The Struggling Landlord, and Other Real-Estate Tales
Bianca Jagger plays the villain in the latest free-market morality play
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The Lab
On Oct. 18, a state judge’s decision evicted Bianca Jagger from a rent-stabilized Park Avenue apartment she’d had since the 1980’s. Soon after, the latest round of objections to rent stabilization in New York City poured forth.
“Why the hell,” as New York magazine understandably put it, “does someone like Bianca Jagger get to have a rent-stabilized apartment, anyway?”
The New York Sun: “New York’s price controls on rent are so silly and socialistic that they deserve to be wiped off the books.”
At present over 1.04 million apartments protect roughly two million residents from what’s this year become the most viciously expensive apartment market in New York’s living memory. Rents reached records by October: A studio in a nondoorman building below 100th Street in Manhattan fetched an average of $2,151, according to a report from brokerage The Real Estate Group New York.
Mick Jagger’s ex (and interior designer Jade Jagger’s mom) had been paying $4,614 a month under the myriad of state laws that govern rent regulation, including stabilization. Ms. Jagger, a British citizen, could not keep the place, the judge ruled, because she was in the U.S. on a temporary tourist visa, according to the Associated Press.
Opponents of rent stabilization often assert that stabilization helps drive up the rents of market-rate apartments and then helps keep the rents high. Their logic runs like this: that the artificially low rents on stabilized apartments force landlords to raise rents on market-rate ones.
Not necessarily—or, to be exact, no one really knows.
It’s up to landlords if they want to raise market-rate apartment rents to compensate for any lost profit from owning stabilized ones as well. The system devised by the state does not put the onus on market-rate apartments to fund stabilized ones in any sort of one-to-one correlation—apartments are stabilized based on the construction or renovation dates of buildings—and no such correlation outside of state law has been proven.
In a city where market-rate apartments (including owner-occupied ones) outnumber stabilized apartments over two to one, the idea of the struggling landlord seems laughable. Indeed, if any do feel squeezed by ownership of stabilized apartments, the state offers hardship benefits if they can prove they’re not turning enough of a profit, according to the city’s Rent Guidelines Board.
Mostly, objection to rent stabilization stems from that unexamined contempt for an imagined class of freeloading rich people working the system: that someone with the means to pay market rate will land in an apartment—sometimes an opulent apartment—with an artificially low rent that’s likely to last for that person’s lifetime. It’s almost impossible for landlords to turn an occupied stabilized apartment market-rate.
The greater danger is not that a few wealthy individuals slip into stabilized apartments but that literally millions of New Yorkers would be tossed into an apartment market where rents have become unhinged from market realities.
Like studios, larger apartments’ rents have ascended to all-time highs in many places. In Manhattan, the average rent for a one-bedroom in a nonluxury building below 100th Street was nearly $3,000 by the end of October, according to The Real Estate Group; for two-bedrooms of similar quality, it was $4,069. Meanwhile, a report out last week from investment-sales firm Marcus & Millichap concluded that the vacancy rate for Manhattan buildings with at least 40 apartments would stay below 3 percent for the next several months.
If anything, the market rate seems just as unmoored from market forces as stabilized apartments—yes, demand dictates price, and landlords should be able to charge legally what they can get, but price has grown beyond value in many cases. After all, no one would buy a lawn mower for $10,000 simply because he or she needed a lawn mower; there are alternatives to lawn-mowing.
For housing in New York City, what’s the alternative to opting out of the rental market—the sales market? That’s even more expensive. Westchester County? Jersey City? A box under the Brooklyn Bridge?
The median household income in New York City was an estimated $46,480 in 2006, according to the Census Bureau, below the U.S. median. Rent-stabilization provides a bulwark against the grim math of living with New York City housing, something Bianca Jagger, after 20 years, has to confront (though press reports do say she has another place in London). Don’t envy her.
