Nonprofit affordable housing providers are sounding the alarm.

Two new reports show rents aren’t covering operating costs in stabilized buildings and project it will cost billions to save them.

Plus, the insurance-cost crisis has finally captured the attention of state lawmakers. 

And we took a trip to Vienna, Austria. What we learned may surprise you. 

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

Check out the latest edition of Housing New York Magazine

Follow @housingny on Instagram X TikTok YouTube & Substack 

Send us questions or comments at podcast@housingny.org 

On The Agenda

1:11: ANHD and Enterprise sound the alarm

3:35: Should Mayor Adams stack the RGB on his way out?

5:14: The Legislature: Insurance crisis hearing scheduled for Tuesday, Nov. 18

6:09: Is NYC Cooked? 

9:00: Preview: Housing lessons from Vienna 

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Transcript

 In this episode of Housing New York, non-profit affordable housing providers are panicking and they're sounding the alarm. They say rents don't cover operating costs in stabilized buildings, and they are at dire risk. Plus, the insurance cost crisis has captured the attention of lawmakers. We will preview an upcoming hearing on this issue. Finally, I took a trip to Vienna, Austria, and what I learned may surprise you. 

Let's start housing New York.

[THEME (waterfall)] 

“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. Hundreds of thousands of renters are at risk, and there is literally no plan. The distress of rent-stabilized buildings is going to be one of the biggest stories for the next 12-18 months.”

[INTRO]

Welcome to Housing in New York. We're taping this on Monday, November 3rd. By the time you listen to this election day may be over, we may know who won and how the key ballot proposals shaped up on this podcast. We are going to avoid those topics and instead focus on a lot of the housing news that is happening.

Let's get right into it.

[01:11] [ANHD and Enterprise sound the alarm]

You know how you keep talking about something over and over again and you wonder why nobody else is talking about it, and you start to think that you might be a little crazy. And then everyone starts to see the same thing and you get this great sense of validation and relief. 

That's sort of how I felt last month when two prominent nonprofit housing providers issued reports that basically said they cannot operate rent-stabilized buildings anymore.

The rents are just too low to cover the costs — just like we've been saying for years. Buildings are failing because of a simple math problem: Either rents have to go up or the costs have to go down. 

Those two groups were ANHD, which has a long history of providing tenant-focused affordable housing, and Enterprise Community Partners, one of the biggest nonprofit developers and housing providers in the city.

We encourage all of you to read the reports, which we will link in the podcast description. 

Here's some of the highlights: First, in the ANHD report, they estimate that 63,700 apartments are already in financial distress. That's the polite way of saying the buildings are functionally bankrupt. These buildings pay no property taxes, but the rents are just too low to sustain operations. As they point out, the epicenter is in the Bronx. 

What I found really interesting about the report is their projections. Without a bailout or tangible steps to reduce costs, the buildings are going to deteriorate. And they put a price tag on saving them: $10.2 billion to $26.8 billion, or about $160,000 to $420,000 a unit — and that might be an optimistic number, since other housing experts have estimated that it will take closer to $500,000 per apartment to rehab a dilapidated building.

The Enterprise report had a similar conclusion. They specifically focus on how the inability to collect rent due to a dysfunctional housing court system has led to severe distress in affordable nonprofit rent-stabilized housing. The second biggest driver of costs is insurance, which we will talk about a little more later in the podcast.

Enterprise said the rising costs are an existential threat to nonprofit housing. Literally, if nothing happens, they are done. 

Or as the kids say today, they're cooked.

In the report, they didn't ask for rent increases though. They want costs to be cut. They also want vouchers to be expanded and they want government subsidies to cover cost losses.

[03:30] [Stacking the RGB]

Let's talk about the Rent Guidelines Board now. 

Mayor Eric Adams will be done with his term at the end of this year, and there were various outlets reporting that he might appoint as many as six new members of the RGB on his way out the door. He legally can do this, but has been criticized because the front runner to become the next mayor is Democratic Socialist Zohran Mamdani, who has called for four years of rent freezes. 

