As of mid-June, New York has passed what is probably the most progressive rent reform legislation, in terms of tenant protections, in decades. Since then, the real estate community has been in utter shock. Furthermore, when these bills were first introduced earlier this year, it wasn’t clear that they would affect free market housing. Now that we know that the laws will apply to all apartments, New York City real estate players are preparing for a dramatic change in the rental landscape.
There are numerous so-called “tenant protection” measures included in this rent reform package but I will outline the ones which I believe will make the most significant difference for those who make their living from residential real estate. Security deposits have always been essential when it comes to renting apartments. Under the new laws, the amount of a security deposit may never exceed one month’s rent of the apartment in question. This is a huge issue, particularly when it comes to tenants from other countries who don’t have any credit history in the United States. These tenants will now be nearly impossible to rent to unless their company personally guarantees the lease which many firms are reluctant to do because of the liability this poses. Owners are also no longer able to charge any prepaid rent in excess of a one-month security deposit, which was a common practice to reduce the financial risk of renting to foreign tenants.