Sam Rabiyah, THE CITY
This article was originally published on Oct 19 5:05am EDT by THE CITY
During a worsening housing affordability crisis, New York City landlords are keeping tens of thousands of rent-stabilized units off the market — a phenomenon tenant activists call “warehousing.”
An internal state housing agency memo obtained by THE CITY shows that the number of rent-stabilized homes reported vacant on annual apartment registrations rose to over 61,000 in 2021 — nearly doubling from less than 34,000 in just a year as the city emerged from COVID lockdown.
That’s higher than the official count in the NYC Housing and Vacancy Survey, conducted in 2021by the U.S. Census Bureau on behalf of the city’s housing agency, which tallied 42,860 vacant rent-stabilized apartments citywide.
Rent-stabilized apartments represent nearly half of all rental housing in the city and are among the most affordable places to live in New York. Rents in stabilized buildings are often lower even than those offered as income-restricted affordable housing.
The data memo also reports an 8% drop from 2019 to 2021 in the number of apartments registered as rent stabilized — 927,753 registered units in 2019 and 857,791 units registered in 2021. This decrease in registration is the largest in the last 15 years, according to an analysis of property tax bills by THE CITY.
Altogether, the state numbers show a loss of over 95,000 stabilized apartments for rent after 2019 — the year a major overhaul in Albany of the state’s rent laws blocked landlords from significantly jacking up rents on vacant units when letting them to new tenants.
Advocates are sounding the alarm about the growing number of empty rent-stabilized apartments.
The Coalition to End Apartment Warehousing, a collective of tenants and 15 community organizations, has been calling attention to the trend, claiming that landlords are fabricating housing scarcity to manipulate legislative changes in Albany. “Creating fake scarcity to raise prices is not a fair way to run the housing market, and it deprives New Yorkers of needed housing,” coalition members wrote in a recent op-ed.
The nonprofit Community Service Society compares the withholding of stabilized housing to political “ransom” by the landlord lobby.
Landlords say that the current price restrictions on stabilized housing robs them of the capital needed to make necessary repairs in older housing stock. They also have their eye on a federal lawsuit filed by two major industry groups, Community Housing Improvement Program (CHIP) and the Rent Stabilization Association (RSA), challenging the entire rent-regulation system as unconstitutional.
That case is currently before the U.S. Court of Appeals for the Second Circuit and could ultimately go before the Supreme Court — and, if the highest court undermines rent stabilization, could potentially reward landlords who’ve kept apartments vacant. Legal success for the landlords is a long shot, but some property owners say they’ll wait it out.
For more than two decades beginning in 1997, landlords benefited from state laws that empowered them to boost rents after a vacancy, above and beyond annual increases allowed for all stabilized apartments set by the city Rent Guidelines Board.
In certain circumstances, they could deregulate apartments entirely — which led to the removal of over 345,000 apartments from rent stabilization during the early-to-mid 2000s alone.
Any time a tenant vacated, landlords received a “vacancy bonus” that let them increase the rent of the unit by up to 20%, and once an apartment’s rent reached a certain dollar amount — most recently, $2,774 a month — the unit left the rent-regulation system entirely, allowing the landlord to rent it at any price.
The Housing Stability and Tenant Protection Act of 2019 (HSTPA) repealed both vacancy bonuses and vacancy decontrol. It also sharply limited how much landlords could pass along the costs of renovations to tenants through rent increases, practices that housing advocates and lawmakers criticized for spiking rents and fueling displacement.
Prior to 2019, landlords could make a lot of money by emptying out rent-stabilized apartments. HSTPA essentially revoked any financial incentive to do so.
One exception to these restrictions — known as the ‘Frankenstein’ loophole — has allowed some landlords to combine adjacent rent-stabilized apartments into one apartment and jack up rents. However, proposed legislative amendments would put restrictions on these apartment conversions, setting new rents at “the combined legal rent for both previous housing accommodations.”
But landlords are still legally permitted to keep their rent-stabilized apartments empty indefinitely.
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Vacancy ‘Cost Effective’
CHIP, the trade association of rent-stabilized owners, claims the revamped rent laws are directly responsible for the jump in apartment vacancies. The 2019 restrictions “make it more cost-effective to keep an apartment vacant” by keeping rents too low to justify repairs, CHIP Executive Director Jay Martin said.
That’s especially true when tenants move out or die after many years, echoed Vito Signorile, vice president of communications at RSA, another landlord group. He asserted that currently, vacant apartments have some of the lowest rents of any rent-stabilized units due to previous tenants “living in these units for decades” without boosts from vacancy bonuses.
Yet the data memo from the state’s housing agency, Homes and Community Renewal, or HCR, suggests a different picture. The 2020 median monthly rent for vacant stabilized apartments is $1,912 — 49% higher than the overall median rent of $1,280 for rent-stabilized units that year. Apartments vacated after 2019 would bring in more revenue for landlords than the typical stabilized apartment, not less.
One factor elevating rents on vacant apartments may be the 421-a program, a recently expired tax abatement. Criticized by policy experts as “an enormous waste of public money,” the program provides tax incentives for developers of new housing and requires some or all units to be rent-stabilized — many renting for thousands of dollars a month.
The rent laws normally apply only to those apartments built before 1974, and CHIP has sought to call attention to the condition of those older apartments, claiming that more than 20,000 apartments need costly overhauls that currently permitted rent levels can’t cover. Renovating those units, the landlords claim, would cost more than the amount renting them out would recoup.
