'The Crisis Has Already Started': Inside The Finances Of 4,300 Rent-Stabilized NYC Apartments

Next month will mark the latest chapter in one of New York's most bitter feuds: tenants vs. landlords.

When the Rent Guidelines Board meets to determine how much the owners of nearly half of New York City's rental apartments can raise their rents, tensions will be high as always. The annual debate between renters demanding a freeze and landlords demanding a big hike is already raging.

But it's not the fight landlords really want.

Nearly six years after its passage, the Housing Stability and Tenant Protection Act of 2019 is still Public Enemy No. 1 for the owners of New York City's aging apartments. It has already led to a surge in defaults and distress, and experts say there is no end to the financial devastation in sight. 

Two property owners, who combined own and operate almost 4,300 rent-stabilized apartments in New York City’s outer boroughs, opened their books to Bisnow to show the impact of the 2019 laws. The landlords shared the information under the promise of anonymity in order to avoid repercussions from lenders, investors or tenants. 

“The crisis has already started,” one of the landlords said. “It's just getting everybody to realize how bad it really is.”

The statements include a breakdown of income, expenses and debt on the buildings, which are of various sizes and locations. They reveal dwindling cash, rising expenses and projections of deeper pain ahead.

"The real estate industry has been complaining for a long time, so how do we know that post-HSTPA is any different?” Mark Willis, senior policy fellow at the NYU Furman Center, said. “I think what you can take away from [the numbers] is that this is real. There will continue to be rent shortfalls that grow over time under the current system, and that is not going to turn out well."

The legislation was intended to protect low-income residents living in the approximately 1 million stabilized apartments across the five boroughs. However, in doing so, it dealt a severe blow to the economics underpinning housing ownership, which many landlords claim has been fatal.

The financial records show how the once-secure housing stock has rapidly run out of funding. The dwindling income while values have plummeted means that not only are the owners unable to further invest in the properties, but they may have to dump them, likely causing further distress.

That’s the fear of one investor who shared financial data with Bisnow on his nonprofit organization’s portfolio of 1,000 rent-stabilized units scattered across the Bronx.

The group acquired the 40 buildings in 2008 when they sat in disrepair. The previous landlord owed tens of millions of dollars on the properties and many of the apartments were uninhabitable.

The nonprofit rehabilitated the units, once again making them a stable source of housing for thousands of New Yorkers. But in 2022, the buildings started losing more than $1M a year combined as expenses rose and the landlord was barred from increasing rents. 

“This portfolio that we had in such great shape, while not as bad as when we picked it up in 2008, is on shaky ground,” the investor managing the portfolio told Bisnow.

Between 2022 and 2024, the buildings have lost nearly $4M before factoring in debt payments, according to the financial records. To maintain the housing, the nonprofit has tapped into its cash reserves, which have been drained from nearly $7M in 2020 to just $1M as of March. 

The investor says his expectations for the future harken back to New York's urban decay of the 1970s and ’80s.

“These areas all have old, old buildings that, without enough of a bottom line, you can't do the repairs that are needed,” the investor said. 

Willis spent 19 years at JPMorgan Chase overseeing its community development program focused on increasing affordable housing before his stint at NYU. He recently presented an analysis of Bronx apartments built before 1947 — the vast majority of which are rent-controlled — to the RGB, showing how rent growth has not kept up with inflation.

As of last year, landlords faced an estimated annual shortfall of roughly $1,400 per unit, more than a full month's rent. The study assumes operating costs also went up at the rate of inflation, though other data shows they have risen even faster.

“If you own a building that is declining in value, it's going to be very hard to get people to put more money in,” Willis said. “The only people who are going to be interested in that kind of a situation are people who think they can get such a good price for the building that they will be able to get their money out annually as the building continues to suffer.”

A Model Upended

When the HSTPA passed on June 14, 2019, legislators hugged each other on the floor of the state capital, celebrating what was seen as a reclamation of power from the real estate industry. 

"This is probably the best day I have ever had in Albany in the entire 17 years I have been here," State Sen. Liz Krueger, representing Manhattan’s East Side, said at the time.

