On June 14th, owners of New York City’s 1 million rent regulated apartments woke up to the dawn of a new age of uncertainty when Governor Andrew Cuomo signed into law a package of statutes dramatically changing the playing field that billions of mortgage loans and investments were based on.
In our previous rent regulation article we spoke about the threats of the new regulations. Now we’re presenting new data and analysis on the H1’19 actual impact.
Although New York real estate investors were prepared for a change, the entire industry was caught off guard by the depth and breadth of the tenant-friendly legislation from the New York State Senate and Assembly:
- Ends previous high-rent/high-income rule: if rent exceeds $2,774/month or occupant income is more than $200,000 two years in a row, unit rent is still regulated
- Abolishes vacancy “bonus”: 20% rent increases on vacant units are eliminated
- Rents below the legally permitted rate are frozen for the duration of the existing tenancy
- Rent increases due to major improvements are capped at 2%
- Improvements limited to $15,000 per unit in any 15-year period
- Renovations limited to three per unit every 15 years
These rule changes translate into lower rent growth, reduced operating income, less room for capital improvements. They also make it extremely difficult to remove units from state rent control regulation.