Property tax reform? Kingston rent regs and rollbacks ... Skyrocketing costs ... and more!

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

In this episode we look at the real-life implications of New York's broken housing voucher system; what the New York City Council's 19th housing emergency declaration really means; the skyrocketing costs associated with maintaining a rental property, and much more.

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Transcript

Could we be one step closer to property tax reform in New York? A court of appeals decision renews pressure on Albany to revamp New York's broken property tax system. For renters, that could ultimately mean lower rents. Meanwhile, the New York City Council declares yet another housing emergency. Why do elected officials celebrate this?

Let's break it all down in Housing New York. 

[Theme music]

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. We shed light on the politics and the public policy shaping the future of New York City housing. 

I worked in the State Senate for more than a decade. Now I lead the Community Housing Improvement Program, where we advocate for smarter housing policies that will help all New Yorkers.  All the opinions in this show are Our mind and do not necessarily reflect the views of chip or its members. We're taping this on Monday morning, March 25th, apologies for the late taping, but last week ended up being busier than we had anticipated with all the fun going ons in Albany. 

Okay. Let's recap this week's top stories and stick around for what you need to know. When I highlight the key points that everyone should remember. Going into next week.  

So we start today talking about the court of appeals decision on property taxes. The property tax lawsuit” The Daily News covered this, calling it the ‘Unfair and unjust property taxes: New York top court clears the way for lawsuit against New York city system.’ This judgment by the court basically allows the case to proceed, the complaint to proceed. So the tax equity now group has launched a lawsuit saying that the property tax system unfairly burdens renters. This is something we've argued about for a while. We're a part of the tax equity now lawsuit.  We've advocated for this because we know that renters are taxed proportionally seven times more on average than homeowners in New York city and condo owners. What happens is the property taxes get. Levied on these buildings. Many of them aren't stabilized that drives up rents.

We know the average one bedroom apartment in the rent stabilization system pays anywhere from 30 to 40 percent of its rent and property taxes. And the fact that folks like Ken Griffin who own Home Depot have a $238 million condo and pay less taxes proportionally than somebody who lives in rent stabilized housing.

So we're hopeful that a fair decision will come out that will streamline the property tax system, make it more fair and equitable because for too long, renters have been bearing a disproportionate burden, paying far more into their property tax. System through their rent checks and the property taxes themselves are higher on these multi family buildings that the rent stabilization system doesn't account for So we need a fairer system.

This is a good first step towards it and we're hopeful for a good outcome  Our next story last week, uh, the city council extended new york's housing emergency for the 19th time So it was groundhog day all over again. We put out a statement obviously highlighting that this is Not a success as you are loyal listeners.

No, a housing emergency is declared when there is a vacancy rate below 5 percent in New York, that is what automatically triggers the council's authority based off New York state law to declare a housing emergency, which puts the municipality on a path to have rent stabilization. Now, lawmakers benefit from that housing emergency because that gives them the authority to keep renewing the system.

They argue that renters benefit from the rent stabilization system, but it creates this vicious cycle where we never build enough housing to get out of the housing emergency. Because there is a rent stabilization system on 1 million units of housing, a little North of 2 million renters live in that 1 million units.

And you have a total housing universe of a little over 2. 3 million units of housing. So half the units are in the. The rent stabilization system. We argue that if you built enough housing, that there was a higher average vacancy rate, we would actually see rents come down as we did during the pandemic in areas of core Manhattan.

Of course, we know all those people came moving back. The vacancy rate shrunk, rent skyrocketed again because the supply diminished. If we had built more and we continue to build more across the city, we will see a rent decline. We know what the true affordability problems are in New York. We know we need to build our way out of it.

But the city council and the legislators continue to rely on regulations.  The 2019 law also allowed for municipalities around the state to opt in to the rent stabilization law that we have had for decades here in New York city. All they have to do is something called a housing vacancy survey. Where they basically determine how many vacancies are within a given municipality, and then the rent guidelines board that they set up in that community votes in.

It's important to point out that the total universe of apartments we're talking about here is about 1, 200 apartments. So it's a very small universe of apartments in Kingston. What Kingston is facing is what we've seen in municipalities across the state, which is a very small universe of available apartments.

And more people living there, more people leaving New York City because they can't find affordable housing moving into these smaller communities where there isn't that much new housing and apartments being built, and that's driving up the rent demands. And so what is happening is municipalities like Kingston are then saying, well, we need to regulate the rents.

