The Evolving Impact Of 2019 Rent Laws In New York City

The year 2019 was a whirlwind for New York City real estate, especially when it comes to the New York multifamily market. In June, Governor Cuomo signed into law the Housing Stability and Tenant Protection Act, which constituted major changes to the New York Landlord/Tenant Law and, more specifically, the Rent Stabilization Law.

The Housing Stability and Tenant Protection Act substantially hinders or prohibits landlords from increasing rents on vacant units through renovations, therefore disincentivizing them to make improvements, some of which are badly needed to maintain quality housing. The law also places more onerous requirements on managers for the operation of fair market units.

More broadly speaking, the New York rental market has been flat for the past few years due to a surge in luxury rental building completions in 2018. These completions consisted of 50,000 residential unit building permits issued in 2015, which is four times the average of any other year this decade — and all of this was prior to the burn off of the 421a tax abatement. The surge in completions put downward pressure on pricing and demand, which has started to catch up with supply, and we now expect free market apartment rentals to be stronger in the next few years.

Catalyzed by the new 2019 rent law, investment sales transaction volume has slowed, demonstrated by the significant decrease in total dollar volume of multifamily trades in buildings both with and without elevators in late 2018 to early 2019. With some of this occurring before the rent laws even took effect, many investors were aware of an upcoming legislature change, and some are now cautious while others are sitting back and waiting to see how the market responds to the new normal.

Falling valuations on rent-stabilized property portfolios have driven up demand for fair market product in the near term and may create a buying opportunity for rent-stabilized product in the longer term as cap rates widen. With more capital chasing fewer deals, capital rates on fair market buildings are expected to compress. Historically, the market absorbed approximately 9,000 free market apartments per year that were converted rent stabilized units. Now, with the new laws, this will no longer be a source of supply. In turn, this substantial loss of new, renovated apartments should raise fair market rents year-over-year in the near term.

With all of these changes, it is more important than ever to have the right property management professionals who understand the nuances of the new laws, the latest requirements and compliance measures. We’ve noticed many property management companies have not yet adopted new technologies as they become available and instead continue to operate with less efficient, more antiquated systems that were used decades ago.

At Canvas Property Group, we realize how crucial it is to stay up to date on available services and regularly evaluate our methods and workflows, aggregating the latest available property technologies. Canvas Property Group also tracks renter trends through data collection to help steer investment decisions and takes a more targeted marketing approach to better serve and accommodate our renters’ needs and lifestyle preferences.