The fact that a tourist visa did Ms. Jagger in reveals that she is either much less well-off than might be imagined or that she must have been cleverly managing large swings in her annual reported income. Any rent-stabilized apartment with rent over 2,000/month is subject to luxury decontrol, so she would have had to forfeit the apartment sooner if her income had been over $175,000/year for two years in a row. If her income was $174,000 one year and, say, $2million the next, she would have been doing well. But if she was under the limit for two years in a row, with her rent over $55,000/year, after taxes, one can't imagine there would have been much loot left for enjoying New York...
If she is on a tourist visa, my guess is she doesn't file a tax return with the IRS. How would the landlord varify or document her income?
Market rate apts do not outnumber RR apts two to one. Unless you are counting owner occupied units.
There are 3M houing units in NYC.
1M are owner occupied - meaning that they are not part of the rental stock.
1M are Rent Stablizid
about 50K are Rent Controlled
1M are market rate.
A more accurate statement with the correct emphasis would be that 50% of the rental units in nyc are rent regulated.
Mr. Acitelli needs to get his facts straight which may or may not include reading Adam Smith. Why is NY special in that rent protections exist? In every other city where rent laws were tossed off the books, the average rent has gone down. That is a fact.
And as far as people believing there exists a rich class of people working the system, I know several people who live in rent controlled apartments who 1) work in cash businesses so the lie about their true income and 2) on top of not paying their fair share they have used the savings to purchase weekend homes.
So what were you saying an "imagined class"?
Quote from article: It’s almost impossible for landlords to turn an occupied stabilized apartment market-rate.
I don't think this is true. If the apartment's rent is $2000 or above, and the tenant moves out - OR, if the apartment's rent was under $2000, the tenant moves, and the landlord does enough work to raise the rent to $2000 or above - it's de-regulated. This happens all the time. In my building in West Harlem it's happened several times this year. The rents were often between $700-1200. The new owners came in and often when a person leaves they gut renovate enough to raise it to $2K - and voila! - it's de-stabilized! (On a side note, this practice is a major factor in the area's gentrification, as the Hispanic people that live there often can't afford the new prices. Before, Dominican landlords kept prices low for their own people. Our new landlord is Israeli. They don't give a shit and want to change the tenant population.)
The scenario of de-stabilization due to an existing tenant's rent rising to $2000 or above from a stabilized increase, plus making $175K or above two years in a row, is less common.
How does one get into a RR apts when the incentive is there for ppl who are already in to hoard them?
Doesn't this mean that the only ppl that benefit are the lucky ones who scored such an apt many years ago?
How does this help the young or the recent transplants?
You have pinpointed a problem (cost of living) but have not proposed a solution that would help the ppl you are talking about.
Loss of rent regulation makes rents go down? When Cambridge, MA lost its rent regulations, rents doubled and trebled and the public schools lost 25% of its children because so many families couldn't carry the load.
U. Designer
Rent regulation does make MARKET rents go down. The overall average in Cambridge may have gone up, but the market average surely went down. It sucks if you had a rent stabilized place before, but it's cheaper for everyone else. This is the most basic economics here - add a lot of supply and prices WILL go down.
*Loss of rent regulation, that is.
Tom
Some people may be against rent control/stabilization because of envy, but I would suspect mostly its because the system perverts the market. First, its not fair to create a class of people, whose eligibility is that their parents and grandparents were first in line, that control something that the majority cannot get. And second, of course it distorts the rents people pay. It's a simple law of economics. If one fifth of New Yorkers could buy snickers bars at 10 cents a pop, obviously the candymaker would try to make it up on those who were not protected. The Jagger item is good for headlines, but its bad journalism to point to to as a reason people are against an unfair, ineffectual system.
Dan
_____________________
NUFF SAID .....
The New York Sun: “New York’s price controls on rent are so silly and socialistic that they deserve to be wiped off the books.”
__________
Nuff Said .....
The New York Sun: “New York’s price controls on rent are so silly and socialistic that they deserve to be wiped off the books.”
__________
__________
__________
Welcome to the 21st Century in what should be a FREE (and rational) MARKETPLACE!
