Should we see landlords and tenants as rival prizefighters, or as potential partners trapped in a dysfunctional system?
The Mamdani administration has been promoting its series of “Rental Ripoff Hearings,” with publicity posters reminiscent of a prizefight, pitting New Yorkers against Bad Landlords. The hearings themselves have felt more like a resource fair. While this may have disappointed audiences hungry for the spectacle of a fight, the distance between the advertising and the product was apt: It’s not knockout punches but resources that are needed to make housing work better for millions of New Yorkers.
The landlord-tenant relationship is far from a simple battle between good guys and bad guys. In a properly functioning housing system, it can be a mutually beneficial compact, with built-in incentives for landlords to maintain buildings in good condition and provide resident services, and for tenants to pay their rent and be good neighbors. But in a city where housing is scarce and both rents and the costs of operating buildings are so high, the relationship breaks down, becomes heavily regulated and often breaks down further.
Housing is not a morality play; it’s an economically complex system. There are some bad actors who actively aim to break the rules for personal gain. But there are far more property owners and managers who are committed to maintaining housing in good condition for their tenants, and many of them are not succeeding. If we misunderstand distressed housing only as a product of landlord neglect or malice, we won’t succeed in solving the problems tenants face, and are likely to make them worse.
In other words, rather than looking at landlords and tenants as prizefighting opponents facing off in the ring, it may be more helpful to understand them as competitors in an increasingly punishing Hunger Games — a competition in which the players aren’t truly antagonists but are forced into escalating conflict by dysfunctional financial and regulatory conditions.
The will and the means to be a good landlord
To start, we should step back and review what a landlord needs to do. “Landlording” involves not just ownership and financial support of the building but also property management, a critical but often overlooked role in our housing system that encompasses staffing and operation of buildings, minor and major repairs, rent collection, administrative filings and numerous other functions. Property management may be performed by the owner or under contract with them. In any event, the owner as landlord is ultimately responsible for the quality of property management.
There’s a common assumption that disrepair in a building — as evidenced by the issuance of housing code violations — is de facto evidence that there’s a bad landlord. The reality is often more complicated. While there are indeed neglectful landlords who purposefully underfund property management and allow their buildings to fall into disrepair, there are also high-capacity nonprofit and for-profit organizations that take on distressed housing with many violations in order to restore it to sound condition.
We shouldn’t look at housing code violations as reliable evidence of scofflaw behavior the same way we might see, say, a long string of red-light camera tickets. Building violations are less like a summons and more akin to a doctor’s visit where the patient shows a fever — an indication that a building is in poor health, but not evidence of why. Violations may be caused by a chronic condition like neglect, past disinvestment or advancing building age. They may be from an acute condition, like a fire in an apartment. The landlord might be at fault — say, because a prolonged disruption to building heat led a tenant to use a faulty space heater — or might not, as in a case where a tenant in psychological distress has set off the sprinkler system, causing water damage to multiple apartments.
The conditions under which tenants live are partly a reflection on their landlord, but also a product of each building’s financial realities. In some neighborhoods and buildings, prevailing rents are high while in others they are lower, and in roughly half the city’s rental housing rent stabilization laws limit the rate at which rents may increase — more tightly since 2019 legislative changes. The basic costs of operating a building vary less: Lower rents don’t mean there’s less of a need to take out the trash or fix the boiler. For an increasing share of buildings, revenues aren’t covering operating expenses or the cost of capital upgrades. Under these conditions, even the best landlords can’t actually be good landlords.
To understand how financial circumstances affect buildings owned by various types of landlords, it’s useful to draw a simple diagram in which the horizontal axis represents the motivations of the landlord, and the vertical axis the revenues of their building. These aren’t absolutes; the point is that it’s a spectrum in both directions.
On the right-hand side of this chart fall landlords who specifically aim to meet tenants’ needs, support their stability and uphold their rights. Among these are the city’s many operators of affordable housing, including both nonprofit and mission-driven for-profit organizations. At the left are those landlords whose motivation broadly derives from financial self-interest.
Every landlord has a blend of motivations. For instance, there are many for-profit owners with a strong social mission, and nonprofits also need revenue to sustain their operations and advance their mission.
At the top of the chart, we have buildings where revenues are more than sufficient to maintain buildings in good condition. At the bottom, we have buildings with low rent rolls that are inadequate to cover the cost of operating the building properly, let alone making the capital investments needed in any building over the long run.
