Governor Cuomo Wastes $6 million in Unnecessary Effort to Protect Tenants

The RSA has just gotten its first look at the some of the ultimate outcomes of the investigations launched by the Tenant Protection Unit (TPU) created by Governor Cuomo within the State Division of Homes and Community Renewal (DHCR) and it’s not a pretty picture.

The RSA received copies of three “Notices of Audit Determination”, each of which involved Individual apartment rent increases (IAI). In each of these cases, the TPU disallowed certain expenses claimed by the owners either because they were not adequately documented or were not considered to be eligible expenses. In each case, the TPU recalculated the legal regulated rent and directed the owner to amend prior rent registrations to reflect a lower legal rent. And, in each of these cases, the actual rent paid by the tenant was not affected because the owners were charging preferential rents which were lower than the legal rent as calculated by the TPU.

These cases raise some serious issues about the justification and the role of the TPU. If the $6 million allocated to the TPU this year alone was intended to protect tenants, then the evidence so far seems to indicate an extraordinary waste of taxpayer dollars because the TPU audits in no way benefitted the tenants in occupancy. However, we suspect that the real purpose of the TPU was to hamstring owners and lay a foundation for further rent restrictions and the TPU is well on its way to meeting that goal. A schedule of allowable costs of IAI’s has never been promulgated and owners must now operate in unchartered waters. We encourage owners to maintain a detailed record of all IAI work going forward including contracts, invoices, receipts and cancelled checks as well as before and after pictures.

If You Live in New York and You Rent, You’re Paying a Huge Tax You Don’t Even Know About

By Business Insider

If you live in New York City, you probably know that your income taxes are high. A combined city and state tax rate of 10.4% kicks in at just $22,000 of taxable income for a single person.

You probably don’t know that New York City has some of the country’s highest taxes on apartment buildings—and if you’re not subject to rent control, much of that cost is flowing through to you as a renter.

Not all property taxes are high here: New York actually has very low taxes on owner-occupied homes. Our property tax system is a perverse cross-subsidy from relatively poor renters to relatively rich homeowners.

If we just taxed all property at the same rate, apartment building taxes would fall by $1,000 to $1,500 per unit.

Here are a few charts that show just how bizarre New York’s tax system is, and how renters are getting screwed.

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Who Says New York Is Not Affordable?

By 

One of the first things you learn when living in New York is that what qualifies as wealthy somewhere else seems barely middle-class here. On the Upper West Side, where I live, it’s hard not to feel as if Manhattan is impossibly expensive for young professionals. The average nondoorman, one-bedroom apartment in the neighborhood rents for about $2,500 a month. Oatmeal-raisin cookies at Levain Bakery cost $4 each. A pair of sensible, unstylish walking flats from Harry’s Shoes can set you back $480. I suppose, by comparison, that the $198 chef’s menu at Jean-Georges doesn’t sound so ridiculous.

New Yorkers assume that we live in the most expensive city in the country, and cost-of-living indexes tend to back up that assertion. But those measures are built around the typical American’s shopping habits, which don’t really apply to the typical New Yorker — especially not college-educated New Yorkers with annual household incomes in the top income quintile, or around $100,000. According to a recent study by Jessie Handbury, an economist at the University of Pennsylvania’s Wharton School, people in different income classes do indeed have markedly different purchasing habits. That may not be surprising, but once you account for these different preferences, it turns out that living in New York is actually a relative bargain for the wealthy.

While compiling her research, Handbury looked at Nielsen shopping data for 40,000 American households, across more than 500 food categories, with details on everything from organic labeling to salt content. Remarkably, she found that for households earning above $100,000, grocery costs are 20 percent lower in cities with a high per-capita income (like New York) than in cities with a low per-capita income (like New Orleans). There’s evidence that the same forces hold true for other products that cater to upper-income people, from high-end retail to beauty services. The average manicure, for example, is about $3 cheaper in New York City than in each of the rest of the top 10 biggest cities in the United States, according to Centzy, a company that collects data on the prices of services.

Part of the reason high-income residents get good deals, Handbury explains, results from a particular economic system. Highly educated, high-income New Yorkers are surrounded by equally well-educated and well-paid people with similar tastes. More vendors compete for their business, which effectively lowers prices and provides variety. There’s also a high fixed cost to distributing a niche product to an area; if there’s more demand for that product, then the fixed cost can be spread across more customers, which will justify bringing the product to the market in the first place. That’s why companies go through the expensive hassle of distributing, say, St. Dalfour French fruit spreads in rich cities but not in poor ones and why New York can support institutions like the Metropolitan Opera.

