Room For Rent? A Look at Rent Regulations and the Outflow of Affordable Housing

Gov. Andrew Cuomo said last month that the renewal of rent regulations for another four years would be the best extension “that has ever been passed.” 

In an attempt by lawmakers to slow the flow of apartments out of the system, the new law raises the rent level at which owners can employ “vacancy decontrol” to begin charging market rates for an empty rent-controlled or rent-stabilized apartment.

The law also aims to help tenants by locking in automatic annual increases to the vacancy decontrol threshold and stiffening penalties for landlords who harass their tenants until they move out.

But despite the legislative tweaks approved in Albany, the stock of truly affordable rent-regulated units in New York City may well continue a steadily downward trend.

The vacancy decontrol threshold was raised this year by $200, to $2,700. Although the new level will be pegged to increases set by the New York City Rent Guidelines Board, the $200 bump is less than half as big as in 2011, when lawmakers raised the threshold by $500.

“Since that time, we’ve lost more than 35,000 units from the system, and that was with a $500 increase in the threshold,” argued Delsenia Glover, the campaign manager of Alliance for Tenant Power. “This threshold increase is $200 for a four-year deal. Do the math.”

Landlord and business-friendly groups say tenant advocates need to check their own math. Official figures show that the total stock of rent-regulated units in New York City is actually on the rise. After years of large declines, the city has experienced an overall increase in the number of rent-stabilized units in recent years, according to numbers compiled by the RGB. There was a net increase of 1,087 units in 2013, and another 169 in 2014.  

Citing such figures, the Citizens Budget Commission in May called it a “myth” that the number of rent-regulated units is rapidly declining. In Crain’s New York Business, columnist Greg David pointed to the same numbers to make the case that the rent regulation system is “growing, not shrinking.”

But tenant groups say that the figures aren’t so black and white. Out of more than a million rent-regulated apartments in the city, a shift of 1,087 units is a statistical blip. More importantly, advocates argue that because the RGB’s numbers are reported by landlords, they don’t account for owners who remove apartments from regulation but don’t report the change, which gives the false appearance of a slower decline—or of no decline at all.

“I think the true numbers are probably twice what’s reported for deregulation,” said Thomas Waters, a housing policy analyst with the Community Service Society. “The numbers are going down, and I suspect going down at a rate of 10,000 a year or so, although you can’t prove that with any of the lines of evidence that are available to us.”

Of course, landlords and tenant groups both have an incentive to portray the figures in a way that bolsters their cause. Landlords say the system, which limits how much they can increase rents each year, is counterproductive because the state’s “price controls” reduce the economic incentive to build more housing and thus limit supply.  

“Instead of raising the deregulation thresholds we ought to be lowering those thresholds because at those rent levels, there’s certainly no housing emergency,” said Jack Freund, vice president of the Rent Stabilization Association, a landlord group.

Tenant advocates insist the regulations are necessary to protect all residents from exorbitant rents, which is critical given New York City’s high demand for housing and low vacancy rates.

“Anybody who spends more than a week here and takes a peek at what the rental market is like readily recognizes that owners have a vast amount of bargaining leverage over tenants, certainly in the unregulated stock,” said Tim Collins, a tenant lawyer and former executive director of the Rent Guidelines Board. “Even in the regulated stock the rents have been going up quite up a bit.”

Still, some experts on both sides of the issue acknowledge that the rate of loss has at least slowed, if not stabilized. Yet even if the total number of regulated units is holding steady, it is little comfort to tenant groups.

What is balancing out or at least slowing down the net loss of rent-regulated units via vacancy decontrol is the addition of new regulated units driven by the 421-a, 420-c and J-51 tax incentive programs.

These newly regulated units, including those added through 421-a, had a median rent of nearly $3,000 in 2014, according to state figures. By contrast, the median rent for all rent-regulated units was $1,200.

What’s more, new units are only temporarily subject to rent regulation, while older units are covered permanently, unless they are removed through vacancy decontrol. The 421-a law is currently the subject of negotiations between real estate and labor unions, but if it’s extended, it will continue to reshape the city’s affordable housing landscape—while the era of rent-controlled and rent-stabilized apartments slowly fades away.

“All of these units that come in under 421-a or by virtue of the J-51 program, these are generally very high-rent units,” Collins said. “So while the overall numbers in the stock may be fairly stable, the number of units that are really affordable are increasingly declining.”