← The Rent Roll with Jay Parsons
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Foreign welcome. It's episode number 72 of the Rent Roll your podcast on all things rental housing, apartments, SFR and build to rent. Today we're covering a topic that on the surface, you may not think you're interested in. Okay. And I wouldn't typically start off that way, but you might see the title. You think? Eh, I might check on this one, but I'm going to try to win you over. Okay. Because I think this is a really interesting story. There's more to it than meets the eye and there's a really interesting emerging leading voice that's trying to restore some sanity to it, counterbalancing some of the things we're hearing from New York City's new mayor. So that is, of course, the never ending chaos of New York City's rent stabilized apartments. All right, so bear with me on this. We're going to cover more than 100 years of rent control history in like, I don't know, three minutes. And then we're going to look at the firestorm that's erupted since 2019 when the new York City's.
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Sorry.
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When New York City's rent stabilization laws were expanded to include vacancy control, which means rents were no longer capped just for renters renewing their lease, but also upon turnover for new leases as well. And that's made a mess even messier. And in New York. And it's a cautionary tale for other cities and states that are also considering various flavors of rent control, including most recently now in Massachusetts, which could have a ballot measure in November that would install a pretty draconian version of rent control as well. And so today we're going to hear from a guy who again, I think is super interesting, very smart, very pragmatic guy. Kenny Burgos, the CEO of the New York Apartment Association. You know, historically, if you followed the rent stabilized market in New York at all, it's, it's really been mostly a collection, I think, of kind of loud voices complaining for good reason, but complaining that costs are rising more than revenues due to these rent caps. And of course they were right. But that emotional argument has, which has mostly been for mom and pop landlords. It's mostly fallen on deaf ears. Kenny, well, he's got a little bit different approach. He's a former state legislator, a Democrat who actually sat right next to Zoran Mamdani in the New York State legislature. Mamdani, of course, is now the new mayor of New York City. So these two guys, they're friends now on opposite sides. You know, formerly in the same side in the state legislature in Albany now on opposite sides of one of the most heated political issues in the nation's largest cities. And also obviously an issue that the new mayor campaigned very loudly on, which was a rent freeze, of course, for the city. And now he's continuing to put a lot of emphasis on that. So we're going to talk to Kenny about how he ended up in this position and what you'll, I think you'll find as you listen to him, you'll probably see what I see, which is that he has, I think, a really unique approach. It's not just emotional, it's practical, it's pragmatic. He's using math and facts and logic and then taking to social media into short term, short, short form videos to press the case for science and logic and math and truth in a way that, you know, honestly I don't think we've seen a lot of, from the housing business. I think there's a lot of issues like rent control where the facts are really on the side of the facts, the science are on the side of, of, of, of, of, of, of just getting more housing and opposing rent control. But we just, we don't see engaging short form videos and social media to really back up those points in a way that resonates with today's, today's culture. And I think Kenny is really doing a good job in ways that probably a lot of others of us can learn from. And so I think you'll enjoy hearing from Kenny and also I'm going to share with you one of his really awesome short form videos. I think you'll enjoy that and you'll hear some of Kenny's stories as well. So stick with us for that. It's going to be a fun conversation. First, let me give a big shout out to our sponsors. First and foremost to jpi, a leading apartment developer with a state of purpose to transform building, enhance communities and improve lives. To check them out@jpi.com Also, big thank you to Madera Residential, a leading apartment owner and operator based in Texas and expanding into the Southeast. Check them out@madera residential.com all right. As always, kick it off with a section we call Here's a Chart. And we've got some charts and graphics and all kinds of fun things for this section today. It's going to be, I'm going to try to keep this pretty tight, but I really want to lead into our conversation later with Kenny. Now before we dive in, I want to give a shout out to this to the sponsor of this segment. It is brought to you by Mason Joseph Multifamily Finance number one FHA construction lender in the Southwest for a reason. Since 2016, Mason Joseph has closed as many FHA construction loans in Texas and surrounding states as the second and third place lenders combined, according to my friends there. So check them out. Mason Joseph, all right. So again, I want to say something I mentioned earlier. I recognize that many of you listening and you've probably given me a chance so far to win you over to stick with me on this. I recognize many of you probably aren't actively investing or developing in New York City. And many of you, even if you are active in New York, you probably have almost no interest, at least most of you probably have no interest in investing in New York City's rent stabilized or rent controlled apartments. And that's okay. You are really who I'm talking to here because people who are already in this, they know these things. I think the broader apartment world probably does not in rental housing world at large, I should say. But it's a really interesting story and again, I think it's a cautionary tale and maybe using some, you can find some ammo to use as these as misinformation gets spread to extend rent regulation to other places as well. So let me give you some quick background on New York. Okay. New York City has had various flavors of rent control dating back to 1920. So that goes back more than a century, more than a century of various flavors of rent control. And yet what do you know, we still have an intense focus on rent affordability and it's never worked. And so what do we do? Let's just keep tightening and tightening and tightening it. New York City has changed and tightened and expanded rent control laws at least a half dozen times over the last century. And now we're talking about doing it even more. Okay, so what actually happened though, when rent control started? I think that's a really interesting story. Let's go back to 1920 because there's actually some lessons that we can learn even for today. There's a fascinating book called the Great Rent Wars New York, 1917-1929. Someone tipped me off to this book somewhere on LinkedIn. I can't remember