Good cause eviction was not expected to have much impact in New York City, for two reasons:
1. Gov. Kathy Hochul in 2024 watered down Sen. Julie Salazar’s original bill (which supporters and opponents alike had accurately deemed “universal rent control”).
2. The city’s rent-stabilized units — nearly half of the city’s rentals — already had the same automatic renewal rights that the new law provided tenants, as well as other protections.
But what about the other half? The 1 million free-market units?
Mitch Perle, principal at Timber Equities, commented on LinkedIn that good cause eviction has led to tenants staying longer in those apartments, reducing availability. Fewer open units mean higher prices, assuming demand stays constant or grows.
“It’s almost as if policymakers are trying to raise market-rate rents,” Perle wrote.
Les Lerner chimed in, “It’s called buying votes with other people’s money.” You could forgive Lerner for having a rather cynical view of government; he is a longtime owner of rent-stabilized buildings in the Bronx.
But is Perle’s theory true? He is in a better position than I to observe tenant behavior, but I was surprised at his claim that good cause eviction is affecting their location decisions in any significant way.
Perle’s premise, I assume, is that because good cause essentially limits rent increases when tenants renew, landlords are seeking higher rent increases on units that become vacant. Staying put right now could mean an unchallengeable increase of up to 8.79 percent (5 percent plus the rate of inflation), while an empty free-market unit’s rent can be raised by any amount.
But I suspect the difference attributable to “good cause” would be modest, so the savings from staying put would take many years to amount to anything. Market-rate tenants tend not to stay as long as rent-stabilized tenants. That’s why they are renting — they expect to move.
Put another way, I suspect that few tenants are thinking, “I’m going to stay in my apartment longer than planned because good cause effectively caps my rent increases at 8 or 9 percent.”
Also, good cause’s impact is further limited because it doesn’t apply to luxury rentals, defined as apartments renting for more than 245 percent of the fair market rent. That works out to $6,152 for a one-bedroom apartment, $6,811 for a two-bedroom, $8,489 for a three-bedroom and $9,158 for a four-bedroom.
(If you have five or more bedrooms, you are literally off the chart.)
Perle’s economics are sound: If fewer tenants are moving, that would mean fewer people bidding up prices on open units.
But opponents of the good cause eviction bill predicted it would result in higher annual increases for renewing tenants, because owners would compensate for not being able to make unlimited increases in future years.
I was dubious of that argument, once Hochul capped increases at 5 percent plus inflation, which is pretty high. With good cause in effect, I could see owners not discounting rents if another pandemic sends tenants fleeing, but otherwise I thought they’d treat tenants the same as before.
Maybe some enterprising grad student will try to assess the impact of good cause in New York City by comparing rents to nearby markets that didn’t implement good cause.
But isolating one factor is nearly impossible, especially because the broker-fee law has made it less expensive for tenants to move. The broker law, I believe, would more than offset good cause’s motivating tenants to stay.
As always, I could be wrong.
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