Since the average rent for a 600-square-foot one-bedroom apartment in New York City is about $3,760 per month, rental prices have outpaced affordability for the city’s residents.
It’s no wonder politicians have tried to make housing more affordable in the city, but policies aimed at doing so are partly blamed for the city’s difficulties New York Community Bancorp Inc. (NYSE:NYCB), whose shares have fallen over 72% since the beginning of the year.
NYCB was hit with a double whammy. In 2019, a law change in New York limited rent increases, resulting in reduced profits for building owners. Combined with high interest rates, construction debt and maintenance costs have skyrocketed without a corresponding increase in revenue.
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“This is going to end badly for the city because we’re all on borrowed time and someone has to pay,” said Joshua Siegel, CEO of StoneCastle Partners.
Despite a $1 billion cash injection in March from a group of investors including former U.S. Treasury Secretary Steven Mnuchin’s firm, NYCB’s stock price is plummeting.
In an interview with CNBC, Mnuchin shared his belief that “a billion dollars on the balance sheet really strengthens the franchise” and that “any problems with the loans we can solve.”
However, not everyone believes that the billion-dollar capital injection into the company will be enough.
Chris Whalen, chairman of Whalen Global Advisors, said $1 billion is not nearly enough.
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“We need 10,” he said, adding that $1 billion was “chump change” in this situation.
Last March, NYCB bought the assets of Signature Bank, which was caught up in the 2023 regional banking crisis that brought down Silicon Valley Bank.
Silicon Valley Bank was the second-largest bank failure in U.S. history, following the collapse of Washington Mutual in 2008.
Within days, the concentrated deposit base of technology startups with limited funds covered by the Federal Deposit Insurance Corp. insured deposits led to a fear-driven bank run that ultimately forced the banks to close.
NYCB also poses some concentration risk. According to The Real Deal, a real estate news provider, about 22% of NYCB’s loan portfolio is tied up in rent-controlled buildings in New York City.
Yahoo Finance senior reporter David Hollerith writes that the scale of the problem is much worse. He said about half of NYCB’s portfolio is tied to rent-controlled multifamily complexes in New York City.
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This article, “NYC’s rent-controlled apartments partly behind NYCB woes, analysts wonder if $1 billion lifeline is enough to avoid SVB-like collapse” originally appeared on Benzinga.com
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