Major Rent Law Passes In New York, But The Fight For Affordable Housing Is Just Starting
By Pete Harrison (@PeteHarrisonNYC)
The national fight for rent control scored a major victory in New York last week. Finally acknowledging the depths of the affordable housing crisis across the state, both houses passed the Housing Stability and Tenant Protection Act of 2019 that represents nearly everything in the Universal Rent Control platform that the state-wide tenant campaign Housing Justice for All has fought for over the last two years. The final version is a dramatic swing in political fortunes in favor of tenants and against the worst speculators within the real estate industry. This was confirmed when Governor Cuomo quickly and quietly signed the bill into law over the loud protestations of the powerful developers who have funded his campaigns for years.
Across the media landscape, big corporate landlords and developers are crying out that this law will single-handedly kill the state’s real estate industry and make the housing crisis worse. That is just absurd alarmism. On the other hand, for many tenants, this bill won’t impact them either way - yet. Let’s dig into the details to see what this bill actually does and doesn’t do and how this sets up the bigger battles to come.
What It Does
There is a lot in this 74-page omnibus bill, but the heart of it is about strengthening and expanding the protections of existing rent regulations. There are about 1 million rent regulated apartments in the five boroughs of New York (about 45% of all rental units) and three surrounding suburban counties, which all fall under the Emergency Tenant Protection Act. Over the last 20 years, hundreds of thousands of regulated units have been deregulated and rents have climbed for the ones that remain.
This is because the current rent laws were crafted to include giant loopholes - things like Major Capital Improvements, Individual Apartment Improvements, Preferential Rents, and Vacancy Bonuses - that empower landlords to raise rents to get closer to the ultimate prize and the most glaring failure of the system - Vacancy Decontrol. Under this rule, when a unit gets to a certain threshold ($2800ish, currently), the unit is allowed to exit the regulatory system and the landlord can charge a market rate.
Most activists and lawmakers don’t question the need for small, local landlords to be able to invest in their properties and capture a fair return and the available data shows that rent stabilized buildings offer that opportunity. However, bad landlords and speculators have systematically abused these programs to harass tenants and defraud the state for years. There is an embarrassing lack of oversight and enforcement that the worst actors have baked into their deregulation strategies. It has created a frenzy of displacement-triggering speculation backed by major private equity firms and Wall Street banks.
This bill eliminates or significantly curbs all of these loopholes. It eliminates Vacancy Decontrol altogether and ends Vacancy Bonuses and Preferential Rents. It vastly narrows how much a landlord can charge a tenant for MCIs and IAIs and increases state auditing of the work being done. It also makes it easier for renters to go back (as much as 6 years) over their apartment’s rent history to see if the landlord has misrepresented increases.
The major breakthrough in the bill is an expansion of the Emergency Tenant Protection Act to every county in the state (from its current total of 8), expanding the rent regulation system for the first time in generations. Now, many upstate and western cities and towns facing a vacancy crisis have the ability to add rent stabilization to its housing stock, potentially covering thousands of new renters. It will still require these towns to opt-in to the system, but the groundwork has been laid for doing so.
Outside of improving and expanding the rent regulation system, this bill provides new protections for renters against eviction and harassment by limiting how much a landlord can ask for a security deposit, limiting “owner use” of units, ending the availability of the “tenant blacklist”, extending the time period when they must give a tenant notice on a renewal, and protecting how long a tenant can stay during an eviction process.
There are two other notable but lesser covered provisions in the bill worth highlighting. First, there are long overdue protections for renters in manufactured home parks, which are under extreme pressure from speculators across the state. Second, the bill makes it more difficult for landlords to convert rent stabilized units into condos or co-ops without a higher total of buy-in from existing residents. This closes a large potential backdoor for landlords to get around the stronger rent laws and ensures that many older, fixed income residents will be able to remain in their homes.
What It Doesn’t Do
This bill represents a generational shift of political momentum for renters in New York, but it falls short of being Universal Rent Control. That’s mainly because it does not include a provision for Good Cause eviction, which would have required that millions of market-rate renters in New York receive a lease renewal at a modest increase in rent. The new eviction protections included in the bill come closer to this than many activists will recognize, but this is by far the biggest defeat in the package. On the positive side, it sets up a critical re-election issue for next year, particularly for wobbly Democrats in the State Assembly who ultimately killed Good Cause.
