A Constitutional Problem

"... nor shall private property be taken for public use, without just compensation."

 

What's happening in NYC is simply an end run around the takings clause of the Fifth Amendment.   The government of NYC is  going to force landlords, through regulation, into an untenable situation which will eventually force them to sell at a huge financial loss, or allow they city to confiscate their property.   There should probably be a suit filed immediately, but it's likely that none will be filed until there are actual damages, which means after actual people lose everything.  

 

 

 https://x.com/billackman/status/2071226941856719202?s=51&t=cLq01Oy84YkmYPZ-URIMYw

" Imagine your family worked for a generation to save enough money to buy a brownstone occupied with rent stabilized tenants on the Upper West Side. The family financed the purchase with a mortgage from a bank based on the premise that rents and cash flow would at least keep pace with inflation so you could pay interest and principal on the mortgage and hopefully have some cash flow left as a return on your investment. While you had rent stabilized tenants, you were led to believe that the NYC Rent Guidelines Board would be required to adjudicate rental increases each year by taking a measure of the inflation of costs to own and operate a building and setting rental increases appropriately. You believed the RGB would do its job as the board is comprised of two representatives each for landlords and tenants and five independent representatives that represent the general public. Now, a new mayor

@NYCMayor

Mamdani is elected on the promise of freezing rents. There are about two million rent stabilized renters that benefit if rents are frozen so by promising frozen rents the new candidate for mayor buys votes and wins the election. The new mayor achieves his objective by stacking the RGB with directors who do not follow their obligations and simply vote for a rent freeze as a preordained conclusion as evidenced by the statements of an RGB director who resigned in protest for this very reason. Meanwhile, inflation in NYC is rampant in utilities, real estate taxes, insurance, repairs and maintenance, etc. and now your rents are frozen. Real estate is a high operating leverage business which means that frozen rents and inflating expenses will cause property cash flows to plummet and your after debt service cash flow to go negative. I expect therefore there will be hundreds if not thousands of small NYC property owners who are now or will shortly be underwater on their mortgages, and without any cash flow to maintain their assets. If you remember the images of the South Bronx burning in the mid 1970s, you can viscerally understand what is happening to small NYC real estate owners. While the rent freeze appears to be short-term good news (long term it will lead to poorly maintained apartments) for 2 million NYC renters, it is bad news for the 2 million or more renters in the 1 million market rate apartments in the City because a landlord-hostile market is not likely to add meaningfully more supply and market rents will likely continue to escalate at a high rate. All of this seems quite unfair and wrong unless I missing something? Why am I wrong?"

 https://x.com/AffordAnything/status/2070864887643783274

 "There's no freeze on property tax. There's no freeze on the wages paid to landscapers, plumbers, electricians, drywallers, flooring installers. There's no freeze on the cost of lumber, copper, baseboard, quarter rounds, flashing, siding, window treatments. There's no freeze on the wages paid to janitors or porters. There's no freeze on utilities -- on electric, gas, water, sewer (building-paid utilities in hallways, lobbies, maintenance corridors; most buildings pay water and sewer for tenants). There are currently 57,421 units sitting vacant in NYC because it's more cost-effective to leave them empty than it is to rent them out. If you're wondering: "How that could be possible? Wouldn't making anything be better than making nothing?" -- the answer is no, because of the 2019 Housing Stability and Tenant Protection Act. The HSTPA mandated a certain level of renovation for a vacant unit, but did not allow landlords to raise the rent enough to be able to recoup those costs. If a long-term tenant moves out after decades, the apartment often requires $50,000 to $100,000 in lead abatement, new wiring, plumbing, and structural renovations. Because the law heavily restricts how much of that cost can be passed to the next tenant. The HSPTA eliminated the "vacancy bonus" (which allowed automatic 20% rent increases when a tenant left) and heavily capped Individual Apartment Improvements (IAIs). This means landlords who want a renovation loan would be rejected by a bank, because the landlord would not be able to show that they could repay that loan. Landlords who pay out-of-pocket would end up losing money, underperforming even what they could get by putting their money in a U.S. Treasury or gov't bond. Therefore, it's more cost-effective to just leave the unit vacant. That's why we have 57,421 vacant units across New York right now. That number is about to get much worse."