Of course, not everything that wealthy New Yorkers spend money on is cheaper here. Housing, after all, is absurdly expensive, even for the rich. Complex zoning regulations and limited land make it all but impossible for supply to grow alongside demand. Still, it’s somewhat unfair to compare housing costs here to those in a place like Buffalo, or even Atlanta, since perks like access to amenities and unusually lucrative jobs are baked into the cost of New York real estate. Yet those higher rents all but ensure that tenants will appreciate an amazing bakery or a fancy shoe store — and that retailers will have to lower prices to compete for their business. Regardless, the rent burden isn’t actually as onerous as people assume: the typical resident here pays roughly the same share of her income in rent as does her counterpart in Los Angeles, Chicago, Philadelphia and Houston, according to N.Y.U.’s Furman Center for Real Estate and Urban Policy.

Professional-class workers who like to moan about the cost of living in New York — and I’m including myself in this group — don’t realize how spoiled we are by both variety and competitive pricing. Truthfully, things seem more expensive here because there’s just way more high-end stuff around to tempt us, and we don’t do the mental accounting to adjust sticker prices for the higher quality. We see a sensible shoe with a $480 price tag or an oatmeal cookie for $4 and sometimes don’t register that these are luxury versions of normal items available from Payless or Entenmann’s. The problem, in part, is that people tend to anchor their own expectations for what they should buy based on what their neighbors are buying, not what some abstract, median American buys. It’s a phenomenon known by some as affluenza, and it partly explains the overborrowing by the lower and middle classes during the bubble years, when their incomes were flat but their high-income neighbors’ incomes were growing phenomenally.

There is, however, an ominous flip side to Handbury’s findings. When you look at the cost of living for low-income people based on their tastes and preferences, New York’s poor turn out to be even poorer than you think. According to her research, a household earning $15,000 a year faces approximately 20 percent higher grocery costs in cities with relatively high per-capita income. The same is very likely to be true for other essentials, like clothing. Real estate is most crushing for all but those lucky enough to get into subsidized housing. For the poor, it is impossible to unbundle apartments from all the perks that help drive up costs.

A concentration of rich consumers should lead to better salaries for low-skilled jobs like waiters or manicurists. But federal programs intended to help the poor, like food stamps or child-care subsidies, are generally not adjusted for the local cost of living. In New York, the poor are “getting disqualified from a lot of these programs because they’re being paid $10 an hour rather than $7.50 an hour,” says David Albouy, an economist at the University of Michigan, “which can sort of artificially put them above the poverty line or wherever the threshold is.”

Between these competing forces of higher-paying jobs and high living costs, the high costs seem to be winning out. As I talked to Handbury, I began to realize why, in part, New York seems so wealthy. It’s not so much that the city has been colonized by hedge-fund millionaires (though it often feels that way) as it is losing its lower classes. The greater New York area now has the longest average commute in the country (35 minutes, compared to a national average of 25). Many of the less-educated are leaving the metro area altogether: from 1980 to 2010, the population of college-educated workers rose by 73 percent, while the population of workers without college degrees fell by 15 percent, according to Rebecca Diamond, an economics graduate student at Harvard.

What’s happening in New York is just part of a national shift. Highly paid, college-educated people are increasingly clustering in the college-graduate-dense, high-amenity cities where they get good deals on the stuff they like, while low-skilled people are increasingly flowing out to cheaper places with a worse quality of life. The end result, Diamond’s research shows, is that measures of the growing income gap between the high-skilled and the low-skilled, which already look pretty shocking, seriously understate the inequality between these two classes.

This two-tier economy can seem inevitable, but other middle-income cities — particularly Sun Belt hubs like Houston and Charlotte — are now offering a third option, says Edward L. Glaeser, an economist at Harvard. A large part of their appeal has to do with policies that make it easier to build homes and expand the affordable housing stock for those people fleeing cities like New York. Places like Detroit are cheap, Glaeser told me, because they have become drastically less attractive locations to live and work. But places like Houston are cheap — and staying cheap, even as they grow — because the local governments have realized their comparative advantage is in deregulation, not in fancy cookies.

 

Source: The New York Times

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

Another Reason Housing Costs Are So High In New York: Government Taxes And Requirements On Closing Costs

Daily News

Homebuyers know and stats show that closing costs you a ton in New York

State is No. 1 in closing expenses for a third year in a row, Bankrate surveys

BY / NEW YORK DAILY NEWS

PUBLISHED: MONDAY, AUGUST 6, 2012, 11:42 PM
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BILL TURNBULL FOR NEW YORK DAILY NEWS. Would this Elmhurst, Queens, house work for you? Keep in mind that average closing costs total $5,435 for a $200,000 mortgage on a single-family home purchased with a 20% down payment. The cheapest state to get in the door with a mortgage is Missouri, with average costs of 3,006.

 

HERE’S ONE more reason why it’s so ridiculously expensive to live in New York: We have the highest mortgage closing costs in the country.

For the third year in a row, New York State leads the way in fees associated with getting a home loan, according to a new survey from Bankrate.com.

The average closing cost here is a whopping $5,435 for a $200,000 mortgage on a single-family home purchased with a 20% down payment.

Compare that with Missouri, the state with the lowest closing costs, where they pay an average of $3,006. The national average is $3,754. Continue reading