New York City’s polarized political climate has created a misalignment in incentives between tenant advocates and housing providers, leaving landlords unable to reinvest in their properties.

Many owners, faced with rising costs and capped revenues, are choosing to keep units vacant rather than re-renting them, resulting in a system where no one benefits. This dynamic underscores the urgent need for balanced, informed solutions.

Educating Lawmakers: Bridging The Knowledge Gap

Kenny Burgos, CEO of the New York Apartment Association, is committed to educating the public about the financial complexities involved in operating rent-stabilized housing.

Burgos, who was my guest on a recent Coffee & Cap Rates podcast, is in an excellent position to take on this assignment. He is a native of the Bronx who was twice elected to the New York State Assembly from that borough before resigning last summer to take the helm of NYAA, a landlord group created from the merger of the Rent Stabilization Association and Community Housing Improvement Program.

In his new role, Burgos has developed a suite of communication tools including eye-catching social media videos explaining building operation and renovation costs, informative podcasts, frequent e-newsletters and a new magazine titled Housing New York.

Burgos uses key data to illustrate the challenges facing landlords. For example, 366,138 rent-stabilized units have rents at or below $1,450, which is roughly the cost the government spends to operate similar buildings without having to pay property taxes or mortgages. The rent for the average pre-1974 rent-stabilized unit outside of core Manhattan is $1,305, which illustrates the operational distress in managing such properties.

In addition, Major Capital Improvement approvals in 2024 were 75% lower than in 2018, reflecting a dramatic decline in investment following the passage of the Housing Stability and Tenant Protection Act of 2019, which capped rents in rent stabilized buildings, even upon vacancy.

Burgos emphasizes that each unfunded mandate and additional regulation exacerbates operating expenses, a burden borne disproportionately by landlords striving to maintain their properties.

I explored the financial hardships facing owners of New York City rent stabilized housing in a previous Forbes article citing annual Rent Guidelines Board surveys showing that distressed rent stabilized properties built before 1974 have steadily risen since 2016, more than doubling in 2022 to 1,409.

Misalignment Leads To Deteriorating Building Conditions

Matt Engel, President of Langsam Property Services Corp., which represents close to 300 properties in the Bronx and Upper Manhattan, is one of the executive members of NYAA and explained on my podcast the untenable situation facing property owners.

Prior to HSTPA, landlords actively invested in their properties, enhancing tenant living conditions and maintaining structural integrity.

Engel recalls, “We had clients eager to make improvements, even proactively offering tenants new appliances. Today, those opportunities are no longer feasible.”

Fixed revenues capped by rent regulations fail to offset operating expenses, which are rising at unsustainable rates.

For example, insurance premiums have surged — 45% two years ago then 25% last year— forcing some landlords to forgo property damage coverage altogether if banks don’t require it. Insurance carriers are abandoning New York, particularly the regulated market, leaving one carrier in some neighborhoods that can charge whatever it wants because there isn’t another option. Disasters like the Los Angeles fires or hurricanes in Florida have exacerbated the insurance crisis.

“We’re having conversations in the industry on how we can work with government to come up with solutions for this because whether it's financially a problem for the insurance carriers or whether it's a more sinister decision that is essentially redlining neighborhoods, which of course has no place here, it's something that we have to overcome,” Engel says.

Moreover, compliance with unfunded New York City mandates such as Local Law 97 imposes significant costs. For instance, retrofitting a fueling system to meet climate change requirements can cost up to $200,000, a prohibitive expense for already-struggling landlords.

Engel warns of a dire trajectory, “We’re headed for dangerous times not seen in 50 years.”

The Path Forward: Incentives, Collaboration And Revitalizing New York City's Housing Market

The government works best when it incentivizes private development and private ownership to invest money in housing, Burgos says. For example, a government program similar to the 485-x tax abatement for new development would help recover thousands of vacant regulated units currently off the market.

Burgos notes, “What the 2019 rent law did was entirely pull away any incentive to invest in your building because you know that you will not see any return on those dollars. You have banks failing and banks unwilling to lend to this industry because they can see very clearly the math will not pencil out.”

Additionally, vouchers at fair market value determined by HUD could help stabilize regulated buildings, but some housing advocates don’t believe owners should be entitled to the full value of vouchers because they exceed rent stabilized rents, according to Burgos.

Declining Property Values And Market Trends

The erosion of financial sustainability is evident in property valuations. Rent-stabilized property values have declined by 35% to 60% from their 2017–2018 peak.

Breakdown of New York City multifamily sales in 2024.

Of the $8.9 billion multifamily sales in 2024, only 29% were predominantly rent-stabilized assets, compared to 63% free-market properties, according to Ariel Property Advisors’ Multifamily Year in Review New York City 2024.

Faced with rising costs and regulatory constraints, many owners are opting to exit the market entirely, driven by mortgage maturities and strategic decisions to divest from rent-stabilized portfolios.

Supply And Demand: Lessons From Argentina

In a recent Forbes article, I wrote about Argentina President Javier Milei’s decision to eliminate rent regulations, which offers an instructive case study. The removal of these laws resulted in a 170% increase in rental supply in Buenos Aires and inflation-adjusted rents declining 40% within one year.

New York City has close to 1 million rent stabilized apartments, or about 50% of the city’s total rental units. Can you imagine the effect of lifting regulations and effectively doubling the supply of free-market housing overnight? Rents would drop quickly as they did during the pandemic when there was a lack of demand.

While full deregulation may not be politically viable in New York City, the Argentinian example underscores the importance of aligning incentives to ensure that tenants and landlords alike benefit from sustainable housing policies.

Charting A Path Forward

Addressing New York City’s rent stabilization crisis requires policymakers to recognize the misalignment in incentives that discourages reinvestment. They need to introduce targeted incentives to bring vacant units back online, stimulate reinvestment in housing stock and encourage collaboration between public and private sectors. Only through a balanced and pragmatic approach can New York City create a sustainable housing ecosystem that benefits both tenants and landlords.

In his latest podcast, Shimon Shkury, President and Founder of Ariel Property Advisors, explored the challenges facing owners of rent stabilized buildings with guests Kenny Burgos, CEO of New York Apartment Association (NYAA), and Matt Engel, President of Langsam Property Services Corp. and one of the executive members of NYAA