When New York Community Bancorp posted large losses last month and warned of more difficulties to come, it pointed to a significant cause for concern: troubled loans in a sinking corner of the New York City apartment market, the Wall Street Journal reported. NYCB is the city’s largest lender on rent-stabilized apartments. About $18 billion of its loans are backed by the city’s rent-stabilized units, representing more than 20% of its total loan book. Many of these loans were made when developers had more flexibility to upgrade rent-stabilized units and then boost the rent to market rate, or convert them to condominiums. In 2019, new laws capped the amounts that landlords can raise rents at these properties. Though these buildings could still deliver steady returns, business plans that were based on steeper rent increases no longer penciled out. Property values started to plummet. Sale prices of buildings containing rent-regulated units have fallen 34% since then, according to Maverick Real Estate Partners, a private-equity fund manager. Some rent-stabilized multifamily buildings have sold for half — or even less than half — of what owners paid for them before the 2019 law went into effect.
