Jake & Gino

Why New York’s Housing Crisis Is Worse Than You Think

The podcast with Seth Gler, senior MD at Marcus & Millichap, unpacks why New York’s housing crisis is deeper than headline rent‑freeze debates, tracing the market’s reliance on rent‑stabilized assets and the regulatory framework that shaped investment returns for two decades. Gler explains the 1990s “individual apartment improvement” formula—spend roughly $40,000 on upgrades to deregulate a unit—creating a massive rent‑gap between legal and market rates. Investors bought 85‑90 buildings annually, funded buyouts for low‑rent tenants, and even used fabricated contractor invoices to meet the threshold. The system yielded low cap rates and high upside until the 2019 Housing Stability Tenant Protection Act (HSTPA) froze rent hikes and outlawed tenant buyouts. “We’d pay a tenant $50,000 to leave so we could spend another $50,000 renovating,” Gler says, illustrating the cash‑flow‑first model. He also notes that “most of the work was legitimate; the buildings are a century old,” while acknowledging that a minority of deals involved fraudulent paperwork. With HSTPA in effect, the traditional value‑add play collapsed, forcing owners to seek immediate cash‑flow properties rather than speculative appreciation. The slowdown in capital inflows threatens new construction, exacerbates vacancy pressures, and leaves tenants caught in a rent‑freeze spiral, signaling a long‑term shift in New York’s multifamily market dynamics.