Universal Rent Control? Cynthia Nixon has proposed it for NY!!

China, ME · Member since 2014 · 3k+ posts · 4k+ votes

I try to avoid political discussions, as they never lead anywhere good in the business world - but this one strikes at the very heart of REI.

Former "Sex and the City" actress, Cynthia Nixon is running for Governor of New York.

One of the planks in her platform is UNIVERSAL RENT CONTROL - the implications of which are obvious - a stranglehold on rental property pricing in exchange for gaining tenant votes.

https://cynthiafornewyork.com/issue/rent-justice-f...

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Account Closed

Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

We have Prop 10 on the ballot and its scary. It repeals Costa Hawkins which currently prevents rent control on Single Family units as well as new construction apartments. It also explicitly allows rent control units to be brought to market rent upon vacancy. Repeal of that would leave cities able to pass any version of rent control they want. We own two homes that are rentals in California. If prop 10 passes I would probably either sell them to owner occupants or convert to short term or corporate rentals before cities like Berkeley and San Jose start passing ever more restrictive rent control. So that means two less rentals in an already tight market. And I'm sure I'm not the only landlord who will react that way. Rent control is a universally BAD idea because it helps no one except a group of existing tenants. It restricts availability and removes any incentive for landlords to invest in their property. And discourages new construction. It causes a spiral of reduced availability and even higher rent for the few available units and deterioration of the units under rent control.

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Moderator Note: Political discussions are not allowed on Bigger Pockets. Keep replies to this thread on topic of rent control and how it affects the real estate business. Do not vere off into liberal vs conservative, or any ancillary political discussions.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
I think NYC already has rent control no ?? one of the guys that used to work for me lived in his mothers rent controlled apartment in manhatton.. they were paying 2500 a month for a place he said and this was 10 years ago that fair market rent would be 12 to 14k per month.. ???
I take it this is state wide agenda..
rent control does not really work.. you have it in SF Berkley and other areas.. there are always work arounds.
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Charlie MacPherson
OP
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
8y
I read on her web page that only parts of NYC have rent control now. This is a statewide proposal.
What worries me is that this idea could easily spread to a larger part of the nation and crash RE values.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Portland just put their version in.. if you give a no cause eviction.. I think you have to pay the tenant 4k in relo compensation for something like that. @mikenuss he would know for portalndia..
and MHP have had their version of rent controls in many states for years.
I could see your fear... in renter dominated cities like mid west deep south were 50% or more of the population rents.. seems that would be a pretty easy one to pass. although you may have a hard time getting those folks to the polls..
on the flip side from what I have seen in those areas of renter dominated areas.. is rents are or have been pretty static for the 20 years I have been working those areas.. they may have gone up 10% in the last 10 years or so but most are pretty static and HUD rents in most areas are higher than market rents.. so it would be the feds putting rent control on themselves.. ??
If anything right now we see weakening in the high end luxury rental market.. at least on the west coast and in certain areas there was only so far the developers could push rent prices.. just like we are seeing prices level off
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Account Closed
Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
8y
@Charlie MacPherson although I hate rent control, I don’t think it would make prices crash. Look at where rent control is currently: SF, Berkeley, NYC, Santa Monica, etc. aka highest rents and prices in the nation.
It will not affect Kansas City, Memphis, Indy, etc. why? There’s no supply (in terms of affordable rentals) problem there
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Charlie MacPherson
OP
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
8y
@Account Closed My best guess is that impending rent control will make owners sell their MFRs in favor of less restrictive markets.
Assuming that the law of supply and demand still hold true in NY, that sudden supply of properties will crash values.
It's easy to say "I'm not in NY, so no big deal', but I really worry about this nonsense spreading to other parts of the country.
Whistling past the graveyard has never been a good strategy.
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Account Closed
Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
8y
Originally posted by @Charlie MacPherson:
@Account Closed My best guess is that impending rent control will make owners sell their MFRs in favor of less restrictive markets.
Assuming that the law of supply and demand still hold true in NY, that sudden supply of properties will crash values.
It's easy to say "I'm not in NY, so no big deal', but I really worry about this nonsense spreading to other parts of the country.
Whistling past the graveyard has never been a good strategy.
I get the logic, but if it’s nationwide, there’s nowhere to go to after selling, right?
I’m in Oakland so I’ve seen what rent control has done to property values and rent prices. All it has done is restrict supply, which led to $3,000 rents for 3 bedrooms in the hood.
If rent control/just cause was magically repealed in the Bay Area, there would be a massive over-supply of rentals available because every below market tenant would get served eviction papers. With a massive supply of rentals available, rental prices would plummet. I’m not an economist of course, but what else could happen?
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Charlie MacPherson
OP
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
8y
@Account Closed As I think about it, the other possible outcome is that MFR owners would rush to convert their rental units to condos. Cash out and move investments to another location.
That would crash the supply of rental units and flood the market with a new supply of condos.
Bad news for renters. Good news for condo buyers. Good job, politicians!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Charlie MacPherson:

@Account Closed As I think about it, the other possible outcome is that MFR owners would rush to convert their rental units to condos. Cash out and move investments to another location.
That would crash the supply of rental units and flood the market with a new supply of condos.
Bad news for renters. Good news for condo buyers. Good job, politicians!
that's what happened in SF they turned them into TICS then those got banned.. LOL..
probably not the devastating impact your imagining.. tic = Tennent in common
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Shadonna N.
Developer · . · Member since 2014 · 520 posts · 162 votes
8y
DC has rent control if your property is in a LLC or if you own more than a certain number of units. You set the initial rent and there is a yearly increase. This allows you to stay in line with market rents.
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Joseph M.
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
8y
California has a rent control Proposition on the November ballot , Prop 10. https://ballotpedia.org/California_Proposition_10,_Local_Rent_Control_Initiative_(2018) I haven’t seen rent control being a positive for cities, the cities with the strongest rent control seem to have the highest market rents . It’s kind of funny because we hear there is a housing shortage yet there is a push for rent control which is likely to disincentive new building, but a lot of people don’t seem to make the connection . Interesting times .
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Originally posted by @Shadonna N.:

DC has rent control if your property is in a LLC or if you own more than a certain number of units. You set the initial rent and there is a yearly increase. This allows you to stay in line with market rents.
Getting around DC rent control is fairly east except in the 5 or larger unit buildings. You own 4 units you are exempt. The next 4 are owned by a company you own 99% of and Joe owns 1% of. The next 4 you own 99% of and Fred owns 1% of.
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Kevin K.
Specialist · NY · Member since 2016 · 82 posts · 60 votes
8y
In All NYC boroughs and a few counties,Building’s built before 1974 with six or more units fall under rent stabilization guidelines. New construction buildings also fall under the same guidelines if the are built under the 421A tax exemption program. I believe what she is trying to attack is many landlords purchase these buildings due to there “upside” potential. When a tenant takes a buyout from a landlord or is pushed out, the apartment can become destabilized (if the rent goes over $2,700) and leased at market rates. Due to gentrification in many part of Brooklyn, Queens, Harlem and the Bronx. This has been a big issue. How this effects supply and demand and the overall market is another issue altogether. Many tenants of rent stabilized buildings complain of a lack of capital improvements. But on the other hand most landlords expenses are rising faster than they are allowed to increase rental rates. Their income is effectively capped, however the buildings expenses continue to climb.
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Account Closed
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
8y
We have Prop 10 on the ballot and its scary. It repeals Costa Hawkins which currently prevents rent control on Single Family units as well as new construction apartments. It also explicitly allows rent control units to be brought to market rent upon vacancy. Repeal of that would leave cities able to pass any version of rent control they want. We own two homes that are rentals in California. If prop 10 passes I would probably either sell them to owner occupants or convert to short term or corporate rentals before cities like Berkeley and San Jose start passing ever more restrictive rent control. So that means two less rentals in an already tight market. And I'm sure I'm not the only landlord who will react that way. Rent control is a universally BAD idea because it helps no one except a group of existing tenants. It restricts availability and removes any incentive for landlords to invest in their property. And discourages new construction. It causes a spiral of reduced availability and even higher rent for the few available units and deterioration of the units under rent control.
6 Reply
Llewelyn A.
Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes
8y
This is exactly why I buy only 4 Unit buildings or under in Brooklyn, NYC.
If this legislation passes, it will cause a HUGE demand for multi-family buildings that are NOT subject to rent regulations.... which is EXACTLY my own buildings.
SO BRING IT ON! haha
The reality is that if building owners are not anticipating changes in Legislation to affect a certain building class in the future, they are gambling with their particular asset class.
I knew a long time ago (21 years and counting) to make sure I invest only in buildings that has a high probability of never being the target of rent regulated.
THUS, this logic continues to push up my building's values.
This goes with ANY Investment, not just Real Estate.
Take Insurance Companies, for example. If they are forced to provide healthcare to every sick person (Ironic.... isn't it... that Insurance company should insure the sick.... obviously a broken system when the incentive of Insurance Company is to only insure the healthy) imaginable by force of law, Insurance company values will go down.
NOW, revert it back to the old system where Insurance company can basically provide insurance for the healthy... and BAM! Prices go up!
So if you see what is happening is that the political landscape changes hands now and then. Because I don't want to have to switch investment types every time legislation causes a problem or reward, I buy Asset Classes that is normally not targeted by legislation.
So.... the point here is know your Asset Class VERY WELL... including possibility of future legislation. In fact, future legislation is probably the one variable that will impact your bottom line the most! So give it the importance that it deserves!
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
8y
It appears rent control, market manipulation, has that potential side effect of creating inventory shortages which then makes todays market rents and values go sky high. Best intentions at work I guess, and increasing inventory might work better than RC.
0 Reply
Joseph M.
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
8y
Originally posted by @Account Closed:
We have Prop 10 on the ballot and its scary. It repeals Costa Hawkins which currently prevents rent control on Single Family units as well as new construction apartments. It also explicitly allows rent control units to be brought to market rent upon vacancy. Repeal of that would leave cities able to pass any version of rent control they want. We own two homes that are rentals in California. If prop 10 passes I would probably either sell them to owner occupants or convert to short term or corporate rentals before cities like Berkeley and San Jose start passing ever more restrictive rent control. So that means two less rentals in an already tight market. And I'm sure I'm not the only landlord who will react that way. Rent control is a universally BAD idea because it helps no one except a group of existing tenants. It restricts availability and removes any incentive for landlords to invest in their property. And discourages new construction. It causes a spiral of reduced availability and even higher rent for the few available units and deterioration of the units under rent control.
Yes, exactly I agree. I had an old teacher when I was younger that spoke of people that are "well intentioned, but ill informed" I see the pro rent control crowd like this. They base their policy pretty much all on emotion rather than economics or reality.
I agree with you it's likely we will see a lot of single family landlords selling. Some people also rent out their personal residence with the idea that they might move back some day. With rent control extending to single family homes this would likely be eliminated. I suppose this could be a win for more out of state markets as people are motivated/pushed to sell their CA homes and invest out of state. There will be consequences for sure. CA isn't the only game in town but sometimes those making policy here act like it is.
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Joseph M.
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
8y
Originally posted by @Matt R.:

It appears rent control, market manipulation, has that potential side effect of creating inventory shortages which then makes todays market rents and values go sky high. Best intentions at work I guess, and increasing inventory might work better than RC.
Both major contenders for CA Gov have said they want to ramp up building in CA massively, but I don't see how that works if rent control covers every residential property. Right now there is an incentive to build a new apartment building due to rent growth, but with more rent control that incentive goes away ,right?
Same in NY too.
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Joseph M.
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
8y
That is interesting, I didn't realize in NYC that rent control does not apply to 4units and under. In L.A it applies to anything over a single family house. So even if one has a duplex it's under rent control if it's build before October 1978 I believe. Most multi is older than that in L.A so most of the rental property does fall under rent control.
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Patrick M.
Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
8y
Fortunately we just got rid of it, but many are still grandfathered in.
It is very difficult with older buildings because we have the state inspecting every 5 years and a heavy political push lately for updating. Tenants that should otherwise move on (have a child, change jobs, downsize/retire) will never leave their rent control. Additionally, we have an anti-eviction statue that puts additional pressure.
It is something very few people can appreciate unless they have been subjected to it. Also- to add insult to injury, the towns/city's have no problem jacking the taxes- that is one of the only exceptions to passing a cost increase on to the tenant. That way they know they will get their money.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
8y
@Joseph M. I guess so if RC is applied to new builds then sure. I think currently it is only for pre 1979 built maybe.
0 Reply
Kirstyn Indy
Rental Property Investor · Member since 2018 · 5 posts · 0 votes
8y
@Charlie MacPhersonits only rent controlled to certain tenants and their immediate family members. Once they move out they don’t get it back.
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Clint E.
Investor · Saint Charles, MO · Member since 2016 · 118 posts · 91 votes
8y
Originally posted by @Llewelyn A.:Take Insurance Companies, for example. If they are forced to provide healthcare....
NOW, revert it back to the old system where Insurance company can basically provide insurance for the healthy... and BAM! Prices go up!
1. Health insurance companies do not provide healthcare.
2. If you only insure healthy people rates would go down, not up, due to less risk.
0 Reply
Josane Cumandala
Appraiser · Brooklyn, NY · Member since 2018 · 106 posts · 118 votes
8y
NYC real estate professional and resident here. I think there are a lot of reforms that make sense and the real estate market would remain pretty much as it is. The thing I dislike about this push for more rent control is that some of it is built on lies or at least misinformation.
Her website states: "Rents in New York City are increasing twice as fast as wages." This is FALSE. Rents have been falling in the city over at least the past year or so and in the years prior to that landlord concessions were at unprecedented highs (paying broker fees, months of free rent, Amazon giftcards etc.) as property owners and managers desperately tried to fill their units without dropping the price. That tactic has officially stopped working and now renters expect price cuts as well as concessions because there is so much competition in the marketplace.
There's no way to impose enough rent control to house everyone. The only way to do that is to bring more units online and let the competition bring prices down to meet demand. Rents have flattened out in the city because wages aren't increasing and because especially in Brooklyn there is an excess of supply. That reality is bringing prices down, not rent control.
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y
@Josane Cumandala you comment reminds me that the biggest proponents of affordable housing seem to be the first, to do things to drive up the cost of housing.
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