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A row of residential buildings in Harlem.<\/p>\n
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Seven years after the passage of the Housing Stability and Tenant Protection Act of 2019 (HSTPA), its negative consequences continue to be deeply felt across New York\u2019s housing market. <\/p>\n
HSTPA left owners of rent stabilized buildings with only one tool to pay for rising expenses, rent increases voted on by New York City\u2019s Rent Guidelines Board. The RGB is currently considering a 0%-2% rent increase<\/a> for one year leases in 1 million rent stabilized apartments, around half the City\u2019s housing stock. A final vote is scheduled for June 25.<\/p>\n The failure to approve a rent increase to catch up with inflation will mean stabilized buildings will continue to lose ground. However, even an increase at a higher level won\u2019t reverse the financial and physical damage HSTPA has already inflicted on the City\u2019s rent stabilized housing supply. <\/p>\n How Did We Get Here? <\/p>\n HSTPA, which took effect in June of 2019, eliminated the ability to increase rents in rent stabilized units even when a vacancy occurs. Landlords have responded by leaving units vacant and postponing renovations, particularly when the regulated rent is extremely low. <\/p>\n Macro trends have also contributed to the plight of rent stabilized housing. After HSTPA was approved, landlords were hit with COVID, which affected collections, especially in the Bronx. Tenants were told by advocates that they could defer payments, resulting in \u201ceconomic vacancy\u201d or nonpayment that continues to be above 15% in some cases today. Lastly, inflation soared and interest rates doubled in 2022 and have stayed elevated since then. <\/p>\n Throughout all of these shocks, the RGB voted to increase rents well below the growth in the expenses. Data from Ariel Property Advisors\u2019 Q1 Multifamily Report shows<\/a> that over the past five years, a 16% increase in rent growth has been dwarfed by a 40% surge in operating expenses. <\/p>\n Data from Ariel Property Advisors’ Q1 2026 Multifamily Report shows that over the past five years, a 16% increase in rent growth has been dwarfed by a 40% surge in operating expenses.<\/p>\n Ariel Property Advisors<\/p>\n For 100% stabilized buildings outside of core Manhattan, the average monthly rent was $1,287 in 2024, while operating costs sat at $1,022, according to the RGB 2026 Income and Expense Study<\/a>. That leaves a razor-thin margin to cover mortgage debt service, emergency repairs, and major capital upgrades, a financial gap further exacerbated by the lingering post-pandemic tenant nonpayment rates.<\/p>\n This math is unsustainable. A recent New York Apartment Association (NYAA) analysis<\/a> warns that Mayor Mamdani\u2019s proposed four-year rent freeze will push roughly half of the city\u2019s rent-stabilized buildings into systemic bankruptcy, unless the government can offset operating cost increases. <\/p>\n What can be done? \u201cVacancy Reset\u201d Would Reverse the Unintended Damage of HSTPA <\/p>\n NYAA\u2019s CEO, Kenny Burgos, who was a recent guest on my Coffee & Cap Rates podcast, observed that HSTPA was sold as a sweeping tenant protection law, but in fact it targeted the financing and economics of the buildings.<\/p>\n One of the most damaging features of the legislation Burgos agreed was the introduction of vacancy control, restricting the amount a landlord can charge when a unit is vacated even by a longtime tenant who lived in the unit for 20 to 30 years. <\/p>\n For example, if the tenant who left paid $1,000 a month, it\u2019s assumed the rent will stay the same for a new tenant, he said. If a landlord renovates the unit to bring it up to code, they can only charge a new tenant an additional $347.22 maximum, which isn\u2019t enough to cover the operating costs of the unit much less the renovations.<\/p>\n The result is that in the middle of a housing crisis, at least 50,000 rent stabilized apartments aren\u2019t being rented and have been removed from the market, Burgos said, adding that the number is expected to rise, No other rent control system in the country, even in California which has similar politics to New York City, has vacancy control because it\u2019s so devastating to the housing stock, he noted.<\/p>\n A vacancy reset would give owners an incentive to renovate vacant units and bring them back online. The new tenant would agree to a new first rent and thereafter receive all the protections of rent stabilization, a policy Burgos calls a \u201crare win, win.