Real Estate Weekly
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Opinion

All I want for Christmas is a rent regulated apartment

By Adelaide Polsinelli

Prudent landlords should be making a list of who’s been naughty or nice this Christmas and turning the new rent laws to their advantage.

New York City’s rent regulations protect tenants and give them an unprecedented upper hand in the market while penalizing property owners, the majority of whom have done everything right — choosing to invest in a rent regulated property, renovate and improve that property and charge a legal rent.

Now though, they are being told how much rent they can charge and being denied any type of incentive to carry out improvements or renovations to their property.

The tragedy is, many of these building owners aren’t huge conglomerates — they’re mom and pop owners, many of whom have been struggling for years, hamstrung by a Rent Guidelines Board that set minimal — sometimes zero — rent increases, despite their rising costs.

With Christmas around the corner, I’ve been thinking that a rent stabilized apartment will be the most sought after treasure this year. It will be like trying to find a Hatchimal last Christmas, a Wii back when — rent stabilized apartments are now a hot commodity.

Think about it. The current political landscape protects tenants and allows them to get away with just about anything, while keeping a lock hold on their rent regulated apartment. They can sublet it on their own and make money off the back of the landlord and there would be no consequences. If they cannot or simply won’t pay rent, a pro-tenant court system is going to make sure the landlord is the one on the defensive.

The pendulum has swung so far, landlords of rent regulated apartments have no incentive to rent them to strangers. They have few options other than keeping the unit vacant and waiting out the current anti-landlord political environment. But, instead of leaving their units vacant and collecting no income, they could play Santa Claus this year and rent them at the new (way-below-market) legal rent to someone who will appreciate this huge gift, otherwise known as a life estate.

Given the choice of renting to a stranger at a pittance of the fair market value, property owners can rent to friends and family. Renting it to your son while he climbs the career ladder makes more sense than renting to a stranger who will enjoy decades of below market rent at your expense.

Rent stabilized apartments may have just become the newest form of currency. Unlike bitcoin, these units are tangible, traceable and trade -able.

Your rent regulated units could be rented to someone who is owed a debt or a favor; or think of them as a strategic investment when rented to a colleague or business acquaintance. These apartments can be used as a means to further a friendship or relationship. They could even be donated to charity – and earn the owner a substantial tax deduction.

In the State of New York today, there is absolutely no good reason for owners to rent these “gifts” to total strangers.

The current anti-business and anti-landlord environment that we have found ourselves in will undoubtedly be detrimental to the city’s affordable housing stock. Many of the landlords who are now being painted as villains will be forced to sell their properties to large corporations who employ economies of scale to run the properties more efficiently than a single asset owner. This discriminatory attitude will have severe and far-reaching consequences that I cannot believe legislators have even contemplated.

As landlords stop spending money on improvements and renovations, the value of the property will fall and the taxes paid to the city will go down. The contractors who carried out those repairs will start laying off workers, maybe even go out of business. Tenants will cling to their rent regulated apartment and landlords will either leave them empty, or rent them to someone they know and trust instead of a stranger.

So if all you want for Christmas is a rent stabilized apartment, I suggest you start to making friends with landlords who have been good citizens and would just like to earn a return on their investment with people who won’t take advantage of a broken system to appropriate an apartment from under the nose of its owner.

— Adelaide Polsinelli is a vice chairman, Compass.

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