The recent enactment of the lowest Rent Guideline increases in the 46-year history of the rent stabilization system has provoked an outpouring of media attention on an issue that is usually ignored but will likely remain in the public eye until next year’s guideline deliberations and expiration of the rent laws. Already, tenant groups are calling for rent freezes on both one-and two-year leases next year while the RSA has called on the Mayor to limit increases in real estate tax assessments and water and sewer rate increases to one percent, equal to the allowable increase for one-year leases.
The debate over allowable increases for rent stabilized apartments has spilled over into a broader debate about housing affordability, the Mayor’s affordable housing plan and who really deserves to get housing subsidies. Jim Epstein at Reason.com points out that “freeloaders of the past” are occupying more than their share of rent-controlled apartments including wealthy celebrities and their children, as well as New York elected officials. And while Mayor de Blasio’s goals of future and existing affordable housing is purportedly to assist lower-income tenants current “affordable” housing programs subsidize households earning up to $193,000 per year. But, as Bob Knakal points out in his Economics 101 primer in the Commercial Observer, part of the problem is that the rent stabilization system has no income eligibility criteria – getting a great deal is a matter of luck and perseverance.
Kyle Smith of the New York Post has a different opinion on the City’s existing and future affordable housing stock, saying that not everyone has the “God given right to live in NYC” and that the City rents are right where they should be. Smith also says that Mayor de Blasio’s song and dance regarding affordable housing in the City has been heard and seen before through former Mayors John Hylan, John Lindsay, Ed Koch, and most recently Michael Bloomberg. The one thing all of these former Mayors have had in common with their affordable housing plans, which were all intended to end the affordable housing crisis in New York City, is that the so-called crisis still has not been solved over the last 80 years. Hence, Smith questions the “largest and most ambitious affordable-housing program initiated by any city in this country in the history of the United States of America” by Mayor de Blasio. Yes, Mayor de Blasio could increase the affordable housing supply, but that does not make the most desirable neighborhoods throughout the City cheap to live in. One interesting statistic that Smith provides that shows that the rent is right around where it should be is that as of 2011, New Yorkers on average spent 32.5% of income on housing, below the nationwide average of 33.1%.
So with arguments on all sides of the affordable housing equation, the question arises of what actually defines affordable in a City filled with diverse neighborhoods. Moving forward in this Progressive era led by Mayor de Blasio, affordability will be defined every more broadly. Major housing developments are continuing to be built with the majority of the units in each building going for market rents for higher-income families and a varying percentage of units in each building being set aside for lower-income families (or middle-income families or upper middle-income families). As long as government plays an ever greater role in the City’s housing market, there will be an increasing clamor for subsidies for the poor, the middle class and the wealthy. And as government’s role becomes ever more pervasive in the housing market, the market’s distortions, misallocations and scarcity will also become more widespread.
As you already know, the Rent Guidelines Board has proposed the possibility of a zero rent increase with guidelines ranging from 0% to 3% for a one-year lease and 0.5% to 4.5% for a two-year lease. This occurred on the same day the Mayor announced his housing plan to preserve 120,000 existing affordable apartments.
On Wednesday, May 14th, RSA Chairman of the Board Aaron Sirulnick wrote a guest editorial article in the New York Observer expressing not only his concern, but the concern of the entire rental housing industry and property owners throughout the City with the Rent Guidelines Board proposal.
It’s hard to imagine how the Mayor could possibly achieve his goal of preserving existing affordable housing with zero rent increases for property owners.
The numbers do not lie. Building operating costs increased in all categories for owners last year. Property owners want to provide safe, well-maintained, affordable housing for their tenants, but the cost of providing these services keeps rising and if there are zero rent increases this year, then it will be incredibly difficult to help the Mayor fulfill his housing plan.
Please be sure to read Aaron Sirulnick’s article in the New York Observer and see why owner participation at the RGB is more important than ever. The RSA is fighting for our members, but we need owners to join us at all of the RGB public hearings taking place next month. Call RSA Director of Communications Vito Signorile at (212) 214-9235 for more information about the public hearings and how to register to tell your story to the Rent Guidelines Board.
At the Rent Guidelines Board meeting on Thursday, April 10th, a representative of the City Department of Housing Preservation and Development (HPD) announced that Mayor de Blasio’s much anticipated affordable housing plan will be revealed the first week of May. As you may already know, Mayor de Blasio has been advocating for the building and preserving of an astounding 200,000 units of affordable housing over the next 10 years. The feat may seem highly improbable, but the Mayor and his administration seem very optimistic about the plan that is set to be unveiled on May 1st.
On that same day, the Rent Guidelines Board will be having their fourth meeting, which will also be when the RSA and other groups will present invited testimony. This meeting also comes four days before the preliminary vote on the 2014 rent guidelines and if Mayor de Blasio has a strong influence in the outcome, we should be expecting the City’s first ever zero rent increase proposal. Should Mayor de Blasio continue to insist on zero rent guidelines, he may very well damage his credibility with property owners throughout the City. This will make it very difficult to obtain their support as he prepares to release this monumental housing plan.
