New York state legislative leaders have agreed on a preliminary package house transaction aims to solve Affordability and supply issues, especially new york city serious.
legislation, Which used to be on purpose The effort to balance the interests of tenants and property owners/developers has fueled dissatisfaction on both sides. group Democratic lawmakers say they will Does not support They believe some provisions weaken protections for tenantsalthough Republican leaders and landlord advocacy groups worry the legislation will worsen New York’s housing crisis. The plan may need revisions to gain full approval from the Legislature.
Below is a detailed description of some of the recommended measures: groups that oppose themand the potential consequences of the plan taking effect.
Provides “just cause eviction” rules, with exceptions
Proposed “just cause eviction” provisions would limit the circumstances of legal evictions and prevent rent increase above the threshold. Landlords can still evict tenants who violate lease agreementsbut they Tenants who fail to pay rent will not be able to be evicted without an explanation for an “unreasonable” rent increase.
plan Allowing rent increases for non-rent-stabilized apartments to be up to 10% or 5% plus the Consumer Price Index, whichever is lower. Landlords who increase rent significantly without reason will not only If a tenant fails to pay rent, it becomes grounds for eviction. In addition, the landlord will need automatically Renew lease unless they have only lead to eviction.
Proposed rules modeled on other “good cause” laws other states, including neighboring countries New Jersey, with some important exceptions. This measure does not apply to landlords whose rent is less than 10 Units, buildings or units whose monthly rent exceeds a certain threshold are constructed within 30 years of the rule’s enactment. Cities other than New York City will also need to opt-in that the rule applies to their residents.
A group of about 50 lawmakers said the legislation did not provide adequate protection tenant. The failed 2019 “just cause” bill would have been broader, with lower rent increase caps and fewer exclusions. On the other hand, the owner claimed contend Landlord burdens will result in higher rents for vacant units and disincentives to investment in rental housing, including Maintenance and development.
Supporters point out ‘just cause evictions’ don’t restrict new construction in New Jerseybut they admit Nor did it prevent evictions; partially Because the law lacks a specific threshold above which a rent increase would be considered unreasonable.
Tenant protection measures relaxed in 2019, increasing burden on landlords
Although the proposed legislation would make tougher It also benefits landlords of rent-stabilized apartments by repealing previous tenant protections in some cases against landlords raising rents and evicting tenants. Current law only allows landlords to raise rent enough to recoup $15,000 in repair costs in process 15 years. This is equivalent to approximately To a $89 per month Increase in individual units and increase in legal requirements been deleted 30 years later.
The new housing plan would raise the limit to at least $30,000, allow landlords to raise monthly rents by up to $167, and provide higher subsidies for units recently vacated by long-term tenants. Landlords can recover up to $50,000 if the former tenant lived in the unit for 25 years or more. Rent increases to compensate for the cost of improvements will also be permanent.
Tenants’ rights campaigners oppose any changes to the 2019 law aimed at preventing landlords from unfairly evicting tenants for Charge higher rents. but These restrictions could lead to a shortage of affordable housing in New York City.
While census data shows New York City’s vacancy rate at 1.4%, the lowest in 50 years, that number does not include thousands of vacant rent-stabilized apartments owned by landlords No ability to rent. New York City Housing and Vacancy Survey Finds Estimates 26,310 Rent-stabilized apartments were vacant last year, and some experts say the real number may be higher.
Because in this notoriously expensive city, renters tend to hold rent-stabilized apartments. because Landlords must obtain tenant approval to make repairs and updates during the tenancy, and some rent stabilization apartment No updated Within 20 to 50 years. When tenants eventually move out, the units they leave behind may not follow the rules Comply with current housing regulations. this meaning is for arrive Lease the unit legally againThe landlord needs to complete Expensive repairs.
The required renovations typically cost more than $75,000, a cost that would take 75 years to recoup given current rent increases. Since the operating costs of many rent-controlled units exceed the allowable rent First, landlords have little incentive Make necessary updates. The real estate lobby argued that changes to the law in 2019 were not enough to bring these vacant units back online.
Incentivize new construction and redevelopment
The New York City metropolitan area needs an estimated 340,000 units to meet housing demand, according to Up for Growth, a Washington-based nonprofit. However, the apartment building permit application has reject since the tax cuts expire in 2022. taxed in a steep rate Compared with apartments or single-family homes, many developers say it’s not financially feasible to build them, especially amid construction labor shortages and rising construction costs.
The new housing agreement includes the “485x” tax break, which is broader than the 421-a program it was designed to replace, although lawmakers are still hammering out the details. Many developers rely on the 421-a program, but critics say waste of taxso legislators may try to address that question.
depending on About the specific situationHoweverthe new tax incentives may not be effective. 1 trade union yes ask Lawmakers introduced a $40 minimum wage requirement for all union and non-union construction workers who support projects that benefit from a 485-fold tax break.
This is also Not clear yet How many affordable units does a developer need to include in a project to qualify for incentives. If developers see salary increases no offset Due to affordability constraints, the tax deduction for a 485x may not seem that attractive in terms of the project’s income potential.
Some officials think tax breaks won’t solve the city’s problems property tax systemwhich taxes some working-class homeowners at a higher rate than luxury brownstone homeowners. A main Reforms can solve this problem and also Also reduces tax rates for leasing buildingsNew York City Comptroller notes About twice as much as condos and co-ops.
This provision in the new housing legislation did not generate the same backlash as other aspects of the plan, although some Democratic lawmakers criticized previously proposed incentives for pandering to businesses,as well as The Real Estate Council of New York said the measure does not go far enough to increase housing stock in New York City, especially amid other challenges the legislation creates for real estate investors.
The agreement would also ease residential density restrictions. The measure, if implemented in conjunction with mandatory inclusionary zoning, could lead to construction 30,000 affordable housing unitsaccording to an independent nonprofit organization. Another tax break included in the plan will encourage Office conversion to multi-family housing projectwhich will be additional 20,000 unitsaccording to estimates.
bottom line
perhaps Each group was outraged by some aspect of New York’s housing proposal, which state legislative leaders spent 15 months studying before reaching a compromise. legislators have Already started New York state’s fiscal year 2025 budget votes, but final details on housing deal yet to be determined announced.
With many unknown factors, it’s unclear whether the agreement will ease New York City’s housing crisis. While some provisions of the agreement may ease pressure on New York landlords, the “just cause eviction” policy may cause some real estate investors to look for opportunities elsewhere.
Are you ready to succeed in real estate investing? Set up a free BiggerPockets account to learn about investing strategies; ask questions and get answers to our community of over 2 million members; connect with investor-friendly agents; and more.
Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
