Changes to the Rent Stabilized Housing Stock in NYC in 2019 May 27, 2020 New York City Rent Guidelines Board York New Board Members Chair: David Reiss Public Members: Christina DeRose ● Christian Gonzalez-Rivera Cecilia Joza ● Alex Schwartz Owner Members: Patti Stone ● Scott Walsh Tenant Members: Sheila Garcia ● Leah Goodridge Staff Members Executive Director: Andrew McLaughlin Research Director: Brian Hoberman Deputy Research Director: Danielle Burger Office Manager: Charmaine Superville New York City Rent Guidelines Board 1 Centre Street, Suite 2210, New York, NY 10007 l 212-669-7480 l nyc.gov/rgb New York City Rent Guidelines Board Changes to the Rent Stabilized Housing Stock in NYC in 2019 04 Overview What’s New Additions to the R The study finds a net estimated loss of 2,444 rent 04 Rent Stabilized stabilized units in 2019. Housing Stock R Since 1994, New York City’s rent stabilized housing stock has seen an approximate net loss of 145,312 units. Subtractions to 06 the Rent Stabilized R Additions to the stabilized housing stock in 2019 declined Housing Stock 26% from the prior year. R Subtractions from the stabilized housing stock in 2019 09 Summary rose 51% over the prior year. R Most of the additions to the rent stabilized stock in 2019 12 Appendices were due to the 421-a tax incentive program, accounting for 65% of the additions. R The median rent of initially registered rent stabilized apartments in 2019 was $4,798, a 60% increase from the prior year. R High-Rent Vacancy Deregulation made up the largest category of subtractions from the stabilized stock, accounting for 70% of the units removed in 2019. New York City Rent Guidelines Board • May 27, 2020 • Page 3 Changes to the Rent Stabilized Housing Stock in NYC in 2019 Overview concluding that short-term regulation with tax benefits is more profitable than free market rents Rent regulation has been a fixture in New York City’s without tax benefits. According to NYS Homes and housing market for over 75 years, although the laws Community Renewal (HCR), the median legal rent that govern rent regulated housing have been of initially registered rent stabilized apartments in substantially changed over time. The laws 2019 was $4,798, a 60% increase from the prior year. governing rent regulation allow for dynamic (See Appendix 3 for initially registered rents changes in the regulatory status of a significant Citywide and by borough.) Events that lead to the portion of the rent regulated housing stock in any addition of stabilized units include: given year. Units enter, exit or change status within the regulatory system. • Section 421-a Tax Exemption Program The figures in this study represent additions and • J-51 Property Tax Exemption and Abatement subtractions of dwelling units to and from the rent Program stabilization system in 2019. Some of the ways in • Mitchell-Lama buyouts which units left rent stabilization were eliminated • Lofts converted to rent stabilized units by passage of the Housing Stability & Tenant • Rent controlled apartments converting to rent Protection Act (HSTPA) of 2019. These figures report stabilization changes in status during the period both before • Other additions and after the law went into effect on June 14, 2019, and are gathered from various City and State Section 421-a and J-51 Programs agencies. This report is an update of previous studies The NYC Department of Housing Preservation and done annually since 2003, when an analysis was Development (HPD) administers programs to done of the changes in New York City’s rent increase the supply of rental housing. Two of these stabilized housing stock from 1994 to 2002. The programs have an impact on the inventory of total number of additions and subtractions to the stabilized housing: the Section 421-a Program and rent stabilized housing stock since 1994 is the J-51 Program. Under Section 421-a of the Real contained in the appendices of this report. These Property Tax Law, newly constructed dwellings in totals are estimates because they do not represent New York City could elect to receive real estate tax every unit that has been added or subtracted from exemptions in exchange for placing units in rent the rent stabilized stock since 1994, but rather those stabilization for a specified period (10-25 years). In that have been recorded or registered by various 2019, an estimated total of 5,723 units were added City and State agencies. They represent a ‘floor,’ or to the rent stabilized stock through the 421-a minimum count, of the actual number of newly program, 39% fewer than the prior year. The largest regulated and deregulated units in these years. number of units was in Brooklyn (64%); followed by Manhattan (22%); Queens (10%); the Bronx (5%); Additions to the Rent Stabilized and Staten Island (fewer than 1%).1 According to Housing Stock HCR, the median legal rent of currently registered rent stabilized apartments receiving 421-a tax Since newly constructed or substantially abatements in 2019 was $3,411, a 2% increase from