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More than 60k rent-stabilized apartments are now vacant
- anigbrowl 4y agoStrange, we were assured in a HN thread a few days ago that landlords would never keep units vacant because the economics just don't make sense! https://news.ycombinator.com/item?id=33224502 https://news.ycombinator.com/item?id=33224502 - discussing how Yieldstar, a consultancy, advises some landlords/property managers to hold or accept a higher vacancy rate while raising rents to increase overall profit.
- SQueeeeeL 4y agoPrices for rent are such a weird ratchet effect, they may only go up. It basically shows that landlords really aren't that interested in being efficient market actors, it's also about validating their own egos (even on an institutional level). If prices were to decrease, then they may see a direct loss of revenue, versus an empty unit which is simply an "unrealized asset"
- akavi 4y agoI'm currently renting an apartment in SF for 25% less than the previous renter paid because I rented it right at the bottom of the pandemic bust. Rents are subject to supply and demand just like everything else.
- Arrath 4y agoI imagine marginal costs of occupation like wear & tear, utilities carried by the landlord, and so on would increase that loss of revenue you mention, and push the calculus even farther towards letting it sit unoccupied.
- readthenotes1 4y agoDon't forget the recent experience with the government forcing you to let someone live in your property for free...
- scarface74 4y agoBy definition when you have constraints on the natural levers of supply and demand in the form of price controls, markets aren’t going to act rationally.
- crazygringo 4y agoHuh? In NYC in the middle of COVID rents had gone down by like 20% in some parts. What do you mean, rents may only go up? That's not how it works anywhere. It's only true over specific time periods.
- themitigating 4y agoThat doesn't seem to be the case according to https://www.redfin.com/news/redfin-rental-report-july-2022/ https://www.redfin.com/news/redfin-rental-report-july-2022/ Edit ignore this I misread the comment
- crazygringo 4y agoHuh? Yes it does, that article literally shows national median rents decreasing in 2020. But rental changes are literally neighborhood-specific. COVID had some neighborhoods in NYC flat, others rising, others falling. In any case, rents fall. That's the point. It's normal.
- themitigating 4y agoI misread your comment because i thought you said "now"
- bombcar 4y agoIt’s a bit more true in the commercial sector. But even there it will eventually collapse or be sold off.
- bombcar 4y agoCommercial property mortgages and valuations are strongly based on rental rates - and until vacancies hit a certain percentage they’re not counted much at all. One popular way to “flip” an apartment building of 100 units or so is buy one that is 100% rented and slowly raise rents until it is 80-90% rented and then sell it n
- WalterBright 4y agoNote that the vacancy rate is attributed to "rent-stabilized" apartments. Something else is going on here that is peculiar to that particular form of rent control. For one thing, rent-stabilization may mean that if a landlord lowers the rent to fill a vacancy, he will not be able to raise the rate again. This creates a very powerful incentive to not lower the rates. Another pernicious effect of government price controls.
- scarface74 4y agoShocking! Legislators didn’t think that artificial price controls would have unintended consequences.
- bcrosby95 4y agoPretty much every law has unintended consequences. But people mostly complain about them for laws they personally disagree with.
- scarface74 4y agoI mean what can be more obvious that artificial price controls will limit supply? This is like 9th grade Economics. It’s not an “opinion” the law is bad. It is a well understood part of capitalism.
- mattzito 4y agoThis is inaccurate. If a landlord lowers the rent of a rent stabilized apartment, they are able to raise it again at the next renewal to whatever the authorized rent is. I lived in an NYC rent stabilized apartment for a number of years, and my rent was always articulated as legal rent is X, offered rent is Y.
- WalterBright 4y agoWhat determines the legal rent? There's gotta be something about rent stabilization which causes landlords to leave apartments vacant.
- Wolfenstein98k 4y agoIt doesn't make sense, until the government tries to set the price. Then it does.
