New York’s real estate policies bear a striking resemblance to the “defund the police” movement that spread through progressive cities in the wake of George Floyd’s murder by a police officer.
Defunding police and real estate investment both attempt to reduce harm by an absurdly simplistic strategy: shrinking the institution that caused it.
The obvious problem is that it also reduces the benefit of the institution. Sort of like amputating fingers to alleviate arthritis.
Polling showed “defund” to be unpopular with most Democratic voters, who appreciated the safety provided by law enforcement despite its horrendous abuses, like Minneapolis officer Derek Chauvin’s squeezing the life out of a helpless citizen in 2020. Anarchy is just not an option.
As a result, “defund the police” petered out. Unfortunately, however, efforts to defund rental properties gathered steam as a way to prevent rent increases and displacement. The tradeoff has been a steady deterioration of the buildings.
The most infamous example, the Housing Stability and Tenant Protection Act of 2019, nearly zeroed out rent increases to pay for individual apartment improvements and major capital improvements in rent-stabilized properties.
The HSTPA also ended the 20 percent rent increase upon vacancy, which had helped pay for renovations to get units back on the market after a long tenancy. Some of the 57,000 rent-stabilized apartments registered as empty are dormant because of that change.
That tally omits an untold number of vacant units that landlords failed to register with the state, perhaps having given up on re-renting them.
The latest incidence of defunding, Mamdani’s unprecedented two-year rent freeze, got a lot of media attention, but really just accelerated a decade’s worth of below-inflation rent increases by the Rent Guidelines Board.
Defunding is also happening to substantial rehabilitation. Although sub-rehab remains a way to remove a building from rent stabilization, and thus a reason to invest, “good cause eviction” and stricter criteria by the state’s Division of Homes and Community Renewal have slowed the pace of projects.
Vacating a building for a sub-rehab is more than twice as time-consuming as before. DHCR now calls buyouts evidence that a building isn’t dilapidated enough to qualify. Waiting for tenants to leave is permitted but tedious because “good cause” generally entitles free-market tenants to lease renewals, a right already enjoyed by stabilized renters.
A rental with regulated units can in theory be demolished and replaced with market-rate buildings, but it’s so challenging that almost no one tries. The state strings applications out for years, as Gary Barnett and Eliot Spitzer can attest.
The city has its own deterrents. Owners of certain buildings must obtain a Certificate of No Harassment before overhauling a property. Single-room occupancies, buildings in certain neighborhoods and some with high violation counts must get a certificate to do anything but emergency or basic repairs.
The median wait for one is seven months, but if past harassment is found, even by a previous owner, there’s a five-year wait to reapply. Landlords can be denied a certificate for exercising their right to take tenants to housing court.
The City Council is considering expanding the program and making it permanent.
Even the Loft Law impedes improvements. Although it aimed to legalize lofts, it gave tenants the power and incentive to drag things out: Delays let tenants live rent-free and give them leverage to demand a large buyout.
It’s a wonder anyone manages to upgrade an occupied property.