New York City pension adopts tenant protection standards

The New York City Employees Retirement System (NYCERS), the pension fund for New York City employees, recently adopted a Responsible Property Management Standards (RPMS) Policy to support and encourage fair rental practices by investment managers with which the pension funds invest. NYCERS is one of the largest pension plans in the U.S. with over $83 billion in assets under management.[1] The effort was spearheaded by NYC Comptroller Brad Lander’s office, which oversees investments for NYCERS and other NYC pension funds.

The standards, which are modeled after the city pension plan’s Responsible Contractor Policy, “aim to improve the long-term quality and sustainability of residential rental real estate investments and reduce housing instability for residents.”[2] The standards were developed in consultation with eight of the largest investment and real estate managers, including Blackstone, Brookfield, Cerberus, and KKR.[3]

According to the Comptroller’s office, the current lack of standards exposes the funds to risks such as higher costs due to resident dissatisfaction, high turnover, and a growing number of regulatory and reputational challenges. The policy “provides assurance that the residential properties in which the Boards invest through diversified national portfolios are maintained and operated to a consistent standard of quality that provides expected financial returns, assures fair and equitable treatment of tenants, and enhances long-term value.”[4]

There are seven overarching Principles:

1. Implement consistent and fair tenant screening and selection practices.
2. Offer clear and fair leases; reduce undue burdens of security deposits.
3. Maintain safe, quality, accessible housing.
4. Foster positive tenant-landlord relations.
5. Honor tenants’ rights to free speech and free association.
6. Optimize tenant stability.
7. Minimize evictions and other negative exits.

Each principle is associated with one or more Standard Practices, which “represent the minimum expectations,” and Best Practices, “which are intended to provide a road map for managers “seeking to further elevate property management quality over time.”[5]

Some of the standards in the policy are:

Rent Increases

Standard Practice. Limit increases on one-year renewals of existing leases to no more than the 12-month change in CPI + 5%.

Best Practice: Limit increases on new leases to no more than the 12-month change in CPI + 5%. Provide relocation assistance to tenants unable to afford rent increases.

Fees

Standard Practice: The lease must not include hidden fees or other unfair or deceptive practices.

Best Practice: Ensure that any additional fees, such as those for pets, parking, and amenities, are not in excess of market rates.

Tenant Associations

Standard Practice: Commit to neutrality in tenant organizing and explicitly prohibit harassment and retaliation.

Best Practice: Recognize and negotiate with tenant unions/organizations.

Maintenance and Habitability

Standard Practice: Provide a user-friendly process for reporting, tracking, and resolving maintenance and repair issues.

Best Practice: Allow for repair deductions from rent under defined circumstances.

Additionally, there is a set of required public disclosures that “are designed to increase market transparency and enable prospective tenants to make more informed choices,”[6] such as:

• Rents for each property
• Code violations
• Average time to resolve maintenance requests
• Tenant exits by reason for move
• Eviction filing rate

NYCERS’ Responsible Property Management Standards Policy represents a landmark step by investors in acknowledging the serious problems that many tenants currently face and how investment managers can better address those problems.

[1]https://comptroller.nyc.gov/services/financial-matters/pension/asset-under-management/

[2] March 20, 2024 letter from NYC Comptroller Bureau of Asset Management Investment Committee to NYCERS trustees, https://comptroller.nyc.gov/wp-content/uploads/documents/03.20.2024-NYC-Employees-Retirement-System-Investment-Meeting-Agenda-Package-Public.pdf, p. 69

[3] March 7, 2024 TRSNYC Investment Meeting, https://youtu.be/fSKqCLswkBU?si=ne4nBc0rhG3kB3_1&t=5068

[4] March 20, 2024 letter from NYC Comptroller Bureau of Asset Management Investment Committee to NYCERS trustees, https://comptroller.nyc.gov/wp-content/uploads/documents/03.20.2024-NYC-Employees-Retirement-System-Investment-Meeting-Agenda-Package-Public.pdf, p. 69

[5] NYCERS Statement of Investment Policy for Responsible Property Management Standards, April 2024 https://comptroller.nyc.gov/wp-content/uploads/documents/03.20.2024-NYC-Employees-Retirement-System-Investment-Meeting-Agenda-Package-Public.pdf, p. 73

[6] Ibid