Website design By BotEap.comNew York’s rental regulations have produced all sorts of weird ways of thinking about real estate. So while a recent court decision doesn’t necessarily improve the city’s housing market in any way, it does at least make explicit a previously implicit outcome.

Website design By BotEap.comThe case, as reported by Bloomberg (1), involved a New York woman who filed for bankruptcy in 2012. A federal judge determined that the value of the lease on her rent-regulated apartment was part of the bankruptcy estate. and therefore the landlord could buy the lease from the trustee. The owner had previously sought to buy out the tenant’s share, which he was not interested in.

Website design By BotEap.comThe tenant appealed to the Manhattan-based Second Circuit Court of Appeals. The federal appeals court, in turn, asked the New York Court of Appeals (the state’s highest court) to assess whether tenant privileges under the rental regulations are assets subject to bankruptcy proceedings.

Website design By BotEap.comThe state court concluded last November that they are not and that a bankruptcy trustee cannot sell them. This decision was adopted in the Second Circuit ruling last week, which established that “a below-market lease is exempt from creditor claims as a public benefit.” (1)

Website design By BotEap.comThink about it. Rent-regulated apartments in New York are owned by private individuals, but the right to live in them is now considered a “public benefit” granted by the state, which has never bothered to pay for what it grants to some of its lucky citizens.

Website design By BotEap.comOpponents of New York’s rental standards, which have been on the books in various guises since 1947, have in the past claimed that the standards amount to a taking of private property without compensation. Previously, the State resisted this characterization. But now the state is arguing on public policy grounds that a tenant’s right to lifetime renewal of a rent-stabilized apartment lease, along with the right to pass that lease on to members of the tenant’s household , is in fact a benefit granted by the government. . The state court characterized rent stabilization rights as a form of public assistance, and the Second Circuit did the same by characterizing them that way.

Website design By BotEap.comThis, of course, is what New York property owners have known all along. But in this particular case, the real loser is not the tenant’s landlord, who at least understood the deal when he bought the property and offered it for rent. Despite the argument of the Rent Stabilization Association of New York City Inc., a landlord group that called the state court decision a “radical interpretation,”(1) it’s actually business as usual for landlords shackled by property restrictions. rent. The real losers are the tenant’s other creditors, who must absorb a loss due to the tenant’s bankruptcy because the landlord cannot buy out the tenant’s lease and thus indemnify creditors. Also in that sense, New York grants benefits to tenants at the expense of individuals: in this case, various creditors.

Website design By BotEap.com“Public benefit” thus joins “housing emergency” in the list of phrases that mean something substantially different in the New York context than in the rest of the country. Rent stabilization may, in fact, benefit individual members of the public, but the state has no part other than to enforce laws that require private landlords to offer the “public” benefit to tenants. Elected officials love to provide public benefits that don’t require them to raise taxes or pass a line item.

Website design By BotEap.comAll of which explains why the 1947 rental regulations and those that followed remain a political if not a practical necessity. It’s why no one wants to build rental housing for the masses of New York when the state seizes that housing to provide a benefit to tenants at the expense of landlords. And it’s why a “housing emergency” born of the Great Depression slowdown in construction and then the return of World War II veterans to city housing continues to this day.

Website design By BotEap.comFountain:

Website design By BotEap.com1) Bloomberg, “New York City Landlords Can’t Touch Rent Controlled Apartments: Bankruptcy”