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lets say there is a 30 unit building in a good neighborhood in nyc (park slope) and a 30 unit building in a bad neighborhood in nyc (brownsville). in both buildings, all units are completely destabilized...
i dont think expenses to the landlord vary by neighborhood, unless there's something about park slope's electricity thats better than brownsvilles. after all, con ed serves both.
now market rate rent will obviously be different for these 2 neighborhoods.
how will the brownsville landlord cover his rising expenses? the park slope landlord will have a much easier time, as the neighborhood is more desirable, he will be able to charge a higher market rent.
what excuse will the brownsville landlord have then?
my point is destabilized or not, the industry right now is not a good one to expect a profit in.
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"The man who sleeps on the floor, can never fall out of bed." -Martin Lawrence
lets say there is a 30 unit building in a good neighborhood in nyc (park slope) and a 30 unit building in a bad neighborhood in nyc (brownsville). in both buildings, all units are completely destabilized...
i dont think expenses to the landlord vary by neighborhood, unless there's something about park slope's electricity thats better than brownsvilles. after all, con ed serves both.
now market rate rent will obviously be different for these 2 neighborhoods.
how will the brownsville landlord cover his rising expenses? the park slope landlord will have a much easier time, as the neighborhood is more desirable, he will be able to charge a higher market rent.
what excuse will the brownsville landlord have then?
my point is destabilized or not, the industry right now is not a good one to expect a profit in.
Well, you bring up two issues, the second is more interesting. The first issue, the one of equal expenses but lower income for the Brownsville LL, is predicated on the false assumption of equal expenses. The major expense of ownibg a residential multi-unit building is the property tax. I would safely assume that there is a significant difference in that expense between Park Slope and Brownsville. Also, if there is a mortgage involved, the mortgage would be higher for Park Slope because the purchase price was a lot higher.
The second issue is more interesting. You say that an owner could get into financial trouble even with a completely deregulated building because of a poor economy. This is absolutely true. Any business in any industry can go under due to a poor economy. The big difference in NYC is that there is an industry - the regulated housing industry - which is pushed under BY THE GOVERNMENT.
Well, you bring up two issues, the second is more interesting. The first issue, the one of equal expenses but lower income for the Brownsville LL, is predicated on the false assumption of equal expenses. The major expense of ownibg a residential multi-unit building is the property tax. I would safely assume that there is a significant difference in that expense between Park Slope and Brownsville. Also, if there is a mortgage involved, the mortgage would be higher for Park Slope because the purchase price was a lot higher.
The second issue is more interesting. You say that an owner could get into financial trouble even with a completely deregulated building because of a poor economy. This is absolutely true. Any business in any industry can go under due to a poor economy. The big difference in NYC is that there is an industry - the regulated housing industry - which is pushed under BY THE GOVERNMENT.
property tax i agree is the major factor. mortgage lets be nice and say each respective owner is in the clear. but thats why i say deregulated. i am trying to paint the scenario without any govt intervention, which is what the landlords are ultimately pushing for. but if expenses keep rising, who's fault is that? certainly not the tenants. if oil is too high, switch to gas, or solar and implement green roofs. as the situation changes the landlord must adapt to it. its not just about collecting rent, paying the bills, and taking the profit. some savvy must be implemented here, as with any business.
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"The man who sleeps on the floor, can never fall out of bed." -Martin Lawrence
To understand the corrosive effect of government control of rents, you have to look at a multi-year period. Since I purchased my building eight years ago, expenses have increased, according to the RGB, by 56.1% (my expenses have increased more than that). http://housingnyc.com/html/research/cresearch.html
In the same period, stabilized rents have increased 27.75% which is less than half the percentage increase in expenses (I used the total increase for one-year leases. The total increase for two-year leases is even less). So the longer one owns rent-stabilized apartments, the greater is the gap between expenses and income. And if one has ownership long enough, profit will turn to loss.
lamontow, your remark contradicts the section on distressed buildings.
http://housingnyc.com/downloads/rese...ports/ie09.pdf
scroll to page 7 right hand column
Why would that line go anywhere but up?
Without spending time scanning the entire report I can think of two factors you failed to consider:
1. vacancy rate allowances
2. RPIE protests that can effectively lower RE taxes which by the way any decrease there is, is never, ever passed on to tenants even if they have a clause requiring an increase in rent, do to any increases of said RE taxes. That same clause, in the boilerplate, will state that under no circumstance will there ever be a decrease.
lamontow, your remark contradicts the section on distressed buildings.
http://housingnyc.com/downloads/rese...ports/ie09.pdf
scroll to page 7 right hand column
Why would that line go anywhere but up?
Without spending time scanning the entire report I can think of two factors you failed to consider:
1. vacancy rate allowances
2. RPIE protests that can effectively lower RE taxes which by the way any decrease there is, is never, ever passed on to tenants even if they have a clause requiring an increase in rent, do to any increases of said RE taxes. That same clause, in the boilerplate, will state that under no circumstance will there ever be a decrease.
1. The frequency of vacancies is unpredictable. One thing for sure is that a building full of stabilized tenants who are paying below market rents will have vacancies few and far between. But when one does occur, you're right, it certainly helps. The change to the rent system allowing vacancy increases was one of the few changes made helping owners in the history of the system. It happened about ten years ago under Governor Pataki. Ironically, one the bills in the Draconian package being pushed by the group of liberal state Dems would drastically reduce the benefit to owners of a vacancy increase. Seems that these Dems can't sleep at night with the thought that their rent system has any law which benefits owners.
