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From the Field

The Financialization of Rent-Regulated Housing in New York City after Rent Reform

Tenant Activism, State Enforcement, and Alternative Knowledge Production

In New York City, rent-controlled housing stock has been progressively deregulated over the last three decades, to the point where it is now wholly in the hands of financial investors. In this paper, Benjamin Teresa analyzes how tenants’ associations have been fighting back against these landlords, who have let housing fall into disrepair while simultaneously hiking rents.

Series: Cities in the Age of Financialization

In June of 2019, the New York State legislature stunned the real-estate industry by passing the Housing Stability and Tenant Protection Act, returning New York’s housing regulatory framework to the more protectionist form that had been in place in the early 1990s but steadily rolled back over the following two decades (Kromrei 2019). Now the open question is whether the rent reforms, a product of decades of tenant organizing, signal a bookend to the period of aggressive forms of financialized investment in rent-regulated buildings that have created poor living conditions and increased displacement pressure for tenants. Based on interviews with tenant organizers, city housing-agency staff, community-based organization staff, and other key informants, as well as research of property and financial records for rent-regulated buildings conducted between 2010 and 2015, this article reviews how recent tenant organizing of the 2000s has pushed the state to respond to the problems of weakened rent regulation and financialized investment through strategic knowledge production that validates tenant experience and legal strategies that redefine the tenant–landlord relationship. This activism suggests that the 2019 reform should be understood as a new terrain for political struggle over housing, and that the trajectory of the struggle will again depend on how the state interprets and executes its enforcement role. The rent reforms are therefore a key moment for both the type of financialized investment in rent-regulated housing that has expanded since about 2001 and for the future of democratic control over housing.

Over the 20th century in New York City, the political struggle over housing has shifted between periods of expanding tenant protections and curtailing them in favor of real-estate investment capital. From the early 1990s to the passage of the Housing Stability and Tenant Protection Act of 2019 (HSTPA), rent regulations were repeatedly changed to facilitate extractive forms of investment in rent-regulated housing. Rent regulation refers to both rent control and rent stabilization, which are state laws that provide tenure protections for about half of all privately-owned rental housing in New York City. Changes in rent laws provided landlords with new legal avenues to pursue rent increases in regulated housing, as well as removing apartments from regulation altogether. Under weakened rent regulations, landlords were still limited to annual rent increases for renewing leases, but could substantially increase rent—up to 20%—upon a vacancy. Landlords could also circumvent legal rent-increase limits if they had been charging a lower “preferential rent” and wanted to increase to the legal rent (Podkul 2018). Additionally, landlords could increase rents to recoup costs of apartment renovations, a system that owners could easily exploit by inflating the costs of improvements (Barker 2017). Moreover, “vacancy decontrol” allowed that once the rent hit an established threshold (about $2,700 in 2018) and the unit became vacant, it could be deregulated and no longer subject to rent regulation.

Since 2001, new entrants into the rent-regulated sector—financial-asset managers such as private-equity firms—have bought hundreds of rent-regulated buildings with new expectations about increasing rents (Fields 2015). This transformation in the ownership and management of rent-regulated housing stock is dependent on three related factors: the rollback of rent regulations during the 1990s and early 2000s that provided new avenues for rent increases and deregulating apartments; a broader transformation in the economy that more tightly bound real-estate and financial markets, introducing new capital and thus increasing prices and expectations about profits; and changes on the ground in property values and rent increases resulting from reinvestment and gentrification pressures that alter possible investment strategies (Teresa 2019). Given that only one out of these three factors have changed, it’s not clear what the future of financialized investment in rent-regulated housing in New York City will be. The previous decades of investment and political struggle over housing show that enforcement has been and will likely remain a key site of struggle over the direction of housing, which will depend not simply on the aggressiveness of enforcement, but about the form it takes: as a remedy to individual harms or as a market restructuring project.

