A 2019 housing law wiped out billions in wealth-building opportunities for New York’s rent-stabilized tenants — and no one is talking about it.
On June 14, 2019, state lawmakers unintentionally wiped out $50 billion in wealth-building opportunity for the very people they claimed to protect.
New York City has roughly 3 million apartments, fairly evenly divided among rent-regulated units, free market rentals, and condo/co-ops. Protecting the city’s poorest residents is noble — but when legislation is driven by ideology instead of logic, the consequences can be devastating.
The Bad Apples Outweigh Good Intentions
Every industry has its bad actors — real estate, law enforcement, law, education, restaurants, plumbing. But policy shouldn’t be built around outliers. Unfortunately, that’s exactly what happened with the Housing Stability and Tenant Protection Act (HSTPA) of 2019.
Instead of addressing actual abuse, lawmakers passed sweeping reform that punished the entire rental housing industry. Owners who responsibly maintained affordable housing are now lumped in with the worst offenders — and tenants are worse off because of it.
The irony? The real estate industry has long supported affordability. Bad landlords should absolutely face consequences for harassment or neglect. But HSTPA was a scorched-earth policy disguised as reform. It gutted a system that participated not only in funding 41.9% of the city’s budget, but also created jobs, invested billions into neighborhoods, and improved safety citywide.
Tenant Equity Was Real
Before HSTPA, rent-stabilized tenants had something incredibly valuable: equity. Because their rents were artificially below market, landlords had strong incentives to buy them out — offering tens or even hundreds of thousands of dollars in exchange for vacant possession.
These buyouts became financial lifelines. Whether used for medical bills, tuition, or a down payment on a home, tenant equity functioned like a retirement account that grew with the market.
This wasn’t theoretical — it was real money. With roughly 1 million rent-regulated apartments in New York City and average buyouts around $50,000, that’s $50 billion in tenant equity that vanished overnight.
The financial incentive for a landlord to pay a tenant to move is gone. The retirement accounts of hundreds of thousands of New Yorkers were reduced to zero. Literally, zero.
A Crisis No One Is Talking About
Imagine being told for years that your apartment was worth a six-figure check — and then one day, that offer disappeared. Clients tell us regularly that tenants still ask: “I’m ready for my buyout.” The response? “That’s off the table. Call your elected official.”
This loss was worse for some tenants than the 2008 crash. And no one’s talking about it.
A or B?
Let’s simplify it. Here are your options:
Option A:
- Predictable modest rent increases
- Buyout optionality
- Renovated apartments
- Safer, more vibrant neighborhoods
- Incentives aligned for both tenants and owners
Option B:
- Frozen rents
- No buyouts
- Degrading housing stock
- Deferred maintenance and disinvestment
- No incentive to improve anything
Which do you prefer?
Policy Ideas That Actually Work
Fixing New York’s housing crisis doesn’t require choosing between tenants and landlords — we can protect both. Here are two actionable, balanced reforms that prioritize tenant stability while ensuring buildings stay livable and financially viable:
1. Vacancy Reset with Strong Protections
New York can borrow a page from California: when a tenant moves out, allow the rent to reset to market — but preserve full rent stabilization protections for the next tenant. This model prevents rent spikes for people in place while restoring economic sustainability for the building.
- Impact 1: Property values stabilize, enabling repairs and long-term investment (cap rates in California are ~200 bps lower than NYC’s).
- Impact 2: Long-term tenants still benefit from below-market rents, which gives them real buyout value — restoring tenant equity and mobility.
✅ Tenants get lifetime protection. Owners get a reason to invest. Neighborhoods win.
2. Tax the Buyout to Fund Housing Affordability
Let’s reintroduce tenant buyouts — but build in a fairness mechanism. Add a 5% tax to every buyout and earmark it for housing assistance programs, public housing improvements, or eviction prevention funds.
- Impact 1: Politically palatable — landlords still write the check, but part of it supports the broader housing system.
- Impact 2: Creates a self-funded stream for affordable housing — without new bureaucracy or deep budget fights.
✅ Tenants who leave with equity help support tenants who need help staying.
A Real-World Win/Win
One client recently bought out a rent-controlled tenant for $250,000. The tenant was paying $500/month for a 3-bedroom unit worth $3,500 on the open market. That’s a $36,000 annual delta — which, capitalized at an 8% return, equals $450,000 in value. Even after a $100,000 renovation, it made sense.
The tenant walked away with life-changing money. The landlord got a viable unit back. And now, that 3-bedroom can house a new family — or multiple roommates — instead of sitting in the hands of one person paying 1980s-level rent.
Final Thought
This isn’t about landlords versus tenants. It’s about aligning incentives so that everyone benefits — especially the people the law was supposed to help. HSTPA did the opposite. It gutted equity, discouraged investment, and froze the system in time.
It’s not too late to fix it. But first, we have to be honest about what really happened.