- jpollock 4y agoWe can't determine if this is a large number or not without knowing the total population - of either rent stabilized apartments, or all apartments available for rent. A certain amount of empty property should be expected - they do require renovation and repair. In commercial real-estate, I believe 10% is considered healthy for offices. It looks like 3% is considered healthy for apartments? [1] Residential vacancy rate source for "healthy" - https://www.suburbsfinder.com.au/resources/vacancy-rate-explained-what-is-a-healthy-vacancy-rate/ https://www.suburbsfinder.com.au/resources/vacancy-rate-expl... [2] Commercial vacancy rates: https://www.statista.com/statistics/194054/us-office-vacancy-rate-forecasts-from-2010/ https://www.statista.com/statistics/194054/us-office-vacancy...
- legitster 4y agoThis is the real answer. You don't have a real market unless there is a bit of slack.
- erik_seaberg 4y ago3% is alarmingly low. We need enough vacancies that landlords actually need to compete on rent and conditions, and bad ones risk losing market share. When the worst landlord in the city can easily fill their building with (resentful) tenants, it’s no wonder they’re often despised.
- thaumasiotes 4y ago> A certain amount of empty property should be expected - they do require renovation and repair. You'd expect a lot more empty property than just what currently needs maintenance. If you have no empty and rentable properties, then when someone comes to you wanting to rent an apartment, you can't rent them one. That's a big problem for you. This is the same reason you don't expect a secretary's day to be filled with work. You need idle capacity so that when something comes up, you can handle it.
- throwaway292939 4y agoI think this is a different case. This sounds more like profit optimization. Maybe it is true that it is acceptable to have x% vacancy if it means that your overall occupied rental price remains higher. An analogy here would be if you're running a hot dog stand, you start selling hot dogs for $10 instead of $5, and have greater unsold hot dogs but higher overall profit.
- colinmhayes 4y agoAbout 2% of total NYC apartments for reference
- freen 4y agoFor reference, the NYC public and emergency housing population is larger than metropolitan San Francisco.
- Wolfenstein98k 4y agoThe Great Forgetting, yet again. Few things have been proven as resoundingly as "price controls don't work", or more accurately "are very net negative". This gets forgotten every time someone really wants them to work. This applies to rent control as much as any other price. When you want the price of something to be lower, subsidising demand increases prices rather than lowering them. Suppliers and owners will not simply accept lower prices, even if you really wish they did. The Great Forgetting - price controls don't work.
- dangerwill 4y agoI agree, time to strip them of the assets then with 0 compensation.
- baggy_trough 4y agoWhat a terrible thing to advocate.
- dangerwill 4y agoAnd landlording is a terrible thing to do
- californical 4y agoAs someone who is renting right now and doesn’t want to own a home currently, where would I live if not for a landlord? Government housing? What in the heck is wrong with someone renting out something that they own?
- yazzku 4y agoSome find it immoral, especially when the landlord has multiple properties, or when, like in the article, they hold up the apartments vacant until their conditions are satisfied. There are also people who are basically social parasites, living off of rent and the work of those who actually contribute to society.
- legitster 4y agoI remember the last time this came up and vacancy rate was mostly a combination of units that were being given away free to family/friends, normal cyclical turnover, and renovation projects. We had crazy low interest rates - it would make sense to see a lot of ownership shuffle. But it's kind of ironic to me that one of the known negative externalities of rent-stabilization is a loss of inventory. I'm not so sure how shocked I should be to see ... a loss of inventory.
- gbronner 4y agoIf you have an apartment that hasn't turned over for 20+ years, you can either rerent it at a low text and get sued by your tenant for lead or habitability violations, or you can borrow money and invest it at less than 2% in a renovation. Both ways you lose a fortune. Or you leave it vacant and still lose money, but you don't have to work as hard doing it
- ETH_start 4y agoAdvocates want landlords to manage their property as unprofitably as possible. These kinds of anti-profit policies are enormously harmful to housing affordability/availability. See rent control for example: https://www.econlib.org/library/Enc/RentControl.html https://www.econlib.org/library/Enc/RentControl.html
- CraigRo 4y agoSo many people here do not know the details of NYC rent regulation, and are posting generalizations and falsehoods. Basically, you cannot raise rents aside from annual increases that are below inflation, and you are limited to a relatively small amount of renovations, and cannot increase the rents much if you do. So you either commit to a potentially multi lifetime below market tenancy that will bankrupt you eventually, or you keep it vacant and hope to demolish it or combine units or pray that the law will change. Or sell it to a guy who will run air bnbs until the city puts him out of business at which point it will go in the tax lien sale. In any event, nobody is investing in bringing these units back online in this legislative environment.
