Legislation changes will affect owners, tenants and members of the vendor and contractor industry

The current economic recession has caused numerous problems for NYC's residential housing industry. The volatility of oil prices and the increases on various operating expenses across the board have shrunk buildings' slim returns. Still, perhaps the greatest challenge that apartment owners and managers face today, is one of a political storm and not an economic one. The 2008 elections saw sweeping changes throughout the nation. While the jury is still out on how a federal government comprised of one party will affect the nation, the turnover of the NY State Senate majority from republican to democratic control has created a potential tidal wave for the housing industry. The state assembly, controlled by Sheldon Silver has long passed pro-tenant legislation annually which if adopted would generate an uproar with owners and create fallout throughout the NYC economy. Until now, the republican controlled Senate has ignored such legislation. With a new democratic-led Senate, it remains to be seen what will happen. The following legislation, if passed in both houses, would have grave results. All owners must contact their state senators and explain to them the effects that would result. One of the bills proposed would make Major Capital Improvements (MCIs) a temporary surcharge to tenants. MCI's are significant investments in a building and are beneficial to tenants and owners, resulting in rehabilitated capital stock in the affordable housing industry. Without this benefit, owners of properties whose rents are restricted would rarely invest the significant dollars necessary to put in new capital systems. The trickle down effect of this law, which would result in a reduction of capital work, would be a diminished contractor and vendor industry. Plumbers, roofers, window companies and electricians would see their workloads cut tremendously. This would result in them having to terminate significant amounts of employees, often hardworking middle and low income individuals. In an attempt to hurt landlords and help tenants, this bill might result in hurting everyone. As a follow up law, one piece of legislation proposes extending the payback period for individual apartment improvements from 40 months to 84 months. Once again, any programs that hurt MCI incentives will result in far less capital investment and hurt the vendor and contractor industry. Another proposed bill would decrease the vacancy allowance currently allowed from 20% to 10%. Vacancy increases do not hurt any existing rent stabilized tenants, and simply allow owners to recap some increases to cover their costs. The 20% increase allows them to do this at no harm to these existing tenants. The Rent Guidelines Board factors in vacancy increases when it figures out the guideline increases. A lower vacancy allowance would result in higher increase, hurting existing tenants. In an ironic piece of legislation, the bill proposes to increase the high income threshold for rent deregulation from $175,000 to $240,000 and the high rent threshold from $2,000 to $2,700 per month. Essentially this legislation protects high income individuals who are benefiting from the rent stabilization system. These individuals can afford over $32,000 per year in rent and certainly do not need protection. One piece which would especially hurt areas such as Queens and Brooklyn would prohibit an owner from returning to the legal regulated rent after they have provided a preferential rent to a tenant until the tenant vacates. This law would create a disincentive for owners to charge such a preferential rent when there is no way to return it up to the previous registered rent. This package of legislation, in a veiled attempt to hurt landlords and to help low income tenants in fact only serves to protect high income individuals, largely living in stabilized apartments in Manhattan. Rent stabilized tenants living in the outer boroughs will likely be negatively impacted by this legislation. What can you do other than sell your buildings and swim across the river to New Jersey? Is it too late for the industry? No. Get on the phone. Write letters. Contact your state senators where you live, work and manage or own properties. Explain to them how this legislation will hurt not just property owners, but tenants and the employees of contractors as well. The Rent Stabilization Association recently held a 600 person conference on these issues to encourage vendors and owners to stand up. I have spoken to multiple state senators over the past few weeks. The conversation that our industry is initiating appears to be taking hold in some office. Don't take this sitting down. Get up, get on the phone and talk to your senators. For help on how to do this or to find out who your state senators are feel free to contact me, or call the Rent Stabilization Association (RSA) or the Community Housing Improvement Program (CHIP) who have been leading this charge. Matt Engel is vice president of Langsam Property Services Corp., New York, N.Y.