Blackstone Pulls Plug On Renovations At Its Biggest New York Property After Rent Reform
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New York City's biggest owner of rent-stabilized apartments, private equity giant the Blackstone Group, says it is stopping improvements at the 11,000-unit housing complex it bought in 2015.
Blackstone said it is now re-evaluating what to do with the apartments at Stuyvesant Town and Peter Cooper Village in Manhattan's Lower East Side new rent regulation laws, Crain’s New York Business reports.
While Blackstone plans to proceed with improvements required under law — such as fixing leaks and hot water improvements — improvements to the vacant apartments won’t continue and large-scale construction improvements may also be stopped, a source told Crain's.
The new rent regulations, signed into law last month, have been met with a barrage of criticism from the real estate industry. The new legislation significantly reduces landlords' ability to increase rents and remove apartments from regulation.
The vacancy bonus — a provision that had allowed landlords to increase rents by as much as 20% when a unit became vacant — has been cut. Landlords who rented a unit for less than they could legally charge are no longer able to raise rents to the full price when leases are renewed.
The Major Capital Improvement and Individual Apartment Improvements programs, which have allowed landlords to pass on the costs of building improvements in rent, have been significantly curtailed.
Members of the real estate community have argued the new laws mean landlords will no longer improve buildings, which will result in a widespread decline in the housing stock in the city. Others have said affordable housing development will be slowed.
“I think the winds are really against building mixed-income rentals,” L+M Development Partners Development Director Tell Metzger said at Bisnow’s Harlem summit last week.
“We are now going back and looking at [some] buildings in our pipeline and saying maybe we should think about this as condominium," Metzger added. "Maybe we should think about this as 100% market-rate. Does this make sense to do as affordable?'"
However, a co-sponsor of the bill, state Sen. Brian Kavanagh, told Bisnow earlier this month the premise that landlords will let their buildings fall into disrepair is “false.”
“We've eliminated the ability to do certain cosmetic changes and we've tightened up oversight, but we believe that we've left a system in place that will allow landlords to invest in their buildings, to make essential investments in the important systems of building and they'll be able to get a reasonable return on those investments,” Kavanagh said.
Blackstone and Ivanhoé Cambridge bought Stuy Town and Peter Cooper Village for $5.3B, one of the largest acquisitions in U.S. history. The rent-regulated complex spans 80 acres and more than 100 buildings.