The Problems With New York’s ‘Good Cause Eviction’ Bill, With Sherwin Belkin

Senate Bill S3082, or the “Good Cause Eviction” Bill is a piece of legislation in New York that aims to address housing problems, evictions without cause, and add in new protections for tenants. Will this legislation fix these problems?

The New York Times recently released an opinion video by Jeff Seal entitled “How the Landlord’s Worst Nightmare Could Protect Millions of New Yorkers.”

So does this bill provide solutions? Sherwin Belkin, a Real Estate lawyer who was featured in the NY Times piece as the lone voice of criticism joins us to share his whole, unedited, perspective.

Click the play button above to listen to the conversation.

Episode Highlights

  • What Sherwin thought of the NY Times video he was featured in.
  • Why calling it the “Good Cause Eviction’ Bill is a loaded title.
  • The problems with the language used in S3082.
  • Why rent controls in places like New York City create negative outcomes for tenants and landlords.
  • What unintended negative consequences could result from S3082 passing in New York.
  • The impact additional legislation targeting the real estate industry (particularly multifamily) and complex regulation has on investor and development interest in New York.
  • Sherwin’s alternative ideas for legislation addressing the challenges tenants may face with rising housing costs.
  • What the future may hold for multifamily real estate in New York.

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About The Multifamily Investor Podcast

The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses attractive offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.

Show Transcript

Scott: Hello, and welcome to another episode of the “Multifamily Investor” podcast. Scott here with you once again. And we’ve got a really fantastic show on tap for you today. We’re going to be talking about a bill that is up in the New York Senate that is called The Good Cause Eviction bill.

And recently, there was a New York Times Opinion Video, it was created by Jeff Seal. And this video was called “How the Landlord’s Worst Nightmare Could Protect Millions of New Yorkers.” Is that true? Is this bill a good thing or potentially a bad thing? Joining me on the show today, who was featured in that video and perhaps didn’t get to share all of his thoughts in that video in the final cut is Sherwin Belkin, who is a founding partner of Belkin Burden Goldman LLP, which is a law firm handling all aspects of New York real estate-related matters.

Their firm represents a wide array of owners, developers, managers, purchasers, and sellers of real estate. So, when it comes to New York real estate, Sherwin certainly knows a thing or two. Sherwin, welcome to the show.

Sherwin: Morning, Scott. Good to be with you.

Scott: Thank you for being here. I want to talk about that video. So to start things off, what were your initial thoughts on The New York Times Opinion Video about New York’s Senate Bill, that’s S3082 or the Good Cause Eviction bill, so it’s been called?

Sherwin: Yeah. I thought it was more a comedy piece than a real deep dive into an important piece of legislation. What’s interesting, I think the whole piece ran maybe 10 minutes, Jeff Seals and I probably spent more than 90 minutes in what was a real substantive discussion about the bill.

Unfortunately, a lot of the substantive discussion got left on the cutting room floor and the jokes in the comedy flew. I’ve suggested to Jeff that we perhaps go on the road as The Odd Couple of real estate.

Scott: I like it. I like it. Well, and that’s why you’re on the show with us today because I really wanted to give you a platform to, I guess, really flesh out your thoughts a bit more, you know, unedited. I don’t wanna leave this on the cutting room floor.

So with that said, again, the bill we’re discussing has been named the Good Cause Eviction bill and it purports to deal with issues where in New York people are evicted from their homes, ostensibly without cause or punished for bringing up maintenance issues. Does this name really fit the bill and its results?

Sherwin: Well, it’s a cute name in that who would not support a bill that would only allow tenants to be evicted for good cause? But the real rub of the road is how one defines good cause.

And what is at the essence of the bill is that… And these are non-regulated apartments in New York. We have an endless array of rent regulations, predominantly rent stabilization. So these are apartments that are not subject to rent stabilization, which has meant that they are free market, owners are in control of these units.

