Housing in the state budget, the White House’s proposed Section 8 cuts & more

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

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On The Agenda

1:04: Housing in the state budget: winners & losers  

2:44: Trump budget proposal could devastate New York’s Section 8 voucher system

3:55: Reconsidering SROs and other creative living arrangements in a housing crisis  

5:50: How this 1,229 unit rent-stabilized building in Harlem failed to break even 

7:30: Despite pause, tariff uncertainty continues 

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Transcript

 This week on Housing New York, it's over a month late, but we finally have a state budget. Plus, the White House is proposing Section 8 cuts and causing concern. And we may only have a few more weeks before tariffs make operating an apartment building impossible. 

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. I'm your host, Kenny Burgos, CEO of the New York Apartment Association. We're taping this on Monday, May 12th. 

To all the mothers listening, I hope you enjoyed Mother's Day yesterday, which was just exceptional weather in New York City. As one of my favorite X accounts puts it, the vibes were immaculate. 

Let's discuss the news.

[01:04] [State budget recap]

Late last week, the final state budget bills were passed. To recap, the budget was 40 days late, included very little for housing, and now we have only 18 session days left. This is basically the worst case scenario, if you care about the state's neverending housing crisis. 

The Real Deal wrote about the final budget identifying winners and losers. In the article, they say $500 million of the budget is going to pro-housing initiatives. This includes $50 million to launch the Housing Access Voucher Program (HAVP), which we support. There's also a hundred million dollars for the Pro-Housing Supply Fund, which supports localities with infrastructure projects if they increase zoning or take other measures to increase housing.

It also created a very narrow pathway to help a few buildings with expiring tax credits convert to apartments with market-rate rents to condos. It's estimated that about 150 buildings could qualify for this provision; so, narrow indeed. 

We should also note that New York City received $1 billion in state funding stretched out over five years as part of the City of Yes deal. This will help to fund affordable housing and create subsidies for a small number of projects. 

We wanted to put this in perspective. It's widely accepted that we have a deficit of about 500,000 homes in New York City. Over the past two years, the state has passed housing legislation that will slow the growth of that deficit. So in five years, we're only going to need about 650,000 homes instead of 700,000 homes. 

If you wanna pat yourself on the back for slightly slowing the decline of New York City, that's fine, but let's not pretend we're reversing this trend or addressing the city's housing problems. 

[02:44] [Voucher funding concerns]

Quick note on vouchers: Concern is high over proposed federal funding cuts to Section 8 funding. 

We spoke to online publication The City about this. 

The proposal from the White House would combine public housing aid, Section 8 funding and several other sources into a single grant. Under the proposal, New York State would lose around $5 billion in funding.

I've said repeatedly on this podcast that housing has costs. If you take $5 billion away from the operating costs for housing, then we're gonna need to find $5 billion somewhere else. That could be higher rents, it could be state and city tax breaks. It could be regulatory reform that leads to more investment in housing creation.

But if you do nothing, then the quality of housing will decline. And this is worrying because currently more than 70,000 Section 8 voucher holders live in rent-stabilized housing. And as I've said before, thousands of rent-stabilized buildings are already functionally bankrupt. If you cut $1.5 billion in funding to these buildings, there will be devastation.

So I hope the funding is not cut, but I'm also hoping elected officials understand the gravity of the situation and start thinking about creative ways to adapt to potential cuts.

[03:55] [Reconsidering SROs]

Have you ever heard about SROs? Well, we want to take a moment to discuss an op-ed penned by Howard Husock on Single Room Occupancy living or SROs. The op-ed, in the New York Post, outlines how SROs were a vital part of the New York City housing stock for a long time, helping low-income individuals find cheap housing that allowed them to avoid living on the streets.

For those of you unfamiliar with this term, SROs generally don't have kitchens, and they typically have a shared bathroom on the same floor. They might have a sink for washing in the unit and a small fridge, but the idea is that it is incredibly basic living and that allows the rents to stay incredibly low.

