New Yorkers like to complain. But when it comes to grumbling about the ever-increasing cost of rent in the Big Apple, they have every reason to do so. And private equity companies seem to be increasingly to blame.
Hundreds of smaller buildings are being purchased by wealthy investors throughout the five boroughs, raising new questions about New York City’s escalating housing issue. According to property records, private equity groups have recently spent hundreds of millions of dollars purchasing residences in rapidly gentrifying neighborhoods such as Ridgewood in Queens, Bushwick, and Bedford-Stuyvesant in Brooklyn.
Private equity firms, which manage investments on behalf of pension funds, endowments, and other significant sources of wealth, concentrate on properties or enterprises that they can purchase at a low cost but that have significant profit potential. They seem to have found the ideal terrain in NYC, given the city’s attractiveness and the fact that most rents are unregulated, and property taxes are frequently controlled, reducing an owner’s expenses.
According to PincusCo, a property records investigation based on information from a real estate information provider, Carlyle – one of the biggest private equity companies in the world – has purchased more than 150 buildings since 2020, most of which are grouped in the neighborhoods of Bushwick and Bedford-Stuyvesant. Several other private equity-backed companies, including Conway Capital and Peak Capital Advisors, have purchased around 150 other structures, according to property records.
Private equity’s entry into this market comes as local and state government authorities battle to develop laws to address the housing problem. Private equity investors initially came under fire in the years following the 2008 financial crisis for acquiring buildings with rent-stabilized units and actively attempting to evict residents in order to deregulate housing, hike rents, and squeeze out profits. Then, in 2019, New York State implemented tenant-friendly rent legislation that effectively prohibited the majority of forms of deregulation.
The growth has also sparked debate in Congress over whether the trend is exacerbating the country’s affordability issues. However, New York City housing seemingly remains a profitable business, particularly the smaller buildings that are mostly not covered by rent stabilization. It’s never a bad idea to take advantage of the Big Apple’s timeless charm – and profit opportunities.
