In this episode we break down the Rent Guidelines Board’s most recent Income & Expense report, which shows a continued decline in net operating income for older rent stabilized buildings; look at the dramatic rise in unpaid New York City property taxes as a classic canary-in-the-coal-mine scenario; and wonder out loud if the new, ostensibly YIMBY super PAC Abundant New York is really as pro-housing as it claims to be.
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In this episode we break down the Rent Guidelines Board’s most recent Income & Expense report, which shows a continued decline in net operating income for older rent stabilized buildings; look at the dramatic rise in unpaid New York City property taxes as a classic canary-in-the-coal-mine scenario; and wonder out loud if the new, ostensibly YIMBY super PAC Abundant New York is really as pro-housing as it claims to be.
Visit our website for more information.
Follow Us:
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The New York City Rent Guidelines Board releases its first round of data, and it's bad. Older rent stabilized buildings are being defunded and are in dire financial condition. In the Bronx, it's even worse. And we are down to the wire in Albany. Lawmakers are going to miss the budget deadline. Are they going to get anything done? 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. 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 of this show are my own and do not necessarily reflect the views of CHIP or its members. We're taping this on Monday, April 1st. And we have a lot to talk about. Let's recap this week's top stories and stick around for what you need to know. Cause after the news, I'll have some thoughts about the new self proclaimed pro housing super PAC called Abundant New York.
Our top story this week is the RGB releasing its income and expense report. Top takeaway is the net operating income declined by 7 percent for older rent stabilized buildings outside the core of Manhattan. There is no April fool's joke though, because the RGB is going to tell you. Rent stabilized is doing fine overall.
In fact, they're going to report that there was an NOI increase. That's because core Manhattan saw a lot of rent revenue rebound post COVID. But if you look at the NOI across the city, places like the Bronx, which saw double digit drops in NOI. Cost surges of 8. 9%, a hundred percent rent stabilized building saw an NOI decline by 19%.
So news outlets like Hellgate and others are reporting that rent stabilized buildings have actually seen a profit when in actuality, because of the way the rent guidelines board does the math, they include all rent stabilized properties in their equations. And what's happening is the Manhattan core buildings are drastically skewing.
the overall NOI, net operating income revenue, for all the buildings across the city. And we've seen this play out before 2019 HSTPA, but the 2019 rent laws actually made this problem even worse, because these outer borough buildings have no ability to catch up on the loss of income operating. That they were able to collect when a vacant apartment would become available.
Or there was a bonus on a vacancy that occurred. Or you had a DRAG on high rents. So since 2019 now, we're finally seeing some of the pricing into the RGB calculations of how disproportionately impactful HSTPA is specifically to the Bronx. But also Brooklyn and Queens and far Northern Manhattan, we're seeing anywhere from 7 percent NOI declines to 18 percent in the Bronx.
So we're going to be advocating, making sure that the RGB highlights the massive disparity in profitability between those core Manhattan buildings, which are. In many ways, skewed by 421 A. In some cases, they're skewed by a surge in ERAP payments and COVID payments that had occurred. And also, frankly, we saw this vacating of folks in the core Manhattan regions and even unstabilized buildings.
During COVID and then a resurgence of folks and concessions burning off in those areas in Manhattan after COVID. So that all led to a surge in some profitability in some buildings, which are so high that they're actually skewing the entire city's overall NOI increases and rent stabilized. But if you look back over the last, going back to 2018, 2019, 2022, before it's the sixth straight year in which operating costs have exceeded income.
And you really don't have to need to follow all the math and the different numbers I've just thrown out at you to understand that if costs continue to exceed income for six straight years, that averages out to a loss in revenue. And that is the trajectory that most buildings outside of Manhattan are on.
And if the laws don't change, those buildings are in dire financial straits. Continuing a little bit on the NOI conversation, we did an analysis of past NOI documents. Before the RG meeting, we sent out a press release that showed how basically because the RGB doesn't keep up, even with inflationary costs, And to that last statistic I highlighted about costs far exceeding revenue increases.
We calculate at least a billion dollars over the last three years has been collectively lost by rent stabilized owners across the city. Because the calculations that the Rent Guidelines Board does and how they determine future rent increases, which are always a year behind costs and rent revenue.
Continues to put these buildings in a position where they're never catching up to their increasing costs. You add that inflation, and many predict inflation will not be going down for at least another year or so. We're hopeful for sooner. But you add all of these costs, interest rate increases, the inflationary costs, and all the inputs that go into these buildings, and we're looking at least a billion dollars in loss collectively across the rent stabilized portfolios outside of core Manhattan.
