A deluge of city council bills is targeting the New York City real estate industry and some of its biggest players
In the past few months, the city has tabled more than 50 bills ranging from forcing building owners to slash energy usage to creating commercial rent regulation on stores, redrawing zoning to prevent voids being used in supertalls to a rent stabilization overhaul.
Last week, City Councilmembers Keith Powers and Carlina Rivera introduced a package of five bills that would cap residential rental agents fees and limit security deposits to one month’s rent.
“It’s not news that New York City is one the most expensive places to live in the country. But there is something we can do about it,” said Powers. “With this legislation, New Yorkers will not only be able to make more informed housing decisions, but tenants — particularly young and low-income tenants — will no longer have to pay thousands and thousands of dollars to build a home here.”
Powers added that the bills have not scheduled a hearing yet and they’ll be working to tweak the language following feedback from those affected, including brokers, landlords and tenants.
“Our intention all along is to make the cost to renters more affordable both long-term and upfront when you’re first starting to rent an apartment,” Powers said. “I’ve heard the bill in its current form will cause financial stress to those who are employed in industry, and we’re trying to work with those affected to come up with solutions to those concerns.”
With a Democratic majority now in the Senate, tenants rights advocates have been pushing to deliver long sought-after reforms.
But the sheer volume of bills has landlords questioning the strategy.
“Whether the proposed policy will accomplish these things, only time will tell,” said Robert Sedaghatpour, principal of Stratco Property Group, a landlord-tenant service specialist.
“That might be the challenge for government, making sure what they’re proposing will accomplish their goal and not have a situation where the collateral damage will outweigh the good they’ll do.”
According to Sedaghatpour, the bills have already send some property owners into a panic. “They’re very hesitant about making improvements to their building and a lot of people are gun-shy on spending more money on their existing buildings,” he said.
“I think the city has to weigh what will actually be effective as policy but also economically with the industry. The most challenging decision is going to be related to that balancing act of how do you not limit an industry with growth but at the same time protect public policy.
“From what I’m seeing, there’s a lot of uncertainty on the landlord front on what their future is in the city.”
REBNY president John Banks said City Council should work more with the industry to understand the issues their bills relate to.
“Much like this misguided legislation, City Council members would benefit from engaging with a wide array of stakeholders to learn the facts before introducing a bill that impacts everyday New Yorkers,” said Banks. “To effectively address the many critical challenges our City faces, including our affordable housing crisis, elected officials must maintain an open dialogue to prevent severe unintended consequences.”
Banks also took issue with the legislation targeted at residential rental agents, saying it would “interfere with the way hardworking New Yorkers earn a living.”
“Real estate agents rely on commissions to feed their families, they offer a valuable service for both renters and owners,” Banks added. “The decision to use a real estate agent is optional and the fees are negotiable.”
Maxwell Breed, a partner with the law firm Warshaw Burstein who represents real estate owners, investors and tenants, said additional regulations will make the rental market harder to operate in.
Breed specifically addressed the bill that caps security deposits and explained that sometimes renters voluntarily offer higher premiums to counteract a possible rejection due to their credit score. To balance out a poor or non-existent credit score, some renters offer several months of rent in advance or a higher security deposit for the apartment they’re interested in.
“Additional security, whether pre-paid rent or a higher security deposit, is another means of securing the contract,” Breed said. “And there’s already so much regulation in so many ways that we’ve almost regulated the market to a point where it’s becoming inoperable.”
Breed said this bill could negatively impact students, as many of them have little to no credit history, but can be reliable renters. Additionally, he added that the bill could leave many vacancies as landlord would no longer be able to accept potential renters who offered a higher initial investment.
“Landlords are in the business of renting apartments so they don’t want to cut out good potential renters just because some might not have viable credit,” Breed said.
Adam Frisch, a managing principal at Lee & Associate’s residential division, said the government is interfering in a market that is generally self-correcting.
“We don’t need a government program to tell us if the market is softening that someone has to lower their fees to continue to make a living,” Frisch said. “It’s not something we need bureaucrats to help us with because we already live on commissions.”
He argued that the continuing pressure from bills could have a chilling effect on brokers working in the city.
“The government is blocking the progress of brokers,” Frisch explained. “If you know that your fee can’t be more than such and such, you’re disincentivizing good brokers to want to work. They’re going to say this is not enough money for the work I’m doing.”