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Effects of financing constraints on maintenance investments in rent-stabilized apartments

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  • Seltzer, Lee

Abstract

This paper studies whether financing constraints adversely affect renters by reducing maintenance. Consistent with a sensitivity of maintenance to financial resources, housing code violations increased after a change in the law that effectively decreased cash flows available to maintain some rent-stabilized buildings in New York City. The effect is most severe when financing constraints are present. Moreover, results of panel regressions using a dataset of 45 cities obtained with Freedom of Information Act (FOIA) requests are consistent with a hypothesis that buildings with higher LTV ratio mortgages have more code violations. Together, the results provide evidence that financing constraints reduce maintenance, an outcome that exacerbates the unintended consequences of rent control.

Suggested Citation

  • Seltzer, Lee, 2024. "Effects of financing constraints on maintenance investments in rent-stabilized apartments," Journal of Financial Intermediation, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:jfinin:v:59:y:2024:i:c:s1042957324000317
    DOI: 10.1016/j.jfi.2024.101103
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    More about this item

    Keywords

    Corporate finance; Commercial real estate; Housing code violations;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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