Show notes
Independent documentary filmmaker and policy analyst at Reason Foundation, Jen Sidorova, joins us to discuss how rent control impacts tenants, landlords and the housing market. Her latest short film project, "Shabbification: The Story of Rent Control", reflects how rent control has a direct effect on housing quality. Almost half of rentals in NYC are rent-stabilized. We highlight the challenges faced by small property owners and the potential consequences of these regulations on the housing market. Bathtub in your kitchen, anyone? Yes, you read that correctly. In some cases maintenance has been deferred for so long that units have not been updated to code. Learn about the history of rent control and stabilization laws in New York. Resources mentioned: Show Notes: GetRichEducation.com/515 You can follow Jen on Instagram @jen_sidorova or check out her writing at reason.org For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text FAMILY to 66866 For advertising inquiries, visit: GetRichEducation.com/ad Will you please leave a review for the show? I'd be grateful. Search "how to leave an Apple Podcasts review" GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text 'GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Complete episode transcript: Automatically Transcribed With Otter.ai Keith Weinhold 0:01 Welcome to GRE. I discuss the effect that now lower mortgage rates can have how to get a strong return with private lending. Then, for this week's guest, she is a public policy expert with reason.com maker of a new film called Shabbification that spotlights the perils and even horrors of rent control in New York City, and she's a young Russian immigrant that lives in one unit of a Buffalo fourPlex and rents out the other three today on Get Rich Education. When you want the best real estate and finance info, the modern Internet experience limits your free articles access, and it's replete with paywalls and you've got pop ups and push notifications and cookies disclaimers. Oh, at no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life. See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor, and it's to the point to get the letter. It couldn't be more simple text, GRE to 66866, and when you start the free newsletter, you'll also get my one hour fast real estate course, completely free. It's called the Don't quit your Daydream letter, and it wires your mind for wealth. Make sure you read it. Text GRE to 66866, text GRE to 66866. Corey Coates 1:40 you're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education. Keith Weinhold 1:56 Welcome to GRE from Ankara,Turkey to Anchorage, Alaska and across 488 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich Education. Today's guest was one of four panelists at a conference that I attended recently. The panel was named innovative solutions to the housing crisis, and her story struck me as interesting, so I invited her to be on the show today, we'll learn that with rent control in New York City, when landlords cannot go inside their own properties and aren't allowed to sell their own properties, seven states have price ceilings on rents, and I'll tell you here At GRE we avoid investing in these places. Listen closely, California, New York, New Jersey, Maryland, Maine, Oregon, Minnesota and then DC too. Now sometimes rent control isn't too restrictive. For example, you can raise the rent no more than the rate of inflation plus 3% per year, or the rate of inflation plus 5% per year. And also, it's not all parts of those states where it applies. In fact, you typically do not find the policies statewide in those states that I mentioned, although you do in Oregon, it's statewide in Oregon, and there you can still raise the rent 7% plus the rate of inflation each year. And the good news is that 37 states actually have laws against rent control, specifically saying that you cannot enact it. So not only do 37 states not have it, they just wouldn't even allow a law for it. And there is a strong consensus, like I mentioned here on the show before, among economists that rent control, it reduces the quantity and quality of housing. Today, we'll focus on just how dilapidated rental units become under rent stabilization, which is a lot like rent control in New York City. And we'll discuss New York State and Buffalo. And by the way, I find something amazing. I mean, just say you would ask a question of any citizen of the world, no matter where they live, from Indonesia to Japan, to Bangladesh, to Nigeria to the United States. If you would just ask any citizen of the world, what is the capital of the world? I think that the best answer that you could come up with is New York City. I'm in the United States, and there are people right here in this country that have such little understanding of New York City, and what goes on there, and where it even is, it just amazes me. Maybe it's my own bias, because I'm a geography guy, but now, for example, to get from New York City out to