NYC's Rent-Controlled Apartments Partly Behind NYCB Issues, Analysts Question If $1 Billion Lifeline Enough To Avoid SVB-Like Collapse

With the average one-bedroom, 600-square-foot New York City apartment renting for about $3,760 per month, rent prices have stretched affordability for the city's residents.

It's no wonder politicians have sought to make housing more affordable in the city, but a policy aimed at doing so has been blamed, in part, for the struggles of New York Community Bancorp Inc. NYCB, which has seen its stock drop over 72% year to date.

NYCB has been hit with a double whammy. In 2019, a change in New York's law limited rent increases, which subsequently lowered profits for building owners. Combined with high interest rates, building debt and maintenance costs have soared without revenue growing at the same rate.

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"This is going to end poorly for the city because we’re all on borrowed time and someone has to pay," StoneCastle Partners CEO Joshua Siegel said.

Despite a $1 billion cash infusion in March by a group of investors, including former U.S. Treasury Secretary Steven Mnuchin's firm, NYCB's share price is plummeting.

In an interview with CNBC, Mnuchin shared his belief that "a billion dollars into the balance sheet really strengthens the franchise" and that "whatever issues there are in the loans we'll be able to work through."

However, not everyone believes the billion-dollar capital infusion in the business will be enough.

Whalen Global Advisors Chairman Chris Whalen said $1 billion is far from enough. 

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"We need 10," he said, adding that $1 billion is "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 took down Silicon Valley Bank.

Silicon Valley Bank was the second-largest bank collapse in U.S. history behind Washington Mutual's 2008 collapse.

In the span of a few days, its concentrated deposit base of tech startups with limited deposits insured by the Federal Deposit Insurance Corp. led to a fear-driven bank run, ultimately forcing the banks to shut down.

NYCB also has some concentration risk. According to The Real Deal, a real estate news provider, approximately 22% of NYCB's loan book is tied up in rent-controlled New York City buildings.

Yahoo Finance senior reporter David Hollerith writes that the scope of the problem is much worse. He said roughly half of NYCB's portfolio is tied to rent-controlled multifamily complexes in New York City.

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