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Why is my landlord warehousing rent-stabilized apartments? Is he looking to combine units?

By Alanna Schubach | August 8, 2022 - 9:30AM

Despite huge demand for apartments in New York City, warehousing apartments remains an ongoing practice.

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Question:

There are several long-vacant rent-stabilized apartments in my building. I suspect the owner is waiting for tenants to vacate the adjacent units—including mine—so he can combine the apartments and set a new, higher rent. Is there a law that compels landlords re-rent stabilized apartments?

Answer:

Your landlord may be keeping the apartments vacant in order to combine them, or he may be waiting in the hopes that rent regulation laws shift in his favor, our experts say. In any case, it's not illegal for him to do so. 

There are no laws preventing landlords from "warehousing" their properties, as this practice is known. In 2020, New York State Assemblywoman Linda Rosenthal introduced a new bill to punish warehousing. That bill, which has not made it out of the housing committee, would fine owners who keep apartments vacant and use the proceeds to fund housing vouchers for homeless New Yorkers. 

Warehousing soared during the pandemic

When rents plunged in NYC during the depths of the pandemic, more than 50 percent of unrented apartments in Manhattan were kept off the market, according to data from UrbanDigs. Instead of offering Covid deals, some landlords preferred to get nothing for a few months in hopes of locking in more expensive leases later.

Now, despite huge demand for apartments in New York City, warehousing apartments remains an ongoing practice. Even in markets that favor landlords, around 20 to 25 percent of apartments may be held back.

"There are multiple reasons a landlord may reserve a stabilized apartment; perhaps for a gut renovation or for family, perhaps for storage or preparing for a sale of the building," says Dennis R. Hughes, a broker with Corcoran.  

Combined units get market-rate rents

Your guess about combining units may also be correct. As a result of changes to the rent laws in 2019 known as the Housing Stability and Tenant Protection Act (HSTPA), landlords can no longer increase the rent and take apartments out of rent stabilization when tenants move out, known as vacancy decontrol. But there is one exception: If owners combine two vacant rent-stabilized apartments into one larger unit, the resulting unit is considered a new apartment and landlords are allowed to charge a new, first rent for the apartment and set it at market rate.

"This allows landlords to set an initial rent of whatever they can get, and the new tenant cannot challenge it or file an overcharge complaint on the grounds that the apartment should be stabilized," says Sam Himmelstein, a lawyer who represents residential and commercial tenants and tenant associations (and FYI, a Brick sponsor).

However, the newly combined unit is still subject to rent stabilization in that subsequent rent increases are capped.

Hoping for a change in Albany

It's also possible that your landlord is leaving the apartments vacant in the hopes that rent regulation laws will eventually be changed in their favor, and they could eventually de-stabilize the units and rent them at a higher rate. 

"Some landlords are waiting and hoping that legislature may change, and parts of HSTPA may be repealed, but that doesn't seem likely under political landscape in New York," Himmelstein says. 

Another possibility is that your landlord is waiting on the results of two lawsuits to reach federal court. These lawsuits are challenging the constitutionality of HSTPA and rent regulation; tenant advocates are concerned that if the cases reach Supreme Court, rent regulation could be struck down entirely. 

"We still have a housing shortage, which is what rent regulation helps address," Himmelstein says, "so there is some anxiety about these lawsuits on our side." 


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Alanna Schubach

Contributing writer

Contributing editor Alanna Schubach has over a decade of experience as a New York City-based freelance journalist.

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