who it was, but whoever it was, thank you. It's a great read. Very interesting story. Long story short, New York City, it was like the Austin of the early 1900s. It was building like crazy. Even as the population was growing like crazy, they were building like crazy. And by the way, people say well, you know, these cities like Austin could build because they have a lot of green space. It's not just about green space and greenfield development. New York City was knocking down old crappy apartment buildings, the old tenement buildings, and they built many more more modern apartments in and more density in their same place. Back then it was a lot easier to do so as a result of all of that supply that was getting built. It was a renter's market. Back in those days, even as the city's population was growing and growing and growing, the city was also growing its supply. So a couple of things happened, things that, you know, today we'd associate with sunbelt markets like Austin. It was happening, you know, 120 years ago in New York. Couple of things. Number one, renters, they were moving around a lot. They were chasing newer apartments and better deals. They were highly mobile, which is the total opposite of New York City's rental market today. Here's a line from this book. It says thousands of families moved out of old law tenements on the Lower east side and into new law tenements in Brooklyn and the Bronx, where they found, quote, much better apartments with plenty of light and air and even hot water, toilets and bathtubs. Often they moved. Not once, but many times. They found one apartment. They. They moved from one apartment to another upon even the slightest inducement in rents. They moved so often, remarked another person quoted this book that New Yorkers maintain their reputation as, quote, the most restless population in the world, which again, total opposite today. Second point, landlords. Back then, they were competing for renters through concessions and through building improvements. Two things that you rarely will find in older apartments in New York today. Concessions were abundant back then in New York City. They were as abundant, if not more abundant, than in places like Austin and Denver and Phoenix today. So here's a good line from the book. It says, desperate to fill their apartments, New York City's landlords went to great lengths to get tenants and hold them. They not only made repairs, but also painted and otherwise decorated the apartments according to the whim and caprice of the tenants. Some even attempted to attract new tenants by offering to pay their moving expenses and to give them a ton of coal. Perhaps the most striking sign of, by the way, cold like back now, we socially bad thing in your stocking back then that kept your apartment warm. Coal was a good thing. Perhaps the most striking sign of landlords desperation was their willingness to grant concessions free rent for a month or two and occasionally even longer. All right, it was a renter's market. So what happened? Well, the cynical say, oh, the city got built out. It didn't have any room to build anymore. It's not that simple. You can find old, dilapidated, obsolete buildings they can build on, which is they could demolish and build, which they did back then. It was still a pretty dense city. Obviously it's expanded more, but certainly in the core of the city it was already pretty built out, but they were able to demolish and rebuild. Well, what happened? What led to these tensions that led to the creation of rent control? Well, yeah, for those of you who know your history, World War I hit, okay, suddenly there were rations and restrictions on, on building materials. There were shortages of coal, which again were needed to heat buildings. That led to all kinds of problems for renters and builders and landlords alike. There was less construction, there was more inflation of all types. And then suddenly there's a severe shortage of housing. And then there's rent inflation. And then you got issues with building conditions. Then there are rent strikes and then there's rent control. And then over time, those problems get exacerbated by regulations on zoning restrictions on demolishing older properties to build newer and better apartments, and all kinds of restrictions on building and construction in general. And of course, more rent control. So New York City sees various flavors of rent control come and go over the coming decades. But really, let's Fast forward to two big critical moments. 1969, New York passes rent stabilization. And so when you talk to a New Yorker, you know, they say, oh, it's not rent controlled rent stabilization. Well, a couple things. Rent stabilization, that's a form of rent control. Let's just call it what it is because spade is spade, right? It's a form of rent control. They have another program they call Rent Control that's for much, much older apartments. The pre. That's, you know, kind of the pre existing rent control program. They just put a new label on the, on what was then a newer program, rent stabilization. But it's the same idea. It's rent control, okay? They just call. It's a specific program in New York City. So 1969, rent stabilization passes it eventually, you know, I'm going to kind of summarize a lot of information here, but basically, long story short, it eventually comes to reach about an impact about about a million, just under a million apartment units in New York City, mostly older buildings built for 1974. And it establishes the Rent Guidelines Board to set rents on those apartments, but initially only for renewal leases. So this Rent Guidelines Board Board, they're the ones who determined what the rent increases would be. It wasn't set to inflation or CPI plus whatever number, like some places do. It was, it was this guidelines board. It was a bunch of people, political appointees. So. But again, initially it was only for renewal leases. So when you renewed your lease, that renewed rent increase was subject to the approval or that would be based on the what the board had set. When someone moved out, rents could be reset to the market. Well, that changed in 2019. That was the year that the state approved changes that allowing the city to adopt vacancy control. Which means those same rent caps apply on turnover. When someone moves out, the new renter moves in and that unit is now beholden to the same rules, those same rent guidelines. And that's when of course, all chaos breaks loose. Okay, so I'm going to share some data from a report that came out last summer from the Milstein center at Columbia University. It's written by with data and analysis from the team at Maverick Real Estate Partners. The report is titled the Mamdani Rent Freeze and its impact on New York City's Multifamily Market. The rent stabilized multifamily sector 1 Sebastian of stability now faces an unprecedented confluence of legislative shifts, political pressures and capital markets turbulence, pushing it to the brink of uninvestability. Okay, all right, so I'm gonna cover this quickly again, I know I'm, I'm just hitting this high level. I'm not going to give you a deep, deep, deep dive in rent stabilization.