The problem is we know, and we just highlighted, that doesn't build and produce more housing. In fact, it's not. Detrimental to the production and the maintenance of that housing. So a city with 1200 apartments like Kingston has now regulated their housing. They're claiming that there's a obviously below 5 percent vacancy rate and they now want to vote to roll back the rents.

In Kingston by 15%.  There's a court battle going on. They've won the recent court decision to claim that they have the legal right to roll back rents 15%.  Nothing, not even the cost of Chick fil A has gone down by 15 percent in the city or the state or the country. The idea that housing costs have gone down by 15 percent is just nonsense and a board arbitrarily rolling back that cost will be detrimental to the housing quality and the housing maintenance of the housing there in Kingston. 

Uh, speaking along the lines of rolling back rents and rolling back housing costs, the real deal highlighted yet another rent stabilized portfolio, the Sentinel real estate group, 1300 units sold in contract for 180 million.  Sentinel pin nearly 300 million for them. Before the passage of the controversial 2019 rent laws, yet again, the controller continues to argue that the city controller that is Brad Lander continues to argue that the rent stabilization law has no financial impact had no real world impact on the value of these buildings.

This is just further proof that the buildings have been eroded in value. A 40 percent discount on 1300 units is a massive write off in value. If the building is a depreciating asset and the value of both future purchasers and the banks that lend on this, the costs keep going up. The rents are capped on a vacant unit.

You don't have the ability to increase the rent to cover future operating costs. The rent guidelines board process doesn't account for that true cost. And so the delta between the rising costs and the future Rent increases grows as you project out future values, and that is what's leading directly to the loss of value in these buildings.

It will continue to happen. It will only get worse until the legislature highly amends the 2019 law or it's stricken down by the court system.  Now to a bit of good news. The city reported the housing vouchers to be reinstated following settlement with social services. The city illegally booted large numbers of New Yorkers off of the city FEPs program over the past two years, and now must make restitution.

One of the few things I would say the legal aid society and property owners, including CHIP, our organization agree on is that vouchers are vitally important to solving the affordability crisis that we're dealing with. Our owners look for voucher holders. They appreciate the government compensating the cost of housing through the voucher program.

And we are constantly working to place voucher holders in our building owners portfolios.  The constant problem, however, is the bureaucracy that has to be dealt with. Oftentimes it's six to eight months before a voucher holder is approved. When a renter finds an apartment that will take a voucher that is available in a community that they want, that the rents line up with the voucher amount approved, that is a long bureaucratic nightmare.

And this lawsuit speaks to what happens. There are times when a voucher holder will be approved and it will take longer than two years for them to go through the process and they will actually Get evicted in some cases once they are approved and the payments from city FEPs are not going out to landlords to cover their housing costs as we've always said and argued that housing has a cost that has to be compensated and paid for and that's why vouchers work but they have to actually work they have to actually pay for the housing they have to be prompt.

City FEPs has been a program that has  to deal with bureaucracy. They are getting better and they are working towards it. But this also speaks to a need to continue to improve the system and make sure that it's working for both the voucher holder, the housing provider and the property owner and the city itself.

So we hope that this will be direct shot across the bow for D. S. S. That they reform their system. They hire more  And they continue to work with property owners to make sure that housing is paid for and that people are permanently housed.  Gotham is David brand covered want to own your own New York city apartment.

This nonprofit is helping renters buy their units. This is the East New York CLT community land trust. They worked to buy a building at 3 million on Arlington Avenue, 21 units and turned it back over to the renters themselves. We don't oppose any of these proposals. In fact, TOPA, Tenant Opportunity to Purchase Act is one of those pieces of legislation that's been bouncing around Albany for a while.

I heard the objection to these bills is basically, they can't be a hindrance on the selling of the property and they have to offer fair compensation for the property owner. Obviously another buyer into the market is perfectly fine. The biggest problem with these is that they have a very spotty history of success here in New York because they don't actually, and the government isn't actually dealing with the underlying problem. 

In Rent Stabilized, as we know, the biggest problem we face is the rising cost to operate housing. There's a common misconception that when rents are increased, it is only to make more profit. In fact, more often than not, it is to cover the increasing rising cost of insurance, which is skyrocketing up by triple digits in parts of the Bronx.

The property tax increase, which we highlighted earlier in the program, that is disproportionately impacting Renters seven times more than single family homeowners, the utility costs that have skyrocketed since the pandemic, all of these things are pressuring down on rent stabilized housing. And the system itself isn't providing a fair compensation to the property owners, and it increases rents at the same time,  turning the occupancy or turning rather the ownership of the building over to the occupants. 

