The landlords of New York City’s one million rent-stabilized apartments, an important source of affordable housing, often say they aren’t making enough money from rent to run their buildings. Some claim the situation is now so bad that it reminds them of the 1970s, when real estate values plummeted and owners abandoned thousands of buildings in low-income neighborhoods.
This is true, these landlords assert, even though a city panel has allowed them to increase their rents nearly 17 percent since 2014. The panel, the Rent Guidelines Board, is backing increases again this year, with a final vote expected later this month.
So why does a report released by the board in March suggest that these landlords are actually doing pretty well?
The report found that rent-stabilized landlords’ net operating income — revenue from rent, minus costs — was up 12.1 percent. The apparent contradiction has become a major talking point in the city’s mayoral race, in which affordability is a top issue and most of the Democratic candidates support a rent freeze. The decision of the panel, which is appointed by the mayor, can increase costs for some two million people.
So who’s right?
What exactly is net operating income, and why does it matter?
Net operating income, or N.O.I., takes into account the revenue a landlord gets from both residents and businesses in the building, minus costs that include maintenance, fuel, insurance and labor. It does not factor in property taxes or debt payments.
Still, the figure is one of the most important indicators of an apartment building’s financial health. Banks, investors and government officials often look at N.O.I. to decide whether a landlord should receive loans or subsidies.
If landlords want a loan to pay for a new roof or heating system, for example, they need to show that the building’s N.O.I. can cover the debt. The N.O.I. also helps determine the building’s value, and, as a result, the amount of tax revenue the city might collect from the owner.
“It doesn’t have to be a ‘double your money in five years’ investment’,” said Michael Johnson, a spokesman for the New York Apartment Association, a trade group representing rent-stabilized landlords. “It just has to be a safe investment.”
If N.O.I. is up, landlords must be doing well, right?
It’s complicated.
While N.O.I. is a key figure, it is not the full picture of a landlord’s financial situation. It does not reveal whether landlords have other income streams or investments, or how much money, if any, they owe on a building’s mortgage.
There’s also a time lag in the data. The 12.1 increase reflects the changes from 2022 to 2023, when the city was rebounding from the worst of the coronavirus pandemic.
The report’s N.O.I. data covers a diverse universe of housing types, including any apartment building that has at least one rent-stabilized apartment. It would include, for example, a new building that has 80 market-rate units and 20 rent-stabilized units.
Mr. Johnson said the increase in N.O.I. reflected changes in these mixed buildings. As the proportion of rent-stabilized units increases in a building, the N.O.I. decreases, city data shows.
Buildings that were at least 50 percent rent-stabilized saw a 7.3 percent increase in N.O.I. Those that were at least 80 percent rent-stabilized saw a 5.1 percent increase. And in buildings that are fully rent-stabilized, the increase was 4.6 percent.
Doesn’t any increase still sound pretty good?
Rafael Cestero, the chief executive of the Community Preservation Corporation, a nonprofit that lends money to owners of older rent-stabilized buildings, said the broad 12 percent increase masked “really deep distress” in lower-income neighborhoods.
Mr. Cestero, a former city housing commissioner, said many owners were struggling to cover debt payments.
The nonprofit has loans out on 14,500 units across some 661 buildings. Mr. Cestero said that in 2023, the most recent year for which data was available, the N.O.I. couldn’t cover the debt for some 28 percent of the loans. Mr. Cestero said that number was typically around 10 percent.
He said the worry was that these buildings would deteriorate, or ultimately be abandoned by landlords, as they were in the ’70s.
“We’re dangerously close to a situation where we have an unsustainable rent-regulated housing stock except for the buildings that are the nicest buildings owned by the institutional owners,” he said.
Because of the way the system was set up, about 80 percent of rent-stabilized units are in buildings that were built between 1947 and 1974. They are typically more affordable, with an average rent of $1,477, compared with $2,219 for those built later.
And in these older buildings, the N.O.I. went up 3.1 percent.
Older buildings in Manhattan that were fully rent-stabilized saw a 3.9 percent increase in N.O.I., while those in the Bronx saw the figure decline by 0.1 percent.
In a few neighborhoods, the drop was larger. In Jamaica, Queens, the N.O.I. dropped more than 15 percent. In the Soundview and Parkchester sections of the Bronx, it was down more than 10 percent. In East New York in Brooklyn, it was down 2.5 percent.
OK, so maybe not all landlords are making more. But what does that mean for my rent?
By law, the Rent Guidelines Board must consider the “economic condition of the real estate industry” and the cost of living in deciding whether the rent in rent-stabilized apartments can increase each year. The board’s decisions, though, tend to reflect the political priorities of the mayor, who appoints the board’s members.
When N.O.I. is dropping, and owners can’t cover their debts or pay their taxes, the panel may feel compelled to allow increases.
But advocates for tenants say that shouldn’t be renters’ responsibility.
“Tenants can barely afford the rent we’re already paying,” said Cea Weaver, the director of the New York State Tenant Bloc, a nonprofit advocacy group. She added, “We shouldn’t have to pay the price with our hard-earned rent money for landlords’ bad bets.”
The nonprofit is asking New Yorkers to vote for Zohran Mamdani and Brad Lander, left-leaning mayoral candidates who have said they would oppose rent increases. Former Gov. Andrew M. Cuomo, who is being supported by donations from rent-stabilized landlords, and Whitney Tilson, a former hedge fund executive, would not commit to a rent freeze during a recent mayoral debate.
Samuel Stein, a housing policy analyst at the Community Service Society, a nonprofit that supports low-income New Yorkers, said that some landlords were struggling with costs. But he said there were other programs and tax breaks they should pursue, instead of rent increases.
“It’s extremely expensive to build new housing at lower rents,” he said. “When we lose these rents they’re gone forever. We support any program that’s going to help these become habitable, decent housing.”
Urvashi Uberoy contributed reporting.
Mihir Zaveri covers housing in the New York City region for The Times.
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