Mark Miller Gallery @mmgalleryles - Twitter Profile

12 days ago

To have affordable housing and an increase in services, you need growth. If you want lower rents, you need more apartments. The Housing Stability and Tenant Protection Act (HSTPA) of 2019 made it financially difficult for many landlords to reinvest in their buildings—even when an apartment became vacant. In my view, this reduced renovation activity, hurt contractors, architects, engineers, expeditors, and building suppliers, and contributed to fewer apartments returning to the market. Even my local paint supplier told me business declined significantly after HSTPA. If New York wants to bring tens of thousands of apartments back into service and create jobs and lower rents, it needs to increase available apartments. It should allow landlords to recover qualified renovation investments over five years instead of fifteen, and increase the current eligible improvement cap from $30,000 to at least $150,000. Five years is a more realistic repayment period because it aligns more closely with the financing terms many lenders offer for multifamily commercial properties. Borrowing money on a relatively short-term loan while recovering the investment over fifteen years does not make economic sense. These renovation incentives matter even more given what’s happening to building valuations. By freezing rent-stabilized rents, you further hurt housing stock and put greater pressure on landlords to increase rents in other areas just to hold onto their properties. As a direct result of HSTPA, the value of multifamily buildings has decreased, and bank lending to rent-stabilized properties citywide fell from $27.6 billion across more than 3,700 deals in 2019 to less than $11.3 billion across roughly 1,400 deals last year — a 74% drop. Because lower valuations mean lower net operating income and less debt coverage for lenders, many banks now require a large private cash deposit into a checking account just to refinance a multifamily property. I experienced this directly: a banker told me I would need to deposit $300,000 — earning zero interest — to borrow a $1.2 million loan. If you wanted to borrow more, that private deposit requirement would go up accordingly. This isn’t a fringe case — roughly $131 billion in mortgage debt is secured by rent-stabilized buildings citywide, and major lenders like Flagstar (formerly NYCB) have stated they are curtailing future loans on rent-regulated properties altogether. Many loans borrowed during COVID at affordable rates will soon come due, and rates now are twice as high. We could see a 2008-style financial disaster unfold in the multifamily real estate sector, which in turn could result in defaults affecting many of the smaller financial lenders that service this space. This is why the renovation fix can’t wait. Shortening the recovery period and raising the improvement cap won’t solve the valuation and lending pressures on its own, but it’s a concrete step the city can take now to get apartments back on the market, put people back to work, and ease the rent pressure that a shrinking housing stock creates.

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Mark Miller Gallery

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