Legitimating and circulating tenant knowledge

Privately owned housing that is rent-regulated comprises about half of all rental housing in New York City and is an important source of affordable housing. Described as once a “financial backwater” (ANHD 2009), owned and operated by long-term, local, independent “tenement landlords” (Sternlieb 1966), rent-regulated housing has become a coveted real-estate asset class, “as secure as owning US treasuries” (Stoler 2007). Since 2001, professional investors connected to broader capital markets, such as private-equity firms, have purchased tens of thousands of rent-regulated housing units, with some estimates placing investors’ market share at 10% of the total regulated rental-housing stock and higher in some neighborhoods (Citizens Housing and Planning Council 2009; Fields 2015). These new entrants purchased regulated buildings for historically high prices, often with amounts of mortgage debt so large that building rental income could not meet the obligations, requiring increases in operating revenues—and, inevitably, rents. Investors sought to capitalize anticipated gains through the sale of buildings within a relatively short time frame, typically between three and seven years. Private-equity actors, in particular, apply professional “asset-management” strategies to “undervalued” or long-term “mismanaged” buildings, with the objective of wringing operating efficiencies from buildings and increasing rents to “market rates” through operating-cost control, aggressive pursuit of illegal and delinquent tenancy, and intensive application of all available rent increases provided under rent-control law. These new investors and the management practices they brought to the rent-regulated sector intensified displacement pressure on long-term, low-income renters, and created unsafe living conditions for tenants.

During this period, community development practice and tenant organizing have shaped state action in contesting the wave of investment in rent-regulated housing. Fields (2015) suggests that a “strategic positivism” has been at the center of organizing strategies, centered around alternative knowledge production that includes the simultaneous deconstruction of financial narratives that normalize investment risk and the construction of alternate and critical ways of understanding the effects of financial practices.

The Building Indicator Project (BIP), first conceived in 2003 by members of the University Neighborhood Housing Program (UNHP) in the Bronx, stands as an example of alternative knowledge production that recursively draws from and constructs state knowledge. More recent tech-based innovations such as “” are also part of this alternative knowledge production. After organizing around speculative investment in rent-regulated buildings with low-income tenants in the Northwest Bronx in the 1990s, UNHP created the Building Indicator Project in 2004. The BIP counts the open housing code violations for more than 62,000 multifamily properties and calculates a composite “BIP score” or indicator by weighting the code violations by severity (housing violations increase in seriousness from class A through class C violations). This score provides a measure of the physical and financial distress of housing, and is actively monitored and updated every quarter (UNHP 2011).

As alternative knowledge, the BIP tool constructed and elevated tenant experience into a format that could circulate in policy networks and among financial institutions. UNHP notes that several bank lenders report actively using the BIP to identify distressed buildings in their portfolios (United Neighborhood Housing Program 2011). After BIP and other tenant activism brought to the attention of city-council members the seriously deteriorated housing conditions in Bronx rent-regulated buildings, the city launched a new regulatory strategy in 2011, called the Proactive Prevention Initiative (PPI), which would use the BIP data to identify buildings in distress. While BIP data identifies properties already in disrepair, the indicators of financial distress can also be used to find those properties that are at risk of deteriorating. City officials described the PPI as a “major shift” in housing-code enforcement policy, moving from reacting to tenant complaints to actively seeking out buildings that are at risk of deteriorating.

Legal strategy in defining the tenant–landlord relationship

There has been some legal experimentation in redefining the tenant–landlord relationship. Community and legal-aid organizations pursue legal action to enforce the “warranty of habitability” defined in the lease that tenants and landlords sign, which requires that the owner keep the apartment safe and livable at all times. New York State law requires the lender to make needed repairs to property during the period from foreclosure judgment until sale; it does not, however, require the lender to cover repairs before the foreclosure judgment, which can be a matter of years (Hasty 2012). A 2010 court ruling that required a lender foreclosing on a rent-regulated building to pay the court-appointed receiver $2.5 million for repairs signaled an important legal precedent for placing responsibility on the plaintiff in foreclosure (i.e. the property owner) for maintaining safe and decent housing conditions.

An unconventional legal strategy involved the application of the Racketeer-Influenced and Corrupt Practices (RICO) Act—a legal tool originally created to combat organized crime—to management practices in rent-regulated buildings. The law permits leaders of ongoing criminal enterprises to be tried for crimes that they ordered but were carried out through their agents. In 2010, at the request of then-New York City Public Advocate Betsy Gotbaum, the law firm Jenner and Block filed a civil RICO claim in federal court against the private-equity firm Pinnacle, alleging that the firm had conspired to overcharge, harass, and evict tenants from their rent-regulated apartments. Pinnacle settled the lawsuit in 2011 and agreed to pay claims to as many as 20,000 tenants across the 400 buildings that Pinnacle owns, potentially costing the firm $10 million (Buckley 2011).

