Why a rent freeze has consequences for many older buildings

Plus, the urgent need to reform Housing Court and the false promise of the Community Opportunity to Purchase Act.

This is your New York Apartment Association weekly update with CEO Kenny Burgos.

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Send us questions or comments at podcast@housingny.org 

On The Agenda

1:17 Rent freeze: the politics vs. the math

→ Watch Kenny on NY1 

→ Watch Kenny on PIX11

→ Furman Center testimony 

5:02: Why we must reform housing court 

→ Read the report

6:26: Basement apartments

7:58: Permits to build new apartments have plummeted nationally 

9:05: False Hope: the Community Opportunity To Purchase Act (COPA)

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Transcript

This week on Housing New York, I did the rounds on local TV talking about the dangers of blanket rent freeze proposals. Plus, long delays are causing housing court hell for both renters and housing providers. And I'll discuss COPA — and I'm not talking about cabana. 

Let's start housing New York.

[THEME]
“We need 800,000 units to meet the demand today. What we have right now in the United States and what we have right now in New York City is almost a crisis of absurdity.”

[INTRO]

Welcome to the Housing New York podcast. I'm your host, Kenny Burgos, CEO of the New York Apartment Association. We're taping this on Monday, May 19th. 

It was a crazy weekend in New York City. A tall ship crashed into the Brooklyn Bridge. The New Jersey transit strike was ongoing. The weekend kicked off with the Knicks completely destroying the Celtics and heading to the Eastern Conference finals for the first time since I was in elementary school, and their fans literally shut down 7th Avenue in an impromptu victory party.

That's New York baby. Now on to the news.

[01:17] [Rent Freeze: the politics vs. the math] 

We kick off the podcast with a thank you to NY1 and PIX11. Both stations spoke to me to get perspective on the proposed rent freeze by several mayoral candidates. 

Here are a few clips from those appearances. 

[—]

[NY1’s Patrick Adcroft] “…There are a million of them and, and there aren't that many landlords. So politically, the equation in New York City often tilts toward the tenant side.”

[Kenny] “Certainly, and but they shouldn't, because we're talking about half the rental market within New York City and by the Rent Guidelines Board’s own math, they've calculated that it's a 6.25% increase just to account for the costs that have incurred over the past year. The problem is this process becomes political, when it should be mathematical. The reality is the government can reduce these costs. It's not that we advocate for costs and rent to go up every single year, but the reality is that every single cost from property taxes, insurance, water – you name it – have increased. And that cost ties into operating housing.”

[—]

[PIX11’s Dan Mannarino] “People who are looking at this are saying, ‘These are greedy landlords who want the money,’ right? But you're saying that's not the case. That they need it for just kind of everyday repairs. So walk me through what a rent increase funds, how these landlords utilize the money.”

[Kenny] “So right now, the, the, again, according to The Rent Guidelines Board, the cost to operate a rent-stabilized apartment on average is somewhere around $1,300; and the median rent for a rent-stabilized apartment is around $1,300. So functionally, this system is already breaking. The NYU Furman Center reported 200,000 units are already bankrupt. So what this increase would do really, is really keep these buildings somewhat afloat. There's costs coming in. There's over a hundred new laws from the City Council that are what we call unfunded mandates — from Local Law 97, to Local Law 11 work, to climate change policy — all these policies are forced upon property owners — private property owners — with no cost [assistance] from the government. But at the same time, they're pushing for a rent freeze and also asking private owners to add on these extra costs to manage these buildings. So the math is just not mathing, right?”

[—]

[PIX11’s Dan Mannarino] “... I mean it’s a million-plus units, right? What is the benefit of a landlord being the landlord of a building that is rent stabilized? Why would anybody want it if it's such a burden?”

[Kenny] “Under current conditions, there's not many, Dan. Honestly, what we're seeing right now is foreclosures coming in. We're seeing buildings sell for 60 to 70% less than their value just five years ago…”

[PIX11’s Dan Mannarino] “They’re foreclosing on the building?”

[Kenny] “They're foreclosing on the building. They're saying — banks are saying they're not getting involved with rent-stabilized properties because the numbers are not panning out. And this is what we've been saying for the longest… The people are not listening to us, and it's a product of revenue. You're seeing the lowest-income communities that need the most help and their buildings are falling apart. And it's not because property owners just want the buildings to fall apart. It's a product of revenue. They've been squeezed to no end, and you just can't squeeze blood from the stone here.”

[—]

[NY1’s Patrick Adcroft] “If you were gonna fix this, if Albany was doing something to change the way this structure works, would it be more targeted programs like that, that help those who most need help?”

[Kenny] “Yeah. I think that's what we should be doing because rent stabilization doesn't have an income testing or an income need — you can make a million dollars a year and live in a rent-stabilized apartment. So a blanket rent freeze, I believe, is a choice of winners and losers, right? If we do a blanket rent freeze, you're essentially protecting one class of people in the rental market while passing on that cost, that continues to go up, to the other class of people. … 'Cause this cost doesn't go away. Someone has to pay this bill. So if it's not passed on to other tenants, it's then passed on to city taxpayers who are then forced to bail out these buildings.”

[—]

In the long run, what I'm really hoping happens is that the rent-freeze proposal is put into perspective. You can't cheat math and economics. If you freeze rents, buildings will not be able to pay for their operations. So they'll either deteriorate or need massive government subsidies. 