- bamboozled 4y agoSo it’s the governments fault for protecting people from predatory rent hikes?
- Eisenstein 4y agoThe current implementation seems to be causing an issue where it is not in the landlord's interest to offer the units to the market. It is the regulation's fault for creating disincentives for the landlord, so it depends on how you allocate blame for making a judgement based on that. That doesn't mean we shouldn't try, or that we need to stick to a counterproductive plan because some people think arguing about regulations on free markets is more important than fixing a pressing problem.
- bamboozled 4y agoNo you just made it sound like it was kind of stupid to even attempt such a law. Similar laws exists in Tokyo and it seems like a non-issue. Find me an empty apartment in Tokyo and I’ll be surprised. Maybe the problem exists elsewhere in society, for example: maybe the cost of living and property in NYC is just too expensive no matter what regulations exist? I’m saying this because I’d imagine if people don’t think it’s worth renting the apartments, why not sell to citizens so they can buy in them and live there? I feel like the world is starting to wake up to the fact that while it’s not easy to outlaw properly speculation, it’s going to be one if the major problems that define our time.
- hedora 4y agoHoly crap. If I owned one of these, I'd also let it fall into disrepair until the city condemned it, then build literally anything else: > Any time a tenant vacated, landlords received a “vacancy bonus” that let them increase the rent of the unit by up to 20%, and once an apartment’s rent reached a certain dollar amount — most recently, $2,774 a month — the unit left the rent-regulation system entirely, allowing the landlord to rent it at any price. $2774 / month is definitely less than I'd want to charge to deal with a tenant that cannot be evicted, but whose apartment must be maintained using labor priced for NYC. I'd guess most of the apartments that are being held off-market are way below that threshold, and also need substantial repairs.
- the_mar 4y agoWait, I pay 3K for my apartment in Manhattan. It’s by no means a palace but it’s not a shithole. The previous tenant lived in my apartment for 8 years. The “maintenance” you speak of constituted of painting everything with a single coat of white paint. I’m pretty sure that’s a lot less than 3K a month My friend pays 2,600 for a one bed in LES. So why are you making it sound like 2,774 is somehow poverty?
- hedora 4y agoI'm used to Silicon Valley pricing. Manhattan is apparently much cheaper than I would have guessed.
- VWWHFSfQ 4y agoA $2,700/mo apt on the LES is most likely 400-500 square feet. So cost is relative. That apartment in Silicon Valley would be 2-3x the size.
- the_mar 4y agonah, my friend lives in a regular 800+ square feet one bedroom, it's just in Manhattan you don't get a dishwasher or laundry. She has to lug her clothes to the laundromat.
- kjsingh 4y agoBurnaby will charge you if you leave your rental unoccupied https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy-tax/faq-speculation-and-vacancy-tax https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy...
- adeelk93 4y agoIt’s a thing in DC. $0.85 for occupied, $5 for vacant, per $100. https://otr.cfo.dc.gov/page/otr-vacant-real-property https://otr.cfo.dc.gov/page/otr-vacant-real-property
- the_gipsy 4y agoGentlemen, experts of economy, it's time to realize we are walking in circles from one government intervention to the other. Capping rents, reducing inflation, minimum wage and UBI, cutting or raising taxes, regulations regulations regulations. Each comment here points out the failure of the last intervention, only to promise the next silver bullet recipe.