Beyond locally focused enforcement and legal action, a financial regulatory framework exists for community organizations to engage. The 1977 Community Reinvestment Act (CRA), a product of an earlier generation of political activism against redlining, provides state supervisory authority to evaluate how financial institutions are meeting the credit needs of the local communities from which they accept deposits. All institutions which receive insurance for deposits from the Federal Deposit Insurance Corporation (FDIC) must submit to CRA evolutions. While the CRA itself does not include enforcement or sanction mechanisms for poor CRA reviews, the evaluation is public and serves as a basis for mounting legal action against a bank. Furthermore, the review process allows for public input, which local community organizations took advantage of in the 2012 CRA review of New York Community Bank (NYCB), the largest multifamily lender in New York City. Based on analyses from BIP data, local organizations knew that NYCB’s lending portfolio included the highest share of distressed multifamily properties of any major commercial mortgage lender in the city. Using this information to explain to the FDIC reviewers the damage that NYCB’s underwriting standards were inflicting on tenants and communities, the FDIC downgraded NYCB’s CRA score from “outstanding” to “satisfactory.” The FDIC takes into account the CRA score in approving bank acquisitions of other financial institutions, and so the downgrade placed pressure on NYCB to address the credit quality profile of its multifamily lending portfolio. This downgrade, justified by community-based objections to NYCB’s lending practices and supported by systems of alternative knowledge production, pushed CRA regulation to take into account questions of credit quality, which have typically been segmented into another domain of regulation in fair-housing law.

Beyond physical deterioration of buildings, long-term and low-income tenants face other forms of harassment that are designed to force them to leave, such as increased rents and fees, intentional withholding of repairs, and efforts to prevent tenant organizing. Tenant organizing during the housing boom of the middle 2000s brought housing problems to the attention of New York State Attorney General. By 2012, amid mounting cases of systematic tenant harassment within the regulated sector, New York governor Andrew Cuomo and New York City mayor Bill de Blasio announced the formation of the “Tenant Protection Unit”, formally housed within the state agency responsible for administering rent stabilization, New York State Homes and Community Renewal (NYSHCR). The unit’s mandate includes investigating landlord practices, and it has powers to audit building finances and legally sanction owners. By 2016, the Tenant Protection Unit had returned 50,000 apartments to rent regulation that were found to have been illegally deregulated. These various enforcement powers were institutionalized in 2015 in the Tenant Harassment Prevention Taskforce, an intergovernmental group focused on managing investment in rent-regulated housing as an enforcement problem.

The future of tenant organizing and the financialization of rent-regulated housing

The Housing Stability and Tenant Protection Act of 2019 restored key tenure protections of the regulatory framework that existed prior to 1993, eliminating preferential rents, vacancy decontrol, and other routes to increasing rent that have produced displacement pressure on tenants, especially since the early 2000s. A central question about the rent reforms is how landlords, investors, and other real-estate actors will alter their practices, and how the state will enforce the new regulations. Historically, there has been a persistent tension within New York’s rent laws between their ability to offer broad social protection to all tenants and the individualizing impulse of legal practice to confer benefits to a freely contracting renter-as-consumer of a commodity: housing. Much of the policy response over the past couple of decades to the financialization of housing has framed the problem through this individualized legal framework, which may protect some current tenants but was predicated on the end of rent-regulated housing. Whether the reforms signal a departure from the financialization of rent-regulated housing in New York City depends on an enforcement approach that does not assume an unregulated future but that instead is focused on restructuring the relationship between property owners and renters. Rent control can offer circumscribed legal protection or serve as a tool that tenants can use to make an expansive democratic claim to the right to housing.


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To cite this article:

Benjamin F. Teresa, “The Financialization of Rent-Regulated Housing in New York City after Rent Reform. Tenant Activism, State Enforcement, and Alternative Knowledge Production”, Metropolitics, 4 December 2020. URL :

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