Lois Weiss: Between the Bricks

Not satisfied to villainize Landlords the tenant bloc is now claiming lenders are part of a grand conspiracy. No. The data says otherwise. Start with what they concede. They list the 2019 rent law and the freeze among the reasons these loans no longer pencil. They call Fannie's move to underwrite the freeze prudent on its face. They admit some buildings are distressed because rent isn't keeping up with operating costs. They call for state and federal operating subsidies. You only need operating subsidies when rent doesn't cover the cost of running the building. That's our point. The distress shows up before the mortgage! The Rent Guidelines Board's own study found nearly 10% of buildings with stabilized units had operating costs above income in 2024. That's before debt service. Leverage can't explain a loss that happens before the loan payment. Then the board froze rents anyway. Its own formulas said one-year leases needed 3.4% to 4.5% just to hold owners' operating income steady. Costs rose 5.3% this year and are projected to rise 4.1% next year. The board chose 0%. CPC, the nonprofit lender they cite as a possible ally, modeled an apartment at the average Bronx stabilized rent of $1,190. With four years of flat rent, it loses $1,313 a year by year four. That's before a single mortgage payment. Even ANHD counts at least 63,700 nonprofit-run subsidized apartments where costs exceed income. The Fifth Avenue Committee, the nonprofit they cite, has lent money to its own projects to keep mortgages current. They say values need to reset. They already did. Buildings at least 75% stabilized sold for 40% less per unit in 2025 than in 2019. Their marquee example, Emerald Equity, lost control of many of its buildings after 2019. One sold in 2025 for $285,000, about 97% below Emerald's 2016 price. That reset wiped out a speculator. It did not lower the heating bill. They say there is no shortage of lenders. Signature failed. Flagstar says it is curtailing rent-regulated lending, and $4.4 billion of its $8.1 billion in NYC loans on buildings at least half rent-regulated is rated criticized or classified. Freddie has reportedly paused. Fannie now assumes four to eight years of flat rents, the length of this mayor's term and a possible second. In July, CPC's CEO warned that lenders underwriting zero rent growth would "strangle the system." That's now the underwriting. Their explanation for Freddie's retreat is, in their words, "if we had to guess." Lenders size loans to the rent a regulator allows. That's arithmetic. Their headline fix is debt writedowns through Fannie and Freddie, which the federal government has controlled since 2008. That asks taxpayers across the country to cover a freeze voted by a city board. It also does nothing for a building that loses money before debt. They hold up the old Signature portfolio as a model. CPC services a large part of it and told legislators about 70% of those loans show financial distress. Mission-driven hands did not change the rent roll. Meanwhile tenants are already paying. 57,000 rent-stabilized apartments sat vacant as of April 2025. Repairs and maintenance spending across CPC's borrowers rose 1% from 2020 to 2024 while total costs rose 28%. That's deferred maintenance on a spreadsheet. Before 2019, a subset of owners ran a model that hurt tenants. The 2019 law ended it but also broke the system. Distress today reaches owners who never ran that model, nonprofits included. The fix doesn't need a federal bailout. Change what happens to an apartment when it becomes vacant. Zero impact on current tenants. Tenant protections stay. The rent at turnover pays to bring the unit back and keep the building operable. CPC already backs the same principle for regulated affordable housing. We can argue about 2016 all day. These buildings need a plan for 2027.