- Eisenstein 4y agoI would think that having discussions about working, net positive regulations would be pointless. I'm not sure why you think that discussing broken ones is indicative of all of them.
- ta8645 4y ago> I'm not sure why you think that discussing broken ones is indicative of all of them. Because it's the same system proposing and implementing them. A broken system is very unlikely to ever produce correct results.
- Eisenstein 4y agoThe system seems to working pretty well for you. You are fed, have a home and a computer, and are probably very wealthy compared to the rest of world. What exactly is broken?
- creakingstairs 4y agoYeah I’m pretty well off thanks to the current system. But the same system is also leading to fair percentage of kids going to school hungry, people homeless or close to homeless (if any emergency happens) and a shitty chromebook if they are lucky and it has been getting worse. So I think the system is broken? I’m from New Zealand.
- Eisenstein 4y agoIt is a bit of leap to go from 'I am doing well but some things aren't working' to 'trash it all and let's do the late 19th to early 20th century economic system again'.
- refurb 4y agoWasn’t it like 50 years ago when NYC landlords were torching their own rent stabilized property for the insurance? Because the rent levels were making the buildings money sinks? We’ve come full circle.
- lifeisstillgood 4y agoSo just wanted to get few thoughts down - western house prices are driven (up) mostly by available mortgages and a vaguely poor future discounting ability by most people. In other words adding 10k to the offer just to get the win does not add much to your mortgage but gets you a house. - increases in rates badly hurts people - a free market in real estate is never really going to happen (because politics) but if it existed it would move the politics over to other parts of the economy- if people could not afford to live in the city, wages would need to be adjusted. In short there is no place for a "free" market because the point of human civilisation is to protect (ourselves / our tribe / those we sympathise with) people from the cold winds of unfettered nature. Whatever part of the whack-a-mole politics is being focused on, the end goal is "decent lifestyle with minimised suffering / extremes". Ie - insurance against the worst. providing insurance against the worst for all society is either a question of paying the huge cost of tragedy for everyone as their tragedy hits, or it is a question of government laying their hands across all ye whack-a-moles and trying to prevent anyone from having the worst outcomes. I think I am arriving at a theory of government that has the goals of totalitarianism but different methods - probably Thaler's Liberterian Paternalism. Anyway - understanding the mechanisms of the housing market is important from mortgage availability, land availablity, road and infrastructure building and workers available all seem the big parts.
- nivenkos 4y agoI mean you can just look at practical, realist governments like in Singapore, and even China to some extent. The problem is once you're deep in the problem, how do you get out? If you let prices collapse then a lot of homeowners will face negative equity. It's scary in Europe where we are facing rising interest rates coupled with the energy crisis and cost-push inflation from that and supply chain issues. It's like the governments have just accepted that hundreds of thousands of people will face redundancy and homelessness next year, with no plan whatsoever.
- Jyaif 4y ago> with no plan whatsoever. Curious to know what you suggest.
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- findthewords 4y agoTo make housing affordable, one must make it unpalatable to investors. Lack of housing is not a problem - an excess of demand from speculative investors fueled by too low interest rates is the problem. Affordable housing is uninvestable housing. Until advocates admit this, the walking in circles will continue. i) Price controls do not work at reducing prices, there are two millennia worth of proof for this.[1] ii) Higher interest rates lower housing prices by lowering the availability of loans. This is a good thing unless you are already bought into the ponzi of ever declining rates. iii) Affordable housing is uninvestable housing. A house is a deprecative asset, the same way cars are. A house does not produce anything. You live in it and it wears down. [1] https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices
- hrbf 4y agoI’m going further to say that the speculative investment style itself is the problem, for many if not all areas. Once this kind of investor comes in, they want to squeeze the market for all it has, effects be damned. They may as well bet on crop failure – and they do.
- fithisux 4y agoWell worded.
- the_wolo 4y agoI'm going further to say that every investing is speculative in itself, because investing is the activity of buying an asset, speculating that there will be a return.