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But I want you to know a
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couple key facts here. Okay, so for those of you can see the screen, here's a chart from the report showing for rent stabilized apartments in New York. The average sales price per square foot in the left here is core Manhattan. And it was basically cut in half for about $800 a square foot. And prior to 2019, now $400 after vacancy control passed the other side of this chart. So again, just huge equity losses and value depreciation right out of the gate because of this change. The other side of this chart that
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you're going to, if you can see
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the screen, if not again, I'll talk to you, talk you through it. It shows a similar drop in prices,
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maybe a little bit less of a
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degree, but basically the same story. The big drop off in prices in the Bronx. But in there, but there in the Bronx the problem is actually even worse because. Well, let me read this from the report. It says in the Bronx, the average sales price has fallen to a level that is roughly on par with the average debt, meaning that a significant portion of the buildings in the borough likely have zero or negative equity. So that's a real problem. Value reduction so big that we almost saw some regional banks fail a while back due to, due in part to exposure to New York City rent stabilized apartment loans. Okay. And that makes really hard to sell these properties as well. And you know, there's a lot more. We can talk about that for ages. I mean, if you want to dig more into that, just Google it. And you can see a lot of stories about this. And some of the prices these apartments are going for are truly wild. When they get sold inside, often cases, the buildings are worth less than the dirt they sit on. So the report goes on to estimate the impact of a rent freeze, potential rent freeze on these rent stabilized apartments, which is what, you know, obviously Mayor Ramdani has famously proposed. So let me read this from the report. It says, quote, the political climate adds another layer of risk. A mayoral administration committed to a rent freeze could, by appointing a sympathetic rent guidelines board, effectively halt all rent increases for a four year term. The impact of such a policy would be catastrophic for many owners. A realistic scenario for 100% rent stabilized building in the Bronx shows that a four year rent freeze followed by a return to a modest 3% annual rent growth would still cause a significant and permanent reduction in NOI. A more Dacronian but entirely plausible scenario of a four year rent freeze followed by 2% rent growth and 5% expense growth would see the property's NOI turn negative within 16 to 17 years, rendering the property worthless. And there's a related problem to all this too, which is this. With vacancy control, New York City now has tens of thousands of units sitting vacant, some estimate more than some estate. More than 50,000 units sitting vacant because of vacancy control. And they're not being held vacant because the landlord wants them to be vacant. Okay, remember, there's no revenue. There's some social media conspiracy theories on this stuff. They don't know what they're talking about. There is no revenue coming from a vacant apartment, just expense. Unless it's some really oddball scenario. There's no revenue coming from a vacant apartment. They're vacant because the landlord usually can't afford to renovate them and bring them up to code and then put them back on the market. So. So that's something that we're gonna hear a lot about from Kenny today. And actually, this is a good time to share this with y'. All. So our guest I've got to mention him. Kenny Burgos, former New York State legislator, now the CEO of the New York Apartment Association. We're going to bring him in later in the program, but I want to first share with you one of the videos that he's put out. Okay, so he and his team are putting out just some really awesome videos, short form videos on social media about the impact in particular of vacancy control in, in New York City. Really powerful, eye opening stuff, but also engaging and fact based. Just the facts. So let's play one of those videos for you now. And if you're listening to on your phone or on your, in your car, you can't see the video. That's okay. You're missing some great, great imagery from the, from Kenny's video, but the audio is going to tell you everything you need to know. Okay, and again, this is a short video, just over a minute or so. So bear with us. Here it is.
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If this apartment were anywhere else in the world, it would be renovated and someone will be living in it within weeks. But here in New York, we handle vacancy differently. In most places, when an apartment becomes vacant, that's the moment you renovate it, bring it up to code and re rent it. Even in California, a state known for strong tenant protections during tenancy, rent increases are limited. But when a unit turns over, the regulated rent can be reset. New York does the opposite. Here we have vacancy control, which is regulation of an empty apartment. So when a tenant leaves, the regulated rent doesn't reset no matter how much work the apartment needs.
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What?
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Under the 2019 rent laws, even if you spend tens of thousands of dollars renovating, you can only recoup a fraction of that cost. And it can take up to 15 years to even do that. And even after that, the apartment's rent may not cover its own operating costs. And that's why at least 50,000 rent stabilized apartments across the city are sitting empty right now. Even nonprofit housing advocates are having this problem and have now called for a vacancy reset because without it, their buildings are not financially viable. These apartments are already empty. A vacancy reset would keep them regulated, require them to be improved, and most importantly, bring them back online fast. New York doesn't only have a housing shortage, it has a policy problem. These homes already exist and they could be housing people right now.
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All right, so that was some great stuff from Kenny and again, he's put out many other great videos like that one. So if you're curious, you can find those on his X Twitter. And again, we'll talk to Kenny More in a bit. But first, it's time for rental housing trivia.
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All right.
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Today's trivia is presented by Authentic. If you've got a property that's underperforming and you can't quite figure out why, check out their multi family leasing and marketing audit. They'll dig into your pipeline leasing funnel and comps and tell you exactly where, where things are breaking down, plus strategies and how to fix it. Listeners of the pod get 50% off. So head to authenticff.com, click on the banner to learn more and claim the offer. All right, so here's the question. In the last 10 years, how many times as New York City's rent Guidelines board set one year rent guidelines below cpi, which is consumer price index inflation for the same period, was it 0 times last 10 years, 1 time, 3 times, 4, 5 times or all 10 times? So give that some thought. And we're going to answer that in a bit. But first in the news. All right, in the news when we review headlines impacting rental housing, we got one from Bloomberg. This was on single family rentals. It says Atlanta is challenging big corporate landlords without waiting on Trump. All right. So this, you know, I think Bloomberg typically does a pretty good job. I thought this is a pretty disappointing story just not being well grounded. Let me read something from it. It says a 2023 study by Brian on of the Georgia Institute of Technology looked at the Atlanta area, specifically finding that heavy investor purchases led to the loss of $4.9 billion in home equity, more than two thirds of it among black households. All right. So that sounds like an alarming stat. $4.9 billion in lost home equity, my goodness. Right. Well, let's look at the study. Let's drill into it. Let's open up the study. What does it say? Well, the study looked at transactions between 2007 and 2016. Well, huh. Let's think about what happened between 2007 and 2016, a little thing called the great financial crisis that led to millions and millions of foreclosures and then bank owned vacant single family houses, which obviously a lot of those ended up being bought by investors and a portion of those were institutional investors. So it's revisionist history to blame invest for quote, lost home equity rather than the great financial crisis that is what resulted in millions of homeowners losing their homes. And what makes this article even worse is that it complains about SFR investors owning houses while also complaining about build to rent construction ruining the area's quote, folksy character. It says that self storage facilities and rental home subdivisions are quote, are quote intrude on the patchwork of brick ranch style homes, horse paddocks and long wooded Dr. Okay, so the irony here bemoaning the lack of