When the Housing Stability Tenant Protection Act (HTSPA) was enacted in 2019, property owners across NYC were caught off guard and had to quickly adapt to the new compliance measures. Three years later, through firsthand experience, Weber Realty Management can now quantify the impact of the HSTPA on its regulated rental units and verify its crippling effects on NYC’s aging housing stock. According to Weber Realty Management, the elimination of vacancy decontrol was the most significant part of the HSTPA as the lack of deregulated units are hindering the housing supply in NYC.
Vacancy decontrol was signed into measure under Rudy Giuliani in 1994. The law allowed property owners to free their apartments of regulation once stabilized/controlled tenants moved out. The apartment could then be renovated to meet market prices. More than two decades later, vacancy decontrol expanded the city’s tax base, and helped revive decaying neighborhoods. Since then, almost 250,000 stabilized apartments have been added to the free-market housing supply. The increased supply had directly reduced market prices, raised the quality of living through renovations, and allowed new renters to move to NYC and contribute to the local economy. But the HSTPA ended vacancy decontrol and now there are no longer new units entering the free market.
Rent regulated tenants also used to be able to negotiate large buyout deals in return for terminating their lease. Some property owners would pay five to six figures to deregulate a single unit. Many property owners successfully arranged buyout deals where tenants used the proceeds for a new home or retirement.
Aaron Weber of Weber Realty said “when HSTPA was imposed, we had to explain to our regulated tenants that their buyout deals were no longer on the table”. He said “since we cannot deregulate a regulated unit, it doesn’t matter if a renter vacates, the unit is regulated forever. There is no upside on your investment anymore.” For instance, Weber Realty manages a 7 unit residential building in Chelsea. During the summer of 2021, two stabilized units voluntarily ended their leases (without compensation). The units were in need of a gut renovation which would cost over $120k each. But since the rents are stabilized at about $1k/month, it would take at least 10 years for the property owner to make their money back. Therefore the units are now being held vacant where the property owners don’t have to risk costly HPD violations, possible legal action, and added building expenses like water, gas and insurance. This is a major factor responsible for the housing supply crunch of 2022. Without newly deregulated units being added to the housing supply, market rate rents will keep rising as demand grows from new renters that want to live in NYC.