How Is the NYC Rent Freeze Affecting Rent Stabilized Building Values and Lending?

According to The Real Deal, New York City's rent freeze is changing how banks value rent stabilized apartment buildings. Lenders are now assuming those rents stay flat for years while taxes, insurance and repair costs keep rising, which lowers the value on paper and shrinks the loans buyers can get.

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How is the NYC rent freeze changing the way banks value rent stabilized buildings?

According to The Real Deal, lenders on rent stabilized buildings are now assuming those rents stay flat for years, while taxes, insurance and repair costs keep rising. Lower projected income means a lower value on paper, and a lower value means smaller loans.

What does that mean for people selling a rent stabilized building?

Buyers can't borrow as much as they could a few years ago, so they need more cash or they offer less. Some of these buildings are already selling at a discount. How much a given building is affected depends on its rents, expenses and condition.

Did Freddie Mac really stop lending on rent stabilized buildings?

Some reports said Freddie Mac paused lending on these buildings entirely. Freddie Mac says that is not accurate and that it is still lending while adjusting to market conditions. Brokers describe tighter scrutiny and smaller loans, and one loan broker told The Real Deal the caution is market wide, not just Fannie Mae and Freddie Mac.

Which buildings does this affect?

It affects rent stabilized buildings, generally 6 units or more, which hold roughly 1 million apartments. It does not apply to typical 1 and 2 family homes.

What happens to tenants when owners get squeezed?

When owners are squeezed between flat rents and rising costs, repairs are often the first thing delayed, which affects tenants too. Supporters of the rent freeze point to tenant affordability, while lenders and owners point to building finances, so both sides have a real stake in how this plays out.

Does the rent freeze lending squeeze matter for Staten Island and Brooklyn homeowners?

Most Staten Island homeowners own 1 and 2 family homes, which are not covered, so their financing is not directly affected. Brooklyn has far more rent stabilized buildings, so owners and buyers of 6 unit and larger buildings there are the ones facing tighter lending and lower valuations. If you own or are considering buying a multifamily building in either borough, get lender feedback on your specific property before assuming a value. This is general information, not financial or legal advice.

Questions about how this affects your home in Staten Island or Brooklyn? Work with Joseph Ranola, or text or call (917) 905-2541. New episodes of Daily Tesla News break down the NYC real estate stories that move the market.