affordable for sale housing, then complaining about the rental alternatives that provide far more affordable alternatives to people needing housing. So I would just say this. How about we prioritize people over the horse paddocks? Is that crazy? I don't know. All right, one more headline for you. This one comes from the Wall Street Journal. It says how Congress plans to take on the housing crisis, modular housing, easier access to home loans and are among the proposals for lawmakers are working on. All right, so a little bit from this. It says the House and Senate are aimed to simplify the federal environmental review process for certain housing projects. The bill the bills expand access to small dollar mortgages and create a pilot program to help some low income families save. And the House and Senate bills both try to make it easier to build manufactured housing. So by the way, what's not mentioned here is is banning large investors from buying houses. It doesn't, I mentioned this last week as well. It doesn't look like it's a big party for Congress right now, even if it is for the White House. But we'll see. You know, I'm not in the game of predicting the whims of D.C. politics. We'll see how this plays out. But certainly some positive things that Congress is focused on. All right, next up, I'm thrilled to welcome or I'm sorry, introduce. I'm thrilled to introduce a new segment of the podcast called Good News. And that's to highlight the good news happening across the multifamily and single rentals world. Because there's plenty of good happening too, even if it rarely gets as much attention. And good news can be presented by my friends at Apartment Life. Apartment Life coordinators help apartment owners care for residents by connecting them in meaningful relationships. This in turn benefits everybody from the resident's well being to the satisfaction of on site staff in the apartment community's bottom line. So if you own or operate apartments and aren't partnering with Apartment Life already, check them out@apartmentlife.com it's a faith based nonprofit that's been around for nearly three decades and doing a lot of good work. All right, so this week's good news comes from Continental Realty Group. It was relayed to me by Apartment Life CEO Pete Kelly. So Pete shared with me this, he said through Continental's foundation Community Growth Foundation. They raised $70,000 from investors to support residents in need over the holiday season. Then on site management teams identified families who were struggling and each family received $1,000 to use toward their greatest need. So here's a real story of the impact and it comes from an apartment community in Las Vegas. A couple that was living there. Life had been difficult since the husband lost his job and things got so tight they reached out to the property manager asking about, hey, can you connect us with local food bank? So the team then presented this couple with one of these gift cards and they were able to to cover some bills. They were to purchase some basic necessities like clothes and shoes and the community also hosted a holiday photo shoot and they were able to have new clothes for that, that, that those pictures. So well done. Continental Realty. It's a great story. So by the way, if you have a good news story to share, email them to info parsons.com and we may feature it on a future podcast episode. All right, let's get back to today's trivia question. Again, it was sponsored by authentic in the last 10 years, how many times has new rent guidelines board set one year rent guidelines? The rent caps below CPI for the same period, was it 0, 1, 3, 5 or 10? The correct answer was 0. Not once in the last 10 years has the allowable rent increase met or exceeded inflation for the same period of time. There you go. All right, next up, it's time for today's interview sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Courtland. To learn how Funnel can help your property centralize operations and automate everyday tasks, visit funnel leasing.com and again, I'll remind you again, registration is open for Funnels form event. I'm speaking there this year but got to tell you, I haven't mentioned this on this podcast before but I recently found out, and I'm a little irked by this, that I'm sharing the billing with another keynote speaker that is much, much, much, much more impressive than me, Mia Ham. And of course Mia Ham is the legendary soccer player. So I feel seriously small and insignificant being sharing the stage with her. So she's awesome. So go see her. It's going to be a good event. Talking about AI centralization, the human side of operations. 3-23-26 in Scottsdale, five star resort again, gonna be good, good event. Check them out. Funnelleleasing.com forum Anyway, our guest today is a former New York State state legislator who sat right next to New York City's new mayor Zoran Momdami when both were serving in the state capitol in Albany. Now they sit on opposite sides of a hot button issue that being rent stabilized apartments in New York City. Kenny Burgos, he is bringing a fresh, pragmatic and fact based, fact based approach to the debate. We're going to hear his story, his approach and how he's presenting a very fresh and engaging approach toward using short form videos on social media. So please welcome in Kenny.
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All right, welcome to the interview portion of today's podcast. And I am absolutely honored to welcome
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in the head of the New York Apartment Association, Kenny Bur.
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So Kenny, thank you so much for being here.
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Thanks for having me, Jay. I'm excited.
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All right. So you know, I've gotten to know some of your story a little bit through social media. We have a great presence. But before we get into all that and everything you're doing right now, tell us a little about your personal background leading up to ultimately getting into state office.
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Sure. I'll try not to bore your viewers on the, on the opening of the podcast. But you know, my story begins in the Bronx. I'm a lifelong Bronxite, family always lived there, still do. And I tell folks I was apolitical pretty much all the way through high school. I joke in high school I literally couldn't tell you the difference between a Democrat and a Republican. And just part of that is my parents fault. They weren't very engaged in the political process. They were very much blue collar workers. Mom worked for Verizon for 30 years. My dad's a business owner. So it really wasn't until college, when you're trying to figure out what you want to do with your life, that I ended up with an internship in New York City Council. You know, I, like most folks, thought I would end up in finance. And my career landed me with an internship in the finance department in the city council. And that's really where, I mean, my eyes were opened. I was just blown away at what I was seeing. The city was, you know, able to do what it was spending its money on and the real impact our city budget and government had on our local life. I mean, you know, I would see, oh, this is how much we were spending on trash cans in my neighborhood in Soundview. And so I kind of caught a bug there. So I was lucky enough from there to parlay that into an opportunity with a council member, Councilwoman Annabelle Palma at the time. And she gave Me, incredible autonomy. So at that moment, you know, I'm in the community boards, I'm meeting with civic groups again, handling her local city council budget, about $5 million for capital. So I'm 21 years old and the council mean to decide, you know, where should we put some money for our local schools, where should we put it for our parks, where should we put it for sanitation? And again, right. That impact is, is exciting. It's, it's addicting in a way where it's like I'm seeing tangible change at the most local level. And so that just basically kept me on this path. So I go on to work for more council members. I sort of cut my teeth in the city council. Then we Fast forward to 2020, just before the pandemic. This is like about January. And former assemblyman Marcos Crespo, also the former Democratic chairman for the Bronx Party, asked me what I consider running for office. And I think anyone who has worked in government office, at some point, you, you know, you envision yourself or you fantasize about what it would be to be an elected official. And so that moment for me came a bit faster probably than most. I'm 26 years old. He asked me if I want to run and I said absolutely. Three weeks later, Covid hits. Next thing I know, I'm running a campaign from a digital platform like we are today. And so then I'm a lawmaker in the assembly from 2020 to 2024, and taking the knowledge that I had in the city council. But that's where I learned about the crisis of re stabilized housing, you know, in my time in the Assembly. Sorry, if you want to cut me off. I don't know. I know I'm kind of rambling here.
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No, no, not rambling at all. This is great. But while we're talking about the Assembly, I gotta ask you a question. So as I was preparing for this conversation, I read somewhere that you sat next to now Mayor Mamdani in the Assembly. Is that right?
