[Crowd chants, jeers]
That's just a sample of what happened Monday night when the [NYC] Rent Guidelines Board held its final vote. Everyone is upset. Some people got arrested. And once again, the board passed a rent adjustment below inflation. We're going to talk about how that intense political pressure has corrupted this whole process and what needs to happen to fix it.
Buckle up as we start Housing New York.
[Theme]
Welcome to Housing New York. I'm your host, G. 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 Tuesday, June the 18th and stick around. ‘Cause after the news, I'll have some thoughts on HEVP, the statewide housing access voucher program, how we need to get it done and how it'll help renters, even with rising costs and increasing rent pressures. So as expected, there was a lot of coverage in the rent guidelines board hearing on Monday, we're going to talk about what happened.
But first, we wanted to play a clip from the tenant members arguing that the process was rigged. And a clip from the owner members. Let's take a listen. The thinking that if we don't keep increasing rents this way, we'll necessitate a double digit increase in the future, is both speculative and ignores the reality that the majority of rent stabilized tenants need affordable homes now.
[Adán Soltren: “We need to make legislative reform of this body and process a priority. And it has become abundantly clear that this is the only way to protect New Yorkers from the politics of this board and big real estate. Over the past two years, we have watched as duly appointed volunteer members of this board have been subject to harassment, threats, intimidation, and inappropriate political pressure.”
[Robert Erlich: “Last year and this year, it is our belief that this board is not reaching conclusions based on an honest assessment of the data. Let us be clear, rent stabilized buildings are in severe financial distress.”]
You just heard from tenant advocate Adán Soltran, followed by industry representatives Robert Ehrlich and Christina Smyth from the board vote last night.
As you can hear, nobody is happy with this process. I think what's most frustrating from property owners is that, uh, even though all the headlines coming out of the rent guidelines board process will be about a rent increase. If you compare rent increases over the last three years to inflationary costs property owners are dealing with, it's actually a minus 4.
3 percent rent increase. How can that be? Well, costs keep going up on these buildings. And yet, the lawmakers who protested last night, who were arrested at the hearing, who continue to testify at these hearings, go up to Albany, they go to City Hall, they vote for bills, they vote for local laws, They push mandates that keep increasing the cost of this housing.
Property taxes goes up, average 5 percent every year. We know insurance costs are up through the roof. We know buildings in the Bronx are down 14 percent minimum net operating income. All these economics keep pointing to buildings losing money and increasing costs. And yet the narrative coming out of the Rent Guidelines Board every year is that when the rents need to be adjusted up, it is a no go.
Travesty for renters. It is unacceptable. It is a moral failing. All of that may be true, but the reality is it has to happen or these buildings become insolvent. So if we don't want renters to experience higher rent increases, which I, as a renter, understand not wanting rent increases. Many of our owners don't want their renters not to be able to afford the rent.
But if they can't collect a rent that covers their costs, they can't afford their buildings. And then they can't stay in business, and then they can't afford their own family's obligations. And the government officials that sit in between this process, with renters on one side and property owners on the other, who continue to push both sides into confrontation while costs continue to go up while doing nothing to deal with it, are the ones really that need to be held responsible here.
Because if we don't start bringing down costs, We will continue to see this ongoing process where we have folks testimony talking about 55 rent increases, making them homeless, and we have property owners talking about being unable to pay their property tax bills. We need a real solution to this. We need reform on the rent guidelines board process.
That's one thing we actually do agree with, with the tenant advocate groups. They would think that a less democratic process is actually better. By taking away the mayor's ability to appoint people. That's one of the proposals they're pushing out there. We think a formula that actually considers costs that is more automatic would be fair, similar to how schools are funded around the state.
A school aid formula, similar to a rent guidelines board formula, but take a little bit of the political pressure and the rhetoric out of the room. Still analyzing all the data and still having the board members consider and weigh the increases. But the bottom line is doing the same thing over and over again is insanity.
It's why we sued in the Supreme Court that this system isn't working and it's why we will continue to pursue legal avenues until the system is reformed. Now we'll get to the stories for the week. And one of the reasons why housing costs keep going up, an article from The Gothamist by Charles Lane covering the trifecta of New York City utility hikes could bring double digit increases for utility costs.
Yet again, highlighting the pressures on rents that lawmakers refuse to deal with. A 9 percent rate hike from the New York City Water Board set for July. A proposed 11 percent increase over three years for natural gas customers in Queens, Brooklyn, and Staten Island. A 12 percent rate hike from Con Ed for electricity.
A 19 percent increase for natural gas over three years. All of these are contributing costs to the operating costs of rent stabilized housing. And they're not being dealt with by the lawmakers who are screaming and yelling and, frankly, getting arrested at these hearings when property owners simply ask for the ability to collect the rent that covers these charges.
