For Post-Rent Control Real Estate, Leave Brooklyn
It’s hard to feel sorry for folks blessed enough to occupy rent-controlled real estate. But such apartments can be a bit of a curse; who can summon the courage to leave them? Well, the NY Times profiles a woman in “The Hunt” column of the real estate section who wished to break free of her…
It’s hard to feel sorry for folks blessed enough to occupy rent-controlled real estate. But such apartments can be a bit of a curse; who can summon the courage to leave them? Well, the NY Times profiles a woman in “The Hunt” column of the real estate section who wished to break free of her $700, two-bedroom apartment in Midwood. LaVerne Walker is an accountant and frequenter of an investment club, and wanted to own for the tax deductions alone among other considerations. Her budget: $250,000, and, predictably enough, she couldn’t find a two-bedroom for that in Brooklyn. Moral of the story: move to Jersey City, where she got a three-bedroom for $230,000. Maybe she can see Brooklyn from there?
Life After Rent Control [NY Times]
Photo by mudpig.
I say introduce a true free market to NY: no controls on rent and no tax breaks for unrented spaces (because it encourages warehousing and keeps rents “high” even during downturns). Only when BOTH those conditions are met will NY ever have anything approaching a free rental market.
Altervoce,
MCI increases hardly encourage a landlord to improve his or her buildings.
If a building is 100% rent regulated, it takes a landlord eight years to make back his cash outlay. After that, the rent increase becomes profit.
Given that most rental buildings in NYC probably average 50% regulated and 50% unregulated, it takes on average sixteen years for a landlord to make back his investment from the regulated tenants.
I agree that at least there’s some benefit to landlords of the MCI program, but it’s not a major incentive to them, and remember, only certain things, like replacing the roof or boiler, qualify for MCI’s . . . fixing up the public hallways, for example, does not.
As a landlord myself, I’m hesitant to make my buildings too nice because I don’t want to provide any further incentive for my regulated tenants to stay.
The NYC rent regulation system screws up the natural tenant/landlord symbiosis that occurs in a free market housing environment.
I would say that if Ella has been paying such nominal rent for the last 50 years, she’s had ample opportunity to save up a downpayment and buy a place. She chose to allocate her finances in other ways, and left herself vulnerable.
Donatella- The taxes are not 4x as high. Maybe double. Plus no Mtg Tax of 1.8%
flatbushrising – i agree with most of what you said, but somehow, in the many cities of the world without rent regulations, there still manage to be people around to fix plumbing, make coffee, and work cashiers. you just don’t have the disparity of some of them paying $148 per month and others paying twenty times as much for comparable space.
i agree that landlords bought into the system and, yes, some landlords and some tenants respect the system. but i also agree that there are many other systems that could protect low income tenants and distribute burdens and benefits in a more equitable way.
altervoce – i think what you’re forgetting, with respect to capital improvements, is the high transactional cost involved any time you try to increase the rent of a regulated tenant, even justifiably. nyc’s courts are flatly pro-tenant, making it very difficult and expensive for landlords to enforce their rights, even when they follow the rules.
Polemicist, if landlords are “get[ing] a fair return on their investment … by providing the absolute minimum service required by law and performing almost no maintenance on the building,” then the purchase price was still too high.
Also, with the rent increases permissible for major capital improvements, there really is no excuse for not maintaining a rent regulated building. It’s been my experience that bottom feeders are often attracted rent regulated buildings and the poor maintenance is mostly a result of the fact that they are just not very nice people.
I can understand not wanting to feel trapped in one apartment for one’s whole life. But Jersey City? Not a solution for me. I don’t know how the taxes on apartments shake out, but on brownstones they are 4X the amount of NYC.
Of course, it’s building by building, landlord by landlord, but just because a place is stabilized doesn’t mean it’s a dingy mess.
Walk around Flatbush area near PLG. Most of the buildings are kept up – neat in front – trash bags placed around the neighborhood since the city doesn’t have trashcans on the corner – and right now there’s a really neat Holloween display on Lenox between Flatbush and Bedford.
My apartment was gut renovated right before I moved in. Granted – there aren’t stainless appliances & it’s Home Depot cabinets – but I don’t care. It’s clean and functional.
Granted, some of the units where people have lived for ages are getting a bit worn – but they are working on those little by little as well – or at least maintaining them.
I doubt any of my neighbors have a vacation home anywhere – except maybe still a home in their native country.
People get up – go to work – raise their families and try to get by. How little we sometimes forget that in order for you to have a high paying job and nice home – there have to be people around to fix your plumbing, serve your latte, and ring up your Fairway purchase.
Altervoce
The sale prices DO reflect the rent roll. Today, there is no question most landlords bought into the system, so they knew what they were getting into.
Landlords don’t really care about rent stabilization too much – they typically do get a fair return on their investment. It is the people who end up getting shafted because the landlord makes his fair return by providing the absolute minimum service required by law and performing almost no maintenance on the building.
Rent control only has two provable effects: it reduces the quality and quantity of housing.
One could argue however that standards of housing could be raised if the people assumed the cost of the subsidy rather than just landlords. Imagine what Brooklyn could look like if the subsidies were targeted for nice stuff like facade repair and renovation.
We all live with the consequences of rent stabilization, it isn’t just the landlords.
On a side note, a nice alternative to dealing with the well off who benefit from rent stabilization and rent control is to consider the positive leasehold value a taxable benefit. The poor would likely continue to pay little or no additional tax, but middle class folks would probably find it more difficult to own that second home.
This is actually the one instance where the IRS doesn’t consider a below market lease or sale as income.