2019 all over again.

Across the city, rent-stabilized owners are getting squeezed between rising costs and stagnant rental income. When will running a rental property become untenable? For some, it already has. Jay looks at the disastrous impact of the 2019 rent laws on New York’s atrophying housing stock.

Housing New York sheds light on the politics and the public policy shaping the future of New York City housing. 

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Transcript

 More signs of distress for rent stabilized buildings as one Brooklyn based non profit aims to auction off 20 rental properties it says it can no longer afford. A leading homeless advocate speaks out about why we need more housing supply. And there is even more data on skyrocketing insurance costs that are devastating older buildings in the Bronx. Let's start Housing New York.  

Welcome to Housing New York, I'm your host Jay Martin. Each week we provide analysis of all the news you need to know about New York's ongoing housing crisis. From the politics, to the policy, to the absurdity. All the opinions in this show are my own and do not necessarily reflect the views of CHIP or its members.

We're taping this on Wednesday, April 10th. So let's recap this week's top housing stories and stick around. After the news, I'll have some thoughts about the state budget process, which is now 10 days late.  Our first story is a Real Deal article highlighting a non profit, which is auctioning off over 20 rent stabilized buildings.

In the Bronx and parts of Brooklyn, an organization nonprofit called Food First is selling dozens of Brooklyn properties, citing challenges, quoting, “These buildings are becoming a serious liability. We have so much backlog of rent.” There's a board member that was quoted in this Real Deal article.

Essentially, these buildings were bought during an HDFC process. They worked with the city to get grants to purchase these buildings, some of them going back to 2004.  The issues they're facing are inability to pay their mortgages, which for the most part were paid off, inability to pay their property taxes, inability to cover their operating cost increases, inability to cover their insurance, and most of this is tied to the fact that their rents are capped.

So very similar issues that rent stabilized owners are dealing with across the city. These are non profits, so much of the argument we hear on the social housing market side, in fact, city and state officials are pushing for billions of dollars for these very organizations under similar structures as HDFCs to purchase private properties from rent stabilized property owners just like this, to operate in non profits just like this, to be able to function, they claim, on the existing rent rolls, Without massive outside subsidy, with the existing cost, in this utopian social housing model.

We've pointed out how the money that they're asking for barely covers the cost to purchase these properties. Let alone the ongoing yearly operating costs. It is a fundamental issue that lawmakers in Albany and in New York City continue to underestimate how immensely expensive it is to operate housing in New York City.

That every time a property owner in rent stabilized housing asks for a rent crease, a person isn't doing so out of greed. They're doing so to cover. Yes, they want to make a profit. These are businesses after all. But the issue is primarily covering operating costs. Keeping the business solvent, being able to pay their mortgages, being able to pay their property taxes.

And this is a perfect example. Of how every best case scenario under the social housing model that is currently being proposed with an HDFC, a nonprofit, which had a very worthy goal. In fact, their main goal was to house people who are dealing with HIV AIDS, who could not have sustainable employment to have affordable housing and rent stabilized buildings across the city.

And they could not afford to keep the buildings operating under the current rent stabilization model. This is not a profit motivated business model. This is decommodified. And it didn't work. So I use this as a challenge to everyone who's advocating for this, for everyone who's advocating to continue to not change the rent laws, to continue to advocate for rent freezes in the rent guidelines board, that unless drastic measures are taken to help make these buildings solvent, we're going to continue to see more of this, not just on the nonprofit side, but specifically on the for profit side as well. 

The next story we're covering is Eric Enquist had a editorial on TOPA. Bit of a cheeky take on how the Tenant Opportunity to Purchase Act is being sold in Albany, how property owners are viewing it. He quotes me in the story, that's not why we're highlighting it, but I happen to mention it because it highlights the first story we just covered.

Specifically, the fact that no one who owns their own building is going to want to raise their own rent to cover their own costs, which is the fundamental issue of programs like TOPA and socially run housing in the city and state of New York. Unless we get a real grasp on the cost to operate this housing, unless there's highly successful subsidies for this housing, a tax subsidy, for example, unless this housing is treated different, It cannot be run as affordable housing.

There's nothing affordable about this housing other than that the rents are capped. So we need to educate lawmakers. We need to educate folks who are proposing TOPA. We've had very productive conversations with the lead sponsor in the Senate of TOPA, Zellner Myrie. I find him to be a very smart lawmaker.