rehabilitated units are exempt from rent regulation, the prior year. increases to the regulated housing stock are The J-51 Program provides real estate tax frequently a result of owners placing these new exemptions and abatements to existing residential units under rent stabilization in exchange for tax buildings that are renovated or rehabilitated. This benefits. These owners choose to place units under program also provides these benefits to residential rent stabilization because of cost/benefit analyses buildings converted from commercial structures. In Page 4 • May 27, 2020 • New York City Rent Guidelines Board Changes to the Rent Stabilized Housing Stock in NYC in 2019 exchange for these benefits, owners of these Changes in Regulatory Status buildings agree to place under rent stabilization those apartments that otherwise would not be Chapter 371 of the Laws of 1971 provided for the subject to regulation. The apartments remain decontrol of rent controlled units that were stabilized, at a minimum, until the benefits expire. voluntarily vacated on or after July 1, 1971. Since the In 2019, 196 units were added to the rent stabilized enactment of vacancy decontrol, the number of stock through the J-51 program, a 37% decline from rent controlled units has fallen from over one 2 the prior year. (See Appendices 1 and 2.) million to fewer than 22,000. Effective as of June 14, 2019, with passage of the Housing Stability & Tenant Protection Act (HSTPA) of 2019, when a rent Mitchell-Lama Buyouts controlled unit is vacated, it becomes rent stabilized Mitchell-Lama developments were constructed when it is contained in a rental building with six or under the provisions of Article 2 of the Private more units. Prior to passage of the HSTPA, only if the Housing Finance Law (PHFL). This program was incoming tenant paid a legal regulated rent that primarily designed to increase the supply of was less than the Deregulation Rent Threshold housing affordable to middle-income households. (most recently, $2,774.76 per month) did the unit Approximately 75,000 rental apartments and 50,000 become rent stabilized.3 This process results in a cooperative units were constructed through the reduction of the rent controlled stock and an program from the 1950’s through the 1970’s. For increase in the rent stabilized stock. Otherwise, the these units to be affordable, the State or City apartment was subject to deregulation and left the provided low interest mortgages and real estate tax rent regulatory system entirely. abatements, and the owners agreed to limit their According to rent registration filings with NYS return on equity. Homes and Community Renewal (HCR), 361 units While the State and City mortgages are were decontrolled and became rent stabilized in generally for a term of 40 or 50 years, the PHFL 2019, an increase of 156% from the 141 units allows owners to buy out of the program after 20 decontrolled the prior year. By borough, 55% of the years. If an owner of a rental development buys out units were in Manhattan; 18% were in Queens; 17% of the program and the development was occupied were in Brooklyn; 9% were in the Bronx; and there prior to January 1, 1974, the apartments become was just one unit on Staten Island. (See Appendices subject to rent stabilization. 1 and 2.) In 2019, 353 Mitchell-Lama rental units became rent stabilized, compared to none in 2018. Since Other Additions to the Stabilized 1994, 11,746 rental units have left the Mitchell-Lama Housing Stock system and become a part of the rent stabilized housing stock. (See Appendices 1 and 2.) Additionally, several other events can increase the rent stabilized housing stock: tax incentive programs Loft Units (other than the 421-a and J-51 programs), “deconversion,” returned losses, and the sub-division The New York City Loft Board, under Article 7-C of the of large units into two or more smaller units. The 420- Multiple Dwelling Law, regulates rents in buildings c program, a tax exemption program for low-income originally intended as commercial loft space that housing projects developed in conjunction with the have been converted to residential housing. When Low-Income Housing Tax Credit Program, produces the units are brought up to code standard, they may affordable housing with rents that are regulated, but become stabilized. A total of 22 units entered the not necessarily rent stabilized.4 The RGB is unable to rent stabilization system in 2019, compared to 43 determine the number of these units that became added in 2018. (See Appendices 1 and 2.) rent stabilized. New York City Rent Guidelines Board • May 27, 2020 • Page 5 Changes to the Rent Stabilized Housing Stock in NYC in 2019 However, there are other tax incentive High-Rent High-Income Deregulation programs, which as part of their regulatory agreements may require their rental units to be rent With passage of the Housing Stability & Tenant stabilized, and whose stabilization status could be Protection Act (HSTPA) of 2019, effective June 14, determined.