Although Mayor Bill de Blasio was able to negotiate a deal with the developer at the Domino Sugar factory site in Brooklyn to build additional affordable housing units, the agreement only secured an extra 40 units. The Mayor can consider this a victory, but he certainly has a long way to go if he would like to accomplish his goal of building and preserving 200,000 affordable units in the City over the next ten years.
The Mayor’s plans are still unclear but despite his efforts, as well as success from former Mayors Ed Koch and Michael Bloomberg, can the dream of continuing to provide thousands of affordable units in New York City ever be fulfilled? Hundreds of thousands of apartments have been built or converted over the last 30 years and are priced at below-market rates, including 190,000 under Koch and 165,000 under Bloomberg, yet the demand for affordable housing only seems to increase.
Even if Mayor de Blasio succeeds in generating 200,000 additional units, this still will not make a dent in New York City’s dream of providing affordable housing for all of those who need it. Perhaps City officials should reconsider their pursuit of what seems to be an impractical fantasy and direct their attention to providing rental subsidies to those truly in need, as the Section 8 program does.
With over 420,000 outstanding repair requests by tenants of NYCHA complexes throughout the City, Mayor Bill de Blasio last week spared the Housing Authority of approximately $52.5 million that is owed to the NYPD for police protection so that the money could be used to make the necessary repairs. Granting this relief to NYCHA is a great job by Mayor de Blasio, but he should consider giving relief to other agencies that provide major services to residential properties, such as the Department of Environmental Protection (DEP). While serving as Public Advocate, de Blasio suggested giving relief to DEP from making rent payments to the City. Now that he has been elected mayor, it would be great to see these suggestions come into fruition.
As one of top issues raised during his mayoral campaign, Mayor Bill de Blasio is aiming to tackle the shortage of affordable housing in the City by promising to build or preserve 200,000 affordable units throughout the five boroughs over the next ten years. His predecessor, Mayor Michael Bloomberg, was able to deliver approximately 165,000 units over a 12-year span, while Mayor Ed Koch was able to preserve about 190,000 units over 13 years during the 1980′s and early 1990′s. Although Mayor de Blasio’s goal will be a lofty one, Alicia Glen, the new Deputy Mayor for Housing and Economic Development, has said that the administration has already begun translating the Mayor’s ideas into an operational plan. The big question in all these plans for owners of existing affordable housing: how do they fit into the plan other than a suggested freeze on rent increases?
Courtesy of NPR, a very well thought out summary of the many reasons why apartment rents in highly desirable urban areas have continued to increase. The growing recognition that supply and demand is what drives housing prices may also be the reason that Mayor Bill de Blasio has committed only to producing more affordable housing, not making New York City a more affordable place to live, which is an entirely different and more difficult proposition. Click here for the story.
A recent story in the New York Times article highlighted one reason that the real estate burden on existing rental buildings keeps going up: new buildings don’t pay their fair share of taxes.
The case in point is a new luxury condo development to rise in the new Brooklyn Bridge Park. Instead of paying real estate taxes, the new development will pay a PILOT (payment in lieu of taxes) that will fund the maintenance of the park. So as the City budget continues to increase, those increases are passed on to the existing stock of rental properties. And as real estate taxes on existing increase, rents that were once affordable slowly become unaffordable—and landlords bear the blame.
Earlier this year, Public Advocate Bill de Blasio blasted the hidden taxes contained in water and sewer rates. He was referring to the “rental payment” the Water Board makes to the City each year. The rental payment is supposed to cover the cost of water and sewer bonds issued by the City years ago. But the current payments greatly exceed those costs and are simply used to balance the City’s budget –truly a hidden tax. But will Bill de Blasio heed his own call for action if he becomes Mayor? Probably not.
What’s the best way to increase the amount of affordable housing in New York City. The New York Times digital edition recently featured a collection of proposals that address this issue.
Most of the proposals were more of the same old: strengthen rent regulations, preserve public housing, tax increment financing, nonprofit ownership and other mechanisms that have been used in NYC to a greater extent than anywhere else, but have all failed to solve the “affordable housing crisis”.
Only one proposed solution has not been tried in New York and it comes from Ed Glaeser, an economics professor at Harvard University, who understands the laws of supply and demand. Professor Glaeser proposes a simple solution of easing housing demand by increasing the supply of housing. And the way to increase supply is to remove the barriers to building created by land use regulations such as zoning, historic preservation and air rights (and we should add rent regulations and labor practices).
But New York City, under Mayor Michael Bloomberg, has moved in the exact opposite direction. Major rezoning, affecting 40% of the city, has downzoned neighborhoods where developers were building higher-density market-rate housing without taxpayer subsidies. Development has instead been funneled into smaller development zones where even greater density will be required, together with subsidies to produce affordable housing.