And what’s important is that because rent stabilization so depresses the rental market. In many instances, it is the free market apartments that allow the building, particularly for small and mid-size owners, allow the building to be financially sustained. So what this bill essentially says is that it is not good cause for an owner to evict the tenant for non-payment of rent where that non-payment results from a rent increase that is the greater of 3% or 150% of CPI.

But those are the… That’s the threshold where a rebuttable presumption of unreasonableness arises that the owner must prove, but overriding that, is the bill says an owner cannot impose an unreasonable rent increase. Well, unreasonable has been a term confounding lawyers for a few thousand years.

And to have to…for a free market owner, each time to potentially have to litigate the reasonableness of a rent increase is far beyond what is a good cause for eviction. And that’s what the bill would do.

It would place owners in a position that every rent increase could be contested in the courts.

Scott: Wow. That does sound like a bit of a nightmare there. So would you say that when you’re looking at this bill, that’s maybe one of the biggest problems or shortcomings with it? Are there anything… Is there anything else in the bill that you would say kind of creates a bit of muddy water?

Sherwin: Yeah. I mean, I would not say the bill is the best piece of draftsmanship I’ve ever seen. There were just a lot of terms where…there are gaps in what the definition is. And when you’re talking about legislation, language, and specificity is everything because where there is a gap where there is a lack of clarity, that leads to litigation.

Legislatures should try to avoid litigation by being specific as to what they intend. So first, this term “unreasonable” is just the broadest possible term for a rent increase. Another gap, and I was cut off on this one, is the seasonal rental.

You know, a owner of a home in the Hamptons wishes to rent out their home for a month during the summer.

Scott: Sure.

Sherwin: You get a substantial rental. It’s a hot area where people enjoy going for a month or weeks in the summer. Once that owner lets that tenant into their unit, they’re covered by Good Cause Eviction. That tenant may like staying there. That tenant may say, “I’ll pay the 3%. I’ll pay the 4%. You’re not getting me out.” So suddenly, that owner that intended a temporary rental for a month or two months, it might defray their cost of homeownership, now finds they have a permanent tenant and their only redress is to go to court.

And as this bill is written, the redress may not really exist at all.

Scott: Wow. Yeah. Again, unintended consequences here, you know, something that, you know, purports to do a good thing, but when you dig in, there’s a lot of…yeah, again, unintended consequences. So kind of taking a step back, really what we’re talking about here is rent control. And when you look at rent control, particularly in New York City, I’m curious to your perspective at a high level, what are some of the negatives it brings about which can impact not only landlords, but even renters themselves?

Sherwin: So firstly, just let’s look historically at New York City for a moment. Rent control was imposed due to a temporary housing emergency. We are now in the 75th anniversary of our temporary housing emergency in New York. Rent control has been renewed, and renewed, and renewed, revised over the years, always with the same goals, to hold down rents and create affordable housing.

Neither of those goals have been met. Certainly, the affordable housing goal has not been met by rent control at all. Rent controls, rent stabilization, if anything, what that does is it creates a landlock. Once a tenant is in a rent-regulated apartment, they are unlikely to leave.

So if you moved into that three-bedroom apartment with a spouse and several children, you raised your children, you’re now a widow or widower, you’re alone in that three-bedroom apartment. You don’t need three bedrooms, a family that really could use three bedrooms would like that apartment, they have no access to it.

And you remain, I guess one could say, over-housed and while others remain under-housed. So, you know, just anecdotally, rent control does not seem to address the problems that it purports to be the cure for. In my mind, that means perhaps after 75 years of what is failure, maybe a new look needs to be taken.

And how would we really address these issues? Because rent control isn’t solving the problems.

Scott: Right. And certainly, more legislation that is akin to rent control would continue to not solve those problems, right?

Sherwin: Right. It’s just adding layer upon layer of non-cure to a pre-existing problem, it’s not being addressed. And, you know, in my mind, the issue is not the landlord income, it’s tenant ability to pay.

