NYC's Rent-Stabilized Housing Stock In Deep Distress, RGB Report Finds

Serious revenue declines hit the owners of New York City’s rent-stabilized buildings hard during the pandemic, according to the 2022 report released by NYC’s Rent Guidelines Board yesterday.

Net operating income for rent-stabilized buildings fell by 7.8% in 2020 as the pandemic rocked NYC renters and landlords alike. But the damage to revenue for rent-stabilized building rents prompted landlord group Community Housing Improvement Program to sound the alarm, warning that the RGB report shows the warning signs for a “housing collapse.”

“Rent-stabilized buildings are always one or two months away from going negative on their cash flow,” CHIP Executive Director Jay Martin told Bisnow Thursday. 

The RGB data shows the result of both tenant protections introduced in 2019 and what happened to the city’s housing stock during the pandemic, when as many as a quarter of rent-stabilized tenants were unable to pay rent at some point, Martin said.

Many landlords of rent-stabilized buildings may be in greater financial distress than the RGB report reveals, he said, owing to the fact that the RGB doesn't calculate average mortgage payments on buildings or maintenance costs.

The landlord group estimates that average mortgage payments for rent-stabilized buildings are approximately a quarter of rent collection, and puts maintenance costs mandated by the New York City Council at approximately $200 per unit every month. 

The RGB’s 2020 data also represents the first full year of information about NYC’s housing stock since the state passed the Housing Stability and Tenant Protection Act in 2019.

The law was hailed as one of the “strongest tenant protections in history” by the state legislature when it first passed. But it restricted landlords' abilities to pass on the full cost of maintenance and repair to tenants — something which Martin says left rent-stabilized landlords with little wiggle room.

“More often than not, they'll have to borrow against the value of the building,” Martin said. “Or they'll just forgo maintenance to the building at all until the rents start covering the increased expenses — which is precarious because if you get a one-time cost, that expense will put you immediately into the red because you don't have any reserves.”

With rent-stabilized landlords falling into financial distress and delaying renovations, CHIP warns that NYC’s housing stock could be in danger. The RGB found that almost 1,000 NYC buildings were distressed in 2020, with rental income failing to exceed or keep up with maintenance costs. 6.5% of rent-stabilized buildings fell into distress in 2020, up a full percentage point from the year prior.

Stabilized rents had been frozen for much of the pandemic, but in June the RGB voted to allow landlords to raise rents 1.5% on one-year leases starting six months after October 2021, The Real Deal reported.

Tenant advocates will argue against a rent increase — unemployment in the city is still well above the national average — but Martin said rent-stabilized buildings will continue to deteriorate without additional help from Albany or the city government, ideally in the form of rent increases combined with assistance for renters struggling to cover their housing costs in the form of further rental assistance or housing vouchers for landlords.

“We're in a situation where owners are really desperate for an increase, and they're expecting one,” he said. “We can have a conversation about reducing rents, but the city has to be a partner with us in helping us reduce the cost to provide that housing as well. And that hasn't happened yet.”