Regulations that govern how more than half of New York renters interact with their landlords –- often to the satisfaction of neither -- are about to get their biggest rewrite in decades. Already, the reverberations are being felt from the city’s property market to Tel Aviv.
Democrats in Albany, now in control of the state legislature and governorship, promise to tip the balance toward renters with a series of bills that would outlaw most tools landlords of rent-regulated units use to raise rents or eventually deregulate them. Tenant advocates say the changes are needed to protect the shrinking supply of affordable housing, while building owners warn lawmakers may make the problem worse by discouraging investment in regulated units.
“It’s years of pent-up frustration and years of loss of affordable housing units that we’ve experienced that is driving this,” said Democratic Assemblywoman Linda Rosenthal, whose district includes the Upper West Side of Manhattan. “We are losing New Yorkers now because they can’t afford the rent.”
The fallout, before a single vote is taken, can be seen from the market for multifamily properties in New York, to the shares of community banks that lend to them, to the bonds of one New York City landlord that trade in Israel, where they are in the midst of a selloff that has brought the price to a record low.
The ability to deregulate units -- and charge market rents or convert them to condos -- is big business in New York. It’s an investment strategy that has made landlord Joel Wiener a billionaire. Wiener’s Pinnacle Group has more than $2 billion of apartment assets, and the side of his business that converts deregulated and vacant units to condos is more lucrative than the side collecting regulated rents, according to filings on the Tel Aviv Stock exchange, where Pinnacle sells debt to Israeli investors under the name Zarasai.
“The company will analyze changes to the rent laws when they are adopted. We decline to speculate on what those changes will be,” said Kenneth Fisher, an attorney representing Pinnacle.
Bank Shares
Shares of New York Community Bank, a lender to owners of rent-regulated buildings -- including Wiener, who had more than $730 million in loans at the end of March -- are down 18% since March 6. Signature Bank, another lender, fell 12% in the same period.
For small landlords such as Chris Athineos, the rule changes would make it difficult to manage properties responsibly. The owner of nine low-rise buildings in Brooklyn, some a century old, relies on a steady schedule of state-approved rent increases to keep them up. The alternative -- selling, possibly to a condo developer -- would mean less affordable housing. Athineos appears in a TV ad about the laws sponsored by Taxpayers for an Affordable New York.
“They’re really backing us into a corner where we’d have no ability to generate the revenue to improve our buildings or even cover our costs,” said Athineos, who estimates that half of the 150 units he owns are rent-regulated.
Red Formica
There’s the one-bedroom regulated unit he owns in Bay Ridge, for example, where he’d like to replace the red Formica kitchen counters and the harvest gold bathroom tiles when his tenant of more than 25 years finally decides to vacate. The unit, which hasn’t been renovated since the early 1970s, could probably also use new wiring so the next renter can use a hair dryer and the air conditioner at the same time, he said.