Few more stories coming out of Albany this week because everybody's talking about the budget. Janicki from Politico reported that revenue and construction trades are at a complete impasse on negotiating their wage agreement for 421A, 485X, whatever you want to call it. Bottom line is the unions hold mass sway and importance and political power in Albany.
The Governor has essentially given a lot of power to both REBNY and primarily the Unionists to negotiate a deal that could work for both sides. They can't seem to come to an agreement, and that inability to come to an agreement has put the entire tax subsidy for the building of new housing, one of the Governor's main agenda items, in jeopardy of even being included in any future housing package.
Something we're monitoring, obviously, because on the rent stabilized side, even though We are not involved at all in 485X or 421A. A budget that is hinging on this happening obviously affects anything that we are asking for and wanting to accomplish. Specifically, rent stabilized buildings, as we've highlighted, are financially distressed.
1 in 10 are insolvent. And they need relief. And so if the dynamic in Albany is continuing to discuss tax credits and labor agreements and nothing else gets done on housing because of that, it remains a huge problem for rent stabilized buildings, Eric Enquist, the editor at the real deal had an op ed about the good cause bad cause Albany's recipe for failure.
And he makes several really good points, but also echoes something we've talked about on the podcast, something I frequently talk about when I'm asked to speak on other podcasts, which is that the nature of Albany is to get a deal that doesn't always necessarily mean good policy. And so often what happens is you have two sides that don't agree on anything.
Putting out proposals that neither one really wants. And then the nature of Albany is to make soup out of those two ingredients that neither one really wants. Well, you and I know that if you're making soup and you put in things that nobody wants into it, at the end of the day, you're still going to get a soup.
Nobody wants to eat. And that is what ends up happening more often than not on housing policy lately in Albany. It's a lot of trying to make devil's bargains between two policies that are fundamentally opposed to each other. We've talked a little bit about good cause before in the past. But one thing that's been clear is good cause does not necessarily create more housing.
In fact, rent control by and large, historically price control policies, whether or not you're looking here in New York city, you're looking internationally, you're looking in California, does not incentivize the creation of more housing. We know that we have a fundamental housing shortage. So the idea that you're trading.
A policy that could very well restrict the supply of more housing with a policy that is meant to create more housing, which is the tax credit for 421A or 485X, is fundamentally opposed. They're two completely opposing forces. So, it's one of the many reasons Eric highlights in his article that you're trying to force two parties that are working at completely opposite directions, To come together on agreement and lawmakers are put in an unenviable position of trying to negotiate these two polar opposite approaches while balancing their own political protection, if you will, that they need to be worried about on the voter side.
So it all leads to where we are now, which is again April 1st. Budget is due. No real signs, at least in the short term, that a budget agreement is coming together anytime soon, mostly because they're trying to force these two completely opposite ways of dealing with a housing crisis, both price controls, incentivizing housing creation together for the sake of getting a deal done.
We are hopeful, obviously, that something can be worked out, but that remains a huge obstacle to any agreement. The next story is a New York Post editorial board op ed will Albany get serious about New York City's affordable housing crisis. If not, all New York will suffer. They quote Gary LaBarbera, who's the head of the building and construction trades, continuing the conversation we had on the last story about the dichotomy that's going on between unions wanting to make sure that they're paid a fair wage, they would argue, and developers being able to have their working capital to build more housing.
At the end of the day, this debate always comes down to what actually pencils out. You can in principle agree that more affordable housing is necessary, but if the government doesn't want to pay for it, it becomes a serious issue as to how it's paid for. Because developers, rent stabilized owners for that matter, anyone else has to go to a bank.
They have to show that the numbers are correct. Future rents, future condo sales, whatever it may be, will pencil out for the upfront loan to build the building. Despite what many in Albany think, people aren't walking around with pockets full of billions of dollars they can just start building buildings with, or they can keep buildings maintained with, or they can buy buildings with.
They have to go to banks and they have to borrow the money. And the banks have an underwriting process where they have to determine with mathematics, which is no emotion, Just math that the project will pencil out that a building you are spending a billion dollars or more on to build. And we just saw a building, the tallest building, frankly, in Brooklyn, just completed already going into foreclosure.
And this is a very serious concern that's being brought up by both the unions and obviously the developers who are dealing with these negotiations, that if. Too many concessions are made and the cost to build affordable quote unquote housing is too high. Then a tax credit won't do any good. A bank won't sign off on a loan if at the end of the day the person cannot pay it back.