Scott: Right. Right.

Sherwin: I thought for a long time, “Why is housing treated differently than all of the other life essentials?” So certainly, medicine and medical care is important. We don’t address that by telling a doctor what they can charge. We address that by Medicare or Medicaid supporting, providing governmental financial assistance so those that cannot afford the medical care, get it.

Food. We don’t tell the grocery store owner, you can only sell the loaf of bread for XYZ dollars. For those that cannot afford the loaf of bread and need the loaf of bread and other vegetables and fruits to sustain themselves, we provide food stamps.

I think the real place to look is not taking what is a societal problem, affordability, poverty, and placing it on the back of one industry, the real estate industry. I think the real answer is to put money in the pockets of the people that need the essential product, housing, whether it’s giving it to the tenant so they can remit it to the landlord, or giving it to the landlord directly.

I think that’s how you address the issue. That raises…well, it’s the tenant advocates that always raises a third rail. The third rail is requiring tenants to prove need. But if the issue that we’re talking about is to try… We’re not looking to try to provide housing for the wealthy.

They can afford it. We’re looking to try to provide a path for housing to those that can’t afford the available housing stock, so whether it’s public housing, in New York City we have New York City Housing Authority, NYCHA, which is an utter disaster, but that’s the governmental program. We have Section 8, a governmental program.

We have other governmental programs in New York. We have something called Mitchell-Lama, which is another subsidized housing program where the government is assisting. What do all of those programs have in common where the government is going to shell out dollars? The tenant must establish need annually.

Scott: Right. And I would argue if a tenant does have need, it shouldn’t be that difficult to establish that if that’s what we’re trying to solve, right?

Sherwin: I’m not suggesting creating some administrative or bureaucratic monstrosity to make it impossible for tenants or difficult for tenants to prove need. I think it should be a streamlined, easy, verifiable method of providing need…of proving need, governmental support, and that provides a pathway to housing.

But taking what is this societal problem with the need for affordable housing and putting on the backs of a private industry, I’ve never quite understood. I mean, I’ve been doing this for a long time and I’ve never quite understood, other than the politics of it, that the landlords are an easy target.

Other than the politics of it, I’ve never understood the carved out for the real estate industry in providing…you know, addressing need in life’s essentials.

Scott: Absolutely. Kind of shifting gears a bit, because there is this bill, when we’re looking at it from an investor standpoint because that’s, you know, our show is all about multi-family investment, how do you think the passage of a bill like this might impact New York City properties and really investor interest in developing them?

Sherwin: Well, in New York, because we have so much rent regulations, about a million apartments that are subject to rent stabilization already, in 2019, the state legislature in New York passed what’s called The Housing Stability and Tenant Protection Act.

That act vitiated, repealed, or diminished virtually every avenue of profit in rent-regulated housing. So what had been a method of deregulating apartments was wiped out. Increases on turnover apartments, wiped out.

Increases for improving the apartment or the building diminished to virtually meaningless numbers. It meant that the non-regulated apartments became even more important for owners to be able to sustain properties. If you are now going to say, on top of what we already did to rent-regulated apartments, we’re now going to impose this upon world free-market units, I think owners in New York City are gonna have to take a real hard look at multifamily as a viable product.

The same act in 2019 tremendously restricted the conversion of rental properties into co-ops or condos. So if you buy properties and you are going to perpetually stay in a multifamily rental platform, it’s going to require a lot of pen to paper to figure out where’s the profit here?

Scott: Right. Right. And I think connected to that, I’m thinking about here in Chicago, many neighborhoods are pushing for revitalization. And multifamily development has really played a key role in that and investment has played a key role in that.

I’m curious, is this happening in New York, and could a bill like this slow or even derail much needed revitalization?

Sherwin: Well, in New York, much of the new building with affordable housing has been constructed under a…for the past decades, has been constructed under a tax abatement program called 421-a. Governor Hochul in her State of the State said that her view was that 421-a should be not what we use going forward.

