We wish the new RGB members good luck… it’s a tough job.

Plus, we explain why New York can no longer rely on federal funding, so politicians should change their thinking. 

This is your New York Apartment Association weekly update with CEO Kenny Burgos.

Follow NYAA on BlueSky: @housing.bsky.social

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Send us questions or comments at podcast@housingny.org 

On The Agenda

0:57: Mayor Adams announces new Rent Guidelines Board members

2:35: Climate law compliance: LL97 & why building owners might not comply

4:09: Feds rescind funding for nonprofit homeless housing 

5:29: New documents shed light on Signature Bank failure 

7:17: Housing permitting is down

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Transcript

This week on Housing New York, we have new members of the Rent Guidelines Board. Plus, New York City buildings are struggling to comply with the city's climate change law because they don't have the cash. And housing permits are down, which means the housing crisis is about to get worse.  

Let's start Housing New York. 

[THEME]
“We need 800,000 units to meet the demand today. What we have right now in the United States and what we have right now in New York City is almost a crisis of absurdity.”

[INTRO]

 Welcome to Housing New York, the weekly podcast recapping all the housing news happening in the state. I'm your host, Kenny Bergos, CEO of the New York Apartment Association. We're taping this on Monday, March 17th, St. Patrick's Day. 

Okay, onto the news. 

[00:57] [New Rent Guidelines Board members]

We kick off the podcast talking about the Rent Guidelines Board. Last week, mayor Eric Adams announced that he has replaced the chair of the RGB, Nestor Davidson, with public member Doug Apple. 

In a press release, Apple was quoted saying, “Rent-stabilized housing is an essential part of the New York City housing market, and its preservation requires delicately balancing tenant affordability while ensuring buildings have sufficient income to support operations.”

We agree with him. Buildings need to have sufficient income in order to prevent decline. 

In 2023, the RGB distributed a memo that said half of rent-stabilized buildings are 100% stabilized and built before 1974. Which means they get no subsidy from the government. These buildings are entirely relying on RGB increases to keep up with operating costs.

When you exclude the core of Manhattan, two-thirds of the buildings are 100% stabilized. The net operating income on these buildings has been cut in half since 2019, and the driving force behind that has been the RGB rent adjustments coming in 2% below inflation annually. 

Mayor Adams also appointed two public members, Alex Armlovich from the Niskanen Center and Reed Jordan who is an urban planner and educator.

We wish them luck. And we know that serving on the RGB is incredibly difficult because the government has failed to make housing policy better. They’ve failed to provide buildings with adequate help; they fail to keep government controlled costs like property taxes and water and sewer payments in check; they fail to provide renters with voucher assistance. 

All this forces the RGB into an impossible place where whatever they do leaves people disappointed. So again, we thank the new members for serving, and we wish them luck.  

[02:35] [LL97 climate-law compliance]

We're going to talk about climate change now, and the struggles buildings are having to comply with new laws.

There is a report out by the Center for an Urban Future, which suggests that many buildings are going to simply pay fines instead of investing in energy efficiency upgrades. The reason is basic economics. 

Let's recap the regulations really quickly. Basically, every building that is more than 25,000 square feet has to put into place energy efficiency upgrades, and they must reduce their carbon footprint or face fines. The idea is that the fines are high enough to force the buildings to invest in the upgrades. 

Here's the problem, though: The law was passed in 2019 when there was a fair projection that buildings would have enough revenue to pay for the upgrades, and the economy would be strong enough to absorb rent increases to pay for it.

Then COVID hit, which eliminated most buildings' cash reserves; and then inflation spiked, and then interest rates grew, and now federal funding is drying up. The reality is that many of these buildings don't have any access to capital to pay for these upgrades. They probably are going to struggle to pay the fines as well. 

Some elected officials are going to say there is funding available for struggling buildings, because that's what they always say when people argue that building owners can't afford to pay for mandates they implemented. But it's just not true. If there was a pool of funds out there available to our members, we would be telling all of our members how to get those funds.

