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It's an ugly reality, which few in our industry are willing to discuss openly and candidly, but with each passing year, New York City is losing rent-stabilized apartments at an alarming rate. According to a June 1, 2006 report issued by the New York City Rent Guidelines Board (RGB), approximately 6,667 apartments entered stabilization in 2005, while 14,045 units were removed from the system. "High rent/vacancy decontrol" accounted for the biggest chunk of last year's loss: 9,272 units or 66% of the total number of subtractions.
Under current law, a unit may be permanently removed from regulation when the legal regulated rent (rent stabilization) or the maximum rent (rent control) of a vacated unit reaches $2000 or more per month. Typically, this "high rent/vacancy decontrol" is achieved when an owner implements substantial improvements ("individual apartment improvements" or "IAIs") to a unit upon a regulated tenant's departure from the space. These renovation expenditures, together with any lawful rent increases permitted upon a vacancy, can then be used to bump-up the "old" rent to the deregulation threshold.
According to the RGB, since 1994, the City has lost 50,702 stabilized units to this decontrol process.
While we certainly recognize a fundamental right to control one's property interests, and believe there is an entitlement to achieve a favorable rate of return on one's investment (without undue or unreasonable governmental interference), we can't help but wonder how this drain of affordable housing units is impacting the citizens of our great City and State. Data released by various residential brokers reinforce the existence of a disturbing trend. With Manhattan condos and co-ops averaging $1.3 million, and rents averaging $3,142 a month, housing options for those not earning six or more figures per year have become increasingly limited.
Make no mistake, it is not our position that private owners should shoulder the brunt of the responsibility for these disturbing developments. This is a problem that must be shared by society-at-large. But until creative solutions are forged, at a minimum, more government incentives are warranted to encourage the private-sector's creation and maintenance of affordable housing for all.
For a copy of the NYC Rent Guidelines Board's report, Changes to the Rent Stabilized Housing Stock in New York City in 2005, please click on the following link:
For a copy of DHCR's Fact Sheet # 36, High-Rent Vacancy Decontrol and High-Rent High-Income Decontrol, please click on the following link: