Housing Affordability is in the Mind of Observer

The release of a recent report by the Center for Housing Policy highlights one of the themes of this blog — what does housing affordability mean. The report, entitled “Losing Ground: The Struggle of Moderate-Income Households to Afford the Rising Costs of Housing and Transportation”, looks at the combined cost of housing and transportation as a percent of income in the 25 largest metropolitan areas in the U.S. In general, the report finds that housing and transportation costs since 2000 rose faster than the increase in income, creating greater burdens for moderate income households. Interestingly, by including transportation costs as well as housing costs, the report finds that the metro areas with the highest housing costs do not necessarily have the highest combined burdens. For example, New York, San Francisco and Boston “are some of the least affordable regions for local moderate-income households when just housing is considered but are among the most affordable when housing and transportation costs are considered together.”

Despite the Report’s focus on overall rising housing burdens, the Wall Street Journal (WSJ) focused on a different angle headlining its press coverage of the report “Despite Pricey Image, New York Affordable for Middle-Income Families”. The WSJ honed in on the report’s finding that middle-income families across the country could spend as much as 69% of their income on shelter and transportation while New York middle-income families spent just over 50% of income on housing and transportation. The WSJ coverage also emphasized that New York would be the fifth least affordable place to live based on housing costs alone but jumps to the 10th most affordable when housing and transportation costs are counted together.

Of course, there are several other caveats that need to be considered in evaluating this study. First, the metro areas considered in this study are defined by the Federal government and contain much larger areas than we would generally consider. The New York metro area, for example, contains portions of New Jersey, Pennsylvania, and Long Island which means that the overall transportation costs measured are much higher than they would be for New York City alone. In other words, housing burdens in central cities with effective mass transit systems, such as New York City, are much lower than indicated by the metro area data.

Looking just at housing costs as percentage of income, it is worth noting that nine of the 25 metro areas have housing burdens of 30% or more of income. Only one metro area has housing costs of less than 25% of income. As I have previously noted, housing costs as a percent of income are rising and the 30% percent standard which is often used to evaluate housing burdens is quickly becoming a relic of the past.

Finally, the Report makes the point that the overall reported numbers do not apply to specific neighborhoods within the metro areas. In New York, for example, we know that affordable housing for moderate-income families is much more prevalent in the outer boroughs than it is in the Manhattan core. It is equally true that such overall findings apply to all moderate-income households. Some households may choose to pay more than they need to for rent to obtain the benefits of location or housing quality.

                                             – Jack Freund, Executive Vice President, Rent Stabilization Association 

(Views and opinions expressed are those of the author and do not necessarily reflect the policy or position of the RSA.)

 

Additional Sources:

Why Downtown’s Cool to Rent Control

Here’s an interesting piece by the Post’s Steve Cuozzo commenting on an issue raised in a recent Wall Street Journal article regarding rent stabilization coverage in the Financial District.

It seems that old-line tenant advocates, steadily losing their traditional constituency, are looking for new constituencies to support rent stabilization. The advocates are failing to find support in FiDi for the same reason they are losing support in the outer boroughs– in most of the City there is little difference between market rents and regulated rents.

                                            – Jack Freund, Executive Vice President, Rent Stabilization Association 

(Views and opinions expressed are those of the author and do not necessarily reflect the policy or position of the RSA.)

 

Why downtown’s cool to rent control

By Steve Cuozzo, October 12, 2012

It’s great news to most New Yorkers that the Wall Street area has become one of the city’s best places to live — evidenced by a Financial District population that’s nearly doubled to 57,000 since 1999 and will soon hit 60,000.

Just about every apartment that comes to market is swiftly snatched up. People love the new FiDi — anchored by the country’s healthiest office market, now also throbbing with families, shops and amenities.

It’s so popular that the rental apartment vacancy rate is below 1 percent.

But to “tenant advocate” reactionaries, the picture is bleak.

Now a family-friendly ’hood: Crossing the street near Battery Park.

Why? Well, tenants there won’t fight to have their market-priced apartments rent-stabilized.

Paul Newell, a Democratic district leader who is trying to inflict rent-stabilization on thousands more apartments downtown, whined to The Wall Street Journal last week that a mere 10 residents responded to his campaign.

Stabilization, the ruinous residue of World War II-era “emergency” rent-control law, to this day warps the city’s housing scene by keeping 1 million apartments effectively off the market — sometimes for decades.

A 2010 court ruling left some 5,000 more downtown units potentially subject to stabilization (on technical grounds involving landlord receipt of a tax benefit). But to win stabilized status, tenants must prove an “overcharge” to the state Department of Homes and Community Renewal or sue their landlord.

Newell, a leftist activist who sued the NYPD over “illegal” arrests (including his own) involving Occupy Wall Street’s Zuccotti Park takeover, is dismayed that FiDi residents haven’t taken up the rent cause in droves.

To explain it away, he absurdly claims the area is full of short-term residents who just have no interest in trying to reduce rents long term. Community Board 1 member Tom Goodkind echoed him, “Our area has always been quite transient,” and lamented, “We don’t want 15 college kids crashing in an apartment. We want people to hunker down and stay.”

Newell and Goodkind claim that people don’t stay long because it’s a lousy place to live lacking “basic trappings” like grocery stores.

Huh? What neighborhood are these guys talking about?

A 2009 poll by the Downtown Alliance found two-thirds of respondents had lived in the district for five years, and most intended to stay. More recent data from the Alliance show a median FiDi household income of $143,000 and average household income of $188,000. Some bunch of student drifters.

If FiDi were a transients’ camping ground, would Rose Associates spend a half-billion dollars to convert 70 Pine St. into a luxury address with 750 apartments at the highest rents in the area’s history?

Food shortage? The area’s proliferating choices range from huge new 55 Fulton Market to supermarkets to scores of gourmet shops.

Well, then — if it’s laughably false that residents want to bolt as soon as they can, why are they failing to fight for rent stabilization?

For one thing, the gap between market-rate and stabilized rents in the area is so small as to make the time and legal fees to seek stabilization not worth the struggle.

But there might well be a deeper explanation — anathema to activists who’d turn the clock back:

Maybe young, affluent residents dwelling amidst capitalism’s nerve center don’t buy into the culture of housing dependency and subsidy that animates “make our landlord beg” activists.

Very possibly, unlike 1960s rent-strike leaders, they recognize greater value in a building priced by the law of supply and demand.

Just as possibly, they understand that lower rents compromise a landlord’s inclination to provide the best service and maintain properties in the best condition.

And they love Downtown the way it is — striving and growing with no need for help from “advocates” whose day is long over.

Source: New York Post

Upper West Side and Lower East Side Historic Districts Will Increase Costs and Raise Rents in Hundreds of Rental Buildings

East Village–Lower East Side Historic District approved by Landmarks

October 09, 2012 03:30PM

The Landmarks Preservation Commission today approved slightly modified version of the East Village/Lower East Side Historic District, according to a press release issued by the Greenwich Village Society for Historic Preservation. The territory covers 330 buildings across 15 blocks bounded by Avenue A and the Bowery and St. Mark’s Place and 2nd Street.

According to the release, the historic district was expanded to include structures such as the Russian Orthodox Cathedral at 59 East 2nd Street and the Magistrate’s Court at 32 Second Avenue, which now operates as the Anthology Film Archives.  As Crain’s reported earlier today, other structures in the district include the firmer Fillmore East concert venue and the German Evangelical Lutheran Church.

The landmarking came as an effort made by preservation groups to preserve the character of the East Village. The decision comes as NYU will expand its campus just west of the district. — Zachary Kussin

 

 

City Council approves UWS historic district

October 04, 2012 

 

The City Council’s Landmarks committee has approved an expansion of the Upper West Side’s historic district. The district will expand to include blocks between Broadway and Riverside Drive, between 79th and 87th streets. It is one of several proposed expansions of the historic districts on the Upper West Side. The City Council, in a full vote, is expected to approve the expansion, okayed by the Landmarks Preservation Commission, as well.

Property owners within the district will now have to get changes to their buildings approved by the Landmarks Preservation Commission, the city agency that deals with renovations and changes to landmarked buildings, as well as designates landmarks and historic districts.

 

Source: The Real Deal

Rents Rise as Real Estate Tax Burdens Increase

Burden Heavy on Landlords of Multifamily Apartment Buildings

By Daniel Geiger 10/09

Real estate taxes have long been a source of ire for landlords in the city.