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That's it. As fate may have it, Zorin and I met a few weeks before being inaugurated. And then we were seated next to each other, what Wayne Jackson, the sergeant at arms, would be referring to as bad boy row. Because we were like, you know, class clowns, if you will, in this 150 seat chamber, you know, him and I and Khalilah Anderson and a couple others, always joking, probably making more noise than we should. But yeah, it's pretty funny to find ourselves, myself on the flip side of the coin of where Our current mayor stands as it comes to certain housing policy.
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Yeah.
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So I know I cut you off, but just tell you a little story. So you're obviously in the assembly, you've accomplished a dream of being elected office, and then all of a sudden you resign and you decide to take on a job that's probably not the most popular job in New York, which is heading up the New York Apartment Association. So tell us about how that came about.
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Sure. I think we have to take one step back. Right. So I'm in the Assembly. President Biden is, you know, our current president at the time. And the Democratic Party, I think as a whole was dealing with identity crisis. And I can tell you, at the ground level, my assembly office, we were a true constituent office. I was seeing 30 to 40 constituents a day, and that's with no exaggeration. And the overwhelming majority of these constituents were related to housing. And so when Jay Martin, former executive director of chip, had approached me and explained to me the crisis happening or unstabilized housing as a result of the 2019 rent laws, it was clear to me then as a lawmaker that this was a major problem and only going to continue to compound. And so I'm looking at what's happening nationally. I'm looking at the frustrations the polls were having in New York. And I say as a Democrat, as an elected member of our body, we have to present solutions. I knew very well it was a controversial topic, just trying to address it, just because housing is such a charged topic. But I then introduced a bill to try and fix what 2019 rent laws did, which was they enacted vacancy control, which I'm sure discuss later. And so I tried to, you know, legislate that as a lawmaker. Then 2024 happens, I'm approached and I learned that these organizations were merging and we're looking for a new leader to lead what is now the New York Apartment Association. And so, you know, I had to take into consideration from my real boss, my wife at that time, she was pregnant. Our son was to be born in July of 2024. And as fate may have allowed me an opportunity to work on an issue that I believe in so deeply that I believe really probably makes the biggest impact on our entire city and state. And without having to be in Albany six months a year, while I would no longer be a lawmaker, I would be able to be in this position and try and influence the law and try to influence policy and become hopefully an expert in rent stabilized housing.
- [33:51]
B
Yeah, we certainly have. So that's a great story. So let's talk about that 2019 law. For those who've not followed it. Can you talk about maybe just the short version of what led to that and the collateral, obviously, what it is, which is vacancy control and what collateral damage you've seen from it?
- [34:11]
A
Sure.
- [34:11]
C
I think any New Yorker is familiar with the term rent stabilization, but I think most people's understanding of that probably ends there. And I was one of those folks, right? Rent stabilization has been around as a temporary measure since 1974, responding to a housing crisis that has been around since then that we are seemingly unable to overcome. And so rent stabilization has gone through several evolutions since then. There have been many changes to the law, both at city and state level from before even when I was born. And so that has led to certainly this frustration, certainly this moment where we are and where we were before 2019, where again, this housing crisis is persisting. We're seeing market rate rents continue to rise. You're starting to see sort of lower quality housing. And so that really, you know, set the stage for the tenant advocates and lawmakers to try and respond. And really what they were responding to at the time was deregulation. Right. And let's be clear, deregulation was not illegal. It was the law. I mean, people can feel a certain way however they want to feel about it. I mean, I'm not here to opine on whether deregulation was good or not for the city, but that's what they were responding to. And so the law in 2019, what it basically did, is what I tell folks in a simple way. There's rent control and rent stabilization, if you will, across the country, in major municipalities. The key difference is not a single one except New York, when they changed the law in 2019, enacted what's called vacancy control. And what that does, it's regulating the empty apartment. It is not regulating the tenancy, which is what rent stabilization was intended to do. Rent stabilization is a price gouging measure to make sure the rents do not have major jumps during tenancy. And we still stand by that. But in responding to deregulation, they wanted to suppress the rent so low that they regulated an empty apartment. And what they ended up doing is actually causing a complete just evisceration of the economic model of running this housing. So much so that we've seen buildings lose over 50% value seemingly overnight. But even more than that, what we're seeing is at a very minimum, and I really do believe it is higher. 50,000 apartments are sitting Empty right now, in the midst of it, probably the most acute moment of this housing crisis right now when New Yorkers are looking for housing across this city. You see these TikTok videos and news reports, I mean, of lines around the block for any apartment that comes online. You see reports of brokers saying they put a $7,300 free market apartment in the West Village and within an hour have 10 inquiries. I mean, people are fighting for the crumbs left. And yet we can't figure out policy to bring 50,000 apartments at a minimum, bring them back online right here in New York City. So that's what I'm fighting for. That is the issue at hand. This is a result of policy. And unfortunately, this problem will only get worse if not addressed.
- [37:08]
B
Yeah. And as you noted, we've seen values tank. I see sometimes the posts about these properties that are selling. It's basically for, you know, far cheaper
- [37:15]
A
in the price of the dirt.
- [37:17]
B
We almost took down a major bank who had a lot of loan exposure
- [37:21]
A
to these rent stabilized loans. So it's, it's pretty wild.
- [37:26]
B
So one of the things you've done, and I will show one of these videos in the podcast I'd like to at least is so, you know, you've put together, I think, a really unique approach since you've came into this role to really, it's not an emotional argument, it's a logical argument. You have these short videos that really just kind of walk through the data in a very pragmatic way. So how did that start? Like, where'd you come up with this idea? Because they've been really great.
- [37:55]
C
Sure. Like the story I told you and how I ended up here. This dates back to my time in the city council. I mean, I remember working in the city council and being just again, so amazed at what I was seeing because since I was someone who was just ignorant to what local government could do, and I tell my city council member, you should put this on Twitter, you should put some Instagram. And I'll tell you, 10 years ago, most lawmakers will tell you social media is not real life. That doesn't matter.
- [38:17]
B
Right.