Someone who genuinely is, I believe, trying to help. who doesn't view this necessarily as a public takeover or private housing, and more as an opportunity for renters to own their own housing at a fair price, that isn't the issue. It doesn't matter who owns the building at the end of the day. If you're not tackling the cost, if government isn't helping private owners, non profit owners, control the cost of operating this housing, You're going to end up in situations like we had in the first story where these buildings are not being invested in to the scale they need to be.

100 year old, 120 year old buildings in some cases. 1909. The building I live in was built in 1909. So we have to have a real conversation. TOPA may provide another buyer for many property owners, but at the end of the day, if we're not having a conversation about the affordability of providing this housing, the cost of the rent is secondary to that concern. 

Our next story is about Shams Debaran, a personal friend of the podcast, friend of ours, a great guy, former homeless individual who's become an advocate for homeless rights, has a voucher in a permanent housing situation now, just a perfect example of what can happen when vouchers work well.  He's worked with us to help place other voucher holders in permanent housing.

Strong advocate for more vouchers. We can't say enough great things about this guy. We really like working with him. He wrote an article in the New York Daily News that kind of really tackles the other part of the equation. That's really not being discussed in Albany enough because much of the conversation is on rents and rents are affected by the amount of supply.

And the fact that the conversation is always about controlling the rents and not about the need to provide more housing, it's fundamentally important. He talks about his own personal story about the need to have housing that is right sized for families. We have a real dearth of multi bedroom.

Apartments in the city. In fact, there are laws being passed punitively to prevent owners from combining units. The argument was, oh, well, they would be able to get a higher rent. Well, perhaps, but they would also be able to make larger apartments for families or multiple roommates. And that is right sizing housing for the demand.

And aside from that, we need to build more housing. And Sham speaks to that throughout his story. He says, We simply do not have adequate housing or affordable housing options to house our neighbors, which is why New York City needs to be bold today, not tomorrow, not next year, but today we need to build more housing. 

Adds that 275, 000 households, but only 60, 000 units of housing have been built since 2021, not keeping pace with the city's population growth. And there are fewer vacant apartments today than there have been in decades. Now, we agree with that. We agree that there are fewer vacant apartments available for rent.

Common difference in part of the conversation is what is available for rent and what needs significant investment and renovation. And we've had great conversations with Shams on this, on how much money is actually needed. He's been in vacant units and seen firsthand the amount of money that needs to go into some of these vacant apartments.

Apartments to bring them up to speed and renovation for apartments that need to be rented back out  City limits had an article by Emma Whitford called staring down the wrecking ball three Brooklyn grandmothers won't be moved It's about a holdout situation of three grandmothers and a rent stabilized building been living there for decades.

The property owner is attempting to vacate the building to tear it down and build a larger building with more apartments. And the story kind of suggests that this is a massive problem of tenants being harassed and property owners threatening to tear down their buildings and build new.  This situation in particular is very rare.

Probably less than 1 percent of the total rent stabilized housing stock is in a situation where a property owner is in a position to fund and finance tearing down and completely rebuilding their building.  They may want to argue for the right to do so, but being in a position to do so is completely different.

And that kind of gets me to my first point, which is that Emma is highlighting this as a constant threat. But I would argue this is the inverse of the squatter story that has been covered quite a lot. Squatters are a potential threat to a lot of property owners, but I think universally it's probably agreed upon that it's still a pretty rare that someone breaks into a vacant apartment or building.

and occupies it for 30 days in a situation in which you're not able to get them out. Does it happen? Yes. Is it something that happens all the time or often? No. And I would say this is exactly the same situation. Are tenants in a position where someone is going to harass them out, to potentially tear down their building and build a new one?

That is so isolated in the grand scheme of the rent stabilized housing market. It is obviously appreciated that the stories like this are highlighted because it helps make the argument that there needs to be a system in place. We would argue that these renters should be guaranteed new housing in the new building.

We're never going to solve our housing crisis if we preserve this idea that people should be living in the same exact apartments for 50, 60, 70 years and then dying in them and then passing them on to their siblings or their children and those same people should be staying in the exact same apartments forever.

Cities don't work like that. They have to evolve, they have to grow, they have to be able to accommodate newcomers. That's the very reason why we have a housing shortage and a housing crisis in New York City. And a crisis of affordability. Because we have so many people locked into their current housing situation.

And so many neighborhoods locked into their current housing zoning that we haven't built new. And we haven't figured out ways to keep housing affordable, keep people properly housed, and build with them, frankly. So, look, we would want to figure out a way where folks like this are assured comfortable housing.

But a rental agreement is not a mortgage. It's not a lease for life. It is not a permanent commitment to the same apartment forever. That just isn't how apartments are supposed to function. They're not designed to. And our city's housing market isn't designed to. That's why the rent stabilization system is broken today.