2. A decrease in the RE tax can only occur if it can be proven that the current tax amount is an overpayment. That is very building-specific and I would assume that an owner would have checked into that immediately on purchase. Most likely if it could have been done then it was done by the previous owner. And even if it can be proven and done successfully, it's just a one-time shot. Anyway, the RE tax rate is so high on multi-unit rental property that it doesn't have to be an overpayment to be very onerous.
Last edited by lamontnow; 07-01-2010 at 05:58 PM..
I have stopped arguing with folk in landlord v. tenant threads. Both sides know what the game is in New York, but both like to ***** everytime the Rent Guidelines come up for renewal.
A decrease in the RE tax can only occur if it can be proven that the current tax amount is an overpayment. That is very building-specific and I would assume that an owner would have checked into that immediately on purchase. Most likely if it could have been done then it was done by the previous owner. And even if it can be proven and done successfully, it's just a one-time shot. Anyway, the RE tax rate is so high on multi-unit rental property that it doesn't have to be an overpayment to be very onerous.
Still your explanation does not explain the "distressed" buildings chart. By your reckoning that line should continue up given that rent controls have been in place since the end of the War, 60 some years?
I manage commercial buildings and all "my" owners file a RPIE every year based on the previous years income/expenses. They are sometimes very successful and sometimes not, it depends. I don't understand why you think it's a one-time shot.
You say:
Quote:
expenses have increased, according to the RGB, by 56.1% (my expenses have increased more than that). In the same period, stabilized rents have increased 27.75%
Yet look at the chart on page 10 in the report. They maintain that after inflation income pretty much mirrors expenses over the years. I'm not questioning your numbers but you appear to be the exception to the rule. Are you saying that this is a massive crime perpetrated on poor defenseless landlord's?
I would still like a legitimate link to double digit landlord expenses and some proof of so called abandonment of buildings based solely on rent controls.
Last edited by modsquad81; 07-01-2010 at 06:53 PM..
I would still like a legitimate link to double digit landlord expenses and some proof of so called abandonment of buildings based solely on rent controls.
Well here's just a sample of the IN-DEPTH analyses of (mostly) the NY housing market written over the years by EXPERTS in the field, regarding the destructive effects of government rent control systems on both the quantity and quality of rental stock. And they actually support their case with extensive data. modsquad, you won't like it.
More? How about the liberal economist Paul Krugman:
"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Referring to the disastrous rent control system in San Francisco, Krugman says when "an official proposed a study of the city's housing crisis, there was a firestorm of opposition from tenant-advocacy groups. They argued that even to study the situation was a step on the road to ending rent control -- and they may well have been right, because studying the issue might lead to a recognition of the obvious."" Reckonings - A Rent Affair - Op-Ed - NYTimes.com
Opposition to rent control among economists spans the political spectrum from Milton Friedman and Walter Block to leftist Nobel Laureates Gunnar Myrdal and Paul Krugman. In fact, it was the socialist Swedish economist Assar Lindbeck who famously said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing it."
The pro-regulation activists can cite the work of no economist - no study, no research - to counter the myriad of housingexperts who have demonstrated the destructive effect that rent control law has on the quality and quantity of housing.
Well here's just a sample of the IN-DEPTH analyses of (mostly) the NY housing market written over the years by EXPERTS in the field, regarding the destructive effects of government rent control systems on both the quantity and quality of rental stock. And they actually support their case with extensive data. modsquad, you won't like it.
More? How about the liberal economist Paul Krugman:
"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Referring to the disastrous rent control system in San Francisco, Krugman says when "an official proposed a study of the city's housing crisis, there was a firestorm of opposition from tenant-advocacy groups. They argued that even to study the situation was a step on the road to ending rent control -- and they may well have been right, because studying the issue might lead to a recognition of the obvious."" Reckonings - A Rent Affair - Op-Ed - NYTimes.com
Opposition to rent control among economists spans the political spectrum from Milton Friedman and Walter Block to leftist Nobel Laureates Gunnar Myrdal and Paul Krugman. In fact, it was the socialist Swedish economist Assar Lindbeck who famously said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing it."
The pro-regulation activists can cite the work of no economist - no study, no research - to counter the myriad of housingexperts who have demonstrated the destructive effect that rent control law has on the quality and quantity of housing.
I think we should let the experts do the talking, don't you?
Happyreading.
DING DING DING...Lamontnow knocks out Modsquad in the 5th round with a left hook to Modsquad's mouth...how ironic..LOL. Great post Lamontnow. Let's go Modsquad...Mr. Smarty pants. Mr. Pro-tenant. Give us links from HOUSING EXPERTS that states rent control/stabilization is good. I smell defeat!
To both of you. Where did I say that rent control is good or bad? You'll probably find that we agree more then we disagree on the issue. What gets me in the ass is the utter lack of any links or resources to back up your absurd claims. That's what makes my colostomy bag overflow. You, victorfox and your ridiculous statement that expenses for LLs went up in double digits last year makes your post easy to dismiss. lamontnow, quoting RGB increases of 56.1% for expenses and 27.75% rent increases is more divious because it looks factual on the surface but anybody who knows about this stuff knows otherwise. You still haven't explained about the distressed properties graph.
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reading.
