New York City’s Rent-Stabilized Buildings Are Becoming a Long-Term Hold

Trying to solve the affordability problem in New York City is like banging your head against a wall. But, if you’re living in a rent-stabilized building, don’t bang too hard — the landlord isn’t likely to fix the damage. 

There are about 1 million rent-stabilized apartments in New York City, according to the Metropolitan Council on Housing, a tenants rights organization. Some 9.2 percent of buildings in New York City with at least one rent-stabilized unit are distressed, according to a 2026 income and expense study from the New York City Rent Guidelines Board (RGB). 

Rent-stabilized properties aren’t exactly a hot commodity, with the debt often exceeding the value of the building. That’s because the sector has taken some hits over the years, and, if you ask the ownership-side experts, a significant blow was the Housing Rent and Tenant Protection Act of 2019. That suite of laws permanently altered rent regulations on stabilized properties, capping rent increases even if owners spend thousands to make capital improvements, and prohibiting owners from raising rent sharply on a unit or deregulating it entirely when a tenant moves out. 

“The Housing Rent and Tenant Protection Act of 2019 sharply constrained revenue growth and limited the reinvestment mechanisms in that category,” said Shimon Shkury, president and founder of Ariel Property Advisors, an investment sales brokerage. “Additionally, COVID-19 affected collections and it is still affecting collections today. And, lastly, interest rates [went up] in 2022, which affected every asset class in real estate, but specifically asset classes that are not growing from a net operating income perspective.”

Since 2019, the value of rent-stabilized properties has decreased significantly amid the generally poor conditions, and landlords say they don’t have the capital or the incentives to invest in their own buildings. So what happens is the quality and conditions of the rent-stabilized units continue to deteriorate. Even when a tenant can’t take it anymore and moves out, there still isn’t sufficient reason for the landlord to improve the unit. Landlords say they cannot raise the rent to recoup that investment, resulting in apartments just sitting empty in a city where demand for housing far exceeds supply. 

“The reason these units are vacant is not because landlords can’t rent them. It’s because it doesn’t [benefit] the landlord to rent them,” Shkury continued. “Here’s the situation: When you get a vacant unit today that’s renting for $1,300, $1,400 or $1,600 a unit, you cannot increase rents to the market level. Before the Housing Rent and Tenant Protection Act of 2019, when you had a vacant unit that was rent-stabilized, you could put money into it and eventually de-stabilize it, bringing it to the fair market. You can’t do that today.”

If a rent-stabilized unit that has been occupied for the last 20 years were to become vacant today, and need between $50,000 and $100,000 in renovations, it is unlikely the landlord would have that kind of capital to make improvements to one unit, especially if the rent were capped around $1,500 per month. 

In that situation “the landlord is going to say, ‘Hold on one second. I’m going to put $60,000 to $100,000 into rehabilitating this unit, but get again $1,500 a month? That makes no sense. I’m going to keep it vacant,’ ” Shkury said. “And that’s a loss to the city.”  

Meanwhile, Mayor Zohran Mamdani appears intent on making good on his campaign promise to freeze rent increases for stabilized tenants for his entire four-year term. The mayor in February stacked the RGB following several resignations. The board sets rent parameters for the stabilized housing stock.

And the decline in value appears to be a real thing. The value of rent-stabilized properties has fallen between 30 percent and 50 percent since 2019, according to Ariel Property data. Net operating income for owners is actually up from before the 2019 legal changes, per the RGB. 

But investors are shying away from the properties nonetheless. The dollar volume of buildings sold, in which more than 75 percent of a building’s units were rent-stabilized, dropped to $1.1 billion and approximately 6,500 units in 2023, down from $4.8 billion and more than 22,500 units in 2015, the Ariel data noted. 

The amount of issues that come with a rent-stabilized property might beg the question then: Why would anyone want to buy a rent-stabilized property in New York City? 