We have to get real about how much it costs to provide housing in this city and state. And this article speaks yet again on how the people in charge who have control over these costs continue to let them get out of control. The next article is a City Limits piece from Emma Whitford highlighting the New York City Council, who should pay the broker fees.
A lot of press coverage over the last few weeks. There was a rally two weeks ago. You had several brokers attend. Redknee organized that. You had, um, Chai Osai, who has been pushing the FAIR Act, he calls it. Basically, banning broker fees across the board for renters if they did not hire the broker. He frames it very slickly.
It's basically saying, well, if the tenant didn't hire the broker, they shouldn't have to pay for it. And if the property owner did, they should have to pay for it. As we know, and we've had conversations with many brokers, There's a lot of things called open listings where many of the listings that they end up placing tenants in, no one actually hired the broker.
It is an open listing and the tenant is benefiting from the broker having the listing, helping them be placed. Our big concern with this bill is that it will actually diminish the access to housing that, uh, tenants already are struggling with. In a housing crisis, you want somebody who has the free time and the ability to go to market, look for available apartments, help you get into those apartments.
We can argue and debate how other cities have shifted those costs to the property owner. But one thing is absolutely clear. The bottom line and what you should really remember about this bill is it will do nothing to lower anyone's rents. Chai Osai and the progressive movement who have been pushing this bill have constantly said, you know, we need to lower the cost of housing.
And while it's true, this may remove one cost. You could argue it'll make rents higher because the cost will be absorbed into free market units. We know that a little over 50 percent of all units are free market. Hard to imagine that those free market property owners will not roll the broker cost into the cost of the rent.
And the FAIR Act probably will backfire because many brokers are going to frankly lose their jobs. And we're very concerned about the unintended consequences of the FAIR Act. Our next article is a Real Deal piece Catherine Brazile wrote on June 11th, Real Estate Winners and Losers on the New York Legislative Session.
In Like a Lion, Out Like a Lamb, she starts the article off. It's a great piece, but I would just add that, um, some of the winners and losers, the losers are all of New Yorkers, unfortunately. A lot of things didn't happen in this budget. Our organization, obviously, as you know, pushed very hard for what we were calling LRHRA, was the ability for a property owner to get close to resetting a rent on apartments they invested significant amounts of money on.
The legislature decided not to move on that bill this session. We are committed to passing that bill in the future. Instead, they reformed the IAI system with a poultry 30, 000 IAI. And a future 50, 000 IAI that the rules haven't even come out yet for. We know that those numbers really don't work for most owners.
It won't really do a lot to inject the needed revenue and value back into these buildings to get these vacant units fully gut renovated and back on the market and frankly improve the quality of housing most New Yorkers need. That is probably the biggest loss of this legislative session. A few things that pass 45 X as we know, hopefully it spurs some development.
Much of that will come years and decades down the line. She covers that in this piece. She also covers a little bit about the fact that the ground lease co op bill we spoke about in prior podcasts did not move. Something that's not going to be passing this legislative session. She also covered the back and forth that's going on with the potential licensing around Sinos.
That also did not move this legislative session, and that's been bouncing around, I believe, for several years. We're eager and hopeful that this continued housing crisis will actually spur lawmakers to work with property owners to solve some of these problems. It remains concerning that they think things like a short term rental registry upstate and good cause eviction are the solutions to housing crises instead of working with property owners to get housing renovated and back online and building more housing now quickly and affordably is not a better solution for the housing issues New York City faces.
Our criminal beat is covering a Gothamist article from the New York City Buildings Inspector pleads guilty to accepting bribes, Queen's DA says. Former Department of Buildings Inspector pleaded guilty, taking bribes in exchange for not issuing violations. Well, I don't want to encourage anyone. If this was something that happened commonplace for our property owners, I think it would happen more often, frankly.
But, um, they get violations all the time, frankly, too many violations. So I don't think this is quite as widespread as maybe this article insinuates. Because we deal with owners all the time, there was one owner I spoke with this week who had violations issued when a tenant called 3 1 1 64 times in 36 hours, they called 64 times, when they sent crews to do repairs on the supposed maintenance issues, the elderly person refused to let them into the unit.
There were still issued violations, though. Until they can get access to the unit, they're gonna have to bring a legal proceeding so that they can get access. Unfortunate. Happens all the time. But back to the story. Billings inspector pleads guilty to accepting bribes. If this is happening, it should be cracked down on.
We're glad the DA is going after these folks. But we also think that there should be better discretion used by inspectors. Our next article is from the Times Union. DOG settles with company New York Hired to handle rental assistance. So way back during the pandemic, our organization worked very hard to advocate for not canceling the rent, but for actually paying for the rent, for rental assistance.