Many activists who were hoping to eliminate Major Capital Improvements were disappointed that they remain in place, but the reform enacted is considerable (as the rumbling of potential lawsuits from landlords suggests). The real issue with the MCI and IAI reforms are the lack of new funding sources for enforcement. Without a modernization and reorganizing of the Division of Housing & Community Renewal, the agency that oversees the state’s enforcement of rent laws, it’s unclear that the status quo of abuse and fraud will truly be ended. Activists will be closely following what legislators do in the next session on this subject, particularly given the Governor’s power to slow walk agency funding and reforms after this stinging loss.
The bill also doesn’t reform the Rent Guidelines Board process, which controls the local administration of annual rent increases under the ETPA. New RGBs will need to be created as towns opt-in to the system, so this was a missed opportunity to reform a flawed system that is now guaranteed to be a larger source of conflict than it already is. The process appoints representatives of landlords and tenants to determine what, if any, increases should be allowed based on a local price index of operating costs, regional economic conditions, and other “cost of living” indicators. This almost always results in moderate to large rent increases each year, despite consistently outpacing wage increases for renters.
The current one-size fits all system pleases no one and doesn’t attempt to solve the speculative behavior that is at the heart of this current crisis. A better system would provide guidance to RGB members for limiting increases when the majority of renters pass the 30% income-to-rent ratio that the federal government considers burdensome (half of all renters in the state already pass it). It should also tackle speculation by considering the length of ownership of a building, the number of code violations a building receives, and the stability of tenancy before allowing rent to increase. This would encourage responsible long-term landlords while punishing speculators and bad landlords with a track record of harassment and displacement.
Finally, the bill fails to re-regulate units that were lost in the heights of the speculative rush to exploit rent law loopholes. This could have represented thousands of units in New York City, but it was too much to get through this session. These units could hypothetically see greater rent increases in anticipation of this being another election issue next year, but expect to see this issue revisited by Housing Justice for All.
What It Means
The housing crisis is quickly altering politics in New York. This puts pressure on both Republicans and Democrats. For the first time, there is a robust state-wide tenant movement to challenge the supremacy of the real estate industry’s hold over Albany. This movement first showed its clout in the 2018 election when it helped swing the senate to Democrats by defeating 6 of the 8 senators in the real-estate backed Independent Democratic Conference (plus Julia Salazar’s victory over an IDC-allied incumbent.) The movement is firmly entrenched after this legislative success and will likely ride this session into an aggressive strategy to primary centrist Democrats in both houses that failed to align with the growing tenant movement.
Real estate has options to fight back going forward, though they are not without risk of further isolation. There will be a lot of effort and money placed on shaping the post-session narrative of the bill in the media. This has already begun, which will be challenging for the tenant movement to counter given the deep seated ideological hostility to rent control in the media. There could very well be a legal challenge, though it is unlikely to succeed. The electoral strategy is murkier. A number of senate Democrats in ‘vulnerable’ seats, notably on Long Island, voted against the bill, so it’s not clear that it can be a wedge issue to flip those seats back to Republicans. There will also be a lot of Democrats who think twice about accepting real estate money, further diminishing its power.
What is clear is that the tenant movement emerged from this session united in a way that has never happened before, while the real estate industry will likely fracture from it as it never has before. There has already been grumbling from smaller members of the big landlord associations REBNY, RSA, and CHIP about the colossal failure of their lobbying strategy. There has always been a tension between the interests of smaller, local landlords and construction labor and the interests of big real estate developers and corporate landlords, but this laid them bare.
In the end, what happens next will be just as important in determining the effectiveness of this legislation. If the tenant movement is able to solidify its gains and press for more, this could be the beginning of a larger shift away from the commodification of housing and towards the acceptance that housing is a basic human right. This will require more than just Universal Rent Control, which, to state again, this bill is not. It will mean building millions of private and publicly owned homes. It will mean pressing for more direct rental assistance for low-income renters, more equitable transit-oriented zoning, and more taxes on speculation and pied-a-tiers.
These are issues that could further split local landlords and construction labor unions from big real estate, further remaking the political landscape in New York towards a more equitable, sustainable economy and culture. Either way, big real estate won’t go down without a fight. They must now fight a massive tenant movement that they helped create.
Pete Harrison (@PeteHarrisonNYC) is a senior adviser to Data for Progress, focused on housing. He is a co-founder of homeBody.