We can use this diagram to help understand how different types of landlords respond to financial circumstances, and what types of public policies can be used to address these situations.
Let’s start with the upper portion of the diagram, where buildings generate sufficient revenue to do right by tenants. This is the way things are supposed to work. For instance, a socially-oriented landlord, on the upper right, has the resources to pursue their mission, maintaining buildings in clean and sound condition, employing attentive and respectful staff, providing prompt repairs and responses to complaints, remaining accessible for tenants’ questions, offering clear communication and feedback, and staying on top of myriad compliance requirements. This condition requires regulated affordable housing to be adequately funded, whether by subsidies that reduce the debt service on the building or by rental vouchers or other subsidies that bolster revenues.
In the upper-left portion of our chart, we’ll find profit-driven landlords who maintain their buildings well. In a properly functioning housing system, there is an alignment between the financial interests of the owner and the interest of a tenant in living in a well-maintained building. If tenants can leave for comparably priced, better-maintained housing when landlords do a bad job, landlords will keep buildings in good condition to achieve lower vacancy rates and a more valuable asset. Under these conditions, there is little need for code enforcement to ensure housing quality.
In a housing market suffering from a deep supply shortage, however, the rents tenants need to pay for quality housing rise can rise sharply. Rent stabilization was established to enable tenants to renew their leases without precipitous increases. Under rent regulation, though, the tools available to both landlord and tenant become duller. Because landlords don’t receive a financial benefit from further investment in their buildings, they have a disincentive to provide more than a bare minimum level of service. With few comparably priced alternatives available to them, tenants can’t act on their discontent by moving out. This makes even financially viable rent-regulated housing far more reliant on a system of enforcement. It also encourages buildings to slip down toward the equator of our chart, or below.
Let’s move our way down to the lower-right quadrant, where we will find the well-intentioned, socially committed landlord whose rent roll doesn’t pay the cost of maintaining buildings and properly serving tenants. There are an increasing number of mission-driven affordable housing operators, nonprofit and for-profit, in this situation. Notably, the New York City Housing Authority can also be placed here: despite dedicated leadership and supportive State and local policy, the federal government’s systematic underfunding of public housing makes it impossible for NYCHA to be a good landlord.
What can a landlord do in these circumstances? In years past, private owners may have been able to raise capital for improvements by refinancing their buildings at lower interest rates, but the rates that made this possible are no longer commercially available, and their return is not imminent. Raising rents to make their balance sheets work isn’t an option in rent-stabilized or subsidized affordable housing. This leaves the alternatives of cutting services to the bone — something a well-intentioned landlord really doesn’t want to do — or asking for government assistance.
Finally, let’s look at the lower left of our chart, which is where we would find a textbook slumlord. Without a prospect of running a profitable building, this landlord’s angle is to squeeze as much cash flow out of the building as possible while spending as little as possible. This is terrible for the people who live there, and it’s terrible for the housing supply. Even if it’s possible to get the building into the hands of a well-intentioned landlord for rehabilitation that keeps it affordable, this requires significant government funding. With public resources limited, this may work for a relative handful of buildings, but not for large numbers of them.
When well-intentioned landlords cannot see a reasonable prospect of operating a building successfully, they will be sellers and not buyers of buildings. Bad landlords become the only buyers, and the worst outcomes multiply.
Policy implications
The goal of housing policy should not be to herd landlords along the horizontal axis of our chart, but to take constructive steps to increase the share of buildings in the upper half of the chart, and to minimize the number in the lower half.
Where landlords are operating housing well, public policy should aim to sustain this. One way is to help manage operating costs. Administrative requirements, legal expenses insurance, utilities or other operating cost hikes all increase the price of delivering sound housing, making some share of well-performing buildings into poorly performing buildings. The City should pursue ways to alleviate burdens for landlords who do their jobs well, such as making low-cost insurance available.
Housing policy should utilize the alignment between the interests of owners and tenants to keep buildings above the equator of our chart. For instance, both landlords and tenants benefit from the smooth renewal of housing vouchers, keeping missed rent payments from snowballing into massive arrears. Rather than sending these cases to drawn-out housing court proceedings, the City should embrace proposals for diversion programs that bring together landlords, tenants, case workers and public assistance agencies to work out timely solutions that prevent evictions and sustain building revenues.
