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Real estate sales and rentals in New York City are impacted by a huge variety of circumstances, from the time of year to new laws and regulations that are put into effect by the city and state governments.
With interest rates hitting a record low at 3.29%, it seems like a perfect time to buy. But with coronavirus dampening transactions, combined with it being an election year, it’s more likely than not that it will be a quieter spring and summer than usual. The trend in real estate during presidential election years indicates that sales will slow from June through October of this year.
This readjustment in the real estate market means it is a great time to be a buyer — there will be more inventory that you can analyze to see if it is a good fit for you. For sellers, it is a better time, if possible, to hold off on listing your home until markets improve.
The rental market in New York City is also undergoing a significant shift, as various laws passed by the New York State legislature and signed into law by the governor take effect. Specifically, the amount that landlords can increase the rent on rent-stabilized apartments has been dramatically curtailed.
Additionally, the New York City Council is considering a rent stabilization law for commercial tenants. As a commercial tenant myself, I think this law seems highly unnecessary. Many New York City leases, like mine, already have fixed escalation percentages built on for a decade. It’s left for both the landlord and tenant to negotiate and agree on this increase. As a tenant, what I find to be more of a burden than the projected and expected rent increase is erratic and unpredictable increases in real estate taxes. Over the years, the pass-through charges from property tax increases have far exceeded my rent escalations. I also feel that if legislators were to adopt this agenda, it would create a sense of political risk and discourage investment, and it would be unfair to landlords faced with increasing expenses and no ability to recapture them.
The potential adoption of stricter commercial rent laws in New York City would see the creation of a board that would set initial rates and then oversee yearly increases. Yet these calculations are difficult for even the most seasoned commercial real estate agents.
Universal rent control legislation is also being considered in Albany, which would impact the entire state of New York by capping the amount a landlord can raise the rent on an apartment and encompassing almost every apartment in the state. Landlords fear that the implementation of this idea would result in the inability to invest in their properties, leading to dilapidated and unsafe structures. From my analysis of the bill, it may even be possible for a condo owner who rented their property to not be able to vacate the unit and sell the property to an end user given the lease. If these laws were to pass, I think they would have a dramatic impact on the value of such units.
Yet amid the fiery rhetoric, we also see improvements being made in the lives of everyday New Yorkers, with the adoption of new rules around security deposits and upfront rent payments. Formerly, landlords could require a security deposit of six months’ worth of rent or greater and require tenants to pay the entire year’s rent upfront. But in a bid to make renting apartments more affordable, security deposits are now capped at a single month’s rent, even if you are from out of town or have bad credit, and it’s illegal to accept more than one month of prepaid rent at lease signing.
This is a huge change for New Yorkers, where for some, the former security deposit norms have kept them from moving to new, and perhaps more expensive, apartments. While this is a positive step for some tenants, others have had issues getting qualified for specific apartments and have been rejected altogether from some, as the landlords have no way of feeling financially protected.
I’ve seen the use of rental insurance companies, which guarantee the rent payments to a landlord, rise significantly. This may even increase the total apartment cost for some tenants. Some insurance companies charge as much as one month’s rent to guarantee a lease. Some tenants may have preferred a six-month deposit, which is refundable, over paying the extra month to an insurance agency and not getting it back.
When a move does take place, landlords are now required to refund a security deposit within 14 days, which has been difficult news for landlords, but more than welcomed by tenants. This transition will ensure that tenants have more access to their capital, though landlords worry about being able to process a move and issue a refund that quickly.
Late fees are also reduced under new rental laws in New York, limited to $50 or 5% of the monthly rent, whichever is less. Previously, landlords had greater discretion on what they could charge for late fees, but the new state law makes living in New York more affordable and less punitive when a tenant needs to make a late rent payment.
Laws being rewritten in New York City mean that the rules around how an apartment is rented are changing. Most tenants welcome the changes, while most landlords have reservations. Yet change toward making housing more affordable is a goal we can all want to strive for these days. With rental prices always moving upward, we welcome these changes for our clients and hope that it results in their being able to afford an apartment they might have otherwise overlooked.
With every market correction, we see greater movement in one area than another. With the election year’s impact on the market combined with the new rental laws from Albany, we’re expecting to see a more dynamic rental market and a quieter sales market.