Rents Rise for NYC's Stabilized Apartments

New York City’s Rent Guidelines Board approved rent increases for almost one million stabilized apartments yesterday evening amid a raucous meeting in which landlord members voiced concerns for their safety and tenant advocates temporarily blocked the building entrance.

The nine-person panel voted for an increase of 2.75% for one-year leases and 5.25% for two-year leases.  This vote, which allows landlords to raise rents starting in October, followed an earlier vote on a preliminary range in April.

Approximately one-quarter of the city’s population lives in rent-stabilized apartments, paying a median monthly rent of about $1,500 in 2023, according to a city survey.  By contrast, market rate renters paid a median $4,250 in May, according to the latest survey by Miller Samuel and Douglas Elliman Real Estate – the second-highest level on record for May.

Neither tenant or landlord advocates were pleased with the board’s vote yesterday, with both sides arguing for rent freezes or higher rents, respectively. Both sides are also displeased with the process itself, calling it political and unfair. Tensions were high at the vote prompting members representing the city’s rent-stabilized landlords to ask the board chair to move the meeting online, which he refused, according to reporting by The Real Deal. Tenant advocates rallied outside of the meeting at Manhattan’s Hunter College to temporarily block the building entrance until the New York City Police Department started making arrests, the publication also reported.

The rent increase could heighten the appeal of these buildings to investors. While free-market buildings accounted for 60% of New York City multifamily transactions by dollar volume in the first quarter of 2024, according to Ariel Property Advisors, a majority of transactions involved buildings comprising mostly rent-stabilized units.

“It shows there are still plenty of investors interested in acquiring rent-regulated properties in New York City, even with the Housing Stability and Tenant Protection Act (HSTPA) of 2019, inflation and interest rate increases,” said Brooke Richartz, Senior Regional Sales Manager at JP Morgan Chase.

Demand for workforce and affordable housing—often found at rent-stabilized properties—far exceeds supply in New York, supporting durable rents and vacancies, according to JPMorgan Chase.

Rent-stabilized buildings’ values have likely declined since they last traded, Richartz said. But that’s less a reflection of the properties than the circumstances of the sale.

“The market expects some ‘forced’ sales of rent-regulated buildings as a result of investors who over-levered and weren’t able to absorb the impact of the HSTPA, interest rates, inflation and the regional banking disruption,” she said. “That could create opportunities for well-capitalized investors who are looking for long-hold assets.”