New York Rent Control Law Threatens Multifamily Lending

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on email
Share on print

New York Gov. Mario Cuomo calls New York’s new rent control law “the most sweeping, aggressive tenant protections in state history.”

Opponents of the law, which Cuomo enacted June 14, feel that it represents a troubling move against apartment owners and developers in New York, particularly in New York City. It also promises to have far-reaching effects on the multifamily lending industry.

New York Post real estate reporter Steve Cuozzo put it bluntly when he wrote that the law “makes it likely that no new apartment buildings will rise. It guarantees that existing ones will decay. It will make repairs and upgrades prohibitively expensive for landlords who must eke out puny profits from properties that require major reinvestment, but where they can’t charge enough rent to pay for it.”

According to American Banker, the law could harm multifamily lenders because some apartment owners might struggle to make loan payments and some investors might shy away from the city’s multifamily market.

Based on CrediFi data, New York City’s two biggest multifamily lenders since 2007 are New York Community Bancorp and Signature Bank. They are followed, in descending order, by Wells Fargo, Capital One, JPMorgan Chase, Investors Bancorp, Sterling Bancorp, National Consumer Cooperative Bank, Dime Community Bank and Deutsche Bank. Based on their lending track records, all of these banks could lose lending business — and potentially millions of dollars — under the new law.

Collyn Gilbert, financial analyst at investment banking firm KBW, says that even ahead of Cuomo signing the rent control bill into law, property owners and developers were taking a wait-and-see approach to apartment projects in New York City, leading to a first-quarter decline in multifamily lending. CrediFi data shows that in the first quarter of 2019, multifamily loan originations in New York City fell 11% compared with the first quarter of 2018 and 52% compared with the fourth quarter of 2018.

The rent control law “encourages landlords to turn apartments into condos, reducing the supply of rental housing that’s available,” says Emily Hamilton, a research fellow at George Mason University’s Mercatus Center. “It will also reduce the construction of new apartments, since buildings may not be profitable under the new rules that would have made sense to construct under the previous policy.”

Furthermore, Mark Fitzgibbon, director of research at investment banking firm Sandler O’Neill + Partners LP, anticipates property values and maintenance spending will decrease for buildings with rent-controlled apartments.

In New York City alone, the law affects more than 1.2 million rent-regulated apartments.

Proponents say the new law will help clamp down on the housing affordability crisis in New York City and other parts of the state.

“These reforms give New Yorkers the strongest tenant protections in history,” state Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie said in a statement. “For too long, power has been tilted in favor of landlords and these measures finally restore equity and extends protections to tenants across the state.”

The new law replaces rent control provisions that were scheduled to expire June 15. In the past, legislators had to regularly extend the provisions. Now, the provisions are permanent.

So, under the new law, what’s behind the expected drop-off in apartment construction and renovation — and, in tandem, the expected drop-off in multifamily lending?

Here are a few provisions of the law that worry apartment owners, developers and lenders:

  • It repeals the “vacancy bonus,” which enabled property owners to raise rents as much as 20 percent each time an apartment becomes vacant.
  • It repeals the “longevity bonus,” which permitted landlords to raise rents based on the duration of the previous tenancy.
  • It lowers the annual increase that landlords can charge tenants for major capital improvements, such as a new roof or new boiler, from 6 percent to 2 percent in New York City and from 15 percent to 2 percent in other counties. Also, these increases are eliminated after 30 years rather than being permanent.
  • It puts a $15,000 cap on individual apartment improvements, such as kitchen and bathroom upgrades, over a 15-year period and allows only three such improvements during that time. Also, rent increases for these improvements are eliminated after 30 years, rather than being permanent.

Because of these and other changes in the law, some real estate professionals predict dire consequences — even foreclosures — for multifamily owners, developers and lenders. For instance, Adam Mermelstein, managing member of New York City-based TreeTop Development LLC, which is active in multifamily housing, predicts landlords “will start giving buildings back to the bank because they simply won’t be able to meet debt service requirements and expenses.”

John Banks, president of the Real Estate Board of New York, perhaps best summarized the concerns of multifamily owners, developers and renters when he complained that the rent control law does nothing to ease vacancy rates or improve apartment affordability.

“Instead,” Banks added, “[the reforms] threaten to put small landlords who own the majority of the city’s rent-regulated units in financial crisis and stifle the construction of affordable housing in the future.”

Learn how you can analyze multifamily lending trends across the U.S. with CrediFi Analytics.

Related stories:
View from the Top: CRE Risk in the Banking System
List of Slumlord Lenders Emphasizes the Power of Data in Commercial Real Estate
These Are the Leading Multifamily Lenders Nationwide

Close Menu

Request a demo today.

Find out how you can discover more opportunities with access to the most comprehensive CRE financing database.







Request a demo today.

Find out how you can discover more opportunities with access to the most comprehensive CRE financing database.







Find out how our data can help you discover more lending opportunities.
Speak with a CredifX representative today.





INCREASE YOUR LENDING OPPORTUNITIES. SPEAK WITH A CREDIFX REPRESENTATIVE TODAY.





SUBMIT YOUR REQUEST FOR COMMERCIAL REAL ESTATE FINANCING


Find out how our data can help you discover more lending opportunities.
Speak with a CredifX representative today.





SUBMIT YOUR REQUEST FOR COMMERCIAL REAL ESTATE FINANCING





SUBMIT YOUR REQUEST FOR COMMERCIAL REAL ESTATE FINANCING


SUBMIT YOUR REQUEST FOR COMMERCIAL REAL ESTATE FINANCING


Mary Kovac Goldberg (Parrino)

Head of Customer Success

Mary has over 25 years of experience in sales and customer engagement, including more than a decade at Thomson Reuters. She is the former head of client services at Complinet, a global compliance and risk software company that was acquired by Thomson Reuters, and led account management for over 15 years at NYSE/Sector’s outsourcing services division. Mary has an MBA in information systems from Pace University and a bachelor’s of science in computer science from Hofstra University.  

