Miracle on John Street

"Miracle on John Street." It's not quite good enough to be a movie title, but I felt blessed last week when my rent renewal arrived, and there is no increase!

When I moved in almost five years ago, my rent was exactly $2000, which for those not au fait with rent stabliization law in New York City, is the lowest rent level that is not regulated. That is, the landlord can charge whatever the traffic will bear. A year later, it went up by 5%. Ok, I could live with that. Another year later, they hit me with a stiffer 12.4% increase. This was right at my pain threshold, but as there was no assurance of getting a better deal anywhere else, I stayed put.

Then 9/11 hit. In the immediate aftermath, the landlord volunteered a 10% rent cut. Residents were bailing out of Lower Manhattan in droves, and while tenants theoretically could be sued, there wasn't a jury on earth that would side with a landlord under such circumstances. Rather than be stuck with apartments they couldn't fill, landlords offered concessions and hoped the tenants would stick it out. Most did.

In the meantime, Congress appropriated funds for a Lower Manhattan Residential Grant program. Tenants in my part of town - below Chambers Street, and east of Broadway - were eligible for a $250per month subsidy if they committed to the area for two years. (Had I lived west of Broadway, the subsidy would have been $500/month.) At my next renewal, the landlord raised the rent by 7.5%, which if you're keeping track is still about $76/month less than pre-9/11 levels. With the HUD subsidy, my effective rent was $2034/month for two years, starting August 1, 2002.

As last weekend approached, I was bracing for the worst, knowing it was about the time of year when my rent renewal would be coming. Not only I about to lose my HUD subsidy, but the landlord would have the first chance in two years to raise my rent. If a May 30 New York Times article can be believed, vacancy rates downtown are just 5%, which (if true) would suggest that any post-9/11 reluctance to live in Lower Manhattan has largely evaporated. In short, I was convinced I was in for a very significant increase.

Well, it didn't happen. My HUD subsidy will of course expire in August, but my base rent will be the same for the third year in a row. What happened? For me, the HUD subsidy was a happy dividend of living downtown, but I intended to stay no matter what. I suspect, however, that there were many who moved in only for the subsidy, and for whom the rents were just barely affordable. Those leases are now expiring, and the residents are most likely headed elsewhere. With their apartments now coming on the market in large numbers, I would guess the time wasn't ripe for jacking up downtown rents.

I don't expect this to last forever. But with several big residential buildings coming on-line in my neighborhood over the next year, thanks to the Liberty Bonds program (another post-9/11 helping of pork from Congress), a healthy supply of new market-rate units should act as a drag on rents for the next year or two. Or so I hope!