Residential apartment buildings are seen on July 26, 2022 in the Brooklyn borough of New York City.
Spencer Platt/Getty Images
Private equity firms have bought up hundreds of smaller apartment buildings in trendy New York neighborhoods.
Tenants, mostly in Brooklyn, are complaining about sharp rent increases and maintenance issues.
Institutional investors are a very small, but growing, slice of total home buyers.
Private equity firms have spent hundreds of millions of dollars over the last few years buying up smaller apartment buildings in gentrifying — or already gentrified — neighborhoods in Brooklyn and Queens.
One such firm, the Carlyle Group, has purchased more than 150 apartment buildings, largely in the trendy Bushwick and Bedford-Stuyvesant neighborhoods in Brooklyn, since 2020, The New York Times reported.
Other private equity-backed real estate investment companies, including Conway Capital and Peak Capital Advisors, have bought up a similar number of buildings in the Brooklyn neighborhoods of Bushwick, Bed-Stuy, and Williamsburg, and in Ridgewood, Queens. But it’s difficult to determine exactly how many buildings in the city are owned by private equity, as rental properties are often purchased by landlords of all types and sizes through shell companies.
Dozens of tenants in these buildings are concerned with sharp rent increases and slow response to maintenance issues they’ve experienced, the Times reported.
Smaller buildings in Brooklyn are particularly attractive to private equity firms because their apartments are in high demand in a very hot housing market, and they often have limits on property taxes and aren’t rent stabilized, according to the Times.
Private equity firms own a very small, but growing, fraction of American real estate. Institutional investors bought just three percent of homes sold in 2021, up from about one percent in previous years. Some argue that private equity, hedge funds, and other institutional investors are a convenient target and are being unfairly blamed for the nation’s worsening housing affordability crisis.
But the housing crisis in New York and elsewhere stems in large part from a housing shortage. Policies that prevent denser housing construction, including land use regulations, like zoning and building codes, have made it difficult for the supply to keep up with demand for housing.
The state legislature failed to pass New York Gov. Kathy Hochul’s package of housing policy reforms this year as Republicans and centrist Democrats opposed her plan to build more than 800,000 new homes, particularly around transit stations.
Democrats also couldn’t reach agreement on measures that would have boosted tenant protections, including rent stabilization and eviction protections. The governor opposed the “good cause eviction” measure and pushed for the extension of tax incentives for private developers. But Hochul signed a few executive orders last month to incentivize communities to build more housing and to allow more residential construction in Brooklyn’s Gowanus neighborhood.