David Libman

Head of Product

David Libman, a fintech and investment professional with 20 years’ experience in fields including finance, technology, new business development and real estate investments, is head of product at CrediFi. Previously, David was a vice president at New York-based iCapital Network, a financial technology platform for alternative investments, and director of acquisitions at Fieldstone Properties, a private real estate investment firm focused on investment-grade multifamily property. David is also the founder and former CEO of Globerex, the first real estate equity online marketplace.  

book your personalized
cre data consult today.

Gain access to CRE finance data.



















Request a CrediFi
demo today.

Gain access to CRE finance data.


















Request a credifi demo today.

Find out how CrediFi brings together cutting-edge technology and data science to develop the most comprehensive CRE financing database






SUBMIT YOUR REQUEST FOR COMMERCIAL REAL ESTATE FINANCING


Request a demo today.

Find out how you can discover more opportunities with access to the most comprehensive CRE financing database.







Book your personalized
CRE data consult today.

Gain access to CRE finance data on 6M properties & 4M loans.





Book your personalized
CRE data consult today.

Gain access to CRE finance data.


















Request a CrediFi demo today.

Find out how you can discover more opportunities with access to the most comprehensive CRE financing database.



















Request a CrediFi demo today.

Find out how you can increase your deal flow with access to the most comprehensive CRE financing database.



















Request a CrediFi demo today.

Find out how you can spot risk early to make more informed trading decisions.



















Request a CrediFi demo today.

Find out how you can discover more lending opportunities with access to the most comprehensive CRE financing database.



















Book your personalized
CRE data consult today.

Gain access to CRE finance data.


















Request a CrediFi demo today.

Find out how you can discover more opportunities with access to the most comprehensive CRE financing database.







Request a CrediFi demo today.

Find out how you can discover more opportunities with access to the most comprehensive CRE financing database.



















Discover new opportunities.
Speak with a CredifX representative today.





Increase your lending opportunities.
Speak with a CredifX representative today.





Demo our up-to-date
ownership & contact
information.





We track finance data
on all U.S. markets.
Which market's CRE data
would you like to demo?





We track over
10,000 CRE lenders.
What data would
you like to demo?





Request a CrediFi
demo today.

Gain access to CRE finance data on 6M properties & 4M loans.





Request a CrediFi
demo today.

Gain access to CRE finance data on 6M properties & 4M loans.





Find the lenders who
give you the best terms –
not just the ones you
already know.

Gain access to CRE finance data on 6M properties & 4M loans.





Secure the financing
you need.





Request a CrediFi
demo today.

Gain access to CRE finance data on 6M properties & 4M loans.





Book your personalized
CRE data consult today.

Gain access to CRE finance data on 6M properties & 4M loans.





View Madison Realty
Capital's lending profile,
documenting recent loan,
owner and property information.





How would you like
your CRE data
delivered?





Demo our up-to-date
lender, owner & contact
information.





Demo our up-to-date loan,
ownership & contact
information.





Book your personalized
CRE data consult today.

Gain access to CRE finance data on 6M properties & 4M loans.





Request a CrediFi
demo today.

Gain access to CRE finance data on 6M properties & 4M loans.





Book your personalized
CRE data consult today.

Gain access to CRE finance data on 6M properties & 4M loans.





Alex Veksler

Head of Content

Alex Veksler has 16 years of finance, data analysis and project management experience. He is a former vice president at Morgan Stanley, where he worked on product control of equity and fixed-income derivatives products as well as various projects involving finance and technology, such as revamping risk attribution and balance-sheet systems for profits and losses. Alex has previously worked at hedge funds, most recently as a director at Exigent Capital. He has a bachelor’s in computer science from Yeshiva University and an MBA from New York University.

Ely Razin

CEO

Ely Razin founded CrediFi in 2014 with Battery Ventures. A rare combination of seasoned corporate executive and technology entrepreneur, Ely previously served as global head of board governance for Thomson Reuters Accelus and head of business law for Thomson Reuters, after the software company he founded was acquired in 2004. The company, Expert Ease Software, developed AI-based software that automatically summarizes key deal terms for transactions in fields including capital markets, M&A and real estate. Ely began his career as a corporate and securities lawyer, and holds an LLB and MBA from York University.

Amichai Levy

VP R&D

Amichai Levy is the former VP of R&D at Israeli high-tech firm Payoneer, where he developed its signature cross-border payment platform and integrated it with existing bank technology. In his prior role at Ness Technologies, Amichai was a key player in developing an electronic case filing system for Israel’s courts. He has over 20 years of experience in software engineering.

David Fajgman

Head of Finance

David Fajgman brings over 14 years of financial and managerial experience to CrediFi. Prior to joining the CrediFi team, he served as finance director of Bioness Neuromodulation Ltd., which develops and manufactures medical devices involved in neurological rehabilitation. He has previously worked in multiple finance roles at Thomson Reuters and as an accounting and consulting manager at Ernst & Young, where he was responsible for a wide range of clients, including companies listed on the Nasdaq and privately held high-tech companies. David is an Israel-licensed certified public accountant and has a bachelor’s degree in business and accounting.

Liat Bar David

Head of Human Resources

Liat Bar David has over nine years of human resources experience, primarily focused on the high-tech industry. She is a former HR business partner at semiconductor solutions provider Broadcom, where she was responsible for onboarding processes, benefits, policies, training and development, performance management and employee retention. Liat holds a bachelor’s in communication and human services and a master’s in human resources and services, both from the University of Haifa.