Today's tenant may be tomorrow's homeless person in New York City, as the rise of new global capital and private equity firms as well as old rent stabilization laws are making the city unaffordable for many residents.
In a long essay in the New York Review of Books, Michael Greenberg suggests that poverty alone does not explain the city's homeless problem. Among the chief factors, he argues, are inadequate rent stabilization laws that place strict limits on annual increases for many apartments priced below $2,700 per month but allow market rates to be charged when that threshold has been crossed. He writes:
Read Full Article »Currently almost half of the rental apartments in New York City are stabilized—about 990,000 units, with 2.6 million people living in them. …But rent-stabilized apartments are disappearing at an alarming rate: since 2007, at least 172,000 apartments have been deregulated. To give an example of how quickly affordable housing can vanish, between 2007 and 2014, 25 percent of the rent-stabilized apartments on the Upper West Side of Manhattan were deregulated.
The clearing out of rent-stabilized tenants has become such a common real estate practice that it is added to a building's value even before the fact. Landlords have found enough loopholes in tenant protection laws to make widespread displacement a viable financial strategy. A building in Crown Heights with one hundred stabilized units and a rent roll of $1.2 million might now fetch $40 million or more—and every tenant must be forced out for the investment to be recouped.
The buyers at these prices are, more often than not, private equity funds that manage pools of investors' money: a typical participant in the Central Brooklyn market describes itself as an asset investment firm that specializes in the “repositioning” of multifamily buildings. The aggressive entry of hypercapitalized investors into the working- and lower-middle-class real estate market has struck Central Brooklyn—and the South Bronx, and East Harlem, and Washington Heights, and practically every New York neighborhood with a concentration of rent-stabilized buildings—like a thunderclap in the span of just a few years. They are a new type of owner in the outer boroughs, ones who can afford patient, relentless eviction proceedings and tenant buyouts in a way that most previous owners, who were often individual slumlords working with a different set of profit margins, could not.
