Some of New York’s most prolific builders are leaving Manhattan and turning to other markets such as Colorado, Utah, and Florida, due to New York’s climbing tax rates and increasing regulations.
An owner of several properties in Manhattan told Crain’s Business Magazine that they are now prioritizing their investments in Miami and that their “outlook now has turned negative in New York.”
Frank Ricci, director of government affairs at the Rent Stabilization Association, which represents owners of rent-regulated buildings, told Crain’s that the phenomenon was partially to sweeping rent regulations passed in New York in June.
“The changes and the proposals have been draconian,” he said. “I think that the faith that a lot of owners have in the city and the state’s political system has been shaken.”
The new laws have been called “the strongest tenant protections in history” by state lawmakers.
The laws include limiting the security deposit to one month, allowing judges to postpone an eviction for up to one year, prohibiting landlords from blacklisting purportedly troublesome tenants, and fining landlords up to $10,000 for unlawfully evicting tenants, among other regulations.
“It is the right thing to do,” Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie said in a joint statement, “None of these historic new tenant protections would be possible without the fact that New York finally has a united Democratic Legislature.”
But the laws have also drawn criticism for hurting the real estate industry, including small landlords.
The laws also affects the tenants and landlords of the nearly 1 million rent-stabilized and rent-controlled apartments, which make up more than half of New York City apartments. Landlords of these apartments can only raise their rent by a set amount decided by the New York City Rent Guidelines Board. The raise is often less than that in the free market.
New York real estate lawyer Samuel Goldberg said that in order to get their apartments out of the regulated status, many such landlords would use avenues like renovating the house to push the rent above the $2,775 ceiling, which automatically makes the apartments go back to the free market.
“Now the way it is is that it doesn’t matter if the rent went above $2,775. It’s still a rent stabilized apartment because it was rent stabilized then,” he told NTD News, “They make sure that rent stabilized tenants gets stay in their apartment.”
He said for the landlord side, the people most affected are the developers that currently own the buildings.
“Because when they bought the buildings, they were doing their analysis, they were under the impression that certain rent stabilized would be deregulated. Now they were sitting with these buildings with a ton of rent stabilized tenants and they are unable to deregulate and get out of it.”
In July, a group of landlords filed a federal lawsuit in Brooklyn, saying the rent laws violate the Fifth and Fourteenth Amendments in the Constitution and that the government has no right to direct how owners use their private property. The lawyers say it could take one or two years for any results to show.
New York is the second state in the country to enforce state-wide rent control. Oregon also passed a rent cap earlier this year. Similar rent controls also exist in some local governments in California and Maryland, according to the National Multifamily Housing Council.
“Now the future developers, the future landlords, they know the law, they know how it stands, and now if they buy a building, they know exactly what happens,” Goldberg said, “The new law does not incentivize landlord and developers come here as they used to.”