- [38:17]
C
And I think those words today, as we can argue, our, our mayor today was likely elected with, you know, mostly because of social media. I mean, certainly other aspects too. I won't, I won't diminish it and say just that. But basically, I always knew social media was a powerful tool. And so even as a lawmaker, I actually started engaging in these reels and these TikToks and I used them to explain some of the work I was doing as a lawmaker. And long behold, it was a great reaction to it. People really responded to people both in and outside of my district. And so I found it to be a great way to communicate where most people are every day. Most people unfortunately roll out of bed and the first thing they do is look at their phone before they go to bed. Looking at their phone. Right. We all know print media and most traditional media has really been seeing a loss of an audience over the years. And so I knew coming into this role I have to just continue to increase that cadence. I would do it occasionally as a lawmaker. I'm now at the point where I'm filming three to four videos a week.
- [39:11]
A
Kenny, let's walk through some of the,
- [39:13]
B
some of the, really some of the narratives and how you've responded to them. So I want to just kind of give you some statements and maybe just help educate the audience on how you would respond to these things. So first one you've alluded to, and I want to dive into this more because I think it's really the heart
- [39:26]
A
of this issue here, which is that landlords are purposely keeping apartments vacant.
- [39:30]
B
And you said there's 50,000 plus units that are being held off market right now.
- [39:35]
A
So what's the real story there?
- [39:38]
C
The real story is certainly that, you know, there's not this large scale collusion amongst tens of thousands of owners across the city of New York from all different demographics and backgrounds that suddenly say, you know what we should do, we should collude to devalue our property, take in less revenue, and somehow, some way, we will blackmail the lawmakers using the language that the people have told me into changing the law. I mean, that is giving way more credit than respectfully, property owners probably deserve in that respect. And even our organization, we just don't have that level of coordination. But the reality is laws have consequences, right? And when crafting a law, most lawmakers will look at it as carrot and stick approach. And what we have here is just absolutely zero carrots and just a beat down sticks to the point. Lawmakers have to, I mean, excuse me, housing providers have to decide, do I want to lose money on an empty apartment or do I want to lose an astronomical amount of money in renovating this apartment. And let me take you through some of the math so people, so your listeners can understand, right? So if you have a rent regulated apartment that has a normal tenant that you know, has a long tenancy, which is very normal, I mean, Just recently, JP Morgan put out a report. They took some data from the American Community Survey that says New York City has the highest. I'm going to mess this up. A sort of stay in place rate, meaning about 90% of tenants were in the exact same apartment the year before and the year before. There's just not a lot of turnover. So it's very common, especially rent stabilized, when your deal tends to be better than the market for tenants to stay in 20, 30 years, when that apartment finally comes back to an owner, many, many laws have changed. The city council is passing local laws at a rate people will be shocked at. So what it means is most of these renovations, the biggest ones being lead remediation. I'm talking about, you know, efficiency upgrades related to Local 97. So that can be window upgrades, electrical, plumbing, you name it. All those major renovations have to take place on turnover. Anyone's done construction in New York knows that costs a pretty sum. So when you have an example of a $1,000 rent apartment, but now it requires $100,000 in renovations, the law tells you you can only be reimbursed for up to 50,000. And they just recently changed that because previously it was $30,000, which is so low. And that $50,000 equates to a $327 increase in the rent, which some will say maybe it's reasonable. So now you have a 1327 rent. The problem is twofold, is you spend 100,000. So 50,000 is not even accounted for. You lost it there. Even the $50,000 recoupment, based on today's interest rates, your loan would cost more than the $327 increase. So you're losing on the $50,000 loan. You've lost the complete $50,000 renovation. But now on top of that, Your rent is $1,327. The rent guidelines board puts the average operating cost of a rent stabilized unit at about $1,300. So that's covering property taxes, insurance, water, sewer, labor, fuel, you name it. So maybe you're making, you know, you can argue making $27 a month in that apartment, but any operator would tell you, you know, that's math is not that simple, right? There's cost on empty apartments and trying to get leasing paying brokers, there's the liability of potentially not getting paid. There's liabilities of violation of income. So all in all, the owner decides, I will keep that apartment empty. I will forego, you know, potential rent rental income here. But at least I know what my costs are, my costs remain at the roughly $1,300 to operate and I can actually project and run a business based on that very static number and not losing more money. So that's as simple as I can put it down. You know, many other cases that are probably more extreme, I mean there are rents and rent stabilization that come back online that are $700 or $500 and they're just economically viable.
- [43:24]
B
Yeah. And also you've done a good job in your videos pointing out that it's not like you know, these costs that you're mentioning, 100,000, even $200,000 in some cases to renovate, but it's not like these are like, you know, kind of, you know, high numbers driven on like trying to over amenitize these units.
- [43:38]
A
Like a lot of this as you
- [43:39]
B
pointed out is really just keeping up
- [43:41]
A
with the city code required to then lease it out again.
- [43:44]
B
So you know that, that's, that's. I think that's really important and you've done a good job, you know, pointing that out. And I think the other thing, you know, Kenny, that I've always thought, I think a lot of people need to
- [43:53]
A
be more mindful of and certainly you've
- [43:55]
B
pointed out is that even if you're making $27 a month, like let's say that you take that for face value. Like the question is what's the alternative? Like what could an investor invest in? I mean they could get a high yield savings account with no risk associated with managing a rent stabilized apartment and get a better return and that's not
- [44:12]
A
a good incentive to invest in maintaining these units.
