City officials are acknowledging distress in rent-stabilized buildings. But they may have different ideas than landlords do about how to address it.
Officials from the Department of Housing Preservation and Development testified Thursday that about 11 percent of older, fully rent-stabilized buildings are distressed, meaning that their income can’t cover their expenses, according to a new analysis based on tax appeals data.
Officials did not however endorse allowing landlords to raise the rent in stabilized housing. Instead, they said, owners could use help on the expense side. And those landlords that need the most help will have to open their books to the city.
“If we can reduce rising costs, this will help most buildings. There are some rent-stabilized buildings that are in distress and for which reducing costs will not be enough,” said Lucy Joffe, deputy commissioner of policy and strategy at the agency. “We should address higher levels of distress with more nuanced tools that are designed to specifically meet their needs and require them to open their books to ensure appropriate public accountability.”
The testimony, given before the Rent Guidelines Board, which controls the rent in stabilized apartments, is illustrative of the current moment in rent-stabilized housing. Mayor Zohran Mamdani ran on freezing rents in stabilized apartments, which make up about half of the New York City housing stock.
Even as distress in the stock becomes impossible to ignore, discussion about raising rents appears off the table. The idea to instead lower landlord’s expenses will likely not be on their terms, as Joffe illuminated.
Just hours after the HPD testimony, the mayor publicly unveiled his first expense-side solution: The intention to stand up a city-backed insurance program to offer lower premiums for rent-stabilized and affordable housing portfolios. The industry has so far appeared to find the initiative encouraging, even if key questions about the program, including who will manage it and the city’s investment, are still undetermined.
“By introducing a city-backed program that can operate with less overhead and access cheaper credit, we will level the market playing field,” the mayor said at the Citizens Housing and Planning Council annual luncheon.
The mayor’s housing plan will further address the cost of property taxes, maintenance, insurance and certain utilities, HPD officials testified.
Despite tacit support for those expense-side solutions, landlords have not stopped agitating for the ability to raise rents in their units. Statewide legislation passed in 2019, the Housing Stability and Tenant Protection Act, made it nearly impossible for landlords to raise the rent on stabilized apartments or take them out of regulation.
That’s resulted in cratering value for the asset class, with many owners dealing with underwater mortgages and runaway expense growth.
“Mortgage debt, which isn’t captured in measures of operating income or any of the analyses presented to the board, may be causing additional distress,” Joffe said.
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