Many New York City bankruptcy cases occur because renters can’t afford to pay their landlords, and rents only keep rising. In 2014, median rent as a share of median income in New York City rose to 39.5 percent, and one third of all tenants pay at least half their incomes in rent. Fortunately for tenants, rent-stabilized apartments are protected in New York bankruptcy. However, according to an investigative article by ProPublica, landlords are using a 1994 New York City law to evict tenants and decontrol apartments, denying renters a bankruptcy benefit and contributing to soaring rents.
The law in question implemented what’s called “vacancy decontrol.” It specifies that when a stabilized apartment’s rent rises above $2,000 and the tenant moves out, then the landlord can charge market rates to subsequent tenants. In 1994, median rents weren’t even $600, so some of the tenant-friendly council members thought it would actually hurt wealthy New Yorkers who were abusing rent stabilization by living in expensive, rent-stabilized Manhattan dwellings. Meanwhile, poorer tenants in outer-borough neighborhoods would still be protected. It didn’t work out as they expected.
The city council overlooked loopholes that landlords can exploit to turn vacancy decontrol into a weapon against the city’s rent stabilization system. For many years, it didn’t adjust the threshold for inflation, so as rents rose with the economy, rent-stabilized apartments’ rents approached $2,000 naturally. Only in 2011 did the council increase the threshold to $2,700. Two, the law gives landlords every incentive to find tricks to pass costs on to tenants to raise their rents and then force them from their homes.
One such loophole was a rule permitting landlords to shift some of the costs of expensive renovations onto tenants. If a tenant moved out of a rent-stabilized unit going for less than $2,000, then the owner engaged in costly, unneeded renovations that pushed the rent above $2,000, decontrolling the apartment. After the city banned this practice, the state legislature restored it, and it even allowed landlords to increase rents by 20 percent after tenants moved out. Consequently, landlords employ numerous eviction tools to motivate tenants to leave, like intimidation, sledgehammers, or bulldogs. The legislature also made vacancy decontrol state law, tying the city council’s hands.
Since 1994, 250,000 out of 860,000 rent-stabilized apartments switched to market rates. ProPublica found that between January 2013 and June 2015, landlords filed 450,000 eviction cases, 80 percent of them by 10 percent of identified landlords. In contrast to this, the landlord in the rent-stabilization bankruptcy case looks even less menacing: He offered to pay off his tenant’s debts so long as he obtained the unit after she died.
Economists often argue against rent stabilization policies, and decontrol laws give landlords perverse incentives to mistreat tenants. If you’re facing an eviction, whether your apartment is rent-stabilized or not, then consulting with an experienced New York bankruptcy lawyer can help you assess your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.