We need to figure out a solution to this. Certainly we don't want any grandmothers made homeless. Nobody wants that. These property owners don't want this at the end of the day, even though this article frames it as if they want to throw these grandmothers out on the streets. What they want to do is build a bigger apartment building.

At the end of the day, that bigger apartment building is going to house more people.  Our final story is a City Limits op ed from Rachel Fee, the New York Housing Conference, highlighting the huge problems nonprofits are seeing in the insurance carriers jacking up rates. on non profits, specifically ones that take Section 8 HUD vouchers.

This is a problem we've highlighted as an organization that at least Albany lawmakers are aware of and have highlighted. The governor even put it in her budget proposal, cracking down on insurance providers that do this screening of underwriting if the property owner takes  It's obviously discriminatory.

It's obviously redlining. But the fundamental problem here is that the insurance costs continue to rise on non profits. They continue to rise on rent stabilized property owners. We've seen that in the Bronx. A 19 percent difference between the expenses versus the income. In Queens, a six to seven percent difference of the expenses versus the income.

We need to keep highlighting those expenses, and yes, we can crack down on insurance companies, but ultimately we're probably going to need the state to come in with an insurance program that backs these buildings, because private providers are fundamentally adverse to risk, and they view these buildings as risky.

Why? Because of all those reasons I highlighted, that they're not covering their ability to cover expenses. Thank you. Mostly because of the 2019 rent laws. Also because they're forced to take rents that are below their ability to subsidize their costs. Also because we're also seeing a spike in fires from e batteries.

We hear this from property owners all the time. So if a housing stock like Rent Stabilize continues to have liability, insurance providers are going to continue to jack up rates. And unless the state forces them to provide a lower, Rate, they are going to likely have to come in with their own product. 

All right. That's a wrap on this week's news. Now for some final thoughts and a quick update on where we are in Albany. This Albany housing package is quickly becoming the serious finale of game of Thrones in that nobody is happy and nobody likes the direction it's going. Many lawmakers are very upset about the potential carve outs, quote unquote, for good cause.

The prospect of high renters being cut out. There's fierce debate on the Good Cause conversation about what constitutes a small building from being included. Four units or ten units seems to be the debate now. There's fierce debate on if new builds will be included, ten, twenty, thirty years. Pretty much universal agreement that Good Cause will be passing in some form.

The debate seems to be on what form that is. We are extremely disappointed by the proposals being discussed on relief for the rent stabilized community. We've been making that disappointment very clear to lawmakers. We had advocated for a comprehensive solution that would prevent price gouging on renters.

Focus only on rent increases so that owners could recapture some ability to renovate long term occupied vacant units with our LRHRA proposal. Instead, lawmakers have started focusing on IAIs. None of the IAI proposals currently being considered come close to putting a property owner in a position to cover the renovation costs, recover the decades of lost revenue on below.

Operating cost rents that are unsubsidized to the rent stabilization system. So you have lawmakers who are not happy with the direction of good cause. You have rent stabilized, real estate, not happy with the direction of any solutions for rent stabilized. You have developers who are not happy with the direction of 485X and the directions that is going.

You have unions who have continued to be frustrated with their negotiations. You have tenant advocates who are extremely frustrated with the conversations that good cause may not apply to every city upstate. All of this boils down to a deal in which no side seemed to be happy. And it's pretty remarkable that when everyone agrees there's a housing crisis, that leaders in Albany can't seem to put together a deal that at least makes one party happy, but somehow makes everyone unhappy.

Including themselves. I think that leads some real conversations within the real estate industry itself as to strategy, as to lobbying, as to proposals. I think it should lead lawmakers to understand who they're listening to and question who they're listening to, perhaps on the tenant advocate side, as to who's driving this conversation and whether or not they have the best interest of even renters in mind.

If ultimately a deal gets done and no one is happy. Thank you. And no one feels it accomplished the said goal. It will have set New York housing back decades. So, we're hopeful that a deal ends up getting worked out. We will continue to be a strong advocate on the best interest of the rent stabilized community.

Realistically pushing for solutions. It does not look good that one will get wrapped up within days that will be substantively consequential or helpful to the rent stabilized housing market to the need for more supply to even the tenants argument that there is a need to control rents. None of that seems to be on the table in this current housing proposal.

So  we appreciate you listening. Each week we'll continue to provide the most up to date information and the nuanced perspective you need to engage with the world of New York housing. If you have any thoughts, comments, or suggestions, you can hit us up in the comments section of this podcast. Catch you all next week on Housing New York.