But she proposed a new program which would incentivize the creation of affordable housing, regulate the percentage of apartments that were created that were affordable, but allow a certain number of apartments to be market-rate. If Good Cause Eviction were to take those market-rate apartments and effectively now make them regulated, that’s going to undermine what Governor Hochul just suggested as a means for creating affordable housing.

And I think rebuilding, the revitalization of neighborhoods that continues to be so needed, is going to be stymied.

Scott: Exactly. And this is why when you’re looking at legislation, you have to think about all the potential consequences and really take an earnest look at it and look at the landscape there, right?

Sherwin: Yeah. I mean, I feel often in New York, we have a very progressive legislature two houses the assembly in the senate both have super majorities of the democratic party which tends to be on the more progressive side. I sometimes think the housing advocates in the legislature take a very myopic view on what will be tenant protective but not, “Are we disincentivizing the creation of housing” or “Are we creating landlocking and excluding those in need of housing?” “Are we potentially rendering properties economically non-viable?” To not take a holistic look at this is i think is a disservice, ultimately not just to the owner class but to the tenant class as well.

Because if you keep on dumping on those that provide housing if you keep on ripping away any avenue of profit this is not conducted as a non-profit enterprise it’s a capitalistic profit intending enterprise. If you can take the word profit out you’re just not going to have the creation of housing at the end of the day that hurts the developer, but it certainly hurts those in need of housing. It just won’t exist right and the capital will go elsewhere. Quite frankly you know I certainly have clients of mine that particularly since the 2019 law was passed the words I keep hearing, “I’m looking in Florida” “I’m looking in Texas” “I’m looking to the Carolinas” “I can only be get beaten up so much in New York.” These are from developers that I’ve worked with from decades who are completely New York centric in their entire portfolios who for the first time are now saying i’m looking all over because i really don’t know that putting the capital into New York State and New York City in particular either in the short or long term makes sense for me.

Scott: So kind of considering then all of this as we look to the future what do you think the future may hold for landlords in New York City?

Sherwin: You know I’m hopeful after all I’ve said i know that sounds strange but I’m hopeful we have a new mayor Eric Adams who I mean he’s been in office three weeks so it’s hard to judge. But at least running for office in his initial statements he said he has said New York City is open for business It’s a very he’s not demonized the real estate industry that’s a very different approach than our prior mayor. Governor Hulkel has said the same things she understands New York City is the economic driver of the state. New York City has been beaten severely by COVID. New York City needs help. If we over regulate if we force capital to go elsewhere we’re not going to help this the recovery that’s needed. So i’m hopeful that some grown-ups have entered the room and that the grown-ups may explain again we understand the need for affordable housing. We understand the need for tenant protection. We understand the need to ensure services are provided tenants should not be harassed. Tenants should be able to raise complaints.

I represent owners but I’m completely in favor of that I’m not in favor of tenants not having rights their rights are sacrosanct and should not be interfered with. Of course but there is another side to the equation. The other side to the equation is rights and obligations. Both sides have obligations and you need to look at the totality of both sides rights and obligations to make the formula work. If you look at only one side the scales get so skewed on the one side you’re just going to unnecessarily or unwittingly punish the other side, and i think that’s what’s happening.

I’m hoping that the governor and the mayor can really flex some political muscle and say we can’t do this any longer.

Scott: Absolutely. Sherwin, thank you so much for joining me on the show today offering some much needed perspective and insights that maybe were missing from the original comedy piece there from the New York Times. Before i let you go where can our listeners go to learn more about you and your work specifically?

Sherwin: Well my law firm is Belken Burden Goldman LLP. Our website is Feel free to go there you will find out everything about me and my firm and if we can help you with any problems. Feel free to call.

Scott: Fantastic thanks again.

Sherwin: Thank you so much Scott. My pleasure.