Albany Close to Deal on Rent Regulation - How Does the Reported “Framework” Affect Neighborhoods?

Thomas J. Waters

The New York State Senate, Assembly, and Governor have reportedly agreed to a framework that would extend the rent control and rent stabilization laws for four years. If the framework follows previous proposals, it likely keeps vacancy deregulation in place, but raises the threshold to $2,700 and indexes it to Rent Guidelines Board increases.

Any rent-stabilized apartment can be deregulated upon vacancy, but in most cases it will cost the landlord money to deregulate the apartment, because he or she will need to use rent increases based on “individual apartment increases” to reach the rent threshold for vacancy deregulation, currently $2,500 per month. In some cases, it will be quite expensive to deregulate an apartment, but it is always financially sensible for a landlord to do it, if the local market will bear a $2,500 per month rent for the apartment. Therefore we can estimate the rate of deregulation on a neighborhood-by-neighborhood basis considering the rate at which rent-stabilized apartments turn over and the share of apartments that can bear a rent at the threshold in each neighborhood. Putting these two factors together, we can estimate that as of 2014, about 17,500 apartments are deregulated each year through this mechanism. (There are other paths to deregulation as well.) 

But how many apartments will be deregulated under the proposed framework? In order to project the effect of the framework, we must also consider changes in the distribution of rents as well as the threshold itself. These changes can be roughly estimated by extrapolating from changes between the 2011 and 2014 New York City Housing and Vacancy Survey.

The analysis shows that rising rents will accelerate the rate of loss – much more than enough to offset the slowdown in deregulation due to the increase in the threshold. The projected total number of apartments that would be deregulated in four years under the framework is at least 87,500.

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