Multifamily landlords in New York City could face tougher rent regulation laws after the State Assembly passed legislation that would make it significantly harder to raise rents and convert regulated apartments to market rates.
With the city’s rent regulation laws set to expire on 15 June, New York’s State Assembly passed legislation on Monday that would extend the rules until 2016, but it also dramatically curtail when a landlord can “deregulate” apartments.
A spokesman for the Rent Stabilisation Association, which represents landlords in the city, told PERE the legislation marked a “tremendous expansion” of the current rules and was simply “ludicrous in many ways”. Although a similar bill currently working its way through New York’s Republican-controlled State Senate is unlikely to pass, the Assembly legislation sets the stage for a battle over rent regulation and control in New York City.
An aide to New York State Governor Andrew Cuomo told the New York Times that he was seeking a deal that would pass in both houses. The Times said other proposals also being considered included a property tax cap, an extension of tax breaks for new developments and relief for landlords from a 2009 court decision against Tishman Speyer and BlackRock relating to the unlawful deregulation of rent stabilised apartments at Manhattan’s Stuyvesant Town and Peter Cooper Village complex.
In 2009, Tishman and BlackRock were forced to lower rents on some apartments at the acquired the 80-acre residential complex, which includes 11,227 apartments, after a New York court found the two firms, as well as previous owner MetLife, improperly raised rents from rent stabilised rates to market levels.
After acquiring the complex in 2006 for $5.4 billion, Tishman and BlackRock set about trying to convert 8 percent of the units from rent-stabilised rates to higher, market rates each year with an ambition of generating cash flows of more than $330 million per year by 2008. However, the firms were unable to convert as many properties as anticipated, depleting the property’s debt reserves and forcing the companies into default in January 2010.
In the wake of the deal, and after writing off hundreds of millions of dollars of investment, the California State Teachers’ Retirement System and the California Public Employees’ Retirement System both banned deals with real estate managers who try to profit from converting rent-regulated apartments by displacing tenants and employing “predatory investment practices”.
The legislation followed public protests over the Stuy Town deal and also Page Mill Properties’ East Palo Alto deal.