Finally good news
Finally good news
Why recent news could signal opportunity for NY multifamily property owners
Gov. Kathy Hochul and lawmakers in NY have allegedly agreed to terms on the NYS budget. On top of that, the Rent Guidelines Board has suggested a 16% rent increase next year for rent stabilized buildings. Owners should be very pleased with this. And here’s why.
Higher rents: Hochul’s inability to pass her Housing Compact plan has created critics on both sides – but, for current NYC multifamily owners, it might not be such a failure. The Housing Compact was going to create more supply in the NY market. Tenants in NYC have seen their rents go up at a fast clip for extended periods of time, growing tenant rent burdens. The governor and other public policy professionals have made clear that more housing needed to be created to reduce this issue and slow rent growth. If passed, the plan would have led to more housing development. With a greater supply of housing, existing owners likely wouldn’t be able to capture the rent hikes they have been privy to in the last decade in NYC. I think of owners who have buildings as their sole source of income. The ability of non-professional investors to participate in NYC’s rent growth is a meaningful business opportunity. If looked at through purely business lenses (which of course, it’s not), limited supply could work well. Having a scarce resource in a market where the government effectively caps the production of goods means customers will pay a premium for that resource.
No Good Cause Eviction: There will be no Good Cause Eviction law in the budget, and odds look slim that Good Cause Eviction passes this year via other means. Reading in between the lines, Hochul was not able to at once win over the NIMBYs (anti-development groups) AND the tenant advocate groups. Elected officials in the suburbs of NY griped about losing control over their local zoning decision making – perhaps fearing the introduction of large developments into their communities. Meanwhile, tenant advocates were unified in wanted to pass Good Cause Eviction. That’s a double threat. It would have been quite politically savvy for Hochul to convince one camp that they did in fact want to build more, while getting the other comfortable that more development would come to NY, but that it would be absent any accompanying tenant protections. Since the budget negotiations took (are still taking?) so long, it’s already May and that leaves only one month left in the NY State legislative session. In other words, there is only a month left for officials to pass Good Cause Eviction this year. Given that no new bills have been introduced since the original bill here, it seems like a safe bet to assume no Good Cause will happen this year. This is a win for owners.
More rent growth (for regulated buildings): Besides the NY State budget, owners also received news that the Rent Guidelines Board (RGB), the agency in charge of setting increases in rent for rent regulated properties, motioned to pass 8.5% and 15.75% rent increase on 1- and 2-year leases respectively for rent stabilized properties. There’s irony here: one week (4/13), NY lawmakers try to pass state-wide caps on rent increases via Good Cause and the next week (4/20), policy makers motion for double digit increases in rent. Also of note: RGB convened on May 2nd to offer a preliminary vote on this proposal You can view the video meeting and discussion here. To drive home how stark of a difference this RGB order would be from previous orders, take a look at the table below, that showcases the last 5 years of RGB Apartment Orders.
It's not clear exactly what Governor Hochul is cooking up for housing in the final budget, or how the RGB proposal will play out in the court of public opinion, but there is enough information here for owners get excited about.