How Supporting Homeowners Can Protect Affordable Rents in NYC

The relationship between New York City landlords and tenants has often been perceived as a zero-sum game. In the typical view, landlords seek the highest possible rent for their units, while tenants desperately seek to keep rents at affordable levels. Meanwhile, rent stabilization laws set the rules for what is acceptable behavior by landlords.

But a recent article in The New York Times on small landlords demonstrates that the usual storyline isn’t always true. Unlike larger, institutional landlords who may never meet their tenants, these smaller landlords often live in the same building as their tenants and rely on their rent to make their monthly mortgage payments. Because their buildings have four units or less, they are not bound by New York’s rent stabilization law and are free to set rents at any level. However, they often don’t charge market-rate rents, valuing tenant stability over obtaining higher rents.

“Some landlords avoid raising the rent at all when they have a good tenant, preferring to catch up to the market the next time they list the apartment,” according to the Times. “Said one Clinton Hill landlord, ‘I never raise it when they’re there … My mortgage is very low. My unwritten rule is: You don’t bother me, I don’t bother you.’”

The article supports one of the key findings of the Center’s new report, East New York: Preserving Affordability in the Face of Uncertainty: in neighborhoods like East New York, landlord-tenant relationships are often much more interdependent than previously understood. Smaller landlords often charge their tenants some of the lowest rents in the city, and often keep rents steady over the course of several years, generating one of the city’s most stable and plentiful sources of affordable rental units.

While the report focuses on East New York, the findings of the report speak to the experience of New Yorkers in neighborhoods where the first tugs of gentrification are being felt. Because of its concentration of low-rise buildings and low-income residents of color, East New York offers a unique case study to understand trends affecting homeowners and tenants in small buildings across the city, and nationwide.

Interdependent landlord-tenant relationships

The culmination of a yearlong investigation by the Center, our East New York report analyzes one-to-four unit homes and the families who live in them. The report documents housing and real estate trends in the neighborhood and their impact on homeowners and renters. It also makes policy recommendations for stabilizing existing homeowners and tenants, while creating new opportunities for affordable homeownership.

“I have a nice relationship with my landlord. As long as rent is paid on time, she gives me no trouble … We’ve become one big family in that house.” – Renter, East New York

One of the report’s key findings is that the relationship between homeowner-landlords and their tenants in East New York is highly interdependent. Many of the landlords we spoke to rely on steady rent from tenants to afford their mortgage and housing expenses. They charge their tenants some of the lowest rents in the city. According to a survey we conducted of East New York homeowners, most reported that they hadn’t increased rents on their tenants in more than two years, despite their legal ability to do so. Homeowners also reported charging rents that were much lower than those frequently found on online rental-listing sites. For example, of the 25 survey respondents who reported renting out a three-bedroom apartment in 2017, none charged as much as Trulia’s median three-bedroom rent for East New York ($2,200). The average rent collected from those homeowners was $1,520 for a three-bedroom unit.

Just as homeowners benefit from reliable rent payments, tenants rely on a homeowner’s housing stability to stay in their own rental units. Because tenants in one-to-four unit homes do not benefit from New York City’s rent stabilization law, they do not have the right to a lease renewal. Therefore, they are highly vulnerable to displacement when a building changes ownership. When homeowners sell, their tenants are often forced to leave as well.

By stabilizing homeowners, we can stabilize tenants — and vice versa

Our report emphasizes the importance of maintaining affordable rental units in neighborhoods like East New York, and calls for the City to develop resources and policies to support homeowners and tenants as part of an affordable housing preservation strategy. We recommend the following approaches:

1. Provide financial incentives for homeowner-landlords who rent to extremely low-income or formerly homeless households: This could take the form of repair resources, tax or water credits, or forgiven tax and water charges. We also recommend implementing the Good Neighbor tax credit to support homeowners who provide affordable rental units. This tax credit would provide a tax abatement to owner-occupants of two-to-four family homes who rent apartments to eligible low- and moderate- income tenants at below market rates. Both initiatives would provide the dual function of helping to stabilize vulnerable homeowners while providing much-needed affordable rental units.
2. Develop educational resources for homeowner-landlords: Homes do not come with an instruction manual, and many homeowners we spoke to expressed a desire to learn more about the basics of home maintenance and landlord-tenant relations. While the City provides educational programming to new homeowners, especially those with rental units, there is little awareness of existing City programs. Additionally, few resources exist for homeowner-landlords who appear in Housing Court without an attorney. Homeowners we spoke with recommended making the forms and process clear and straightforward enough that it can be easily navigated without a lawyer, as well as having additional informational resources available for unrepresented homeowners in Housing Court.
3. Legalize Safe Basement Apartments: Many East New York homeowners have converted their basements into unpermitted rental units, which attract tenants because they are cheaper than other available housing options. These rentals are unregulated, which puts the safety and well-being of tenants, homeowners, and their neighbors at risk. Fearing the loss of their affordable living situation, renters are hesitant to complain about health and safety issues lest their homes receive vacate orders. Meanwhile, homeowners with illegal basement units are unable to receive City funding for much-needed home repairs, and risk substantial fines if reported by a neighbor. Recognizing the need for solutions to illegal basement units, organizers of the Basement Apartments Safe for Everyone (BASE) Campaign have sought resources and policy changes that will allow homeowners to convert their basement units to safe, legal apartments. Ultimately, when illegal basement units are converted to safe, legal, and affordable apartments, both tenants and homeowners will benefit.