Which is more powerful, the laws of rent stabilization or the laws of economics?
My Monday column was about a two-bedroom, prime West Village apartment with a stabilized rent of about $1,400 that sits vacant because it needs a $100,000 overhaul. I mentioned it in conversation with someone, to which she declared: “I’d pay $100,000 to get that lease.”
Think of the real-world value of a permanently renewable, low-rent lease for a renovated, 1,200-square-foot, prime Village unit that you can eventually bequeath to a roommate, such as your kid. It’s in the millions.
So paying a hundred grand to renovate is perfectly logical for a tenant. But not legal. Or is it?
I asked some landlords and lawyers. Here’s what I learned.
Technically, a landlord cannot require a prospective tenant to pay for renovations in exchange for a lease. And technically, the owner must provide a code-compliant dwelling at lease-signing.
But if there’s a high degree of trust between the landlord and tenant, wink-and-nod arrangements involving rent-stabilized leases and renovations can and do happen.
“I have a friend who has renovated rent-stabilized apartments for his kids for apartments in the West Village and Gramercy Park,” one owner told me. The friend has “an in” with the owner of those buildings, one of the city’s most prominent landlords. Clearly, the two have reached some kind of understanding.
“I do the same when I can in my buildings,” the owner added, referring to properties in Prospect Park South, Flatbush and Crown Heights. “But when low-rent apartments come up, they sit vacant until we find a brother or cousin of the super/porter where we can rent the apartment as is. Most of the time, they fix it up. Occasionally, they live in squalor.”
Trust is necessary because the tenant could, in theory, report the squalid conditions to the government and compel the landlord to renovate. The owner might never collect enough rent to justify the outlay and operating burden.
“I would rather invest in treasuries at 5% than get an 8% return in rent-stabilized housing,” a Harlem owner of such housing tweeted. “With treasuries, I eliminate the risk of socialism and I eliminate work hours. I just buy and sit. Who wants to do all of the work associated with rent control for 3% extra?”
The first landlord was equally blunt. “I would never put any money into a low-rent apartment,” he wrote. “The losers are the 25- to 40-year-olds who can’t afford a $5,000 market-rent apartment and can’t afford doing their own renovation.”
“The whole market for fixed-up, rent-stabilized apartments is dead,” he concluded. “The whole system is just so stupid.”
What we’re thinking about: The City Council considered downscaling the floor-area ratio in a Garment District portion of the Midtown South rezoning to ensure that demolish-and-rebuild projects would not pencil out. The point would be to save the manufacturing tenants in those buildings. Wouldn’t that be like scratching up your new car so no one steals it? Word is the Council will reject the Garment District carveout when it votes on the broader plan Wednesday. Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: Riverbank, a Midtown rental tower that JPMorgan just bought for nearly $250 million, was the site of the “Club Kids” murder, later documented in the film “Party Monster” starring Macauley Culkin as the killer. (It was called Riverbank West at the time.) Thank you to TRD’s Alexis Manrodt for spotting this on social media.
Elsewhere…
— Surveillance technology can identify someone by the way they walk, but Council member Jennifer Gutiérrez has introduced a bill that would classify a person’s gait as personal identifying and private information, Gothamist reported. The classification would create oversight into the way that the information, as well as data about phone or computer use, is used and distributed. “Right now, the city can collect and share information about how you walk, type or browse — without treating it as sensitive. That needs to change,” said Gutiérrez.
— The City Council will likely not hold a vote to override Mayor Eric Adams’ veto that kept Bally’s proposed casino in the running for a state gaming license, City & State reported. Some Council members, including Bob Holden, aren’t thrilled with the Council’s decision to stand down, claiming it doesn’t honor Council member Kristy Marmorato’s opposition to the casino bid. “Member deference is the only real power we have,” Holden said.
— A 2.7 magnitude earthquake hit New Jersey’s Bergen County on Tuesday, three days after a 3.0 magnitude quake centered in Hasbrouck Heights, according to CBS News. No damage was reported.
— Quinn Waller
Closing time
Residential: The top residential deal recorded Tuesday was $6.5 million for a 3,628-square-foot, single-family house at 45 Park Place in Park Slope. The Golan Team at Compass had the listing.
Commercial: The top commercial deal recorded was $10.9 million for an 11,775-square-foot, mixed-use property at 385 Broome Street in Little Italy. Dax Real Estate purchased the seven-unit building from Hermes Management LLC.
New to the Market: The highest price for a residential property hitting the market was $5.7 million for a 2,461-square-foot condominium unit at 250 West 96th Street on the Upper West Side. Pamela D’Arc, Robert Khederian and Jackie Gill of Compass have the listing.
Breaking Ground: The largest new building project filed was for 38-11 32nd Street, 38-10 33rd Street and 32-08 38th Avenue in Long Island City. Combined, the three permits call for 253 new units and 241,908 square feet. Joseph Frankl filed them on behalf of Steven Hurwitz of Cavu Property Group.
— Matthew Elo
