In June, the state of New York passed a bill that changed current rent laws and introduced new rules for tenants and landlords. Due to the significance of these changes, the effects of the bill requires those relocating to New York City — both from within and outside of the US — to review their expectations before making the move.
How Will New Yorkers (Present and Future) be Impacted?
The biggest impact on tenants will come from the portion of the bill that stipulates New York landlords can now only collect one month’s rent and security deposit for any new tenant. In the past, our agents have been able to use extra security deposits as a way to mitigate the landlord’s exposure, but this is no longer an option, as the new law has taken away the landlord’s protection if the tenant were to stop paying rent.
These new laws mean that in New York, tenants’ credit reports have now become as important as the income requirement for housing. For those relocating domestically with a credit score less than 700, or for new hires and foreign nationals with no US credit history, this means that they may run into qualification problems when looking for a place to live.
Those relocating domestically with a credit score over 700 will not experience any qualification problems. If their credit score is between 670 to 700, their housing options will be severely restricted. They will likely need a personal guarantor or have to purchase rental insurance from Insurnet, The Guarantors, or Rhino.
However, it’s important to note that not all landlords accept these rental insurance providers,and the landlord is not obliged to accept a tenant simply because they have an insurance policy.
Costs for insurance are in addition to first month’s rent, one month security deposit, and the broker fee. If the transferee has to purchase this insurance, there is a one-time charge. This charge can range from one month’s rent for domestic transferees, to 1.25 times one month’s rent for foreign nationals.
For foreign nationals moving to the US, they need to understand landlords may expect them to purchase additional rental insurance, and that it will cost them 1.25 times one month’s rent. For example, if the monthly rent is $2,000, the insurance cost will be $2,500.
Landlords’ reaction to the new laws is split. Since the new law makes it harder to evict someone, most landlords are less willing to take risks. We’re seeing that about one-third of landlords will require insurance. One-third will take high-net worth transferees with no credit history for one month’s rent and security deposit. And one-third are case by case. They may take the deal for one month’s rent and security deposit with no credit history, but it depends on other factors like assets in the US, the length of the job, the time of year, how long the property has been on the market, among others.
We’re also seeing that many renters are turning to their employers to pick up this cost at the last minute. It’s crucial that transferees understand that if they have credit issues, or no credit at all, it can be challenging to secure housing, and they may be required to purchase renters insurance.
If they have a credit score below 670, one of the few options transferees have is to choose a co-living space that will not check their credit.
With the new rent stabilization laws, bad credit becomes a significant obstacle. For anyone moving to New York, it’s key that they have a credit check run in order to have a complete picture of their credit history. They should then share their score with their agent so they can match them with the proper solution.
While the new laws require some adjustments, Dwellworks will continue to work with our partners to identify landlords who will work with foreign nationals without the extra cost of guarantor programs.
We will keep our clients updated on other observed market trends, as landlords are just starting to react to these new regulations, and we expect ongoing changes.
Updated on 8/19/2019