How the Credit Crunch Hits NYC Renters

You thought New York City landlords were notoriously greedy and aggressive? Wait till you see what private-equity companies get up to when they enter the space. Gretchen Morgenson reports:

In the last four years, developers backed by private equity firms have acquired almost 75,000 rent-regulated apartments, Mr. Dulchin said, or about 6 percent of the city's 1.2 million such units. Major private equity-backed participants in this market include Vantage Properties, which has partnered with Apollo Real Estate Advisors; the Pinnacle Group, a unit of Praedium Capital; and Normandy Real Estate Partners.
These companies often make clear that raising rents is crucial to their financial goals...
The New York City Rent Guidelines Board says the vacancy rate on rent-regulated apartments is 5.6 percent each year. Buildings with vacancy rates far higher suggest resident harassment, tenant advocates say.
Vacancy rates have risen above 20 percent in some buildings owned by Vantage Properties; in some Normandy buildings, the rates exceed 30 percent...
Vantage's debt service is an estimated $1,098 monthly on each unit, almost 50 percent more than the average rent.

I think this is partly private-equity companies simply being aggressive, and partly a change of plan forced on them by the credit crunch. When Vantage and the others bought these apartments, the negative carry was not much of an issue: they could refinance easily and cheaply as necessary, and over the long term the returns are likely to be very good. But now refinancing is much more expensive and often impossible, which means that Vantage risks losing the apartments unless it can make its monthly nut. And to do that, it needs to get rent-regulated tenants out, and market-rate tenants in.