- chii 4y agowhile that's true, it's not black and white. The invested asset produces output. This output is useful, and speculative demand of that asset will, in normal circumstances, produce more of that output due to the pressure to increase the number of those assets. Housing is not different. Except that there are some people who would prefer to limit the builds of new housing.
- qeternity 4y agoIt’s unreal how many people in the comments here haven’t spent any time researching basic issues in Western housing markets. People keep talking about evil investors and taxing secondary and investment properties. But the biggest group of housing investors are primary residence owners: we turned housing into a nest egg retirement plan, and now we can’t undo that. Housing cannot be both affordable and a good investment. Housing should not be any different from any other good or service. This all stems from massive government intervention in housing markets decades ago on the basis of horrible conclusions of family wealth, and further intervention isn’t going to fix things. You want cheaper housing? Slash regulations and NIMBYism, and get government out of the equation.
- SkipperCat 4y agoYes on slashing NUMBYism. Its a form of predatory control where those who walked in the door first shut it in the face of the person behind them. Sadly, NIBMYism was created to give more voice and democracy to everyone. Giving local community groups veto power and other rights empowered some of the worst of us into using it to block all types of housing (especially affordable housing). A perfect example of how a republic is sometimes better than a democracy.
- qeternity 4y ago> Sadly, NIBMYism was created to give more voice and democracy to everyone. NIMBYism wasn't created, it's a naturally emergent property of a rational actor. Then the government poured fuel on the fire with subsidized housing loans, and quantitative easing more generally. But NIMBYism exists because most people have been conditioned over the past decades that they will make a lot of money from their primary residence. And this is what needs to die.
- hotpotamus 4y agoI see this sentiment a lot, but it doesn't match what I've seen. One of my friends recently bought a relatively expensive house in South Texas and then a bit later plans arose to build an apartment complex nearby (maybe a few hundred units - I forget the details). He rallied his neighbors to talk to their city council and the project was cancelled. I talked to him about it a bit and mentioned that it was almost textbook NIMBYism and he agreed. The thing is that at no point was home value ever part of his thinking - he bought this house at a bit of a premium to live in the neighborhood that had larger lots, relatively older, professional families, and quiet nights (his old house was near a college campus and had lots of renters who liked to party it up on all nights of the week). He just wanted to keep his quiet, low-traffic neighborhood. He'd be happy if his house never increased in value since he plans on living there indefinitely and all an increase in price means to him is more in wealth/property taxes. He is not the only one I've talked to who thinks this way.
- alzamos 4y agoI’ve been curious about the dynamics around the often-cited statement “rent control doesn’t work”. It seems that with rent control, you’d have higher demand and lower supply resulting in excess demand (both theoretically and it seems in practice). Does anyone know of any studies that: - Analyse the effects of rent control in the presence of “vacancy-busting” measures like heavy vacancy tax/fines? (i.e forcing supply to stay high?) - Analyse the price elasticity of the demand and supply respectively? (i.e is the excess demand mostly demand driven or supply driven?)
- colinmhayes 4y agoNo links, but Berlin's rent control policy was practically an RCT because it only applied to half the city. Many papers were written on the situation and I'm sure one answers your questions.
- Ekaros 4y agoIf rent-controls are the solution, why not expand them? Why not have price controls for housing in general? Let's say only allow to sell housing for inflation-2% per year more than you bought it for? That would keep it affordable for everyone and stop the unearned gains from price rices?
- charlesrocket 4y agoSo they neglected their properties for decades and now about to fix them for free?
- scotty79 4y agoWe don't need rent regulation. We need progressive property tax. This would make professional investors drop real estate on the market like hot potatoes, tank the real estate price and made it affordable to buy for people who intend to live in properties they buy.
- jefurii 4y agoA better headline would be "More than 60K rent-stabilized apartments are kept off the market by landlords".
- mrlonglong 4y agoIf these pricks are deliberately leaving flats unoccupied to drive up cost of housing, then local government should step in and confiscate them and allocate to people who really need housing at a decent rent amount.
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