NYC Mayor-Elect Will Likely Be Able To Implment Rental Price Freeze

reminiscences of a stock operator pdf

New York City mayor-elect Bill de Blasio told voters that he would institute a one- or two-year rent freeze if he won, and now it looks like he will be able to follow up on his promise, putting some pressure on local banks and law firms that handle evictions (representing either the tenant or the landlord).

“We believe that New York City Mayor-elect Bill de Blasio will more likely than not succeed in instituting a one to two year rent-freeze in rent-regulated buildings in the city. Furthermore, rent increases in subsequent years are likely to be at a lower rate than increases in recent years,” writes Citi analyst Josh Levin.

Mayor-elect Bll de Blasio doesn’t have authority for rent freeze

Bll de Blasio doesn’t have the authority to institute the freeze on his own, but he will be able to appoint four out of nine members of the Rent Guidelines Board when he comes into office, and one of the remaining five is there for the express purpose of representing tenants. Unless one of his four appointees does an about-face, de Blasio will be able to enact pro-tenant policies with ease. Realistically, he also needs New York governor Andrew Cuomo’s political backing, but that probably won’t be an issue.

Levin thinks this will impact banks because there will be less interest in acquiring rent-controlled properties and fewer deals to be financed. Also, while landlords are able to apply for rent increases after completing capital improvements on their properties, they may be hesitant to take the risk in the current climate, again resulting in fewer capital loans. If rents stay frozen, or nearly so, for more than two years he thinks it could also result in credit problems.

Loan prices vs. rent prices

“If the yield on the 5-year treasury, off which many of these loans are priced, moves up considerably while rents don’t, it’ll be more difficult for borrowers to service the debt when it’s refinanced,” writes Levin. Over the last few years the RGB has been approving rent increases in the 5% – 8% range, well ahead of inflation.

About one million housing units are affected by rent stabilization (compared to 38,000 that are still under rent control), so while it’s not the entire city the effect isn’t negligible either.

For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)

About the Author

Michael Ide
Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.

Be the first to comment on "NYC Mayor-Elect Will Likely Be Able To Implment Rental Price Freeze"

Leave a comment

Your email address will not be published.