From the Wall Street Journal, November 30:
New York City Mayor-elect Zohran Mamdani wants to tighten rent control, but how’s this for a little socialist irony: He may first have to bail out the city’s landlords who are losing money because they are already limited in the rent they can charge.The New York Housing Conference, a nonprofit that promotes so-called affordable housing, warns in a new report that landlords will need $1 billion in government aid to avoid default. “A significant number of affordable housing buildings in New York City are experiencing operating deficits, where rents are not covering expenses,” the report says.
These are publicly financed buildings with rent-restricted units set aside for lower-income tenants. The problem is that allowable rent increases in recent years have averaged less than 2% annually, which hasn’t kept pace with landlords’ surging costs for insurance, maintenance and utilities.
Insurance costs increased by more than 25% annually between 2019 and 2023 to $1,770 per apartment per year. That’s more than the rent on some apartments. New York’s prolonged Covid eviction moratorium also led to more tenants not paying rent, which the report says “continues to be a challenge.” Perhaps that’s because state and city laws make it difficult to evict deadbeats.
The result: About half of affordable housing buildings are not “collecting enough rent to pay their bills,” the report says. Yet “most expenses related to housing are fixed or nonnegotiable, including mortgage payments, water & sewer charges, insurance, fuel, and electricity, leaving maintenance as the largest single category of discretionary operating costs.”
That means landlords will have to stop repairing leaks—or default on loans, which are backed by the city government. The report warns the latter could increase borrowing costs for the city. This could reduce its ability to finance more low-income housing and other public works, though elected leaders would likely respond by raising taxes.
The report also notably warns that Mr. Mamdani’s proposed rent freeze will exacerbate these problems. Yet its recommendations largely entail more government subsidies and regulation: A $1 billion financing program to restructure distressed loans, government funding for insurance, and restrictions on water and sewer rate increases....
....MUCH MORE