Buffalo, that's an almost seven hour drive to the northwest two different parts of New York State. These are two very different places. We'll get into that shortly. But first in the wider real estate world, I did a little research since first mentioning this to you last week here, where mortgage rates have fallen fully one and a half points from the recent high. All right. Well, with every half point drop in mortgage rates, like I learned from First American, that's my source. With every half point drop in mortgage rates, about 1.1 million additional American households can qualify to buy an entry level home that's defined as the bottom 25% priced here. That's the number, and I checked their math. So with a full point drop in mortgage rates, then 2.2 million more American households can qualify to buy an entry level home. So we could very well have more buyers here soon, but yeah, when all these homeowners are still locked into three and 4% mortgage rates, I don't know that you're gonna have that many more sellers. So with demand exceeding supply, look for more upward pressure on home prices, especially higher values for those entry level homes that make the best rentals. Now, I'm talking about borrowing right there. And what happens when rates go down for mortgages, when they go down for borrowing? Well, rates on savings accounts, they typically fall as well. And this is a scenario that a lot of people expect. Now, most of my real estate activity is a borrower. I'm always here touting the virtues of how leverage builds wealth, and I know that I don't want to be a saver. So for my more liquid funds, I am a lender, and I'm reliably paid a stable 8% interest rate. And I think I've told you before that for years now, I make loans to real estate companies, and they use my funds to rehab properties and for other operations. Yes, an 8% return that I'm getting, and it's almost like getting an 8% yield on a savings account, and it's not expected to fall when interest rates fall. Well, the primary difference is that I often have to wait a few months if I want my full principal return, but not years. So it's not as rigid as a bank CD, but it's not as liquid as an old fashioned bank savings account. So the private real estate company that I've long made loans to works pretty diligently to maintain asset value and assure optimal returns. They'll tell you that they've never missed making a payment for their private money lending programs. And I did a little research, and I found that their fund utilization is 99.6% that really means that they deploy almost all of the capital if you want, you can potentially get a high yield at the same place I do. Sometimes you can get more than 8% or less than an 8% return, depending on what liquidity terms you want and what other terms you like. The company is Freedom Family Investments. They are real estate centric. If you want, go right ahead and learn more. You can do that by texting FAMILY to 66866. Remember, you're the lender, they're the borrower. And again, for most investment types, I want to be the borrower, but for liquid funds, and the fact that the rate of inflation is now down, an 8% return has a higher real yield now than it did two years ago and one year ago. And again, I'm happy to share it with you. It's Freedom Family Investments. If you want to learn more, do it now while it's on your mind and text FAMILY to 66866. This week, our guest is a public policy expert that's also involved with a film called Shabbification, the story of rent control. Hey, welcome to GRE Jen Sidorova. Jen Sidorova 9:16 Good to be here. Thank you for having me. Keith Weinhold 9:18 Yeah and congrats. Shabbification screening in a lot of places, like the Anthem Film Festival at Freedom Fest last month and this month in New York City, tell us about the film. Jen Sidorova 9:31 Yeah, so in Shabbification, I follow small property owners like myself who are subject to regulation, and most of them are owners of rent stabilized properties in the city of New York. Right, I follow three specific landlords. I They take me to their homes, they take me to their properties, and they show me around, and you can visually see what regulation has done to their property. Yeah, one of these properties was occupied by a tenant. From 1969 up until 2021 wow. And the landlord was never allowed to be in the property, so obviously no repairs were made. And you could see visually that the apartment was like from the 60s. It's like a museum, but not in a good way, because it's really falling apart, right? So it's like, almost like a Tenement Museum, or, you know, another museum New York City, where we they actually preserve those dates. But in this case, a private landlord actually owns that space, and they're having a difficult time. And so what my specific Shabbification With my film is about is a very specific regulation in New York City that happened in 2019 that applied to rent stabilized properties. What it did that is that it won't allow