And any candidate calling for a rent freeze needs to answer that question: Are you going to pledge billions of dollars to annually maintain buildings that you defunded with the rent freeze? 

[05:02 [Housing Court]

Let's discuss housing court now. Their May magazine the City Journal wrote extensively about this topic. Specifically, they broke down a report that was issued by the New York State Bar Association’s Real Property Section's Housing Subcommittee.

That's a mouthful, but the report was eye-opening. It concluded that reform is necessary and reform on all levels. It says technology needs to be upgraded, staff training needs to improve. It also calls for the state Legislature to pass reforms. Their top proposal was to remove non-payment cases from housing court and put them in a separate process. 

They even suggested a pre-filing mediation program. This is what we call eviction diversion. Our members see this every day: They rent out affordable, unsubsidized, rent-stabilized housing, and unfortunately, some renters cannot keep up. The owners have no desire to evict them, but they need to collect the rent so they can pay property taxes, insurance, and maintain the building and pay their mortgages.

Every time they set foot in housing court, they're losing money. That is money that could have been spent on the building. So a streamlined process for nonpayment cases and more help upstream for tenants struggling to pay would be a win for everyone. Buildings would have more money for operations. Renters would avoid the hassle and indignity of having to go to housing court. 

I hope these suggestions are taken seriously and improvements are made. 

[06:26] [Basement apartments]

I wanted to touch on a new topic today: Basement apartments. 

There was a story in City Limits about families, mostly in Queens, who live in basement apartments that are technically illegal. But they aren't slums; many of them are nice and refurbished. Rents are often half of what a legal apartment would cost in the same neighborhood. 

This story highlights a lot of the city's housing problems. First and foremost, the lack of supply, which creates this black market. Also, owners of these two-family homes with basement units usually can't afford the homes unless they rent out that space, but because it is illegal to do so, nobody talks about it. The tenants don't want to complain to the city about the apartment because they know that if the Department of Buildings comes to the home, they will issue a vacate order, and the family will likely end up in a homeless shelter — which is far worse than the current situation.

At the same time, there are valid concerns about the safety of these units. The city launched a pilot program to try and make the basements more safe, but the cost of the upgrades was on average $275,000, which is money these homeowners don't have. 

The city can't afford to subsidize this for tens of thousands of homes, so we need to think more creatively about this problem. We need to figure out a cheaper way to legalize these apartments or make it legal for these homes to be torn down and rebuilt with higher density, which would create a funding path for the rebuilds. 

What we can’t do is put our heads in the sand. We need more creative ideas on all of our housing problems.

[07:58] [Build permits plummet nationally]

Let's zoom out now and take a look at the national housing picture, because it is not good. 

Permits for new apartment buildings declined in 2024, that's according to a report by The New York Times. A confluence of events has caused this downturn. High interest rates are a big part of it, but so is the lack of certainty in material costs due to changing tariff policy. And labor costs are now a big concern for the construction industry due to the immigration crackdown. 

There are some places that are still building at a good clip, mostly Sunbelt cities where soft cost — or costs that are driven by government regulations — remain low. For example, in many parts of the country where construction is still happening, they have less zoning restrictions — like smaller lot sizes — and they allow more density.

In places where housing is not being built, minimum lot sizes are larger and single family homes are the only things allowed. The result is that places like Florida and North Carolina are going to continue to have growing populations, while New York is likely going to remain static, and that means we will be losing political power in the next U.S. Census.

[09:05] [The Community Opportunity to Purchase Act (COPA)]

Let's end the podcast talking about some legislation we think is about to move in the City Council, specifically the Community Opportunity to Purchase Act, or COPA. 

This bill is Intro 902, and we found out there's going to be a hearing for it in early June in the City Council. Once a bill has a hearing, it can pass.

This bill would direct the Department of Housing Preservation and Development, or HPD, to create a list of certified nonprofit housing providers. Entities on that list would get the first shot at buying apartment buildings that are put up for sale. The owners would not be able to sell the building to anyone else for 180 days.

HPD would have a lot of power to determine who is on the list. Also, owners can petition to get around this regulation if there is financial hardship or the death of an owner or other circumstances. 

This is what I call a false hope bill. It sounds like a good thing and City Council members can run for office by saying that it has given renters more power to own their homes.

The reality is that you cannot cheat math. As I keep saying, the buildings need money to operate. 

The irony is that nothing currently prevents tenants or nonprofits from purchasing buildings that are already for sale right now, because the problem is that they don't have the money or income to purchase buildings that are already failing.

What this law will do is distort the market and drive up building prices, and that will likely make it harder for nonprofits to purchase them. Don't take our word for it, that's what the de Blasio administration said about previous versions of this bill. They made the point that without government funding backing these nonprofits, the bill won't work.

When the government goes into the market with a goal of outbidding private buyers, the prices go up. That's just Economics 101: it's called subsidized demand. 

The City Council should focus their attention on things that will actually make the city more affordable and increase the supply of housing.

[OUTRO]

That's it for the podcast. As always, you can follow us on social media @housingny. Feel free to tell us how you feel about the podcast or anything else: just drop us a note in the comments or engage with us on X, Instagram or TikTok. 

You've been listening to Housing New York with Kenny Burgos and I'll see you all next week.

And remember, good housing policy starts with good conversation.