CAPITALISM = MARKET RENTS FOR EVERYONE !!!!!
LET THE MARKETS DETERMINE THE RENTS !!!!!
__________
__________
__________
I'm afraid this article is just asinine, and betrays a little lack of understanding of economics 101.
"It’s up to landlords if they want to raise market-rate apartment rents to compensate for any lost profit from owning stabilized ones as well. The system devised by the state does not put the onus on market-rate apartments to fund stabilized ones in any sort of one-to-one correlation..."
This is akin to saying "It's up to businesses if they want to charge prices to consumers that allow them to turn a profit. There's not government law saying businesses can't charge less than they paid wholesale!"
Rent control/ stabilization is a bad idea, period. Any decent economist can tell you it screws everybody except those lucky enough to score a rent controlled apartment.
Raze -- exactly. A landlord will charge as much as she can get for a market rate apartment, regardless of whether she owns regulated apartments also.
The reason why rent regulation inflates the market is that people continue renting cheap apartments that they wouldn't otherwise rent, which decreases the supply of available apartments, which means that it's easier to rent an expensive market rate apartment to someone who is desperate.
Yes! There are some that are in rent stabilized apartments that can afford to pay market level rents and are making out like bandits. However there is another side to the coin. The older, retired, disabled and fixed income people that need rent stabilization in order to have a home to stay in. They cannot afford to move to another location because of limited funds. They need the hospitals and doctors that care for them and those that no longer have any family need the emotional connection with friends and health care providers that know them. So while folks throw stones at rent stabilization, do realize that where the elderly and disabled are today, you may be tomorrow.
People who cited ECON 101 as a justification to get rid of rent stabilization are not very good economists. All the rental apartments are not all in the same market. Even if you got rid of the rent stabilization laws, you would still have to face the fact that a 3 bedroom apartment in the Bronx is not a substitute good for a studio apartment in Brooklyn. Therefore, they exist in different markets and the supply of one doesn't necessarily affect the supply of the other.
The last NYC Housing Vacancy Survey showed very little difference between the % of income that people pay under rent stabilization vs. market rents in most of the market. In some income brackets, people actually are paying *more* for rent stabilized apartments.
Silly people, calling for a free market to set all rents. We have in New York City what is called a market failure. Unregulated, rents would not be set by the market at the "right" level. Because there is a cap on supply, market prices would lead to artificially high rents and windfall profits for landlords. In a functioning market, supply would be drawn to the market until the windfall disappeared and prices dropped. That may work in cities where there is excess housing capacity, but not in NYC. Hence, we need regulation to correct the market failure.
Furthermore, we as a city value neighborhood stability and recognize the cost of frequent market-driven upheavals.
Finally, as all rent-regulated buildings are either pre-1974 or the result of the landlord accept tax benefits, except for a few owners, rent regulation was something the landlords got into with their eyes open. In other words, if you don't want to be a rent stabilized landlord, don't buy a regulated building. Get into some other business!
"Any decent economist can tell you it screws everybody except those lucky enough to score a rent controlled apartment"
Some people "lucky enough to score a rent" stabilized apartment moved into them when the neighborhoods were drug-infested, crime-ridden areas that nobody wanted to live in. Because they stayed and helped stabilize the neighborhood through community, i.e. planting trees, making gardens out of rubble-strewn abandoned lots, making friends, helping older neighbors, forming block associations for street improvements, etc., some of these neighborhoods are now desirable.
Not all of these people, who are now getting older, are making "hi-tech" salaries and need to still live in their "homes" of 30 plus years. A lot of them are artists, fixed-income retirees and low-income in general. Buying a "second" home in the suburbs is not only impossible but undesireable.