But those numbers also raise questions about landlords’ claims. CHIP’s spokesperson, Michael Johnson, told THE CITY in an email that “Every apartment occupied before 2000 likely needs a gut renovation, because the NYC Council passed Local Law 1 of 2004 (The Lead Law).”
But fixing lead paint issues alone does not require a gut renovation, according to Ken Wray, executive director of the Parodneck Foundation, who has experience renovating older housing in Manhattan. Wray told THE CITY that lead encapsulation would cost a few thousand dollars — if testing shows lead abatement is even needed at all.
Some tenants assert that their landlords are deliberately pushing out rent-stabilized tenants and keeping those apartments vacant.
“You can’t live in the city as long as I have and not have issues,” says Craig Martin-Roseberry, referring to the 29 years he’s lived as a rent-stabilized tenant of 336 W. 17th St in Manhattan.
An artist manager with roots in the 1980s downtown club scene, Martin-Roseberry lived peacefully in his Chelsea apartment until it changed ownership in August of 2016. According to Martin-Roseberry, the building’s new landlord, Michael Besen, began systematically emptying apartments — denying market-rate residents new leases and offering buyouts to rent-stabilized tenants to get them to vacate.
“It’s easy to kind of browbeat people … offer them what appears to be lucrative or helpful, but really isn’t,” Martin-Roseberry says.
Martin-Roseberry also recalls nonstop construction, which he claims the landlord carried out without appropriate permits. As of this month, the landlord still has two “work without a permit” violations open with city enforcers, according to Department of Building records.
Today, tenants report that only four of the 15 apartments at 336 West 17th St. are occupied. “They can easily scare you out,” Martin-Roseberry says, “and most people feel that having to endure — having to get a lawyer, court cases, paperwork — it’s just easier to leave.”
Across town, tenants at 225 E. 26th St. witnessed 44 out of their building’s 89 units go vacant following a change in management in 2019. One tenant recalls what appeared to be “construction as harassment” on his floor, filling hallways with dust and potential toxins from within the walls, and pushing several rent-stabilized families to move out.
Tenants also reported living without gas for six months. From February to June of 2020, HPD issued seven different class C (“immediately hazardous”) housing violations at the building for inadequate supply of gas.
The owners of the two buildings, Besen Partners and TriHill, did not respond to requests for comment from THE CITY.
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Millions in Profit
Landlords have also cited COVID repercussions, including an eviction moratorium, lease-breaking and widespread nonpayment of rent as adding to their pain.
Numbers compiled by the staff of the city Rent Guidelines Board suggest that by and large, they’re doing just fine, or better.
The board’s 2022 Income and Expense Study reports that landlord profit fell by 7.8% between 2019 and 2020 in buildings that contained rent-stabilized units — but that adjusted for inflation, net operating income had increased 46.6% since 1990, including more than a 20% increase between 2010 and 2020 alone. Six out of 10 buildings that contain rent-stabilized units also contain market-rate apartments, an analysis by THE CITY found.
A typical rent-stabilized apartment yielded $6,540 of net profit in 2020, and $8,652 in Manhattan, the Rent Guidelines Board found.
And those landlords are typically big ones. An analysis of property owner registration data by the nonprofit group JustFix showed that landlords with 1,000 or more units own the majority of NYC’s rent-stabilized housing stock, and landlords with 100 or more units own 88% of all rent-stabilized housing. (The author of this article previously worked at JustFix.)
The typical owner of rent-stabilized property would have made over $6 million of post-expense income in 2020 alone, the RGB’s numbers indicate, or more depending on how much of their portfolio was market-rate.
None of that is stopping landlords from pursuing rollbacks of the 2019 laws.
CHIP is drafting bill language that “essentially allows an owner to reset a rent on vacancy,” says Martin — bringing back a version of the vacancy bonus abolished in 2019. As head of an association of 4,000 owners of rent-stabilized property across the city, Martin claims his organization could bring 25,000 apartments back to market in six months, after negotiating with lenders and contractors.
To Jacob Udell, director of research and data at the University Neighborhood Housing Program in the Bronx, landlord groups holding thousands of affordable rentals off-market brings about an “antitrust concern.”
“The housing crisis in NYC has never been more severe, and these landlords are openly holding an essential good off-market in the hopes of forcing policy more favorable to them,” Udell said. “Affordable rental units with strong tenant protections are exactly the type of housing most in need right now, and withholding them has undoubtedly exacerbated the affordability crisis.”
City Councilmember Gale Brewer (D-Manhattan) has proposed a bill that would require “registration and inspection of vacant dwelling units” by the city Department of Housing Preservation and Development — making unit-level data on warehousing data available through the NYC Open Data portal. In Albany, Assemblymember Linda Rosenthal proposed the End Warehousing Act of 2021, which would fine landlords who hold apartments vacant beyond three months, and use money collected to fund vouchers for homeless people.
“We have a crisis, we have part of the solution to the crisis, and we have a class of people who refuse to extend themselves,” Rosenthal told THE CITY.
As for Martin-Roseberry of West 17th Street, organizing with his tenant association has been the most effective way to combat displacement in his building. By bringing their landlord to court, Martin-Roseberry’s association was able to fix some of the building-wide issues that led to apartment vacancies in the first place.
“You are not going to be able to run me over and get rid of me, and that is the sum of it all,” he says. “We will fight you.”
If you’ve noticed vacant apartments in your rent-stabilized building, we want to hear from you. Write to us at [email protected]
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