Before its passage, landlords were able to use a series of legal loopholes to buy up buildings, deregulate housing and jack up rents. They could remove units from stabilization entirely if their rent surpassed a certain threshold, which was fairly simple if they spent enough on capital improvements. They were also allowed to increase a unit's rent after a tenant voluntarily vacated by up to 20%.

Stories of landlords harassing tenants to get them to vacate or emptying buildings with heavy levels of construction were everywhere. 

That all changed under HSTPA, which made it nearly impossible to remove a unit from stabilization. But in targeting bad players, the legislation effectively capsized the system.

Among the most common issues cited by landlords is the cap on how much they can raise rents after improving the buildings or individual units following a tenant’s departure. It’s not uncommon for tenants to live in rent-stabilized apartments for decades or, due to succession rights, generations. That leaves owners with extremely low rent and empty apartments that need substantial repairs.

When comparing two buildings of similar size owned by separate landlords in different boroughs, each shows a steady decline in net income. The numbers shared with Bisnow include loans and depreciation due to a property’s aging. 

At the end of 2020, an 80-unit building in the Bronx recorded a net income of approximately $274K. That fell to just $29K by the end of last year. In Queens, a 100-unit property generated a net income of roughly $340K in 2021. That has since dropped nearly in half to $178K.

As values have tumbled, selling rent-stabilized buildings has become an exercise in stomaching loss. In 2018, a rent-stabilized unit in Upper Manhattan would go for a median price of $290K, according to a report by the University Neighborhood Housing Program. In 2024, the median price dropped to $122K. 

In Brooklyn, the median price dipped from $275K to $196K. It also dropped from $266K to $175K in Queens and $177K to $112K in the Bronx. 

Originally, the package of laws limited owners’ ability to recover costs of apartment upgrades after a tenant moves out to $15K. That ended up significantly underestimating the cost of renovation. As a result, in 2021, 61,000 rent-stabilized apartments were reported as vacant, double the number from the year before, according to an internal state housing agency memo obtained by The City. 

That cap has since been raised to $30K, and the vacancy number subsequently dropped to roughly 26,000 units.

But the other challenges remain in place, even if a landlord doesn't seek to deregulate their units, leaving the other mechanism of increasing income in the hands of the RGB.

The nine-member board makes a yearly decision on how much landlords can raise rents following a series of highly contentious meetings where landlords and tenants go head-to-head in attempts to advocate for opposite outcomes.

For one-year leases, landlords were able to increase rents by 2.75% last year after allowing increases of 3% the year before. The RGB is considering raising rents this year by 1.75% to 4.25%, and it will make the final decision on June 25.

“You have these private owners who own and operate the property, but the government controls both ends of the equation,” New York Apartment Association CEO Kenny Burgos said.

'I Actually Take Pride In What We Do'

One property owner shared with Bisnow financial documents accounting for four different portfolios totaling over 3,000 units in Brooklyn, Queens and Staten Island.

Some of the portfolios consist of large complexes, while others are groups of walk-ups scattered around a neighborhood. In several cases, the buildings make up large swaths of the areas that they are in, making the owner a significant player in the greater communities. He said he often checks in on his tenants while walking through the complexes.

“I actually take pride in what we do, because we're long-term owners,” the owner said. “I don't have a problem with rent stabilization when it creates the stabilized housing that it’s supposed to.”

Going back a decade, the buildings have always been relatively profitable. The spreadsheets do not show any large fluctuations in rents that may indicate landlord-driven rent surges.

But the portfolios’ net operating income has been on a downward slope since 2019. When accounting for debt service and capital expenses such as unit and building improvements, two portfolios are already underwater and the others are on their way, according to what the landlord considers as “reasonable” projections. That does not include future spending that may be required for large upgrades, such as to comply with Local Law 97.

That’s largely due to skyrocketing costs. Across four portfolios analyzed by Bisnow, insurance costs have at least doubled in the past decade. At one — a Staten Island complex with more than 1,000 units — the cost of insurance has surged from $174K in 2015 to $898K this year.

At the same property, taxes have doubled. The same double-whammy hit the owner at a group of buildings in Queens which span nearly 900 units. Repairs and supply costs have shot up 150% over the same period.

