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The Real Estate Philosopher


Commercial Rent Control in NYC? The Great Sucking Sound of Capital Fleeing NYC – We Can’t Let This Happen

Nov 12, 2019

“The only thing necessary for the triumph of evil is for good people to do nothing.” ― Edmund Burke

 
Last November, I wrote this article begging, pleading, importuning the New York City Council to not proceed with commercial rent regulation, but apparently at least some of them are not listening.
 
After the actions from Albany concerning multifamily rent control a few months ago prices of multifamily in NYC have fallen at least 30% and possibly as much as 40%.  The great sucking sound everyone heard was the sound of capital fleeing NYC multifamily; hence the price drop.  And as many persons have pointed out, who now is going to put capital into NYC multifamily?  And the answer is – eventually – the government.  Indeed, it is not farfetched to conceive of the housing stock falling into disrepair due to the lack of capital, and as a result, the government being forced to take over a large portion of NYC’s housing stock in coming years. 
 
Okay, if you have a certain political view you might say well housing is a “right” that justifies the eventual government takeover of housing.  There are differing views on this issue and I don’t personally agree, but I can see and respect the other side of the argument.
 
But now for retail – seriously?  Renting retail space in the “best” city in the world is a “right” that has to be regulated by the government?
 
That is the conclusion of Councilmember Stephen Levin, who represents parts of Brooklyn, as the basis for his determination to introduce a commercial rent control bill sometime next week as reported by Gothamist. 
 
Okay – retail rent control would be awful – and if it becomes adopted the price of retail will fizzle, just like multifamily – but it might actually be worse…..
 
Last year, there was a hearing to discuss the proposed Small Business Jobs Survival Act.  At that hearing, concerns were raised that the Act would not limit rent control to small businesses.  Instead, it would apply to all commercial businesses, including office.  
 
Was that a drafting error?  I don’t know.
 
Additionally, we don’t know what this new proposed bill will include as it hasn’t been circulated yet, but recent comments Levin made to CRAIN’s today seem to confirm that small office spaces would be regulated under this new proposed bill.
 
I won’t go on an emotional rant here – as I am speaking to the real estate industry, that gets 99% of my articles – and say that this is the time to not just sit by but instead DO SOMETHING.
 
The argument to make is not that people who own real estate will lose money.  The argument is that capital will flee a regulated real estate industry, which is terrible for NYC.  Tax revenues will drop, construction jobs will drop, and the vibrancy of the city will decrease.  We enjoy so many things in NYC and of course, there are always problems, but having investor eagerness to put money to work here can solve many things.  We don’t want to have investors say there are just better cities to deploy their money. 
 
At a minimum, I urge you to write to NYC council members and beg, plead or do whatever you can to bring them to the right conclusion, i.e. not to make this terrible mistake.
 
I love New York – I really do – and this will be a dagger through its heart.  The great sucking sound of capital fleeing will get louder still. 
 
So, I have linked here a list of the names and emails of the NYC council members and I suggest that everyone who gets this pen them an email. 
 
In your communications, I urge you not to be emotional, but to honestly and analytically point out the dramatic dangers to our beloved city if retail – or commercial – rent control is enacted.
 
I will be doing this myself and ask you to join me in this crusade against a potentially lethal decision for NYC.
 
Bruce M. Stachenfeld
a.k.a. The Real Estate Philosopher®

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As the Chairman of Duval & Stachenfeld – a law firm in mid-town NYC known as The Pure Play in Real Estate Law – I am inviting you to join The Real Estate Philosopher™. This will consist of my thoughts and also thoughts of friends and colleagues.

It will not be published in any traditional media – it will go only to friends of our firm. The purpose here is very simple – to put forth thoughts in the real estate world that are different, provocative, and challenging of accepted wisdom. Hopefully, nothing said here will be mainstream thinking.

You may be wondering how I am qualified to write on these topics since I am “just” a lawyer. However, I have an unusual place in the real estate world. As the Chairman of The Pure Play in Real Estate Law (one of the largest real estate law practices in NYC), I interact with an incredible number of real estate players. This ranges from small real estate shops with nothing but a gleam in their eyes, to some of the largest real estate institutions in the world, and everything in between. This gives me a unique and global perspective and allows me to act as an amateur philosopher in the real estate world. This has always been my hobby and it is what I love doing.

Regards,

Bruce Stachenfeld
a.k.a The Real Estate Philosopher™

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