That turned out to be both a blessing and a disaster all wrapped into one. We still have owners. I still get texts to this day from owners who are still receiving ERAP payments from this program, which is kind of shocking when you consider the pandemic stretched all the way back to 2019. But somehow this organization, this company, this state is still sending out drips and drabs of disbursement for prior rental payments.
To this piece, the private consulting company that was hired by state officials three years ago to oversee the disbursement of billions of federal dollars for rental assistance has agreed to pay a hefty settlement to resolve a lawsuit filed by a former employee in the U. S. Department of Justice over cybersecurity issues.
So tangential, not directly related. There was serious concern that the renter data and property owner data was going to be disclosed and be available. This contract that this organization got was 310 million. Which was above the 115 million that they were projected to get to distribute the 3. 5 billion in arrears that the federal government gave to the state of New York to distribute to pay back for rental assistance.
310 million to do something that the state should have been doing on its own, and then to get sued by the Department of Justice for messing it up. So, a tale as old as time, unfortunately, of government inefficiency. Outsourcing, in this case, to a private company who ended up screwing it up anyway. Bye. I really wish socialists would look at things like this, and I really wish if they were going to focus on more government, they would focus on when they mess up, and then focus on fixing when they mess up, but that doesn't seem to be the goal here.
The ERAP program is an example of when government can do good things, but doesn't do them properly. Could have been a great thing, could have made a lot of property owners whole, could have made sure that a lot of renters had housing security, but took billions of dollars and hundreds of millions of dollars and just squandered it.
Did not distribute it properly. Didn't listen to any property owners when we told them it was going to create a backlog in housing court and, uh, did not function properly when they distributed the program. So it's unfortunate we're still dealing with the side effects of that. And we all know housing court is backlogged by years.
We'll continue to work on freeing up the logjam housing court and fixing any future subsidy programs that come down the pike. All right. So that's a wrap on this week's news. Now for some final thoughts, I'm going to highlight the AM New York op ed that we, our office did. I wrote rectors won vouchers.
Lawmakers should take notice. One of the bigger disappointments that. The legislative session ended without any movement on HAVP. This all is connected. HAVP, by the way, is the Housing Access Voucher Program. It would be a statewide universal voucher that we believe could actually save the state money, eventually take the place of both the CitiFEPS program, be functioning much like a state run Section 8 HUD voucher, but run by the state, save the state money that they're currently spending on, on shelter housing and wraparound services.
Uh, the ancillary costs of dealing with homelessness and our op ed argues that at the end result is that it actually saves the money that social services end up providing for those who are dealing with homeless issues. The reason why this is all connected with everything we've talked about on the podcast going all the way back to the RGB is once again, this is a solution to affordability.
But yet, lawmakers don't want to deal with it. They keep talking about people not being able to pay rent. They keep talking about rent going up. One tweet I saw this morning from an assembly member who said that rent increases of 2. 75 percent were ludicrous. Another one I saw said that it was a moral travesty the rent guidelines board voted to increase rents.
Well, I think it's ludicrous and a moral travesty that this voucher program hasn't been passed. When there are people who are struggling to pay their rent, it is an issue of struggling to pay for their own housing. And that's where I think the government should step in. I don't think the government's job is to tell property owners their job.
And by the way, other renters end up paying for the cost of other citizens as well. Because every below market rent in a rent stabilized building is ultimately subsidized by higher free market rents in deregulated units in that same building. So every time the Rent Guidelines Board votes for a rent increase that's below the inflationary costs, as we mentioned earlier, they're going to vote against it.
Minus 4. 3 percent over the last three years, they're actually increasing rent costs on the free market units within rent stabilized housing. So vouchers can meet the difference. It could help people and can keep people housed. It can be more efficient and properly run. Unlike ERAP and other programs that we just talked about, if they work with property owners and make sure that it's a seamless system that actually helps people before they get into housing court, helps property owners before people accumulate rent arrears, and before they get into insolvency issues from renters who can't pay their rent, He will provide property tax revenue to the city of New York because we know a significant amount of every single dollar spent on a voucher ends up going right back in municipal revenue.
Taxes, local economic benefit, water, sewer, utilities, all get paid by vouchers. It's the best investment that a government can make in its people. It's well past time the state do it. Stop relying on the federal government to do everything. Stop relying on the city to do its FEPS program. Start providing actual help and stop relying on property owners to pay for the housing of every single rent stabilized tenant in the city of New York.
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. It doesn't matter if you're a landlord or a tenant, politician, or an everyday working New Yorker. We all call this city home and it's going to take all of us working together to solve this crisis.
If you have any thoughts, comments, or suggestions, you can hit us up in the comments section of the podcast. Catch you all next week on Housing New York.
