Accurately Assessing and Effectively Addressing Vacancies in NYC’s Rent Stabilized Housing Stock
Executive Summary
Amidst the broader challenges of housing affordability in New York City, concerns have been raised about whether an increasing number of rent stabilized units are being kept off the market because they require renovations greater than can be financed with the returns from re-renting those units.
Real estate owners have alleged that changes to New York State’s rent regulation laws made as part of the passage of the Housing Stability and Tenant Protection Act of 2019 (HSTPA) too severely limited the amount by which rents can be raised on vacant units, rendering it economically inefficient to renovate them for re-rental. Some have called for a rollback of the HSTPA and a restoration of vacancy decontrol.
To better understand the issue, the Comptroller’s office analyzed data from the recently-released 2023 Housing and Vacancy Survey (HVS) and other sources to assess the changes in conditions and composition of rental housing supply before and after the passage of HSTPA five years ago.
This analysis finds that the number of rent-stabilized units that are vacant and not available to rent, both in general and specifically due to landlords’ inability to make repairs, fell significantly from 2021 to 2023.
A quite small number of affordable rent-stabilized units – likely fewer than 2,000 that rent for $1,500 or less, representing less than 0.5% of the City’s stabilized housing stock – is sitting vacant due to landlords’ inability to make repairs. This report makes recommendations for addressing the challenges facing these units.
Key Findings
- The COVID-19 pandemic caused a significant one-year bump in rental vacancies from 2020 to 2021. However, vacancies have now plunged to their lowest rate ever.
- The vacancy rate among rent stabilized apartments in NYC is even lower than the vacancy rate for all rental units, declining from 4.57% in the 2021 HVS to 0.98% in the 2023 HVS.
- Between 2021 and 2023, there was a significant decline in the number of units that are vacant but not available to rent for any reason (e.g. held for occasional use, awaiting or undergoing renovation, legal dispute). This universe is much smaller for rent stabilized units than for all rentals:
- The number of rent stabilized units in NYC that are vacant but not available for rent for any reason declined from 42,860 in 2021 to 26,310 in 2023.
- The number of rent stabilized units deemed dilapidated or otherwise uninhabitable declined from 11,500 in 2021 to just over 3,000 units in 2023.
- For rent-stabilized buildings, the rate of sales and the value per unit have recovered from the pandemic dip in 2020, and both have returned to levels similar to before the passage of the HSTPA in 2019.
- This report finds no evidence that the HSTPA led to an increase in vacancies, or distress on the city’s rent stabilized housing. The proposal for the re-introduction of vacancy decontrol is a dramatic overreaction.
- There are likely fewer than 2,000 vacant apartments that rent for less than $1,500 each month and have been held off the market due to an owners’ inability to make repairs. For this small universe of units, a targeted approach is warranted to return them stable occupancy.
Recommendations
To ensure that rent-stabilized buildings can receive the repairs they need to place rent stabilized units back online, while ensuring tenants remain protected, this report recommends the following:
Raise the Cap on Individual Apartment Improvement Increases (IAI) to $25,000
- The State should raise the cap for allowable Individual Apartment Increases (IAI) from $15,000 to $25,000 (to match HPD’s recently launched “Unlocking Doors” program) and peg it to inflation moving forward.
Modify Existing Programs to Address Hardships
- For the very small universe of buildings where unit vacancies cannot be addressed by a higher IAI cap, the Office of Rent Administration (ORA) within the State’s Department of Homes and Community Renewal (HCR) has a process through which building owners can apply for hardship, allowing for modifications to legal rents on a case-by-case basis as necessary. HCR should adapt the hardship program to include:
- Capital subsidies: The City of New York’s “Unlocking Doors” pilot provides a grant of up to $25,000 per units for rent stabilized units that are vacant and unavailable to rent. The State Legislature should authorize a similar program to complement City funding.
- Rental vouchers: The State should pass the Housing Access Voucher Program to provide rental subsidies for low-income and homeless families. These vouchers could be made available for units or buildings facing hardship, while still ensuring affordability. CityFHEPS vouchers could also be used for this purpose. The State should also consider amending Section 610 of the Private Housing Finance Law to allow for owners who utilize vouchers as part of a hardship application to charge up to the fair market rent as long as a voucher holder resides in the unit, under HCR supervision. The legal rent, registered with HCR, would only increase subject to the rules of rent regulation.
- Preservation loans: Property owners can be assisted to utilize preservation loan programs at HPD, including but not limited to, the Housing Preservation Opportunities program, which provides tax exemptions to owners of buildings in good physical condition in exchange for signing a regulatory agreement.
Include Funding for Preservation Purchases in the City’s Fiscal Year 2025 Capital Budget through the “Neighborhood Pillars” Program
- The City should increase funding for the Neighborhood Pillars program in its FY 2025 capital budget. Neighborhood Pillars enables affordable housing groups to acquire and renovate multifamily rental buildings, in order to stabilize them, address repair issues, and permanently preserve them as affordable housing. The “Homes Now, Homes for Generations” campaign is calling for the addition of $250 million for Neighborhood Pillars each year over the next four years. Expanding Neighborhood Pillars would provide a strong preservation strategy for buildings where over-leveraging or long-term neglect by prior owners have resulted in significant distress.
For the small number of units that are vacant and unavailable to rent as a result of distress, a modest increase in the IAI cap, a more strategic approach to hardship applications that offers appropriate capital and rental subsidies, and funding for preservation purchases will ensure the proper balance of affordability and tenant protections with an owner’s ability to economically make repairs and reinvest in their property.