- [44:16]
C
Yeah, and, and you know, it's, it's been a position that I've only seen increase. You know, I'll get comments online or interact with folks where they say, you know, housing shouldn't even be a business. Right. And if this speaks to the larger trend of the evisceration of the belief in capitalism, but even not even diving into that larger conversation, I have to set the stage them and say rent stabilization accounts for nearly 1 million apartments in the city of New York run by private operators. The city, if this is the path in which you want to go where it's not a profitable business and the city handles it, handles nychan listen, I think NYCHA is not a simple, I'm not trying to get cheap shot here. You know, everyone sort of knows the stories of nycha and there's a lot more that impacts their operations similar to ours. But the reality is the City does manage nycha. The city manages a lot of things. And I think most people, if you compare city operations to private operations, the private operations win every time. NYCHA is 177,000 apartments. Rent stabilization is 1 million. And so if you want to remove the quote, unquote, profit motor from this operation, sure, the city can probably try and engage in operating as housing. But do they have the capability, the cash and the capacity to do so when you're Talking about nearly 9, 10 Xing their current portfolio? And a portfolio doesn't pay property taxes. Right. There's the other part of that equation where these properties pay the majority or a large portion of New York City's prop. I'm sorry, New York City's tax revenue that helps the city run. That's property taxes. So if you remove the profitable model, the city's not going to pay charge itself property taxes. So how do you run the city? How do you get your school? How do you get your parts? How do you. How do you get your roads clean? As we've seen the snow just pile up, Right? So it's just again, it's this misunderstanding of where housing sort of fits into this larger piece of the puzzle for the entire city's operation, its experience and its economy.
- [46:10]
B
So you had a good video out recently. You're shifting gears again about. You're addressing the question of, hey, you know, these units that are sitting vacant and you all repairs, that's only happening because landlords refused to maintain these units when they were occupied. And your answer, it was interesting because I didn't know the reality of this. And I imagine a lot of people probably in New York don't even understand the reality of this.
- [46:34]
A
Can you explain why owners have a hard time maintaining those units when they're occupied?
- [46:39]
C
Absolutely. And I didn't know it either, you know, until very recently. So in New York City, and particularly for rent stabilization, those repairs, any repair that happens, and not a small one, but any major repair that happens during tenancy is subject to tenant approval. Right? Meaning, you know, if you want to make an electrical upgrade, the tenant has to approve it. You cannot just sort of by decree, as a landlord, say, I'm going to come in. Unless there's, you know, real threat to the safety, health and safety of the tenant here. But either way, the tenant has to approve it. And that does come along with a subsequent rent increase. Sometimes it could be minimal, but most tenants are going to say no. Beyond that, if the renovation is substantial enough, that requires temporary displacement, meaning the tenant will have to move out maybe for a few months. So now you're asking the tenant, are you willing to move out of your apartment for a few months? Are you willing to also take a rent increase so that we can make these upgrades? Most tenants, this is their largest bill in their life. And the number one goal is to keep it as low as possible. And so this is why most owners wait until turnover to do these major repairs. And, you know, you can talk to owners across the city of New York. I mean, you know, you have tenants that are. One will say, hey, you know, to the landlord, I want a new kitchen. Happy to do so. It's going to cost 40, $50,000. It's going to, you know, increase your rent by a couple hundred bucks. No problem. I really want a new kitchen. I plan to be for 10 years, but most will not take that path. You have some tenants that won't give access to the apartment at all. I mean, I made a video and I've showed folks where you have owners whose own building for 20 years and have never seen the inside of certain apartments. I mean, the reality. The reality is when someone signs a lease that is there, that is effectively their property for the time in which they have that lease, the owner cannot just enter that apartment at will. And so this is where I think the misconception. People will say, well, why haven't they renovated during tenant. See, and it's just, again, it costs money, which leads to a rent increase, and it's subject to tenant approval. Say no.
- [48:39]
B
Yeah, no, that's a great point. So, yeah, you had a video that showed the inside of a unit that hadn't been looked at in 20 plus years. And you realize, man, like, that really is going to take a lot of work and you may not get that money.
- [48:50]
C
That was. That was like almost 30. 30 something years. I know you're working your math off of just 2,000. That was 1988, man. We always. It gets further and further away and
- [49:00]
B
I mean, people need to stay like this. Like you've. I think you said you called like a time capsule or something like that. That's what it was like. It just has. It's been locked in time.
- [49:07]
C
Red velvet walls. I mean, artifacts in there. And that's not a unique case. I've been in many apartments that, I mean, that will just blow your mind.
- [49:16]
B
Yeah. And like appliance brands have been out of business for 40 years, you know, just out in there. All right, so Kenny, let's just. Well, you've. You've been doing this for a while now, obviously, I guess it's not that long.
- [49:27]
A
It's been.
- [49:28]
B
You started in 2024, you said, so about 18 months. Yeah, 18 months. Okay, so we're still early. But is this approach working and do you see a scenario where maybe some
- [49:36]
A
common sense reforms could come about?
- [49:39]
C
Yeah, I mean, you know, it depends who you ask if they're working. Right. Working would mean to some of my members there's change and we're, I think we're time from there. But I will tell you from, from my vantage point, when I first addressed this, if you will, as a lawmaker, I was accused, as was the industry of fear mongering and saying the sky is falling. I think here we are now several years later from the 2019 rent laws and we've seen some high profile bankruptcies like Pinnacle. We've seen banks nearly collapse. Like you mentioned, signature. I'm thinking Flagstar. I'm sorry, excuse me. And I think a lot of lawmakers, thankfully, since they've been following me since when I was a lawmaker, have seen my videos and they're now making the connection of my educational videos and what they're seeing on the ground from their constituency. You know, I make a point sometimes when I hear from owners like, you know, I had an owner who gave back four buildings to the bank and I told some, some former colleagues, listen, just giving you a heads up, these buildings in your district, our members have given it back to the bank we ran for 30 years. What do you know, a month later, they're tenants who have never bothered them in their time in office, are now having problems, are now calling and saying, hey, we have concerns this new owner, hey, there's a lot less money coming into this building. And so what we have now I think is more of a recognition of the distress and the crisis that has been brewing since 2019. Now the question is, how do we go from that recognition into, you know, smart policy that actually, you know, can keep tenants in mind, but actually puts this housing in a position where it's no longer being defunded. And that's the question you have at hand. So in short form, yes, this has been helpful. There have been changes. You know, people have been coming to me in private and said, you're absolutely right, you're 100% right, we agree with everything you say. I just can't go out there in public and agree with you. So I still have some work to do.
- [51:33]
B
Well, certainly wish you the best to do it. One last question before I let you Go. You know, we're always talking about a lot of the problems and the challenges, but, you know, what are the solutions? You know, what can we do across the country? But most importantly, a place like New York, where this problem's been brewing for
- [51:46]
A
so, so long, with this housing shortage
- [51:48]
B
so severe, you know, people ask you, hey, I get that this isn't working, but what does work?