The city’s assessment process for commercial buildings has continually bumped up valuations for office buildings citywide over the past decade, interviews with real estate professionals and a review of data show. The result has been that tax collections on the industry have risen from about $4 billion in 2001 to $7.6 billion today, all while the tax rate—a number that is politically sensitive and which officials hence are loath to trifle with—has remained essentially the same, real estate analysts insist.

The situation has left many landlords feeling like the city’s golden goose for revenue. Even while real estate values plummeted during the recession, taxes on the industry continued to rise, or at best, remained stagnant but never retreated.

The issue is perhaps even more pronounced for residential property, where landlords of multifamily rental apartment buildings say they are being unfairly saddled with the brunt of the tax burden as compared to co-ops, condos and single family homes. Even a back-of-the-napkin calculation would appear to show that something is indeed awry in the way the city assesses such buildings.

Take a notable co-op building such as The Dakota, a storied residence on the Upper West Side where apartments routinely sell for millions of dollars. The building in 2012 was valued at a paltry $65 million, at least a tenth of what most real estate experts say a true valuation of the building should be and well below what the city would appear to assess a comparable rental building.

“When you look at a number like that, it really does look like it was cooked up,” Eric Olson, a tax attorney with the firm Akerman Senterfitt told The Commercial Observer.

In general co-ops and condos pay about $10 to $12, most landlords say, while rental buildings meanwhile pay far higher taxes in the $20s per square foot. Members of the real estate industry say the inequality is baldly political, a move by officials to avoid saddling properties where the tax burden is transparent and sticking the bill on rental properties—which charge rent and where most tenants aren’t aware of the percentage of it that goes to taxes.

“If you started raising taxes on co-op and single family homes there would be tremendous political repercussions,” one residential landlord said. “So instead the city puts it unfairly on rental buildings where tenants don’t know what the taxes are. It’s gotten to the point where taxes account for 30 percent of rent.”

Source: The New York Observer

Here’s a shocker: New Yorkers Unfazed by High Rents!

Rent too damn high? New Yorkers don’t care

A surprising new survey has revealed that New Yorkers are unfazed by the city’s sky-high rents.

While the rest of the country’s apartment dwellers cite rent is the number one factor in deciding what and where to rent, residents of the Big Apple rank it just seventh in the survey by Rose Associates, the New York-based real estate firm.

Throughout the year, Rose works with research group Kingsley Associates to track the satisfaction of residents living in their buildings and to track a number of performance metrics. Rose then compares the findings to the Kingsley Index, which is based on surveys at over a million apartment units in the U.S.

“While we do this survey to ensure we’re providing the best service possible to our residents, it’s sometimes fun to look at the secondary data that’s gathered,” said J. Brian Peters, chief operating officer of Rose.

“In a city where the average one bedroom apartment rents for north of $3400 a month, it is interesting to learn that rental rate is not the renter’s chief concern.”

Other findings uncovered by the survey:

• New Yorkers are three times more concerned with an apartment’s floorplan than their national counterparts.

• The quality of property management is more than twice as important to New Yorkers as it is to renters outside of New York.

• When asked for the strongest factor when deciding to renew or not renew a lease, 67% of New Yorkers cited location of a building and just 26% cited the cost of renting in a building.

• New York renters especially value apartment features and finishes — these attributes are 10% more important to New Yorkers than their national counterparts.

• New Yorkers don’t like to move; the bother is more of an issue than the rent they pay.

Rose has been conducting its surveys since 2007. So far this year,  8,000 have been given to residents in Rose-managed properties.

For the first time, Rose is also surveying tenants in buildings it manages in Brooklyn and Westchester County, areas where the company is increasing its activities.

 

Source: Real Estate Weekly

From San Francisco, a foreshadowing of the debate on tiny apartments that has not yet taken place in NYC

San Franciscans Divide Over Pint-Size Apartments

By MALIA WOLLAN
Published: September 26, 2012

 

SAN FRANCISCO — This city of sprawling Victorian homes and expansive harbor views has erupted into a fight over itty-bitty apartments.

On Tuesday, the Board of Supervisors had been scheduled to vote on proposed legislation to change the building code to lower the minimum size for apartments, allowing developers to build so-called micro-units as small as 220 square feet.