Doesn't solve any of those problems. It changes who owns the buildings, but co ops face many of these same problems. In fact, co op city was dealing with a potential huge carriage fee increase this year because they have significant maintenance and utility costs increases. So we wish them the best of luck in operating these buildings and hope that the government understands that this is much more an issue of the long term cost of operating 80 to a hundred year old buildings, but this is something we'll be monitoring and highlighting in future podcasts.

One other final note on this Gotham story, we did the math and if the government doesn't subsidize the tenants paying no more than 1, 200 a month rent, if they don't get subsidies to help cover their operating costs, their rents will double to be able to cover their operating costs increases now that they own the building.

So that's just one example of how prohibitively expensive it is to run these buildings.  One article we wanted to really highlight, uh, was City and State highlighting the real estate lobbyists talking to New York. A New York Housing Justice for All report breaks down to influence peddling, highlighting several meetings with Senator Brian Kavanaugh, the housing chair, that 13 million dollars was spent over the last five years.

This is what Housing Justice for All claims was spent. I think this is comical. That housing justice for all actually is highlighting this for a number of reasons. One housing justice for all is funded by an organization called vocal. New York gets a 6. 8 million yearly operating budget, which you don't have to be a mathematician to realize 6 million over five years is far more than 13 million, far more than the entire lobbying strategy for the entire real estate industry.

Is what housing justice for all has access to in a period of five years. So that's just one example of these tenant groups, which are very well funded. There's a common misconception that they're bootstrap organizations. They're often funded with direct subsidies from taxpayer dollars through other nonprofit organizations.

Another group that has a 40 million yearly operating budget is make the road, New York. which is also part of the coalition of housing justice for all. And again, we don't begrudge these groups, but to say that they are underfunded and they're up against big, bad real estate interests with tons of money behind them.

Well, let's just say it's more than 10 X what chips yearly operating budget is. So for these organizations to claim that they're up against the wall, it's just not born by the facts. All this information is public. You can look up the nine 90. Nonprofit groups, trade organizations like ours, all these nonprofits have to publish this information publicly.

You can look it up. You can look up their salaries. You can look up how much money they get, and you will see that these are extremely well funded groups that have tons of money and resources to lobby the legislature for the programs and policies they propose. Now we can have a debate on whether or not you think that's good and whether or not their policies are good, but you can't debate the numbers.

The numbers show clearly that they are spending far more money on lobbying than even the real estate industry is with his advanced resources on lobbying.  All right, so our last story is what you need to know about what's going on in Albany.  The bottom line is folks, it's not looking good for a housing package to come together.

Bills for the budget would need to start being printed in just a few days to meet the April 1st deadline. They have to age unless they're given a message of necessity from the governor. They have to age three days once printed. I can tell you the mood in Albany is not one of optimism that there is going to be a housing package done and completed by April 1st.

There is ongoing speculation that we're looking at least mid April before there is a  comprehensive housing package done in the budget. There's always the chance, obviously, that a budget is passed and the housing package is taken up later. The main obstacle at the moment seems to be REBNY having debates and arguments with unions on a wage floor deal.

The speaker of the assembly keeps saying that right now negotiations are between the labor unions and REBNY and all future 421A deals. I can tell you our conversations with the legislature around some relief for rent stabilized properties in the IAI system On the senate side they are focused on trying to increase IAIs, but albeit at a very small amount With the same amortization rate, which does nothing to provide the upfront financing That's needed from property owners who need to borrow to renovate these units The assembly side has actually been much more realistic about the finances And cost of operating this housing and renovating these units of housing after decades of occupancy and the bottom line.

Also on all of this is that there's going to be a hundreds of thousands of new voucher holders flooding back into the system that need housing. We believe our proposal LRHRA will do both. It'll allow owners to renovate units. Set a new reasonable, affordable rent. That's capped at the HUD rent reasonableness level.

It will create a pipeline for voucher holders to have new housing. It'll get let out of units. It's close to a win remains opposed by tenant groups and some in Senate leadership who are again, concerned about rents on empty vacant apartments going up. But we continue to push the assembly again, is, is much more realistic with those costs, but all of this is one of many conversations caught up in the housing package. 

Good cause is still very much alive and still very much out there. The legislature continues to say that they will not pass a housing package without good cause. The version of good cause that gets passed or considered is highly unlikely to be the one that we've all seen in bill language from Senator Salazar.

She so much has admitted that.  And if you have a crystal ball and you're trying to make projections as to when we're going to have a housing package, I would err on the side of believing it will be a very late budget this year, unfortunately.  I want to thank you all for 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. 

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.