New York's Housing Market Teetering on the Brink of a Downward Spiral, According to New Legislation

In April 2024, New York State enacted the Good Cause Eviction law, aiming to protect renters from arbitrary evictions. However, concerns have been raised about its potential impact on landlords and the rental market.

According to Ann Korchak of the Small Property Owners of New York, the law restricts an owner's ability to maintain, upgrade, and renovate their properties, pushing some towards foreclosure. This concern is rooted in the history of rent control in New York City, where from the late 1970s through the early 1990s, inflation in fuel, labor, and taxes far exceeded allowable rent increases, leading many landlords into foreclosure or abandonment, resulting in the loss of over 200,000 rental units.

The Good Cause Eviction law pairs onerous limits on when landlords can end a tenancy with annual rent-increase caps. Landlords can evict only for specific reasons: nonpayment, substantial lease violations, nuisance or illegal use, major property damage, or the landlord's intent to occupy, demolish, or take the unit off the market.

New York City's rental market already operates under a highly complex regulatory system, with more than 1 million apartments covered by rent stabilization. The Good Cause law applies to New York City and other municipalities can opt in. More than a dozen cities have done so, including Albany, Rochester, and Binghamton.

However, extending Good Cause to currently unregulated units brings more owners into a costly, restrictive system, leaving many landlords with thin margins. In New York City, rent-stabilized units from before 1974 have the highest rate of maintenance deficiencies, with an average of 75 percent more issues than newer stabilized units and 79 percent more than market-rate apartments.

To prevent a repeat of the twentieth-century rent-control collapse, legislators should consider raising exemption thresholds, allowing cost pass-throughs, strengthening code enforcement, investing in rehabilitation, and adding sunset reviews to the law. This could help strike a balance between tenant protection and landlord viability.

Some cities have sharply narrowed these carve-outs, like Rochester, which restricts the exemption to landlords who own a single rental unit. This approach could help alleviate concerns about the impact on small property owners.

In conclusion, the Good Cause Eviction law is a significant policy change in New York's rental market. While it aims to protect renters, it's crucial to consider the potential impact on landlords and the overall housing market. Ongoing discussions and potential adjustments to the law could help ensure a balanced approach that benefits both tenants and property owners.

Since 2022, 176 rent-stabilized units have gone into foreclosure, with over 2,000 more in mortgage-default warnings. Annual foreclosures have roughly doubled each year. Long-term effects of rent control, such as Good Cause, can shrink the rental supply, shift ownership toward large institutional investors, and worsen housing quality. In parts of the Bronx, more than 80 percent of housing stock was destroyed during this period, often from arson linked to collapsing property values.

The structure of Good Cause echoes the Rent Stabilization Law of 1969 and the Emergency Tenant Protection Act of 1974. It's important to learn from the past and consider these lessons as we move forward with this new policy.

The Good Cause Eviction law is a complex issue with far-reaching implications for New York's rental market and its residents. As the law is implemented and its effects are observed, it will be crucial for policymakers and stakeholders to work together to ensure a balanced and sustainable solution for all involved.

New York's Housing Market Teetering on the Brink of a Downward Spiral, According to New Legislation