“…any purchase price over $1 would be ludicrous.”

Rent-stabilized buildings are approaching a ‘death spiral’. The city must act before it's too late.

Plus, co-ops are also struggling with soaring housing costs, and we take a moment to remember former Congressman and New York City legend Charlie Rangel.

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

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On The Agenda

1:21 'The Crisis Has Already Started': Inside The Finances Of 4,300 Rent-Stabilized NYC Apartments

→ Thousands of rent-stabilized NYC apartments face foreclosure in tenant ‘bloodbath’

3:24: The Rent Guidelines Board’s rare revote  

→ Citizens Budget Commission: Rent-stabilized buildings approaching a “death spiral”

4:43: Co-op costs set to skyrocket

6:06: Charlie Rangel: a New York legend

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Transcript

This week on Housing New York, a Bisnow bombshell — a detailed report with open books shows how bad things are for rent-stabilized housing in New York City. Plus, co-ops’ concerned. Owners of apartments in one of New York City's largest Mitchell-Lama complexes are seeing huge double-digit cost spikes. And we remember former Congressman Charlie Rangel, who passed away this weekend after serving four decades in the U.S. Congress.

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 the Housing New York podcast. I'm your host, Kenny Burgos. We're taping this on Tuesday, May 27th. I hope everyone had a wonderful Memorial Day weekend. It's consistently one of my favorite weekends of the year. I actually went with my family to Playland over the weekend, which, if your childhood was anything like mine, was incredibly nostalgic. A bit worrying though. It doesn't seem like the local amusement park has many days left. 

Okay, onto the news.

[01:21] [‘The crisis has already started’]

We start with the in-depth reporting from Bisnow. Reporter Sasha Jones got an inside look at the income and expenses of one large rent-stabilized property owner. The 4,300 unit’s portfolio revealed what we already knew and have been saying: The crisis is here. 

Top line is $4 million in operating losses since 2022. Cash reserves for the building drained from $7 million to $1 million, and insurance costs are up 5X in under a decade. 

Reporting detailed how the portfolio was healthy. Back in 2019, net operating income was strong enough to pay for all the investments back into the building and cover mortgage payments. But since then, the buildings have started to fail, albeit slowly. 

In 2023, net operating income or NOI was still positive, but well below 2014 levels. NOI is the measure used to determine a building's value and overall financial health. What that basically means is that there is no longer enough NOI to pay for the mortgage on the buildings. Things get exponentially worse starting in 2025 as out-year projections show the NOI falling for the next decade. 

The reporting also looked at a 1,000-unit portfolio in the Bronx that is run by a nonprofit entity. In 2023, those buildings had an NOI that was negative by $2 million. In 2024, it rebounded slightly and is now only losing $1 million a year.

This is a group of buildings that are receiving government subsidies and are not paying as much in property taxes, and still they are struggling to survive. The reality is that without rent adjustments that keep up with inflation and regulatory reforms, almost all these buildings will die in the next five years. 

It's just a matter of when. 

In fact, over the weekend, the New York Post reported that foreclosures were filed on buildings with more than 2,000 rent-stabilized apartments. The quote that caught my eye? Foreclosure attorney Alexander Paykin says “There are situations where given the rent-stabilized nature of a tenancy, any purchase price over $1 would be ludicrous.”

[03:24] [RGB revotes]

Speaking of ludicrous scenarios, the Rent Guidelines Board met this morning and voted to alter the preliminary range that was approved a month ago. This change is unprecedented, but it was not a political decision — we are told. It was a technical mistake that was made in the first vote. The new preliminary range for a two year lease is now 3.75% to 7.75%. The range on a one-year lease remained 1.75% to 4.75%.

Also last week, the RGB heard testimony from several invited guests. Among them was the Citizens Budget Commission, a nonpartisan think tank that has a reputation for holding elected officials accountable when their political wishes don't jive with the math. 

They told the RGB that building deterioration is an imminent threat due to a decade of defunding. The term they used was death spiral. 

They called on the city to act immediately to stop the physical and financial deterioration of the rent-stabilized housing stock before we cross a precipice. And it is impossible to sustain these buildings. The data from their view shows that sub-inflation rent-adjustments for the past decade have made it impossible for thousands of buildings to keep up with maintenance and repairs.

This data backs up with what Bisnow reported and what I have been saying for the past year. 

The question now is, are people listening? 

[04:43] [Co-op costs set to skyrocket]

Rent-stabilized buildings are not the only housing stock that is crumbling under the high cost of operations. The Gothamist wrote about 22% hikes on monthly costs for one of the city's largest Mitchell-Lama co-ops last week.

More than 25,000 people live in Rochdale Village in Queens. The board recently informed residents that their monthly carrying charges are going up by more than 22%. To put this in perspective, the current charge is about $1,000 to $1,600 for a one-bedroom to a three bedroom apartment. These costs are going up to around $1,200 to $1,900, and this is just for operations. The mortgage payments on the co-ops and the taxes still have to be paid. 

This particular development is designed to provide home ownership opportunities to income-restricted families. So huge hikes in operating costs like this are very difficult for many to handle, but at the end of the day, the costs have to be paid. In this case, Rochdale Village is a state backed Mitchell-Lama, so the 22% hike may not be sufficient to cover costs, and the state may force the board to raise carrying charges even higher than this.

I'm gonna say it again: Housing has costs. This is a government-backed complex, and I feel for the people living there. Nobody wants to pay more. But if they don't pay, then the state has to find the money and the budget to cover that loss. Or if nobody can pay, the buildings will just deteriorate. That's just reality.

[06:06] [Charlie Rangel]

We wanted to end a podcast talking about a political legend. Congressman Charlie Rangel passed away over the weekend at the age of 94. 

He was a towering figure in New York City politics before he rose to national prominence. A veteran of the Korean War, he used to say that every day was a blessing. 

He was part of the Gang of Four, a group of Harlem lawmakers that broke barriers. Mayor Dinkins was the first Black mayor. Basil Paterson was a state senator, and his son, David, became the first Black governor. Percy Sutton was a legendary figure and former Manhattan borough president. 

Congressman Rangel was the first Black person to chair the powerful House Ways and Means Committee, which sets tax policy for this country. He was one of the driving forces behind the passage of the low-income housing tax credit. This has led to the development of hundreds of thousands of affordable apartments throughout the country and remains a key tool for affordable housing in this country.

All the stories about Rangel’s life also mention the story The New York Times wrote in 2008 about the four rent-stabilized apartments his family owned. He was even attacked by tenant groups for it. I talk a lot about the inefficiency of the rent-stabilized system, but today is not the day for it. We wanna remember Charles Rangel for the good he did for this city and his community.

He's a legendary New Yorker.

[OUTRO]

That's the podcast for this week. We hope you'll keep following us on X, Instagram and TikTok. You can find us @housingny. We love hearing comments from you. You can post them in the comment section of wherever you're listening, or engage on social media platforms. 

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.