\u201d<\/p>\n \u201cA vacancy reset wouldn\u2019t increase rent on any single in-place tenant today,\u201d Burgos said. \u201cIt wouldn\u2019t cost the city or state government a dollar and it would bring housing supply on the market, which would relieve pressure on free market rents.\u201d<\/p>\n Plunging Property Values Hurt Tenants Most<\/p>\n On average, values for rent stabilized properties have fallen by 50% since HSTPA took effect, lower than many mortgages. In the Bronx, the average value fell to $78,849\/unit in Q1 2026, although many are selling below that level, pricing New York City hasn\u2019t seen in 20 years, according to Ariel\u2019s research. <\/p>\n On average, values for rent stabilized properties have fallen by 50% since HSTPA took effect, lower than many mortgages.<\/p>\n Ariel Property Advisors<\/p>\n Therefore, owners can\u2019t borrow to pay for capital improvements or refinance their way out of a mounting solvency crisis. Many tenant advocates may cheer the loss in value, but they shouldn\u2019t because that translates to a bad tenant experience and higher violations.<\/p>\n \u201cIf your building is valueless, then it is valueless to a bank as well,\u201d Burgos said. \u201cAnd if it\u2019s valueless to a bank or lender, how do you invest in buildings that many times are 100 years old.\u201d<\/p>\n NYAA estimates that more than 200,000 apartments in 5,000 buildings, the majority in the Bronx or Northern Manhattan, are already in severe financial distress with operating and maintenance costs exceeding gross income.<\/p>\n Owners of financially troubled rent stabilized buildings have very few options, Burgos said. They must pay their property taxes, which averaged over 30% of all costs for pre-1974 buildings with 100+ units in 2024, pay insurance (7.6%), utilities (8.5%), fuel (5.6%), and labor (15.4%), according to RGB data. Unfortunately, maintenance and repairs suffer. <\/p>\n More distressed rent stabilized buildings have entered the Alternative Enforcement Program (AEP) program in recent years.<\/p>\n Ariel Property AdvisorsHow to Look at the Numbers? Newer, Subsidized Buildings Mask Negative NOI in NYC’s Older Housing Stock<\/p>\n Pre-1974 stabilized housing is in a class of its own. Burgos argues that the RGB\u2019s methodology doesn\u2019t work in a post-HSTPA environment. Instead, the agency should separate NOI metrics for pre-1974 and post-1973 rent stabilized housing because combining the two distorts the reporting.<\/p>\n He explained that pre-1974 stabilized housing, which make up 80% of the 1 million rent stabilized units, are caught in an involuntary system with units stabilized in perpetuity, no income restrictions, or public subsidies. <\/p>\n In contrast, in post-1973 rent stabilized housing, developers entered into agreements voluntarily through the 421a or 485x tax abatement programs in exchange for setting aside 20% to 25% of the apartments as income-restricted rent stabilized units. In the newer buildings, market rate units subsidize the rent stabilized units, allowing landlords to cover their rising expenses. <\/p>\n However, the headline news from the RGB\u2019s 2026 Income and Expense Study, highlighted that Net Operating Income (NOI) for rent stabilized units was 6.2% between 2023 and 2024, leading policymakers to argue the buildings were financially healthy, which isn\u2019t the case, Burgos said.<\/p>\n Upon further reading, the report shows in the Bronx and Queens, pre-1974 buildings with over 100 units showed negative NOI of -7.7% and -1.0%, respectively. Also, after adjusting for inflation, NOI excluding Core Manhattan, only rose by 0.9%. <\/p>\n Burgos said the private owners of pre-1974 stabilized housing stock are forced to subsidize their tenants\u2019 rents without the government assistance available to Affordable Housing providers. But converting rent stabilized buildings into government subsidized Affordable Housing would be impractical because the city and state don\u2019t have the cash or capability to do that, which is why it\u2019s imperative that the government work with the private sector, Burgos said. He noted that the government can\u2019t even pay for the $78 billion in outstanding capital needs<\/a> for the 177,000 units of city-run NYCHA housing.<\/p>\n COPA Fails to Address the Underlying Insolvency Threatening NYC\u2019s Housing<\/p>\n Some politicians believe the solution is to pass the Community Opportunity to Purchase Act (COPA)<\/a>, which would mandate offering distressed properties for sale first to designated nonprofits before allowing the private sector to bid on them. Former Mayor Eric Adams last year vetoed an earlier version of COPA. Mayor Mamdani supports the legislation.<\/p>\n