You may have even seen an example of this in Will Smith's movie, The Pursuit of Happiness. 

As Husock points out in his op-ed, the progressive politicians in New York City felt like this type of simple housing was not okay. They felt like all apartments should have bathrooms and kitchens, so they passed laws that eliminated SROs, outside of a few thousand that are grandfathered into the law.

The result was that tens of thousands of people no longer had housing that was affordable to them. Some tried to rent rooms and apartments, or ended up in overcrowded settings with friends and family like we see today. But many ended up in homeless shelters, which in many cases are basically like SROs, or in some cases even worse.

Husock proposes turning some deserted commercial buildings into SROs, which would likely be cheaper than trying to convert them to condos or full residential apartments. But as he notes, the building code prevents this from happening. 

It highlights the larger point, which is that we really need to think more creatively about how we can provide housing that people need. And the best way to do that is to look at reforming our laws — whether that's the building code, zoning, or laws regulating the industry. 

In politics, it's often said that you have to create policy with the pieces that you are given, not the pieces you wish you had.

[05:50] [Failure of a 1,229 unit rent-stabilized complex in Harlem]

We saw another example of the financial decline of rent-stabilized housing last week. Crain’s New York reported on the foreclosure of a 1,229 unit rent-stabilized complex that was praised as a shining example of private-public partnership to provide affordable housing in the city. 

Former Mayor Bill de Blasio cut the deal, which included $100 million in tax breaks, and the owner of the complex invested millions into fixing up the place with an agreement to keep the rents affordable.

Despite all this help from the government, these buildings still failed. And that's because of the changes to the laws in 2019 and the below-inflation rent adjustments advanced by the Rent Guidelines Board for the past decade. Now, this shining example is worth less than the mortgage on the building. 

The next few years will be very hard on the tenants that live in these buildings. Foreclosures take several years and the people operating the building will absolutely invest all of the rent back into the building, but that won't come close to fully maintaining it and taking care of all the mandatory upgrades that are necessary. 

Once the foreclosure is over, the bank will try and find a buyer, but that will be difficult. There's no pathway to turn around these buildings and make them profitable. So the more likely scenario is that they will go into receivership or the bank could just walk away from the building altogether, forcing the city to run it. 

Without massive annual subsidies, the buildings will continue to decline. And what's really scary is that these buildings are not an outlier. They're actually in far better shape than half of the older rent-stabilized buildings throughout the city. 

Right now, this rent-stabilized housing crisis is not coming. It's already here. 

[07:30] [Despite pause, tariff uncertainty continues]

We're gonna end the podcast talking about tariffs. 

At The Real Deal forum last week there was a booth set up by our friends at FNF Supply. They basically provide everything you could need to run an apartment building, from smoke detectors to garbage bins, to cleaning supplies — basically everything. 

They told a reporter that the backlog to get natural gas detectors, which are now required to be installed by law, is 11 weeks. 

Fortunately, the tariff war is not impacting the production of these, but there are a host of things that buildings rely on that are only produced in China. Even things as basic as heavy-duty trash bins. 

Places like FNF have a stock warehouse to weather a few months of supply chain delays. But it was very clear that basic things needed for maintenance of buildings could be impossible to find in a few months if this trade war persists.

We mention this because if apartment buildings don't have supplies, they won't be able to fix a lot of things. This could lead to more violations that owners won't be able to resolve. 

Many people in the government right now are quick to criticize the Trump administration for the tariffs. We just hope those same people are willing to cut building owners a break when those tariffs make it more difficult to run apartment buildings.

[OUTRO]

That does it for the podcast. As always, you can follow us on social media @housingny. 

Feel free to tell us how you feel about the podcast or anything else. Just drop us a note in the comments, or engage with us on X, Instagram or TikTok. 

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

And remember, good housing policy starts with good conversation.