Rent stabilized properties are changing hands, make no mistake. Some examples include Summit Properties’ winning bid in January of $451.3 million to acquire 5,100 rent-stabilized properties owned by Pinnacle Group, and Camber Property Group’s $79.9 million sale of a rent-stabilized multifamily portfolio in Brooklyn a couple of months later. Benevel Management toward the end of last year bought three Bronx rent-stabilized properties from Stellar Management for $54 million, while a Related Companies affiliate in spring 2025 sold a rent-stabilized portfolio in the Bronx for $18.2 million. 

The answer to why some of these properties are trading is that the buyers are playing the long game — a very long game.

When buying a rent-stabilized property you need three things, according to Bob Knakal, chairman and CEO of investment sales brokerage BK Real Estate Advisors: capital, courage and conviction. 

“You need capital because you pretty much have to buy through all cash, you can’t leverage these buildings,” he said. “You have to have courage, because it’s going to take a while before things get better. And you have to have conviction, because in the face of some really bad stuff you’re going to have to believe, and keep holding on, and probably hold on for 10 years or so.” 

Knakal does believe there is a buying opportunity in the rent-stabilized market.

“Rent-stabilized housing values have fallen 75 percent, and I think over the next two or three years they will go down another 10 or 15 percent, such that the buildings will be trading at 85 to 90 percent below where they were at the peak of the market,” he said. “But there has to be a shift in policy, because eventually these buildings are not going to be sustainable.” 

In the late 1970s, New York City landlords were famously — or rather infamously —  burning down rent-stabilized buildings as a way to collect insurance money and deal with declining property values, rather than make investments into the properties. Legislation was passed in the aftermath, creating a 30 percent return on invested capital for the private sector.

“So what did the private sector do? They dumped tens of billions of dollars into the housing stock,” Knakal explained. “In 1978, the dilapidation rate in New York was 14 percent — meaning that 14 percent of the housing units were deemed uninhabitable because they were in such bad shape. By 2019, because of these programs, the dilapidation rate had fallen to 0.04 percent.” 

Today there is no financial incentive for landlords to invest in repairs and improve the quality of rent-stabilized buildings. But that doesn’t mean there won’t be incentives — eventually. 

“The equity is completely wiped out,” Knakal said. “The mortgage is worth 50 cents on the dollar. The owner doesn’t want the building, they want to give the keys back to the bank. The bank doesn’t want all of the liabilities that are inherent in these buildings. The owner and lender don’t have incentive to invest in the building. So the building’s an orphan, it’s a zombie. Nobody wants it now. The reason why I think it’s a good buying opportunity is because, ultimately, something has to change.” 

The onus is on policymakers to make changes that might align the interests of government and the private sector. 

“The first thing to do is to incentivize the private sector to reinvest in the buildings,” Shkury said. “There are tens of thousands of rent-stabilized units currently sitting vacant. Allowing a one-time market reset upon vacancy would bring these units back online, directly benefiting the city by increasing the housing supply. It would also improve conditions for existing tenants by enabling reinvestment in the housing stock, while giving owners a path to recapture a portion of their capital and rehabilitation costs.”

Another solution might be to convert rent-stabilized properties into affordable housing properties, which happened last year when LeFrak sold a rent-stabilized property portfolio in Queens to Black Iris Capital for $109.5 million. 

After closing, the properties were designated for long-term affordability, leveraging the city’s Article 11 tax exemption benefit, which can last up to 40 years for certain rehabilitated properties. 

Greater collaboration between the public and private sectors can help solve New York City’s housing and affordability crisis, brokers say, so long as both are actually willing to work together to understand what needs to be done so landlords can make a profit and tenants can have a quality roof over their heads. 

“New York City is a great place to live and a great place to invest,” Shkury said. “And, yes, there are some challenges in residential and housing. But it is solvable as long as all stakeholders, including the local government, are willing to collaborate. I know that landlords are willing to do that, and I know that it’s going to be better for the city and the tenants if we align these incentives.” 

Amanda Schiavo can be reached at aschiavo@commercialobserver.com.