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“Rent-stabilized housing is under severe operational strain, and in many cases the rent generated is too low to operate and maintain quality housing.”
Thursday night, as expected, the Rent Guidelines Board (RGB) voted to implement a 0 percent rent increase on rent stabilized apartments for next year. This reflects an important recognition of a fact heard loud and clear across tenant testimony at this year’s RGB public hearings: incomes have not kept pace with rising expenses for many New Yorkers—including the cost of rent.
At the same time, there is another reality that needs to be recognized—one less visible but increasingly urgent. Rent-stabilized housing is under severe operational strain, and in many cases the rent generated is too low to operate and maintain quality housing.
When buildings can’t cover their expenses, they can’t provide safe, quality housing. This is not about good versus bad owners; it is about whether buildings have sufficient resources to cover the basic costs of maintenance and operations.
When revenues are constrained, owners and operators are forced to make difficult trade-offs. We’re already seeing delays in the day-to-day work that keeps buildings safe and livable: routine repairs, preventative maintenance, and system upkeep. Over time, those deferred decisions compound, affecting both building quality and habitability.
Financial distress at the building level inevitably becomes physical distress. That outcome is not theoretical; it is the unavoidable result of sustained revenue constraints, and tenants ultimately shoulder the consequences.
The imbalance between revenue and expenses has accelerated in recent years. CPC recently released our New York City Rent Stabilized Portfolio Data Brief, highlighting insights from our survey of borrowers’ income and expense data. Since 2020, operating expenses for rent-stabilized buildings have risen approximately 27 percent, while rents have increased only about 11 percent, a more than two-to-one gap.
Insurance costs have increased roughly 75 percent, utilities about 21 percent, and general and administrative expenses approximately 52 percent—all of which are essential to keeping buildings operating. During the same period, repairs and maintenance spending has increased only 1 percent. In an environment where the cost of labor and materials has risen significantly, flat spending in this category suggests routine repair work is not getting done, and maintenance is being deferred.
As a result of these financial pressures, we are seeing growing delinquencies and foreclosures in CPC’s New York City Rent Stabilized loan portfolio, where we never used to before.
More buildings are not generating enough income to pay their mortgages. Meanwhile, though rental payments have rebounded from pandemic lows, fully occupied rent-stabilized buildings are still operating with greater collections losses than ever before. And, the lower the rent, the deeper the distress, yielding even greater instability for deeply affordable buildings in lower-rent markets such as the Bronx.
Combined, these warning signs signal a meaningful break from historical norms and are heralds of growing financial distress. As New York City learned in the 1970s and 80s, financial distress quickly leads to physical distress and decreased housing quality. If we hope to avoid a similar catastrophe today, now is the time to act.
Now that the RGB deliberations are done, the challenge ahead is to take politics out of the equation and figure out how to both protect affordability and stabilize building financial health to ensure quality housing for our tenants.
New York City’s leaders must focus on a broader, coordinated set of interventions that address the bigger picture affordability concerns for both tenants’ bank accounts and buildings’ operating budgets.
To succeed, this suite of solutions will need to lower expenses and create commonsense avenues to grow building revenue. That includes lowering operating costs through insurance market solutions and more predictable utility pricing. Property tax reform, in particular, is urgently needed. Multifamily rental housing carries a tax burden more than five times greater than that of owner-occupied one-to three-family homes. Our system of establishing tax rates is over-lobbied, under effective, and in desperate need of overhaul.
It also means improving operational systems such as Housing Connect (the city’s affordable housing application portal) and voucher administration so that subsidies actually flow efficiently. And it means strengthening revenue tools where appropriate, including allowing rents at turnover to better reflect current market conditions and area median incomes.
It is also time to recognize that the RGB process is not serving anyone well. It has become a politically charged spectacle that pits tenants against owners and fuels a cycle of overcorrection. For decades, owners had the advantage, shaping the system to their benefit. Presently, the power has shifted to tenants, helping to strengthen protections, but also tightening constraints on the revenue needed to maintain buildings.
In both cases, when one side has greater political influence, it presses that advantage to the fullest, anticipating the inevitable swing in the opposite direction. The result is a feast-or-famine dynamic that undermines stability for both sides and contributes to growing distress in the housing stock.
We can keep rent stabilization and its strong tenant protections while creating a fair, predictable, and transparent framework for rent adjustments, one that reflects changing economic conditions. Other approaches used by states like California tie allowable increases to the Consumer Price Index plus a modest percentage, demonstrating how predictability can provide stability for both tenants and housing providers.
The path forward requires acknowledging that protecting tenants and preserving quality affordable housing are not opposing goals. They are interdependent and can be mutually reinforcing. Solving for both will require partnership, creativity, and the political will to address not just what rents are, but what it actually costs to keep housing safe, stable, and livable for current and future generations of New Yorkers.
Rafael E. Cestero is CEO at Community Preservation Corporation (CPC).