But amid a fierce debate over housing set off by the micro-apartment proposal, lawmakers chose to postpone the vote until November.

An artist's concept of a 300-square-foot apartment proposed for San Francisco.

“We have a housing affordability crisis here; rents are through the roof,” said Scott Wiener, the city supervisor who introduced the legislation and who says tiny apartments will help provide affordable housing to single people, students and the elderly. While the city’s affordable housing advocates agree that there is a crisis, many feel the micro-apartments will only exacerbate the problem by catering to the young, high-tech set, further driving up rental prices.

Opponents of the legislation have even taken to derisively calling the micro-units “Twitter apartments.”

The proposed change in the building code comes at a time when the city is already deep in the throes of an identity crisis brought on by an influx of technology workers from across the globe. In recent years, several large technology companies, including Twitter and the online game company Zynga, have chosen to locate their headquarters in the city’s urban core, eschewing more suburban Silicon Valley locales. The higher-earning newcomers have contributed to rapidly rising rental prices.

The average rent for a studio apartment in the city is $2,126, an increase of 22 percent since 2008, according to RealFacts, a company that tracks apartment rental data in cities across the country.

Mr. Wiener estimates that the rent for a micro-apartment will be $1,200 to $1,500 per month. The legislation would allow only new buildings to include the 220-square-foot apartments.

“What San Francisco really needs is affordable family housing,” said Ted Gullicksen, director of the San Francisco Tenants Union. “This is not family friendly. This is aimed at tech workers and those who need a crash pad.”

Proponents like Mr. Wiener say the units are not intended for those in the technology industry and point instead to the growing population of people living alone. Nearly 40 percent of residents here live by themselves, the census has found.

But such cramped quarters — about the size of five Ping-Pong tables — worry tenants rights advocates.

“Are we saying it is acceptable to box people up in little tiny spaces?” said Tommi Avicolli Mecca, director of counseling at the Housing Rights Committee, a nonprofit organization. “What standard are we setting here?”

Similar small-studio proposals are being considered in urban areas across the country. New York City recently approved a 60-unit pilot project containing apartments as small as 275 square feet. San Jose, about 60 miles south of San Francisco, already allows 220-square-foot units. Cities like Seattle, Chicago and Boston have also experimented with such units.

Internationally, cities like Paris and Tokyo have long been known for their pint-size pads. But in recent weeks housing authorities in Singapore, a hub of dense development, limited new small apartments to encourage developers to build more diverse and family-oriented housing.

“Units of this size already exist in the city,” said Tim Colen, director of the San Francisco Housing Action Coalition, a group that supports the micro-unit legislation. “And we think these small units are a logical, necessary response to an extremely high-cost housing market.”

 

Source: New York Times

RSA President Joe Strasburg responds to the City Comptroller’s recent report on rising rents in Crain’s New York

Letters to the Editor: The truth about rents

City comptroller’s report misleads on housing-cost burden

 

The city comptroller’s recent report on rising rents (“High rents hitting middle-class New Yorkers,” CrainsNewYork.com) slices and dices the statistics to erroneously make it appear that rent burdens in New York City are higher than elsewhere and, unbelievably, to suggest that middle-class renters have greater housing affordability problems than poor renters.

First, New York’s rents have been rising along with rents in the rest of the country to the point where a majority of renters in New York and nationally pay more than 30% of income for rent, making the 30% limit an outdated standard. (Some of your readers may recall that the federal government used to define paying more than 25% as unaffordable.)

Second, a large part of the rise in rents is the direct result of the increase in government levies for real estate taxes and water and sewer charges, yet the comptroller does not suggest restraining those increases as a way to rein in rising rents—perhaps because Comptroller John Liu, as a city councilman, voted for two midyear real estate tax increases. Nor does he suggest that zoning and other restrictive regulations raise the cost of housing.

Third, when gauging affordability, the comptroller’s report fails to consider that many renters willingly pay more than 50% of their income in rent for the privilege of living in core Manhattan or highly desirable outer-borough neighborhoods (or to consider the 1 million college students who are paying rent with little or no income).

There is a clear need to expand the supply and contain the costs of housing in New York City, but exaggerating the scope of the problem while ignoring root causes does not foster the rational discussion we need.

 

— Joseph StrasburgPresident 
    Rent Stabilization Association

 

Source: Crain’s New York