It took six years, but the real estate industry finally got a chance to grill Andrew Cuomo about the 2019 law that crushed rent-stabilized building owners.
The opportunity came in a meeting with the Real Estate Board of New York that was private, but Cuomo’s spokesperson later issued a public statement about it.
Warning: It might make your head explode.
“While well-intentioned, the 2019 bill had unintended consequences in some places — specifically changes involving MCI and IAI repairs,” said the longtime Cuomo loyalist, Rich Azzopardi. “There’s been widespread acknowledgment of these issues, which subsequently were the subject of legislative tweaks.”
To the uninformed, this makes it seem like the law included a few innocent mistakes that were repaired. But owners of rent-stabilized buildings know better.
The tenant activists who literally wrote the law on behalf of Senate and Assembly leaders knew exactly what the consequences would be, as would anyone with even a passing knowledge of rent stabilization.
Far from unintended, the consequences were deliberate. Let’s give a rundown of the reality.
About those IAIs, or individual apartment improvements: Even state legislators are not so stupid to think apartments can be renovated for $15,000, which is the amount they allowed landlords to recover through temporary rent increases.
Even more damaging to old buildings, the lawmakers ended the 20 percent rent increase that had been allowed after a tenancy ended.
They figured landlords would swallow the extra cost rather than let apartments sit vacant. They were wrong. If the renovation expense is high and the legal rent is low, the math doesn’t work. As it stands now, tens of thousands of rent-regulated units remain vacant.
Similarly, major capital improvements, or MCIs, cost far more than landlords were allowed to recover from tenants.
The “tweaks” passed several years later were barely better than nothing.
Cuomo should have prevented this from happening, but instead removed himself from the negotiations for reasons he never explained. The truth is that he had allegedly reached out to tenant activists, apparently seeking political cover for a compromise bill, but they refused to meet with him — confident they could pass something without him. The governor, a famous control freak, had lost control of the process.
At that point, he made a disingenuous promise — a dare, really — that he would sign whatever state legislators put on his desk. And when the law passed, he had to live up to that pledge.
The conventional wisdom is that he didn’t think Senate and Assembly leaders could round up enough votes without him to pass such a flawed law. But it’s more likely that he was looking for a bill that both tenant leaders and the industry would endorse, only to realize that was impossible.
“The governor played chicken and lost,” said Jay Martin of the New York Apartment Association, which represents rent-stabilized owners and was not part of Cuomo’s recent meeting with REBNY.
Whatever Cuomo’s rationale, I have no doubt that he was looking for the best possible outcome for himself, not for rent-stabilized housing. All politicians put their careers first in such moments. That’s why he pretended to embrace the outcome, rubbing salt in landlords’ wounds by celebrating with a bill-signing ceremony.
Another reason it’s hard for landlords to wrap their brains around Cuomo’s public explanation is that changes to individual apartment improvements and major capital improvements were hardly the only problem with the law.
It also made deregulation virtually impossible for individual units. That matters a lot for buildings’ financial and physical health because market-rate rents from units in otherwise rent-stabilized buildings provide an important cross-subsidy.
Landlords use that revenue to maintain and improve their properties, to attract and retain free-market tenants — something they have little incentive to do for regulated tenants, but which clearly benefits those renters.
Cuomo also presided over the separation of rent stabilization and the 421a tax abatement for multifamily projects. The two laws had been paired legislatively for years so the industry and tenants each had something to gain from the passage of the other. It was an unusual but effective political arrangement.
Severing them left the governor with less leverage when the time came to renew the rent law, and the newly left-leaning legislature closed the rent spigot until nothing but drops came out. Buildings began to shrivel, and violations have piled up.
Cuomo’s rivals in the mayoral race are all talking about his subsequent scandals — the nursing home fiasco and sexual harassment allegations.
But those matter little to owners whose buildings are under water and who are still waiting for accountability on the 2019 rent law. They were not in the meeting with REBNY, which is clearly backing Cuomo for mayor.
“All of a sudden, it’s wrapped in a bow,” Martin said of Cuomo’s sitdown. “It’s kumbaya.”
Read more
The Daily Dirt: Why it’s hard to track rent-stabilized bankruptcies
Signs of distress hit rent-stabilized buildings
Three hacks in a room: How Albany is messing up real estate