- [51:53]
C
Yeah, well, I'll speak for New York specifically, but you can probably then scale this out or project this out for the rest of the country. You know, first and foremost, a smart regulation. You know, I tell everyone we are. We do not have the goal of deregulating units. We do not have the goal of repealing line stabilization. We are here to say that our owners have been operating under this system for 50 plus years and we're able to make it work. Today. It cannot work. So we need smart regulation that actually works with tenants, but doesn't defund the buildings that they live in. The next thing I think, you know, this is absolutely, for New York City and for the entire country is aggressive upzoning. I mean, there's no question, I think at this point in the housing debate that the policy choices of the zoning choices in these neighborhoods have led to, you know, these inflated values for home prices. And policy has then sort of been continually feeding that monster, if you will, of inflated home values. And this has led to our homeless crisis. This has led to our housing shortage. This has led to increases in rents. I mean, we're seeing it in major metros, in Austin and other cities that they're actually able to suppress rent by, wow, crazy thought. Forcing competition. I mean, we see it in every other industry. You force competition, you got to compete. Prices have to come down. If there's an oversaturation of supply, the next thing is fair property taxes. New York City is infamous for having one of the most backwards and convoluted property tax systems to the point where we basically have to give developers 35 years of zero property taxes to ask them for a sliver of affordable housing. And I will add that affordable housing comes in much higher than pre1974 rent stabilized housing, which I represent. Right. So the property tax system, which overtaxes renters to a degree, that continually contributes to the rent today, Right. That has to be fixed. And many mayors have talked about it, many past politicians talk about it. No one's actually done it. So the question remains, will Mayor Mangani keep true to his word and say he's going to reform property taxes? But the Real question is, what are those details? What will they look like? Because there will be winners and there will be losers, and we can't ignore that fact. And then I think just lastly on how we sort of fix housing is just better economic support for renters. Again, going back to the very real affordability crisis, going back to the very real inequities in wages, stagnant wage growth in some, I would say, at some income levels, the cost to operate housing, to build housing, I think, has reached such a level it would be unwise and unlikely for us to expect real wages at sort of the minimum wage and lower wage levels to ever reach those amounts where they can afford even the lowest rental units. And so that's where the economic support comes in. Right. Things like Section 8 are crucial, and they were smart enough to sort of increase those rates. And you're seeing in New York, where I remember 10 years ago, a Section 8 tenant had a little bit of a difficulty navigating the market and finding units they could pay for with their voucher. Today, I don't even know how legal it is, but I've seen, you know, single family homeowners looking for apartments and saying section 8 only because the section 8 voucher payment is, you know, is paying such a significant amount. And so I think, you know, that economic support for renters is crucial to fit into this puzzle of fixing housing.
- [55:01]
B
All right, one last question for you, Kenny. I gotta ask you. When you think about your new mayor, your former seatmate in the assembly,
- [55:09]
A
you
- [55:09]
B
know, he's shown us a willingness to, To. To change his mind on topics as he gets more educated, as, as with your friendship or really past relationship. And as he gets better educated, do you see him perhaps being more flexible on, obviously, he's campaigning for a rent freeze and whatnot. Do you see him wanting to be
- [55:25]
A
part of the solution at some point?
- [55:27]
C
Well, I'll say. I, I don't. Politically, I don't see any way he comes off the rent freeze. I mean, that's coming from a former politician myself. There's no, there's no world where he can just say, I want a rent freeze, but now I no longer want one. Right. But my hope and my intention is that he's forced his conversation and elevated to a point where, and I told him this, I said, you know, this housing crisis is not your fault. You didn't pass 20, 19 rent laws. You didn't, you know, you weren't responsible for the policy years that, the years of policy that led us to this point. But you're such a high profile figure now as the executive of the city, you attach yourself with the campaign promise to this rent freeze that you will bear major responsibility if and when this housing collapses. And so with that said, I do believe that he has no choice but to continually engage in this conversation, recognize the role of private operators in his housing, recognize that the city does not have the funds nor the state to simply grant money or even tax credit their way out of this crisis. And so there is a world where he can still deliver to his constituency, he can still remain popular, he can still address the affordable housing crisis, but actually makes Mark policy choices to stabilize this housing, no pun intended. You know, we've seen this happen. I think you're alluding to is where his recognition of the private market and building housing. Right. But the key difference there is that building housing on, you know, a theoretical either empty plot of land or demolished land, there's no inherent constituency there, maybe the surrounding neighborhood, right. And whatever that comes with, but there's no constituency in that building just yet. So it's a bit easier to have that conversation when you're talking about policy for in place tenants that live in these buildings. For an amount of tenants that adds up to well over 2 million, it's a much harder conversation for an elected official to have. And that's my job here. Along with others, I hope to have those tenants recognize what's happening here to bring them to the table and for them to hopefully recognize that every change in policy that is perceived to be to the benefit of a housing provider does not come at a cost to tenants and doesn't have to come at the cost of tenants. This is not a zero sum game. We make it one. But it just does not have to be, as I alluded to in the past four points that I said, right? You get the zoning, you get the economic center for tenants, you get smart regulation, you fix property taxes. You can actually get to a world where housing is affordable, where housing is abundant, it's safe, it's high quality, and we can hopefully then, you know, focus our attention on other policy issues that we have to address because those, you know, they're. There are endless issues in the city of New York.
- [58:00]
B
Absolutely.
- [58:00]
A
Well, well said.
- [58:01]
B
Particularly on housing not being a zero sum game. We're now seeing, you know, populists on both sides of the aisle trying to make that type of argument. It's not a healthy one. So, Kenny, appreciate what you're doing in New York. Wish you the best of luck and hope that in the next few years. We're talking about great improvements in New York. So thank you for all you're doing.
- [58:18]
C
I hope so. Thank you so much for having me.
- [58:41]
A
And that's a wrap on episode number 72 of the rent Roll. Big thanks to Kenny for being our guest today. Then thank you to our sponsors. Thank you to jpi, Madera, Funnel, Mason, Joseph and Authentic. And thank you to all of you for spending part of your day with us. We'll see you next week.