We urge the public to understand why this is happening. It's not a better bet to pay the fines. It's literally the only option available to most buildings right now.  

[04:09] [Feds rescind funding for nonprofit homeless housing]

Okay, we have to talk about the federal government now. 

Over the weekend, it was reported that the Trump administration was going to release funds for nonprofits in New York that provide housing to the homeless.

And then it rescinded the order. 

They say it was a technicality and that the funding will be paid out eventually. But housing providers are worried. 

Much of this funding goes to actual building operations or wraparound services that certain nonprofits provide to renters. Gaps in payments force buildings to delay maintenance or upgrades.

The Trump administration seems to be focused on the regulations that allow for nonprofits to push for a housing-first model, where they put homeless individuals in apartments before they are required to meet certain prerequisites. 

The details of this are complex, like most things with housing, but the larger message is clear: New York can't rely on federal funding. 

The old way of thinking about housing needs to change. Most politicians in New York have spent the past decade believing the pathway to better housing was federal funding for nonprofits to build social housing. But there was never enough money. 

They would talk about how we have to fight for more. Now we know more funds are not coming. 

We need to figure out an alternative approach, and the most logical pathway is reducing regulations and creating incentives for the private sector to invest back in the city.  

[05:29] [New documents shed light on Signature Bank failure]

We're going to talk about the failure of Signature Bank now. This week, details started to come out about the fire sale of the bank's rent-stabilized building loans a few years ago.

It turns out the winning bid, from community preservation corporation Neighbors Restore & Related, was not the highest bid. The group paid about $0.56 on the dollar to buy a $4.3 billion pool of loans. Freedom of Information requests reveal other bidders were willing to pay more. $0.82 on the dollar was the highest bidder. But the Federal Deposit Insurance Corporation, or FDIC, chose the experience of operating in this highly regulated space over the cash grab, according to their statements. 

We have a few thoughts on this story. We agree that CPC and Neighbors Restore have a unique experience in this field, and if you want to stabilize these buildings, you're going to need help getting government subsidies, which these groups are very good at.

The sale price was likely a fair one. After the 2019 laws and the COVID pandemic, the value of these buildings has absolutely declined 40%. Another way to think about this is if a building had a $10 million mortgage, the CPC-led group bought it for $5.6 million, which makes sense when you realize the building is only worth about $8 million now or less. They're underwater. 

It's also very important to understand that FDIC is not letting the CPC-led group cut building owners any deals. They still owe the full loan amount on their buildings, and their buildings are still losing value every single year. 

What the CPC-led group can do is modify loans and help secure government subsidies. They're also going to be less aggressive on foreclosures, but this year they have been forced to start some of those procedures. 

We suspect foreclosures will increase because the reality is that there is no path forward for most of these buildings.  

[07:17] [Housing permitting is down]

We're going to end the podcast with some bad news, though it's not surprising.

Reports out last week were that housing completions in New York City were up, which was expected because there has been a lot of government backed housing creation in recent years. But the more troubling news was that housing permits were down. This should worry everyone. 

Let's simplify this: We don't have enough housing. In fact, we need so much more housing that rents continue to rise in much of the city even in February, which is historically a time when people aren't looking for apartments. So we don't have enough housing, we aren't building fast enough, and now there is less housing in the pipeline. 

So we know that the situation is going to get worse before it gets better.

Government officials need to understand this and they need to do whatever they can to increase supply. Five-year plans or pledging to invest government funds towards a problem isn't going to cut it. We need a different approach. 

[OUTRO]

That's it for the podcast. Next week we're going to do a deep dive on what's happened during the past two years at the Rent Guidelines Board. We think this is important before the board meets for the first time [later this month]. 

As always, you can follow us on social media @housingny. 

This podcast is a proud product of the New York Apartment Association. You can leave a comment where you were listening to this podcast, or reach out to us directly. 

You've been listening to Housing New York with Kenny Burgos, and I'll see you all next week. 

And remember, good housing policy starts with good conversation.