Should rent stabilized apartments be expanded or abolished completely? If asked, I think almost everyone in the rental market would all stand up at once, and say “HECK YES, expand rent stabilization!” My first inclination is to jump on that bus as well. Why not? A rent controlled or rent stabilized apartment in New York City is like the leprechaun’s pot of gold at the end of the rainbow.
It is so elusive and wonderful that it can be hard to actually understand what a rent stabilized apartment is. Getting access to a rent stabilized apartment is an opportunity in itself, so we are told. You would almost have to consider it, even if it wasn’t in your ideal area, right? Let’s walk through this concept before we jump on that bandwagon.
Rent controlled apartments essentially limit the amount a landlord can charge for rent, based on a Maximum Based Rent System. In New York City, the Maximum Based Rent is calculated by making sure that the rent from these units cover the building’s maintenance, but often not much more than that. The landlords also have to provide certain minimum services that have already been identified and regulated at either the state or city level.
How can this be a bad thing you may ask? It almost sounds closer to winning the lottery than an actual issue. A set limit on rent increases… I will take the à la carte option please. Let’s add our cell phone carriers, gym memberships (I don’t go, but it makes me feel healthier just having it), and our general insurance/healthcare costs to this paradigm as well. A set structure with limited increases, what’s not to love?
Technically, you can only (legally) live in a rent controlled apartment if you or another family member has continuously lived there since July of 1971. It must be passed down to you directly. Once a rent controlled apartment becomes vacant, it is not up for grabs at that same elusively low price, but instead becomes rent stabilized. With rent stabilization, there is a legal maximum rental price that the landlord is not allowed to exceed, subject to a state deemed increase each year.
Even on rent stabilized units (which are much easier to snag than rent controlled apartments), these legal rents are often much higher than the market would dictate – so the building will charge you what is called a ‘preferential rent’ that is less than the legal amount. What most people may not realize with preferential rents is that your legal rent amount is only able to increase by a certain amount each year, but your renewal increase can be up to that amount. So if your preferential rent is 50% less than the unit’s legal rent, you can technically receive a 50% renewal increase when your lease is up.
Is the Grass Greener on the Other Side?
What are some of the risks/negatives of a rent controlled apartment? The downside of rent control is that you will find it only in older buildings and the landlords will not be particularly motivated to renovate your apartment, fix or replace your appliances, or address any regular maintenance issues.
The landlord wants you to move out of your rent controlled apartment. He doesn’t want you to stay, he wants you to leave as quickly as possible. Once you leave, he can raise the rent. In most cases, rent controlled apartments can actually cost the landlord money when you factor in all of the operating costs for a building compared to the reduced rent that your unit is generating. Your rent is cheaper than everyone else’s, but the condition of your building justifies it.
Some Green Grass.
Rent controlled units can offer tenants a sense of protection. Rent increases are monitored and regulated by either a state board or a local governmental authority. I would imagine there can be a sense of peace and safety living in a rent controlled unit because not only is your rent regulated, but you are also afforded special protections in the event of an eviction. No one ever wants it to get to that point, but sometimes it does. As a tenant, you’d would want and appreciate that extra safety net.
Let the Market Regulate Itself.
As novel of an idea as rent control was when it first started in the early 1920’s, it no longer really applies today. It is not that nothing should be utilized to ensure a fair marketplace pervades, but it should be regulated like everything else with supply and demand. The majority of U.S. housing and rental markets are free from governmental regulations in regards to pricing.
The rental rates and housing prices are allowed to spike and flow as necessary. The market has natural supply and demand indicators that help to self-correct prices that will determine what the true market value is at any given point in time. When demand is high, prices will rise. When demand subsides, prices will plateau and begin to fall again.
Rite of Passage
If you can survive in New York City, then you can make it almost anywhere. That probably sounds like a cliché, but I think most people tend to agree. I am not saying that NYC is a bad place at all, but you have to be able to take care of yourself. New York City invariably has a way of testing all of us at one time or another. What matters is how you react to that test.
Of course, finding that almost-mythical rent stabilized apartment would absolutely check off a box or two on your list of goals, so that you are able to move onto the next item. Whether that would be finding your soul mate, building a successful career, or finally sending out all of those applications to be on reality TV. Who knows, maybe you could be the next Dance Mom or Real Housewife. Your chances of securing one of these reality TV careers may actually be higher than the likelihood of you moving into a rent controlled apartment.
The moral of the story is that you’d be better off focusing your energy on finding a great apartment that meets your search criteria than compromising on a (likely illegal) rent controlled apartment to save some money. Either way, we suggest always using a quality broker when looking to buy or rent in NYC. TripleMint can help you find the right apartment, each and every time. Of course, if I can get my hands on a rent controlled apartment, all bets are off.