Luck has nothing to do with it.
in cities where rent laws were tossed off the books, people were tossed into the streets. rents doubled and trippled and there was mass displacement. entire communities were gentrified and taken over by developers.
the fact is, the middle class is shrinking into the working poor, and that group is growing larger every day. I don't know any of the people that you know. this morning I heard on the news that the cost of an average home in NYC is up more than 20% this year, more than $1 million, while in the rest of the country prices are down. there are always some people who manipulate the system, and right now it is the landlords who are manipulating the Rent Regulation Reform Act of 1997 and its subsequent amendments to raise rents on rent stabilized apartments as high as possible with all the allowable, legal but unethical, immoral rent increases so that working people and poor people, ordinary people can't afford them, and I'm not just talking about Manhattan.
many working people are paying 50, 60, 70% of their income for rent stabilized apartments, $1,500 for 2 bedroom slum apartments with rats and roaches and leaks in the middle of East NY or Bed Sty. because they have no choice. because even rent regulation isn't cheap anymore. because the landlords have everything they want. because every year thousands of apartments get deregulated. because NYC is becoming rich people heaven. Bianca's apartment was over $4,000 a month. is that such a deal? rent regulation is almost over, so all you critics, be happy.
ps
by the way, landlords can ask for a hardship increase if they are not making enough of a profit, but they hardly ever do. why not? they would have to open their books to prove the hardship, and that they won't do. I wonder why? could it be that ..... there really is no hardship?!!!??? that they're making a really good profit, and that they wouldn't get a hardship increase, even though they're always crying hardship? wa da ya think, hmm?
We write from a TENANT pov, but not to support abusers such as Jagger. Nonetheless, there are a number of errors in the article, the disclaimer that it was written as deveil's advicate notwithstanding.
Most importnat is the wrong and ridiculous statement that it is impossible for a LL to remove an occupied rent stabilized apartment.
Quite to the contrary: it is easier and easier. The well funded LL lobby group and their attorneys have either abandoned, reduced reliance on OR combined old mafia methods--ie turning off heat and hot water, refusing repairs etc--with a host of new techniques.
Here are a few of the most prevalent examples of the above.
1/ LL's target "vulnerable" categories of tenants: the elderly and middle aged single women, those with "roommates", those who travel for work, those who spend time taking care of elderly parents etc. for repeated complaints, letters, and repeated court filings on trumped up charges. They make it clear that should they loose an evioction attempt, they will simply wait a while and refile. (Don't forget that under our wonderful judicial system, anyone can say almost anything about anyone and sue: the bar for a court allowing the most specious of suites to go forward is astonishingly LOW--no more so than in the NYC Housing Court.
2/ LL's hire P.I.'s to thoroughly inverstigate a tenant's private and work life. They use court records to suboena all manner of financial a nd other records. the send people to peer inside vacations homes and take photos. If the vacation dwelling is anything other than a primitive seasonal cabin, they claim that the tenant actually lives in the cabin not in the r.r. aptment. The existence of electricty and a t.v. are enough to cast suspician in a Judge's jaded mind.
3/ LL's file repeated GOLUB notices (a notice to vacate on grounds of a non-primary residence), with the most preposterous of claims about a primary tenant's "real" residence, going back many decades--whether based on fact or not. And thereby forcing a tenant to defend each preposterous claim.
4/ LL's make it clear to building staff whom to service and whom to ignore--andd whom to lie about in court. LL's reward staff for bad behavior toward selected tenants as well as delaying or failure to do needed repairs. Regular verbal abuse by staff to an elderly person is intimidating, AND deniable by the perpetrator: all he has to claim is a mis-understanding or a hard of hearing tenant.
5/ LL's now install camera's everywhere in "public space" inside andd around buildings, including outside tenants' apt. doors. Under the guise of "more security"--the cameras watch and sometimes record tenants and staff alike in public areas --including inside elevators, laundry and storage rooms etc, thereby adding a marked level of intimidation and anxiety to the public areas / "culture" of a building.
6/ LL's deliberately "rehab" areas of a building that tenant's have been using for meetings of a tenant assiciation, making it impossible for a large T.A. to meet inside the building in which its membership lives--thus reducing the number of participants--esp. the elderly or those with small children for whom going out for a meeting is a major inconvenience.
