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Moody’s Sees Limited Impact on Five-Year Freeze on NYC Apartment Rents
Just 6% of the 481 CMBS single-property multifamily loans in New York City would see credit metrics deteriorate to the point of default risk specifically due to a proposed five-year freeze on rent increases, Moody’s reported. However, the effect would vary across borrowers.
According to Moody’s, the decisive variable in predicting CMBS performance is unit mix. Buildings where fewer than half of units are rent stabilized are expected to see DSCR and debt yield improve through 2030 even under higher expense inflation, while those above the 50% threshold face the inverse.
That being said, Moody’s also noted that rent freezes would pressure cash flow at state housing finance agencies (HFAs) that finance multifamily properties and curtail a small portion of multifamily REIT operating income. “However, HFAs usually have strong project-level debt service coverage, loan-level credit enhancement, and program-level over-collateralization. Among the three multifamily REITs we rate with New York City multifamily investments, exposure to stabilized units in New York City is low.”
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- ◦Lease
- ◦Financing
- ◦Policy/Gov't
