New York City’s multifamily property market took a hit in the first half of 2019, a direct result of looming changes to the state’s rent regulation laws.
Transaction volume slid to an 8-year low, according to preliminary numbers from Ariel Property Advisors’ Multifamily Mid-Year In Review.
Enacted on June 15, the new legislation limits the upside potential of multifamily buildings that are dominated by stabilized units since it severely limits a landlords’ ability to increase rent over time, even upon vacancy, with no ability to destabilize the units.
From January through June, New York City saw $3.3 billion of sales and 158 transactions spread across 210 buildings, representing declines of 48, 29 and 56 percent, respectively, compared to the second half of 2018. On an annualized basis, sales volume stood at its lowest since 2011.
“In light of the new laws, we have revisited our underwriting methods for every type of multifamily asset and have been advising sellers of these buildings on a daily basis about our view of the current climate,” said Shimon Shkury, President of Ariel Property Advisors.
“While pricing for most multifamily assets will go down based on several factors, some properties will only be slightly impacted, while others will not be affected at all, such as free market buildings, old 421-a rental buildings and some affordable housing multifamily assets,” Shkury said.