And the thing about a tax credit to remember It is an upfront cash. It is future savings, but you don't actually save any upfront money and have additional revenue just because you have a tax credit, you still have to borrow the money and you still have to pay it back. It just allows you to pay it back at a better percentage.
because you're not paying a tax on top of it, a property tax burden, which by the way also falls off after a certain amount of time. We would argue for a supply side solution to this, to reduce as many regulations as possible within reason, to make zoning something that isn't a hindrance to building more housing, so that development is profitable, so that good wages can be paid back to these unions, and that more and more people build to the point where what we're seeing is happening in other southern Places like Texas, Florida, other places that have rapidly allowed the increase of more housing.
You're actually seeing a stagnant rent growth to a drop in rent growth because the competition for renters is so high. So, property owners have to price rents at realistic rates. They don't have this kind of cornered market in which they have no competition for future rents. And we think that's a much better approach than forcing affordability and forcing costs higher and higher.
And other states have proven that it, it can work. Our next story is about unpaid New York City property taxes. They have hit a record 880 million this year. The argument from lawmakers, and this was highlighted in a Bloomberg piece, that the reason this property tax fiasco reared its head now is because a Bloomberg, in fact, going back to Giuliani policy of tax lien sales against property owners.
who incur massive amounts of unpaid property taxes was allowed to lapse during COVID that these folks have no consequences on paying these property tax burdens. We find that argument a little interesting considering we are frequently faced with the same problem on rent collections. As you know, housing court is a disaster.
On a simple non paid case we're looking at 68 months before you get your first appearance. Some of these cases going back as late as 2020 before COVID are still ongoing and working their way through housing courts for non payments. We're seeing people with arrears approaching hundreds of thousands of dollars on rents that are about 1, 800 to 2, 000 a month.
So we're talking years and years of non paid rent. So the lawmakers are arguing at the same time that the reason people aren't paying their property taxes is because there's no consequence while protecting a system in the housing court process that has no consequence for not paying rent. And look, evictions are not the goal.
They should never be the goal. The whole point of housing and going into the business of providing housing is to have people living in your building. They have rents being paid, but rents need to be paid. So property taxes can be paid. So this argument that the government is now making that tax delinquencies have gone up property tax delinquencies directly, because there's no consequences, it's completely contradictory to their rent collection policy.
And just to indicate this as of March, according to the department of finance, single family and condos were one third of the delinquencies. Rentals were 28. 5 percent of the delinquencies. That's directly attributed to the delay in housing court and the inability to collect rent on rentals. It also has to do, obviously, with some of the problems financially.
The rent stabilized buildings are incurring. Commercial properties are in even worse shape. They're facing as high as 38. 2 percent of the 880 million owed is being attributed to property tax delinquencies in commercial properties, office buildings. So, New York is in for a world of hurt. We've been trying to highlight this idea like the economy is chugging along all is well.
The property tax base of New York is under serious threat because the underlying financials are unsound. The devaluations in office, the inability to collect rents and rent stabilized, the devaluations in rent stabilized, And the individual burden single family homeowners are facing are all pointing to a very troubling financial fiscal picture for New York City, and it seems as if now New York lawmakers are catching up to the problem and starting to realize that they have a doomsday scenario in the future.
The problem is, Their ways of fixing it are to be punitive against property owners instead of figuring out ways to financially make these billings more sound. Our next story is from Reason Magazine. They are a well known libertarian outlet, but we've come to rely on them as actually one of the more rational voices out there highlighting property rights issues, and they've cued in on the squatters problem that has seemed to be uptaking around the country and certainly here in New York.
And part of the reason here in New York Is the problem is because of housing court. Now I've already seen some pushback. So the article here was squatters rights laws violate the takings clause. So they're making a constitutional law argument on property rights, which is interesting.
I've seen some pushback from tenant groups and even legal aid groups that this is such an isolated problem. We really shouldn't be focusing on it. The problem of squatters and the article in reason highlights cases in Washington cases in Atlanta, but for our purposes, obviously we're focusing here on New York.
And the reason why New York, we think it's particularly acute and it isn't just squatters rights. Because if you think about it, everyone who isn't paying rent, but living for free is a squat. At the end of the day, if you sign a lease, that says I agree to pay, even if it's 5, to live somewhere, and you choose not to make that payment, or you can't make that payment, because certainly people have hardship.
You know, this reminds me, as an aside, as someone who's had to deal with my own rental problems, my mother and I were actually evicted at one point when I was a child. We were very close to the landlord that ended up evicting us. An old Italian woman, my mother and I, single mother, living with her. We couldn't and she had to pay her mortgage.
