A crucial fact almost always missing from the “freeze the rent” conversation is that rent-stabilized rents, adjusted for inflation, have been going down for years.
How many years? The answer might surprise you: 10.
The last time an RGB increase outpaced inflation was at the beginning of the de Blasio administration, before the new mayor filled the board with his own appointees (who froze rents three times). The streak has continued under Mayor Eric Adams.
A chart posted on X by newly appointed Rent Guidelines Board member Alex Armlovich, a senior housing analyst at the Niskanen Center, tracks the difference between the Consumer Price Index and the increases allowed by the Rent Guidelines Board back to October 2000. The fifth column shows the RGB increase minus the CPI for that period.
In the real world, a sub-inflation rent increase is a decrease. But candidates never make that distinction on the campaign trail, because it doesn’t resonate with voters. A better question is why reporters don’t mention it when covering candidates’ calls for a rent freeze.
Rent drops don’t only benefit tenants in traditional rent-stabilized buildings. Tens of thousands of units in buildings receiving 421a, J-51 and other tax breaks are also subject to RGB decisions. Because mortgages for those buildings were not underwritten for rent decreases, many of those properties are barely above water or under it.
Rafael Cestero, CEO of the giant housing nonprofit Community Preservation Corporation and a former city housing commissioner, raised a red flag in a Crain’s op-ed Tuesday. The financial struggles of CPC’s rent-stabilized building and loan portfolio show that the problem is not profit-seeking by landlords. Rather, it’s math.
“Rent-stabilized housing stock is in deep, growing financial and physical distress,” he wrote. “Since 2020, operating expenses across our portfolio have increased by 21 percent, including a 6 percent increase in the past year alone. Meanwhile, rent collections plummeted during the pandemic and have yet to recover.”
Collections in CPC’s rent-stabilized buildings average around 92 percent, which matches what I have heard from affordable housing providers, who said pre-Covid, collection rates were about 5 points higher.
“That might not sound like much, but when your margins are already razor-thin, it can be the difference between keeping the lights on and falling into financial distress,” wrote Cestero.
He didn’t mention that CPC is servicing a large number of loans that Signature Bank made to rent-stabilized buildings before failing. But he alluded to it, citing the nonprofit’s “unique window into the financial and physical health of the city’s rent-stabilized housing.”
His conclusion: “The data we collect tells a troubling story.”
But the candidates and the media are not.
Read more
Rent-stabilized shortfalls may grow “exponentially,” new data shows
The Daily Dirt: State bills take another crack at helping rent-stabilized owners
Rent-stabilized building sells for $285K — a 97% value cut