Rent guidelines board season kicked off Thursday with the first of many temperature checks on the state of rent-stabilized housing, an asset class drowning in distress.
For landlords praying for a lifeline in the form of a rent hike, the data isn’t looking good.
This year’s Income and Expense Study found buildings’ net operating income — a measure of profitability — surged 8 percent between 2022 and 2023 when adjusted for inflation. (RGB data has a two-year lag time, a perpetual complaint of city landlords and their advocates.)
Dial in on the outer boroughs and Upper Manhattan, where distress has concentrated, and NOI grew 4.4 percent, according to the report — the first inflation-adjusted increase in four years.
Property owners, as in past years, called B.S. on the findings.
For starters, the New York Apartment Association, which represents rent-regulated owners, claimed the topline number includes over 120,000 free-market units. Many rent-regulated buildings were at least partially deregulated and contain a mix of market-rate and stabilized apartments.
“The inclusion of these buildings distorts and confuses the data,” NYAA CEO Kenny Burgos said. “It creates a warped perception that rent-stabilized buildings are doing okay, when the reality is that most are in severe financial distress.”
NYAA also said the analysis fails to break out inflation-adjusted data for properties outside of Core Manhattan and built before 1974. The RGB defines Core Manhattan as south of West 110th and East 96th Streets.
That older, outerborough product is more likely to be majority rent-regulated and therefore pulls lower rents, demands more repairs and is more likely to be distressed, recent trades and foreclosures show.
By NYAA’s math, NOI for that subset, which comprises 65 percent of the surveyed stock, slipped 2 percent between 2022 and 2023.
By borough, Bronx profits fell nearly 8 percent in the period, profits in Brooklyn by 0.2 percent, in Queens by 1 percent in Queens and in Northern Manhattan a little over 2 percent.
The Bronx is overwhelmingly rent-stabilized and its landlords are being throttled by surging insurance costs.
Meanwhile, RGB data showed inflation-adjusted NOI growth in Core Manhattan, where buildings popped 18.6 percent between 2022 and 2023. Those buildings are often newer, more recently stabilized at market rate and benefitting from a tax break, or if they’re older, heavily deregulated.
Before the rent law banned the practice, owners deregulated units to reap the surging rents in the city. NYAA found pre-1974 buildings in the area, which are more likely to be deregulated, saw NOI jump 16.3 percent during the period.
“This report shows a tale of two cities when it comes to regulated housing,” Burgos concluded. “The data clearly shows disinvestment in these buildings from 2022 to 2023, which should alarm everyone.”
One group seemingly unconcerned: tenant advocates.
On the heels of the report’s release, Cea Weaver-led New York State Tenant Block claimed the RGB data supports a rent freeze, a demand echoed by rent-stabilized tenants every year since the pandemic.
The group argued the board has okayed three rent hikes in as many years and it’s time for the members to throw tenants a bone.
Landlords have repeatedly claimed that the hikes — 7.75 percent in the last two and a half years — fail to cover inflation and the related surge in expenses, let alone needed renovations or mortgage payments, which are not calculated as part of NOI.
But the I&E findings are only the beginning. There are still seven more reports, a slew of meetings and a preliminary hearing ahead of the board’s final vote in June on adjustments for about half of the city’s rental stock.
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