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A Real Estate Attorney Weighs in on Rent Regulation

NICOLE MCNULTY: During the pandemic, tenants got aid in the form of rent freezes and moratoriums on evictions. Landlords got access to government programs like PPE. But now many landlords say they’re finding it tough to stay in business. Last night, the Rent Guidelines Board passed a preliminary vote that would allow rents to increase 0-2% on one year leases. Joshua Stein, is a commercial real estate attorney in New York city. He’s represented both landlords and commercial tenants.

JOSHUA STEIN: Well, the board itself is appointed by the mayor. It's supposed to be balanced between property owners and tenant representatives. And then you've got this circus of political demonstrators with signs and screaming and "Cancel rent" and "I'm a poor property owner and I can't make a living." It's all very emotional. Very irrational, having nothing to do with the alleged, uh, administrative mission of this board, which is supposed to look at how much expenses have gone up and let property owners keep up with their expenses. What has happened is because of the political pressures over the last five years, the expenses have gone up faster than the permitted rents have gone up. And this has been an absolute disaster for property owners.

MCNULTY: What would happen to some of these landlords, if they continue to lose out on this rent on these payments?

STEIN: Well, it's not only the rent guidelines board that is squeezing property owners. It is the pandemic, the evictions, the moratoriums, uh, and above all, ever rising expenses. And it is reasonable to predict foreclosures, changes in ownership, as a result. And then ultimately if these buildings become completely uneconomic, there will be real estate tax lien sales, where these buildings will not be able to pay their real estate taxes and the city will get to take them over.

MCNULTY: Could you just give me a few examples of what those property expenses are?

STEIN: The biggest one is actually real estate taxes. This the city takes about 30% of your gross revenue as real estate taxes. Payroll is another big one. You also have utilities, electric, water, you have insurance, and then you have repairs and maintenance. So, those expenses pretty much eat up probably 85% of your revenue.

MCNULTY: What would this zero to 2% increase mean for tenants and what is the best way to balance both the needs of landlords and tenants?

STEIN: Well, you know, you, you, you have to pay rent. There is a cost to providing housing. Housing is not free. So, if you're a property owner, your costs go up. If you're a tenant, it's entirely appropriate that your rent should go up, especially if it's way below market, as it often is with the rent regulation regime. Now, the best way to balance the interests of tenants and property owners is to seize the current moment as a perfect opportunity to get rid of rent regulations. And the reality is there's lots of vacant apartments, lots of them. Um, some of them are from people who have fled. Some of them are from rent regulated apartments that came back to the owners and the owners do not want to rent them because it's uneconomic to rent them. Uh, and you have rents declining as a result of the people who fled the city.

MCNULTY: But how would getting rid of rent regulation helps say tenants, who've lost their job during the pandemic?

STEIN: It is not as the job of property owners to accommodate the people who cannot afford the market price for whatever goods and services they need. That's a governmental, it's not something that should be foisted on, uh, the people who happen to own property and have tremendous expenses that they need to pay in order to operate the property in a responsible way.

MCNULTY: Joshua Stein is a commercial real estate attorney in New York City. Thank you so much for being with us.

STEIN: It was my pleasure and thanks a lot.


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