Impact of Rent Control - Part 2

Our first part on Rent Control showed how Rent Control is designed to help local politicians and provide landlords with ways to generate new tenants at higher rates.

From the landlord point of view, there may or may not be reasons to support local Rent Control. For those that are “slumlords”, there can be some positives. Many tenants with financial limitations simply cannot afford to move or live elsewhere with higher rents.

Such tenants are often willing to endure less than favorable living conditions due to the economic restrictions, desiring to continue paying the same rent no matter how bad things get.

If, for example, a slumlord has a 12 unit apartment building fully rented, and the building provides a positive cash flow, there is now zero incentive to provide any upgrades or improvements. The slumlord no longer needs to continually attract “new” tenants.

Chances are the basic maintenance and management services are already factored in to the positive cash flow. It’s status quo for a period of years.

When a slumlord owns multiple buildings under these circumstances, they also have the opportunity to grow their rental portfolio. Lenders are more likely to finance a landlord with a proven track record and positive cash flow.

With a larger portfolio, if one building encounters a problem such as the need for major renovation or facing being condemned, the landlord has options such as selling the property to get out or tax benefits of rehabbing.

However, because of Rent Control, there is no need to help the tenants under these circumstances. It is not always the tenants that gain the most benefits.

Meanwhile, some tenants actually abuse their rent control privilege. Manhattan is a prime example. There are residency requirements of only a certain number of days per year. Over the years this had led to people who really live in other cities but come to NYC on business or leisure treat a Manhattan apartment like a time share and only stay a few weeks out of each year.

The point is that Rent Control has a different impact in different cities while currently falling under the same heading.

Our first part on Rent Control showed how Rent Control is designed to help local politicians and provide landlords with ways to generate new tenants at higher rates.

From the landlord point of view, there may or may not be reasons to support local Rent Control. For those that are “slumlords”, there can be some positives. Many tenants with financial limitations simply cannot afford to move or live elsewhere with higher rents.

Such tenants are often willing to endure less than favorable living conditions due to the economic restrictions, desiring to continue paying the same rent no matter how bad things get.

If, for example, a slumlord has a 12 unit apartment building fully rented, and the building provides a positive cash flow, there is now zero incentive to provide any upgrades or improvements. The slumlord no longer needs to continually attract “new” tenants.

Chances are the basic maintenance and management services are already factored in to the positive cash flow. It’s status quo for a period of years.

When a slumlord owns multiple buildings under these circumstances, they also have the opportunity to grow their rental portfolio. Lenders are more likely to finance a landlord with a proven track record and positive cash flow.

With a larger portfolio, if one building encounters a problem such as the need for major renovation or facing being condemned, the landlord has options such as selling the property to get out or tax benefits of rehabbing.

However, because of Rent Control, there is no need to help the tenants under these circumstances. It is not always the tenants that gain the most benefits.

Meanwhile, some tenants actually abuse their rent control privilege. Manhattan is a prime example. There are residency requirements of only a certain number of days per year. Over the years this had led to people who really live in other cities but come to NYC on business or leisure treat a Manhattan apartment like a time share and only stay a few weeks out of each year.

The point is that Rent Control has a different impact in different cities while currently falling under the same heading.