Regulations for affordable housing should be flexible enough to support long-term affordability within today’s financial realities. For instance, subsidized affordable housing is subject to a regulatory agreement with a housing agency that requires them to serve residents at a specified income level. Changes to rent laws in 2019 have in some instances imposed tighter caps on rents, leading to a revenue shortfall in affordable buildings. It’s possible to remedy this: when an affordable unit becomes vacant, it should be possible to reset rents based on the original regulatory agreement. This would help bolster the finances of affordable housing without raising rents on any tenant or removing any unit from regulation.
A sustained policy of adding more housing will help bolster the market power of tenants to vote with their feet. But this will remain less true for residents of lower-priced rent-regulated housing. For these apartments, code enforcement should aim to improve the performance of landlords whose buildings have revenue sufficient to support proper maintenance when they are unresponsive to tenant complaints. The issuance of violations is less likely to produce satisfactory results for buildings in the lower-left quadrant of the chart, however. Violations of course do not create new revenues to cover the cost of repairs and upgrades, and financial penalties can actually diminish the ability to pay for these improvements.
The City can and should intervene to address serious and urgent housing maintenance problems, and HPD’s enforcement system includes undertaking emergency repairs, which ameliorate conditions temporarily. Other programs, including Article 7A and Third-Party Transfer (defunct, but proposed to be revived in modified form), have been created to transfer property management or ownership to a more responsible party. This can move them toward the right side of our diagram, but without the infusion of additional funding, these buildings will typically remain in or fall back into poor repair.
This brings us to the elephant in the room: New York City has a large and growing population of buildings in the lower-right corner of the chart. For these buildings, tenants and owners aren’t Rocky Balboa and Ivan Drago. They’re more like Katniss Everdeen and her competitors, pitted against one another by a system that sets both up to fail.
Counting the lifeboats
First, the good news: The City has extensive experience in designing programs to recapitalize aging affordable housing. For instance, the Permanent Affordability Commitment Together (PACT) program provides funding to recapitalize public housing as well as a resident partnership model to help center the priorities of tenants for capital improvements and new property management. A comparison of violations data for PACT buildings and other housing, conducted by Citizens Housing and Planning Council, which I lead, suggests that the program’s capital investments are dramatically improving building conditions. Gov. Kathy Hochul has proposed reviving and enhancing the J-51 tax incentive program to support the rehabilitation of regulated housing.
But the sheer scale of the financial needs is sobering. Many buildings that were developed under programs dedicated to social goals of long-term affordability and tenant stability have been systematically underfunded over time, reducing them to what I’ve called “antisocial housing” that fails to provide tenants with decent homes. NYCHA’s capital needs alone are estimated at roughly $80 billion. Estimates for other regulated housing vary, but Enterprise Community Partners and the National Equity Fund recently found that nearly 60% of their New York housing portfolio was experiencing negative cash flow, indicating a large and growing problem.
There are nearly 180,000 units of NYCHA housing, nearly 47,000 units of Mitchell-Lama housing under City jurisdiction, and nearly 200,000 units in subsidized, income-restricted housing. The City has both a financial interest and a moral obligation toward these buildings and their residents. If we can’t bring mission-driven affordable housing operators and tenants into a more harmonious relationship, there’s little reason to think it’s achievable for other categories of low-cost housing.
There is also an enormous problem to solve in the non-subsidized housing stock. While rent-stabilized buildings that also contain a significant share of non-stabilized units have generally performed well, RGB data shows pervasive financial trouble in buildings containing primarily rent-stabilized housing. NYU’s Furman Center estimates that there are more than 450,000 rent-stabilized units in this at-risk category.
Some observers have imagined a future in which the City takes ownership of this housing to restore it and keep rents low. Even if we set aside the experience of in rem housing in the 1970s and 1980s — when the City was unable to manage distressed housing and placed it back in nonprofit and private ownership to be rehabilitated and maintained — a major commitment of public resources would perversely prioritize this housing ahead of distressed income-restricted housing the City itself has financed. The City needs to explore solutions for non-subsidized housing that do not drain the resources needed to keep subsidized affordable housing afloat.
In an environment where more of the city’s low-cost housing is sinking into the red, we run a very real risk of running out of lifeboats for it. We must reverse the widening gap between expenses and revenues. If we don’t, we can expect even harder choices about public priorities, housing conditions that continue to deteriorate and a further fraying of trust between tenants and landlords — with neither one emerging from this fight a winner.