The Independent Budget Office of New York City announced this week that approximately 13,000 rent-regulated apartments in the city had remained vacant for more than two years, feeding the claim that owners are purposely “warehousing” properties in order to persuade legislators to relax rent rise limitations.
Exterior view of old apartment buildings of Manhattan in New York City. (Photo: IStock)
According to the article from New York Post, A coalition of 22 tenant organizations known as the End Apartment Warehousing Coalition favors legislation that would levy a tax on any landlord whose unit is empty for more than three months.
Tenant activists argue that such an approach will aid in the abolition of homelessness.
In actuality, forcing business owners to operate at a loss would be an unprecedented type of bureaucratic overreach.
To see why, consider New York’s Housing Stability and Tenant Protection Act of 2019, which significantly tightened the screws on owners of roughly 1 million rent-regulated apartments.
Most importantly, it capped rent increases that could be justified by “major capital improvements” to units to only $15,000 over a 15-year period for the first time.
That implies that regardless of how much owners must spend to fix heating systems, roofs, and windows, they will be limited in how much they can raise the rent.
This was a mechanism for tenant activists to remove a regulatory “loophole” that permitted buildings to hike rents.
However, there is a direct relationship between the capital improvement reimbursement cap and the so-called “warehoused” units.
It only makes sense to lockup a property if it costs more to maintain it — and keep it in line with housing codes — than the rental income warrants.
In other words, an anti-warehousing rule would require owners to lose money every month — or risk violating housing laws by renting a subpar unit.
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Keeping the unit unoccupied makes sense and saves money.
According to the article from Head Topics, Matthew McDermott This was a technique for tenant activists to remove a regulatory “loophole” that permitted buildings to hike rents. Why rent control in New York City may become the new abortion If it costs more to maintain a property — and keep it in accordance with housing standards — than rental income justifies, padlock it. headtopics.com
The End Warehousing Coalition, for example, is advocating for a measure sponsored by Manhattan Borough President Gale Brewer to demand unoccupied apartment inspections and, presumably, renovations, on the grounds that they may contain rats or represent a fire hazard to neighbors.
This method results in the worst of all worlds: forced maintenance and no rental income at all.
The most recent Census Bureau Housing and Vacancy Survey of city apartments revealed rodents in 33% of rent-regulated units, compared to only 18% of market-rate units, and mold in three times as many.
There are twice as frequent bathroom and elevator breakdowns.
When you can’t raise the rent if your costs rise, you’re obligated to do whatever it takes to keep costs low.
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