{"id":1004380553,"date":"2020-01-08T10:48:02","date_gmt":"2020-01-08T18:48:02","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004380553"},"modified":"2020-02-14T08:25:01","modified_gmt":"2020-02-14T16:25:01","slug":"the-long-term-effects-of-nycs-rent-control-regs","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/the-long-term-effects-of-nycs-rent-control-regs\/","title":{"rendered":"The Long-Term Effects of NYC&#8217;s Rent Control Regs"},"content":{"rendered":"<div id=\"attachment_1004286689\" style=\"width: 310px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1004286689\" data-attachment-id=\"1004286689\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/real-estates-confidence-game\/riggsnewsletter-1\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2018\/12\/Riggsnewsletter-1.jpg\" data-orig-size=\"756,603\" data-comments-opened=\"0\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"Riggsnewsletter-1\" data-image-description=\"\" data-image-caption=\"&lt;p&gt;Ken Riggs&lt;\/p&gt;\n\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2018\/12\/Riggsnewsletter-1.jpg?w=756\" class=\"size-medium wp-image-1004286689\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2018\/12\/Riggsnewsletter-1.jpg\" alt=\"\" width=\"300\" height=\"239\" srcset=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2018\/12\/Riggsnewsletter-1.jpg 756w, https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2018\/12\/Riggsnewsletter-1.jpg?resize=300,239 300w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><p id=\"caption-attachment-1004286689\" class=\"wp-caption-text\">Ken Riggs&nbsp;<em> Photo courtesy of RERC<\/em><\/p><\/div>\n<p>Despite a nationwide push by the Trump administration to decrease regulations in all facets of the economy, many municipalities and states are moving in the opposite direction\u2014especially regarding commercial real estate.&nbsp; While these restrictions may be well intentioned, they may create unintended negative consequences for both investors and consumers. &nbsp;<\/p>\n<p>Perhaps the most significant of these new regulations is the rent control law enacted in New York state earlier this year. Although rent control laws in New York City date back at least to 1943, the new law includes significant new restrictions that are expected to stay in place for a long time.<\/p>\n<p>Gov. Andrew Cuomo signed the rent control bill, known as the Housing Stability and Protection Act of 2019, on June 14. The law makes it harder for apartment owners to increase rents and elimi\u00adnates rules that allowed units to become free of any rent control. The new regulations dictate the rents of about 1 mil\u00adlion apartments, amounting to about half of the apartments in New York City.<\/p>\n<p>Some provisions include:<\/p>\n<ul>\n<li>Landlords can no longer increase rents by more than 20 percent when&nbsp;tenants move out.<\/li>\n<li>Landlords can no longer deregulate an apart\u00adment from price controls if its rent exceeds $2,774 a month or if the occupant\u2019s yearly income exceeds $200,000.<\/li>\n<li>Rents below the legally permitted rate are now frozen as long as existing tenants occupy the unit, and rent increases due to capital improvements are capped at 2 percent annually.<\/li>\n<li>Newly constructed buildings are classified as stabilized and, therefore, subject to the new laws; they can\u2019t be classified as exempt \u201cafford\u00adable housing.\u201d (\u201cAffordable housing\u201d is defined as dwellings that cost their residents less than 30 percent of their income.)<\/li>\n<li>With new building taxes of as much as 30 percent of gross income, tax abatements are much less attractive because these programs regulate rents.<\/li>\n<li>Condo\/co-op conversions now require that 51 percent of existing tenants buy their apartments before they can be converted, further complicat\u00ading and limiting a traditional exit strategy.<\/li>\n<\/ul>\n<p>For current renters, the new provisions will probably be positive. In most cases, their rents won\u2019t increase as long as they stay in place.<\/p>\n<p>For people who want to become renters and landlords\u2014especially in the long term\u2014the effects might not be so good. In fact, some landlords, investors and CRE professionals in New York City predict that the state\u2019s new rent control law will have a negative impact on valuations for assets that have a high concentration of rent-sta\u00adbilized units\u2014and especially those with revenues very close to their operating expense levels.<\/p>\n<p>According to RERC valuation experts, prop\u00aderties that have below-market rents will be affected the most; valuers are antici\u00adpating 1 percent to 2 percent income increases into perpetu\u00adity. Cap rates for some New York City apartments, which have been as low as the 3-4 percent range, are expected to rise into the 4-5 percent range, which could cause initial value to decline by 25 percent or more.&nbsp; After the impact of the new rent controls fully kicks in, the next buyers will have to factor these value losses into their calculations. Down the road, it won\u2019t be as attractive to buy or develop apartments.<\/p>\n<p>In addition:<\/p>\n<ul>\n<li>Investors have become skittish and many transactions have been canceled.<\/li>\n<li>The new law limits the recovery for capital improvements, and many landlords will decide to make minimal improvements to their properties.<\/li>\n<li>Investment demand will likely dwindle, further reducing the prospects for capital investment. This in turn will create the unintended consequence of lower quality living for consumers.<\/li>\n<\/ul>\n<p>In light of these developments, appraisers and investors will have to look at prop\u00aderties on a case-by-case basis, and sometimes a unit-by-unit basis. The fear is that regulated stock will deteriorate and tenants will move to market-rate projects that continue to maintain their properties.<\/p>\n<p><em>Ken Riggs, CFA, CRE, MAI, FRICS, CCIM, is president of&nbsp;<a href=\"https:\/\/www.situs.com\/services-2\/situs-rerc\/\" target=\"_blank\" rel=\"sponsored\">RERC<\/a>, a SitusAMC company.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The city&#8217;s new rent codes will have a long-term negative impact on both asset values and the residents they are supposed to help, writes RERC\u2019s Ken Riggs.<\/p>\n","protected":false},"author":1140,"featured_media":1004286689,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21684],"tags":[],"class_list":["post-1004380553","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-viewpoint"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v24.6) - 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