There’s Nothing Left to Squeeze
The New York City government is making it impossible to live and make a profit. They tied my arms behind my back, they tied up my legs, they cut off my hands, they cut off my feet, they’re choking me by the neck, and they’ve got a vise grip on me and my wallet. There’s nothing left to squeeze. - Anonymous Landlord
The above quote is an actual quote spoken by a landlord. You will not read that in the New York Times, New York Daily News, or Wall Street Journal (though possibly in the New York Post), but this is how many small landlords feel after the devastating DeBlasio years.
Let’s start with a fact: small mom-and-pop landlords do exist, especially in neighborhoods like Bath Beach and Bensonhurst, often as owners of rent stabilized buildings ranging in size from 6-family to 60-family buildings. Are there as many as there were 30-40 years ago? No. There are many more corporate, faceless landlords than small mom-and-pop landlords. Given the 2019 New York State Rent Law changes and the amount of compliance required of local laws, many of these small mom-and-pop landlords are looking to sell and move their money to other states that are more friendly to property owners.
Here’s the problem, landlords in rent stabilized buildings cannot receive vacancy increases or longevity increases when long term tenants move out (often feet first to the local funeral home). These newly vacant apartments are frequently in need of upgrades, usually a new kitchen and bathroom, but many need to be gutted at a cost of $50,000 to $80,000. Individual apartment improvement increases, however, are capped at $15,000 by the State of New York, and the State requires lots of documentation before deciding whether to approve an increase that is a few cents more than $89.00. There’s no incentive to gut an apartment and many landlords simply choose to leave the apartment vacant and take a loss. Couple that with many years of low Rent Guidelines Board increases due to Mayor DeBlasio from which most landlords have still not recovered, ever increasing property taxes, ever increasing utility costs, and it is no wonder why the ever decreasing number of small mom-and-pop landlords are struggling and considering throwing in the towel.
On top of that, New York City local law requires XRF lead paint testing of all surfaces in an apartment by August 2025. This testing costs thousands of dollars and lead abatement costs thousands more. Additionally in 2024, Local Law 97 goes into effect and many buildings will need to reduce emissions or face hefty fines. Most rent stabilized buildings in Bath Beach/Bensonhurst were built sometime between 1910 and 1950. They are old and making the necessary upgrades costs money - thousands of dollars. From where is this money coming?
Moreover, consider the need for standard maintenance. Brass pipes can corrode, bathrooms need re-grouting, walls need painting, window cams and balances need replacing, floors need replacing or refinishing, bathtubs need re-glazing, mailboxes need replacing and updating, superintendents and property managers need raises, and the cost of supplies and labor continues to rise. That does not even take into account situations in which a family of five people occupy a one bedroom apartment, which puts tremendous wear and tear on the apartment and often makes proper pest extermination difficult. Neither does it take into account the tenants who make unreasonable or excessive demands of landlords because they feel that for $900 rent they deserve a luxury apartment nor the expensive and ever difficult process of evicting of tenants who simply stop paying rent.
As former Governor David Paterson was recently quoted by the New York Post as saying,
“Albany lawmakers ‘seem to almost treat certain members of the population as if they were expendable. And they’re not expendable. [The real estate industry] really is the backbone of the city. You’ll really find out how bad it can be if they do move away. Or you have situations like you had in the ’70s where you had the proliferation of crime and the un-affordability of housing… created a really squalid condition around the city.’”
Governor Paterson was speaking about high taxes and the migrant crisis, but the sentiment applies to many aspects of the real estate industry and New York City in general.
No one denies that rents have gotten too high in many buildings or that there are some really horrible slumlords who have taken advantage of tenants, but bad policies or poor regulation by governments in the past should not be taken as carte blanche to add restrictions for landlords to recoup their money following needed apartment renovations or excessive compliance that prevent good landlords, especially small mom-and-pop landlords, from making enough profit to invest in their properties.
As the landlord quoted at the start of this blog, “There is nothing left to squeeze.”
Your Friend,
John