Offloading the buildings would mean paying taxes on the depreciated assets as well as taking a cash loss to pay off the debt — if the owner can find someone to take over the portfolio. Earlier this year, L+M Development Partners sued its lender for refusing to take the keys back on a rent-stabilized building in Harlem after the landlord defaulted on its mortgage.

“We're hoping that between now and when we actually are in distress, which is going to happen, we could get a change in the laws, which will allow the buildings to start becoming profitable again,” the for-profit landlord said.

In its own calculations, the RGB has found that the operating costs of buildings containing rent-stabilized apartments increased by 6.3% between 2024 and 2025. The RGB also has reported that NOI has surged for rent-stabilized landlords, although real estate lobbying groups point out the NOI data also includes free-market units, which are setting rent records.

The RGB also found that the greatest increase in costs comes from insurance, which jumped nearly 19% over the past year. 

Though insurance has risen across real estate assets, coverage for rent-stabilized assets has especially increased due to the risks involved in operating them, according to Danielle Lombardo, head of North America Commercial Real Estate Insurance for WTW.

“At the end of the day, especially with rent-stabilized, there's only so much cash flow, and every increase in insurance dollar expense reduces operating income,” Lombardo said. “So if there are double-digit increases year-over-year, plus the interest rate environment, plus tariffs, etc., it puts people in a position where they just can't be profitable, and that's not sustainable.”

Those costs mean that critical building-wide renovations are being delayed. 

Ann Korchak, the board president of Small Property Owners of New York, owns two 10-unit buildings. Like many small-time landlords, she inherited the buildings, first bought by her husband’s grandparents. 

With cash running low, she recently opted to patch the roof at one of the buildings as a short-term solution rather than undergo a major costly repair.

“We are all just struggling to figure out what to pay first. It has to be the taxes, so you don't wind up on the lien sale list. You have to pay your insurance. If you have a mortgage, obviously that has to be paid,” Korchak said. “My family has to replace a boiler, and we're really scratching our heads. Like, how are we going to get it done?”

'What Do They Do From There?'

Landlords and housing groups have spent the past five years waging war against the HSTPA. 

The Community Housing Improvement Program and the Rent Stabilization Association — which have since merged to form the NYAA — sued to overturn the legislation, arguing it constituted an illegal taking of property. They even brought it to the Supreme Court, but in 2023, the high court declined to hear the case.

The landlords' arguments have persuaded some of HSTPA’s biggest supporters. After signing the bill into law, former Gov. Andrew Cuomo boasted about the legislation, calling it some of “the most sweeping, aggressive tenant protections in state history.”

But earlier this year, Cuomo, now the frontrunner in this year's mayoral election, reportedly expressed regret about the rent reforms in a private meeting with the Real Estate Board of New York. 

New York City’s housing crisis is at a critical point, with the rental vacancy rate falling to a multi-decade low of 1.4%, construction slowing and market rents at historic peaks. Landlords say the situation will only get worse, especially for low-income New Yorkers, if rent-stabilized housing is not preserved.

Owners are increasingly falling into distress. New York City apartments that were built before 1974, the majority of which are rent stabilized, had a 25% distress rate by balance and nearly 7% by loan count, according to a report released by KBRA in February. Post-2000 properties had a distress rate of 2.9%.

The red flags have put regulators on alert, with the Securities and Exchange Commission questioning institutions about their exposure to multifamily buildings impacted by the 2019 legislation. Meanwhile, following the collapse of Signature Bank and the near-death of New York Community Bancorp, lenders have sold off rent-stabilized loans and tightened their purse strings for borrowers.

Even Community Stabilization Partners — the venture that acquired a stake in Signature Bank's rent-stabilized portfolio on the condition it works to protect vulnerable residents — has encountered the inevitable issue. The venture has had no choice but to begin foreclosing on some of its borrowers.

But lenders aren't building managers. When they foreclose, their strategy is to sell the building quickly while attempting to recover as much of the loan value as possible.

Those who step in might not invest in them given the deteriorating values, experts say. Instead, many expect money to be soaked out of the properties as they decompose — unless something changes.

“What you have is a new crop of what we can categorize as gamblers. Are they going to be bad operators? Hard to say,” Burgos said. “But they're going to be confined to the economics that are facing them. Even if they get these buildings near 10 cents on the dollar, some of these numbers will never pan out. So what do they do from there?”