“He that goes a-borrowing, goes a-sorrowing.”
That’s certainly how some advocates see debt on rent-stabilized buildings.
Last week, I looked at the relationship between rents, net operating income and violation counts in rent-stabilized buildings.
Buildings with a high number of violations have lower rents and lower NOI than older, rent-stabilized buildings in general, but they still have positive NOI.
Rent Guidelines Board member Arpit Gupta previously referred to this fact to explain why he believes most landlords have the financial ability to keep their buildings in good condition. He’s advocated for, among other things, a “rent freeze for slumlords,” where rent increases are conditioned on building maintenance.
Several people reached out after the newsletter went out to talk about debt service; the data did not take debt service into account. The Rent Guidelines Board doesn’t look at debt service, although it does look at operating costs. The data is just not collected.
But in the adversarial conversation between the city, tenant advocates and landlords, everyone sees debt a little differently.
“If I got a building for free, should I be able to make it work even with the rent freeze? Yes. Even with expenses going up? Yes,” said Michael Weiser, president of GFI Realty Services. “But what’s missing in this entire conversation is that the buildings aren’t free.”
Tenant advocates see housing maintenance and housing quality as a first priority. You need to keep your buildings in safe, habitable condition, they believe. And if at the end of the day, and after a rent freeze, you’re not able to pay the bank? Well, that’s too bad. It’s your fault for borrowing too much or making a bad investment.
Landlords see debt as an ironclad obligation. It comes automatically out of their accounts — it is sometimes tied to property tax payments. And the penalties for nonpayment are steep. You get hit with default interest and are at risk of foreclosure.
Landlords do have some discretion, at least in the short term, of how much they want to put into maintenance and repairs.
“If I don’t sweep the hallways, I don’t lose my building,” as one landlord told me.
In response to this relationship, the Mamdani administration appears to be trying to heighten the penalties for poor conditions. They’ll ramp up inspections, find more violations and work in court to transfer ownership of buildings to nonprofits, according to the mayor’s housing plan. That’s at the same time that rents are frozen.
Will greater enforcement make housing conditions on the whole better? When landlords have enough cash on hand, that would certainly be the case. In the current situation it may just result in more foreclosures in the short term and, if the mayor has a say in it, transfers to nonprofits.
Tenant advocates in general like that part. The livelihoods of tenants and landlords are intertwined in the capitalist system and advocates want to unwind them.
What we’re thinking about: How has the rent freeze affected the values of rent-stabilized buildings? Any noticeable effects since the vote? Let me know what you’re seeing at lilah.burke@therealdeal.com.
A thing we’ve learned: Ever wondered how the hot dog got its unusual name? When a young German immigrant started selling the world’s first hot dogs out of a pushcart on Coney Island in 1867, locals rumored that they were made out of dog meat. The rest, as they say, is history.
— Spencer Davis
Elsewhere…
— Ambulance response times dropped by 63 to 70 seconds, or 6 percent, below 60th Street in Manhattan since New York implemented congestion pricing in the area, Gothamist reported. A paper published this month for the National Bureau of Economic Research found that ambulance response times sped up due to the reduction in traffic in the area, with passenger vehicle counts falling by about 21 percent in the affected zone.
— It got no easier to find parking on Manhattan roads below 60th Street after New York implemented congestion pricing in the area, Streetsblog reported. A parking study released this month by the Department of Transportation found that before and after the toll started, an average of just 15 percent of any given block’s parking space sat unoccupied.
— Governor Kathy Hochul announced Tuesday the groundbreaking of a $71.5 million affordable housing development in Brooklyn that will create 78 affordable apartments across two new buildings. The development, Bartlett Crossing, will offer a mix of studio, one-, two-, three- and four-bedroom apartments and is part of a redevelopment project that will ultimately create 390 affordable homes on formerly vacant, city-owned land in the Broadway Triangle neighborhood. The development is being led by Unified Neighborhood Partners, a joint venture of four Brooklyn-based nonprofit organizations: St. Nicks Alliance, Southside United HDFC–Los Sures, RiseBoro Community Partnership and United Jewish Organizations of Williamsburg.
— Spencer Davis
Closing time
Residential: The most expensive residential sale recorded Tuesday was $5.75 million for a co-op unit at 1056 6th Avenue in Carnegie Hill.
Commercial: In Maspeth, the most expensive commercial transaction was $18.8 million for a 43,247-square-foot warehouse. The seller paid $4.86 million in October 2009.
New to the Market: The highest price for a residential property hitting the market was $13 million for a 3,678-square-foot condominium at 67 Vestry Street in Tribeca. Kristin Lukic with Corcoran has the listing. The unit last sold for $9.3 million in 2023.
— Matthew Elo
