Moody’s Analysis Suggests Most N.Y.C. Landlords Could Weather Proposed Rent Freeze
A proposal to freeze rents on New York City’s nearly one million rent-stabilized apartments has become one of the most contentious housing debates in the city, with landlords warning of financial distress and tenant advocates arguing for relief from rising costs.
Now, a new analysis from the debt-ratings firm Moody’s is adding another perspective to the discussion.
Released Wednesday, the report examined what could happen if rents on stabilized apartments remained unchanged for five years. It found that only a relatively small portion of landlords, about 6 percent, would face a heightened risk of mortgage default under that scenario.
“We’re talking, incrementally, something very small,” said Darrell Wheeler, the head of commercial mortgage-backed securities research at Moody’s and the report’s lead author.
The findings arrive as the city’s Rent Guidelines Board weighs whether to approve a rent freeze. The independent board, which sets annual rent increases for stabilized apartments, left that option on the table during a preliminary vote in May and is expected to make a final decision later this month.
If enacted, the freeze would rank among the most restrictive rent caps in the country. The policy would affect more apartments than exist in San Francisco and Miami combined and would allow Mayor Zohran Mamdani to fulfill one of the central promises of his campaign early in his tenure.
The analysis was prompted by questions from investors concerned about how a prolonged rent freeze could affect the financial products tied to apartment-building mortgages.
Wheeler said investors specifically wanted to understand whether the proposal could lead to lower bond ratings.
“I don’t think we’re going to see downgrades due to this action.”
To conduct the study, Moody’s reviewed approximately 481 loans tied to apartment-building owners across New York City. Those loans cover about 42,400 apartments, of which roughly 43 percent are rent-stabilized. Wheeler said he believes the sample broadly reflects the city’s housing market.
The mortgages are packaged into commercial mortgage-backed securities, investment products that bundle loans secured by properties such as apartment buildings, offices, restaurants and shopping centers. Investors purchase bonds backed by those loans, and their performance depends in part on borrowers continuing to make mortgage payments.
Moody’s examined how those bonds would perform if rents remained frozen for five years. The firm concluded that most owners would likely continue meeting their obligations, largely because many landlords have sources of revenue beyond rent-stabilized units.
In many cases, owners can still raise rents on market-rate apartments within the same buildings or elsewhere in their portfolios, helping offset revenue lost from a freeze on stabilized units.
The report found landlords would generally become vulnerable to default only if building income was insufficient to cover debt payments or if owners lacked the resources needed to refinance their loans.
Wheeler acknowledged that Moody’s focuses on highly rated bonds and that the analysis may not fully capture riskier situations.
He also cautioned that some property owners could still experience financial strain.
There would be “some economic pain for some of these landlords,” he said, particularly for owners whose portfolios consist entirely of rent-stabilized apartments.
Landlord groups quickly challenged the findings.
The New York Apartment Association, an advocacy organization representing property owners, argued that the report relies on a narrow segment of the housing market, including newer buildings that are often part of larger portfolios and may benefit from city tax incentives.
According to Kenny Burgos, the association’s chief executive, the analysis does not adequately reflect the conditions faced by owners of older, smaller buildings, particularly outside Manhattan, where landlords may have fewer financial resources and less access to government assistance.
“If a freeze moves the needle on the strongest players in our market, just imagine what it does to the most vulnerable buildings. This is a warning, not reassurance.”
Property owners have repeatedly argued that a rent freeze would come at a time when operating costs continue to climb. They point to increases in insurance premiums, property taxes and maintenance expenses, saying those pressures already make it difficult to maintain buildings.
Some landlords have also said they are leaving apartments vacant because renovation and repair costs are too high to justify returning units to the market.
Mamdani has countered that the city could provide relief through measures such as subsidizing insurance costs. He has also suggested allowing financially distressed owners to raise rents on certain vacant apartments that are not rent-stabilized but remain subject to affordability agreements with the city.
The Moody’s report is unlikely to settle the broader political debate. But it offers a more measured assessment than the dire predictions advanced by some opponents of a freeze, suggesting that while certain landlords could face hardship, widespread mortgage defaults would be unlikely under the scenario examined.
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at moumita.b@thenationaldigest.com.