landlords to put them properties on the market even if they rent stabilized tenant vacates them. They're no longer allowed to put their properties on the market at all. And more than that, they are also not allowed to raise rent, even if they do repairs. So sometimes the cost of repairs in New York City for one bedroom unit can be 200,000 and they're only allowed to raise the rent by like roughly $90 a month, and only for 15 years. So it will take them, like, 200 years to recoup their investment. And obviously that doesn't make any sense, so stories like that is what my short film is about. I myself am a small property owner, so it was very special for me to go and kind of tell the story of people like me. Keith Weinhold 11:36 That's amazing. So rent stabilization something that New York City has a history of. I sort of think of that as a genteel term or rent control. And a lot of times when your rent can't be raised above a certain amount, you get these long term tenants, in some cases, for decades, and in this case, over 50 years, with this particular tenant in New York City and landlords don't have much of any incentive to improve property when rent control is in place, because they know they cannot get a commensurate bump in rent. Speaker 1 12:11 rent control and rent stabilization are a form of government enforced limit on the rents. And in New York we have two laws that govern that we have more but the most prominent ones are the rent control law of 1969 and the Rent Stabilization Act of 1974 so back in the day, there were issues with availability of affordable housing, and the government was trying to fix it, and that fix was supposed to be temporary. It was supposed to eventually run out once the tenants who were currently in place at the time in late 60s and 70s, once they move out, landlords were able to put those properties back on the market. And eventually, that's kind of what was going on up until 2019 when housing stability and Tenant Protection Act made it so that the landlords could no longer put their rent stabilized properties on the market anymore. So essentially, all rent stabilization became permanent in the state of New York, and actually, in the just a couple of weeks after my film, in April of 2024 we had another law. It's called Good Cause Eviction, and that one regulates every landlord or enterprise who owns more than 11 units. So once you own 11 units or more, you're subject to regulation. You can no longer evict your tenant without a good cause. And there's a bunch of other rules that apply, including the limit on how much rent you can raise year to year. So yeah, that's certainly what's going on. That's roughly the landscape all regulation in New York. Keith Weinhold 13:44 Yeah, some of this is really punitive, because if rent control comes into a market, that's one thing sometimes that landlords want to do. They want to sell their property, and in some cases, there's a roadblock against that. You know, Jen, I looked up the definition of Shabbification. I just simply googled the term. Urban Dictionary had one of the first hits, and fortunately, it was a G rated definition there in urban dictionary, it was defined as the opposite of gentrification. So therefore with Shabbification, it's where a neighborhood goes through deterioration and despair. So tell us about some more of those bad cases of deterioration, in despair, in Shabbification. Just how bad does it get? Speaker 1 14:30 Well, one of the properties that we went to was basically from 1910 it was in Chinatown, and we saw was that the bathtub was in the kitchen in that property, oh my gosh. And I believe that was a way for them to do renovations fast and cheap, like 100 years ago. And because that property falls under rent stabilization, and there's obviously limits on how much rent you can charge. So. Landlords of those properties never really make renovations. Sometimes you could see cases like the director of photography, who was in the film, he lives in a rent sabilized property, and in his case, he has a shower unit in his kitchen as well. Instead of a tub, he has a shower unit. And it kind of is, as he described as one of those telephone booths, like, you know, red telephone booths from London, and then kind of just sits in the kitchen, and you obviously cannot really have company or friends visiting or dinner or anything if you have something like that. But those are the setups that we frequently see. Also a lot of things like uneven floors or just, you know, the property, if it's not being taken care of, there might be, like, a hole in the wall, a hole in the ceiling, or the ceiling is falling out. And those are really graphic images. And we do, we do capture them on camera a lot in Shabbification, and that comes from, kind of, my attraction to urban decay. I do enjoy, you know, touring older buildings, or maybe buildings that are preserved as a ruin, maybe like an old pris…
Full show notes at the publisher 
Our TOPPODCAST Picks 
Stay Connected
