How Will Good Cause Eviction Change NYC Real Estate?

Legislators in Albany, New York have recently been working on ‘Good Cause Eviction’ legislation (Senate Bill S2892B) which, if passed into law, would cap annual rent increases in NYC to 3% for all apartment types (including market rate units) and essentially require landlords to perpetually continue a tenancy.

The proposed legislation would apply to all types of rental units including individual condo and co-op units as well as rental buildings, whether regulated or market rate.

The bill’s sponsor is New York State Senator Julia Salazar (D, WF) who represents the 18th Senate District which includes the Brooklyn neighborhoods of Bushwick, Cypress Hills, Greenpoint and Williamsburg, with parts of Bedord-Stuyvesant, Brownsville and East New York.

This proposed legislation is just one of many recent legislative changes affecting NYC which strengthen tenant protections at the expense of landlords. Recently passed legislative changes affecting NYC include a cap on security deposits as well as the potential prohibition on traditional rental broker fees.

New York is just one of many states which have enacted tenant-friendly legislation in recent years. In 2019, Oregon became the first state to enact a statewide rent control policy which caps rent hikes at 7 percent plus inflation during any 12 month period.

Does the annual rent increase cap apply to individual condo and co-op units?

Yes. The Good Cause Eviction legislation as currently written prohibits annual rent increases in excess of 3% for all types of apartments, including individual condo and co-op units. The most recent version of the legislation allows for rent increases of 3% or 150% of the Consumer Price Index (CPI), whichever is higher.

The inclusion of outright limits on annual rental rate increases for market rate apartments in the legislation is why many industry participants have labeled this legislation as ‘Universal Rent Control.’

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Can I refuse to renew a tenant If I want to move into my apartment or sell?

The Good Cause Eviction legislation as currently written provides no right for a landlord of a unit in a building with more than 12 apartments to recover an apartment for personal or family use.

Landlords in buildings with less than 12 units would need to prove a “compelling and immediate necessity” to non-renew a tenant and recover a unit. If a unit is in a building with fewer than 5 units, the legislation as currently written does not permit a landlord to recover the unit for a family member.

Under the legislation, landlords are required to show “just cause” for not renewing a lease, which presumably includes direct violations of lease terms.

For example, using an apartment for illegal activity would give a landlord grounds for non-renewal of a lease.

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Will Good Cause Eviction legislation reduce apartment values in NYC?

Yes. Caps on rent increases will undoubtedly make owning residential real estate in NYC less desirable, both for large investors as well as small-time landlords and individual owners. More worryingly, restrictions and limitations on non-renewals and the ability to easily recover a unit for personal or family use will strongly deter individuals from buying vs. renting.

For example, a prospective purchaser of a condo in a small apartment building whose job may require 1-2 year stays abroad would be unlikely to buy vs. rent since it would be nearly impossible to recover the unit from the tenant and move back into it upon returning to NYC.

The legislation as currently written provides no clear ability for an owner to recover a unit and non-renew a lease if she or he wants to sell an apartment.

od cause eviction legislation being considered by New York legislators would cap annual rent increases in NYC to 3% and require landlords to renew leases.

And because prospective purchasers would be more inclined to buy a primary residence vs. an investment property under the legislation, owners who must sell with a tenant in place due to the good cause eviction regulation would receive significantly less money when selling.

Good Cause Eviction legislation will also reduce the value of rental buildings because it’s unclear whether the mandatory caps on rental increases would allow building revenue to keep up with rising building expenses such as real estate taxes and utility costs which have often exceeded the rate of inflation in recent years.

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Published 03/19/2020
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 148 Lafayette Street, New York, NY 10013.

1 thought on “How Will Good Cause Eviction Change NYC Real Estate?”

  1. I am 71 and have lived in NYC my whole life. While I agree there has to be some caps, extreme caps will cause a repeat of what happened in the 70’s. Due to rent control, landlords couldn’t afford to maintain the buildings so they abandoned them. Please Google photos of the South Bronx and East Village in the 70’s/80’s to see the result. What’s being proposed will be a disaster!!!

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