She was a widow. And eventually we had to leave and, you know, it wasn't a court eviction. She said, I'm sorry. I have to find somebody who can pay the rent. We lived there for six additional months. Even after that, she cooked for us. We were part of the family. But eventually, we did have to leave and move in with some of my mom's friends and basically live on the couch.
So I'm extremely sympathetic to people who have hardship. You know, our number one goal here as an organization is to figure out ways to eliminate evictions altogether. And many of these laws in New York were put in place to protect. But the unintended consequences of those tenant rights laws are that it's protecting people who had never had any intention of paying rent, never had any intention of legally signing leases and living in someone's property, whether it be a single family home with one rental or multifamily rental properties.
If you have 1, 000 rent, for example, and you're not paying 250 of that rent. If you're not going to your. back to the property owner and saying, I can't pay the thousand dollars this month, I've lost my job, or my wife and kids are sick, and I've got a bill, but I'm willing to pay a part of the rent.
Property owners more often than not will accept that. They will want to work with you. You're showing good faith that you're trying to do what you can to pay towards your housing costs. But what we frequently encounter is folks who never pay a cent. And I find it just fundamentally hard to believe that if your rent is X amount of money, you, you can't afford 5 towards the rent.
You can't afford a hundred dollars, anything at all. That's where it starts to get into a willingness. You're just taking advantage of the laws, which protect you from not having to pay for the housing. Costs that you're incurring by living there. And if you apply this theory to healthcare costs or motor vehicle leases or any other kind of financial obligation, at some point, you have to pay for the cost of the product you're using, as we highlighted in the property tax conversation.
If you're not paying the property owner does not have the ability to pay their property tax bill. Then schools don't get their payments. Roads and sewers aren't maintained. It's a holistic problem when people are unable to pay for their own housing. We want to solve all that. We want to work together to do that.
But it starts with the ability for an owner to say, This is my property. This is what it costs. If you want to live here, you have to pay it. But you don't have the right to come in and not pay for anything. Live here indefinitely and allow the court system to protect you. And we thank The Reason magazine for highlighting that story.
All right, that's a wrap on this week's news stories. Now for some final thoughts. Specifically, we're going to talk about a New York Times piece. A New York group plans to spend big support of EMB campaigns. This group called Abundant New York, which is going to work to elect candidates who support building more housing.
It is yet another sign that the state's housing politics are changing. This is a super PAC put together by the group. Open New York. Now we like to talk about how chip and the property owners that we work with. We think we've come a very long way in talking about being pro housing, supportive of new development, supportive of new affordable development.
Groups like open New York are primarily YIMBY groups. So it's interesting to see them getting into the conversation of electing certain people. It's very interesting to see them with their first round of endorsements. One of them being a socialist. Open New York also supports things like good cause eviction, which we talked about earlier, could be a hindrance to the production of new housing.
And look, we have no objections to people having a wide array of political opinions, but it seems a little disingenuous to be a quote unquote YIMBY group, which is supportive of housing production. While also actively raising political dollars to contribute to socialists who fundamentally espouse anti capitalist, anti commodification, anti belief in the building of new housing and making a profit off of it.
It seems very contradictory. In fact, the point that I highlighted before that we as a group are very proud that we've gotten property owners in support of building more housing is because groups like Open New York have said publicly many times that landlords are the biggest opposition to new housing.
That may be the case 20 years ago, may even been the case 10 years ago, may even be the case for very small property owners who don't understand the dynamics of property evaluation, property tax burdens, sharing the burden with more buildings being built in and around their areas, specifically in the suburbs.
But as far as New York City goes, and as far as our owners are concerned, There's really fundamentally no opposition to building more housing. We need close to a million units of new apartments in New York City. 800, 000. Anywhere from 000, depending on which elected official you talk to at any given time.
There is no way we are going to get there if we collectively and collaboratively don't talk about the need to build rapidly a whole bunch more housing. So I think groups that are supposedly pro housing, while supporting people who fundamentally oppose the building of more housing, And believe that the only way to make housing affordable is to decommodify it, to prevent somebody from being able to make a living on buying, building, and selling that housing.
I think that's extremely hypocritical. Obviously politics is complicated, but this idea that a group, which is creating a political entity, not a policy entity, raising funds to elect politicians for specific ideas and ideologies under the umbrella of being pro housing is now openly supporting both policies and policies.
Elected officials who are in opposition to the development and rebuilding of new housing. Seems like a conflict of interest to me. I will let you be the judge of that. 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.
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 visit us in the comments section of the podcast. Catch you all next week. Hopefully we'll have a budget deal and we'll have a housing package.