7/ Among the most important tactics LL's use to rid their buildings of r.r. tenants, employs their close realtionship to the compliant anti-tenant DHCR. Via applications for a slew of Major Capital Improvement applications. MCI'snot only alloow LL's re recover costs, but become a vehicle through which LL's can fraise rents in perpetuity.
The DHCR is the new enforcer for LL's: Using secrecy andd aministrative law preogatives, it is the LL's best handmaiden to raise regulated rents rapidly. MCI's are used both to pressure the housing budgets of low and moderate income r.r. tenants and to rapidly raise rents over the $2000.00/month level, after which LL's are entitled to "review" a tenant's tax returns for the prior two years.
If a tenant's combined gross income exceeds $175T, the apt. is deregulated. If the tenant wants to remain, s/he must pay market rate rent. Ten years ago, a cap of 175$ seemed like a generous one; in todays economy it is not. (Although I personally would prefer that really wealthy abusers of r.r. were indeed ousted because they act as the worst of red flags for r.r. itself and againt the rest of us, the middle income people who badly need to live in r.r. apts.)
8/ We have also noticed another new trend in the current high rental market: there has been an increase in buyout offers and amounts; as a consequence the number of buyouts have increased. The stingiest of LL's knows that a buyout plus cooking the rehab books to get an apt. off the r.r. roles will return any "investment" many time over--usually within a year.
9/ Last but not least: years of court appearnances and legal bills it takes to fight off a wealthy, vicious and persistant LL, his employees and the lawyers he keeps on retainer are stressful and wearing on a target tenant--and also on others in the building. Who wants ones entire life rippe apart for =years on end? Who wants to spend a life in Housing Court--even if, under ideal circumstances--and surely not in NYC-- a Housing Court is a respositary of justice for tenants?
Make no mistake:
Judges are as politial as politicians;
Courts are simply another form of bureaucracy;
LL lawyers, tenant lawyers and judges inhabit a shared legal culture--which in the current period is not overwhelmingly friendly to tenants or to r.r.
Go to court and listen: You'll hear multiple if coded references to the "Handwriting on the Wall"--ie the impending end or r.r., the success of LL tactics. Money talks. Big Money and Developers and Politicians eager to leave the mark of new construction and new populations on a city talk louder than tenants.
We hope this brief commentary helps clarify some real issues that r.r. tenants face every day.
Rents will never go down in New York City, it will never happen whether stabilization is scratched or not - too many greedy Landlords/individuals who feel they deserve top dollar for their units because this is New York. And the droves of young new college grads and professionals who want to live here. Even if it doesn't work out for them, they still what to try to make it here. And if you believe removing stabilization will drop prices in this town? - Well I have a lovely bridge for sale you may be interested in....
Moreover you can thank Rudy for all of this - he along with Joe Bruno worked hard to undermined the Middle Calss in New York City and helped the Landlords destabilize their units.
I have to really giggle. The Right Wing and people in the Bible Belt and across the Heartland have no idea. They think he is for the little person, they are so sadly mistaken...if they put him in the White House they will see real New York values (got to make money, money, money, and more money) excercised that make San Francisco values look tame.
You got it. Not to mention, NYC is a sanctuary city with a ton of illegals occupying R/S apartments. If the Right Wing and the Anti-Illegal Immigration Lobby had their way and Homeland Security was to come in and round up all the illegal immigrants Nationwide, including NYC, it could and would be a potential windfall for the NYC Landlords.
The DHCR would never be able to regulate the unwarranted increases from the vacancies and the apartments being taken out of stabilization illegally would be immeasurable.
if nyc loses rent stabilzation and low income housing to solely house the rich, where will the service workers live? they'll have to live outside nyc. how stupid is that? its rare now for artists just starting out to live in nyc--even with spitzers new 12K for artists program. landlords are greedy and always complain...including the ones that got funds for low income housing and instead built luxury housing. Besides, nyc is a war-zone. the fact we are a target for terrorist attscks should drive down rents, but it does not; what nerve!