaulting on their mortgage loans.
The data sparked debate among board members, including four who represent the interests of owners or tenants, over the effects of the pandemic on rent collection and tenant income; “skyrocketing” prices in market-rate apartments in buildings that also contain stabilized units; and the drivers of “warehousing” — a practice in which owners keep units off the market because they say it costs too much to renovate them.
“In those same buildings where there was a mix of rent-stabilized and market-rate, those same rents for market-rate folks have gone through the roof and folks are starting to come back and pay those outstanding rents,” said Adán Soltren, a tenant attorney who serves as one of the board’s two renter advocates.
But raising stabilized rents could curb those dramatic increases and bring more apartments back on line, countered Christina Smyth, an attorney and one of the two landlord reps.
“We have an opportunity, hopefully, to get more stabilized units back into circulation, which would ease up on skyrocketing rents,” Smyth said.
Sheila Garcia, an organizer and renter rep on the board, honed in on “warehousing” and questioned why owners would keep apartments off the market if their revenues were plummeting.
“If you are strapped for cash and you really need to rent all these units out I would assume you would want all of them in the market,” Garcia said.
Landlord lawyer Robert Ehrlich disagreed and said the cost of renovating many of them far outpaces potential rents when prices are capped.
“If someone’s living in a rent-stabilized unit for 40 years, you’re not just going to put it back on line because guess what to de-rent it there’s things that have to be done,” he said.
Following the release of the report, tenant and landlord groups sought to spin it to meet their interests.
“This report is proof positive that the disinvestment and defunding of New York’s rent-stabilized housing stock needs to stop,” said Jay Martin, the executive director of the rent-stabilized landlord group Community Housing Improvement Program.
The Community Service Society, a progressive policy group, said the data demonstrated the impact of the pandemic on wealthier communities, which emptied out during the pandemic, leading to lower average rent collection and landlord revenue.
“Neighborhoods in working- and middle-class neighborhoods of the city, like every community district in the Bronx, East Flatbush, or the North Shore of Staten Island, where tenants did not have the option to flee the city, saw their rates of rent collections rise,” the organization said in a statement. “The Rent Guidelines Board must not reward landlords with a major rent hike based on old data that mostly reflects losses in the non-stabilized Manhattan market.”
The board next meets for a public hearing on April 13 ahead of a binding vote in June.
Tagged
new york city
housing
manhattan
bronx
Politics
David Brand
David is a reporter covering housing for Gothamist and WNYC. Got a tip? Email [email protected] or Signal 908-310-3960.
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