As you can imagine, this has caused a lot of controversy in political circles. Some have accused Adams of corruption. Others have said it just looks bad to mess with Mamdani’s signature campaign pledge; and some have cheered the idea because they know that four years of rent freezes will lead to massive disinvestment in housing that could displace thousands of renters and exacerbate the city's housing crisis.

Our take on this actually hasn't changed at all in the past year. The members of the RGB are civil servants who must abide by the law. The law says they must review hosts of data and make an informed decision. If the members of the board are not abiding by this legal responsibility, then I think we all lose.

The government needs to be honest and trustworthy, not just a rubber stamp for political ideology. 

What we are more concerned about is who the next mayor appoints to be the chair. The chair could limit the amount of data that is created and presented to the board, intentionally choosing to cut reports on building finances.

You might be thinking that sounds paranoid, but members of the state Legislature have already introduced a bill that would do just that. It would ban the Rent Guidelines Board from creating and reviewing the Price Index of Operating Costs report. This is the report that every single year runs a calculation for how much rents need to be raised in order to stop buildings from falling into disrepair.

In 2016, when Bill de Blasio first froze rents, this calculation by the RGB said buildings could be maintained with a 4% decrease in rents. This is why Bill de Blasio's rent freeze was ultimately viewed to be legal. There was data to back it up.

In contrast, this year the RGB data said rents needed to be raised 6.25% to keep buildings adequately funded. The RGB instead raised them only 3%. 

If we look at the RGB’s own data, Bill de Blasio's rent freeze in 2016 was 7.25% better for property owners than Eric Adams’s 3% increase this year. 

If our rent-stabilized housing stock is no longer going to follow the data and just follow the whims of a politician, then we're going to have serious problems.

[05:53] [Insurance Hearing]

Mark your calendars. On Tuesday, November 18th, the state Legislature is going to get together and solve all our problems with skyrocketing insurance. 

Okay. Maybe that won't happen, but they are holding a key hearing to discuss the problem. 

This is an issue that is tanking affordable housing, both nonprofit and privately owned. We mentioned the report by Enterprise Community Partners earlier. In the report, they say insurance has more than doubled since 2017, and that in the Bronx, $1,806 is the average insurance cost per apartment. That’s a lot more than one month's rent up there. 

The cause of this insurance spike is multifaceted, but I'm going to focus on what I believe to be the biggest reason: organized crime and fraud.

You heard that right. There are organized crime rings in the Bronx that are engaging in insurance fraud and they're making millions. Each year it is being paid for by either higher rents, or when the rents are hard capped, the buildings are deteriorating because there is no money for maintenance.

What exactly is happening is that these organized crime rings recruit people to fake falls in front of buildings. Then they usually wait three to four months in hopes that the building deleted the video of the fall. The reason they do this is because they will get a higher settlement if there is no video of the fall.

It is estimated that roughly 90% of these claims are fraudulent and that it is driving up insurance costs for everyone. 

It's important to know that even when there is what clearly appears to be fraud on the video, the building still pays the deductible, which can be $10,000 or $25,000 or more. That's money that could be spent on upgrades that would make renters' lives better.

It's also a big reason why some empty apartments take longer to get back on the market. There just isn't capital to make repairs because of an insurance claim. 

If we can bring down the cost of insurance, it could make housing better for everyone. 

[07:36] [Is NYC Cooked?]

I'm a big fan of The Economist. They do great work looking at trends and making projections about how things will look in a few years. So a recent article about New York City grabbed my attention. 

They looked at the trend of finance jobs leaving the city, why that’s happening and the long-term impact it might have. Not shocking was that housing came up as a factor in their reporting. 

The core reporting looked at the scary loss of revenue the city might face as more and more finance jobs move to places in the south, and some of the ultra-rich CEOs of these firms also relocate out of the city. Their tax revenue has been the main source of payment for the city's robust social safety net. 

Jobs and industries leaving New York is not a new thing. There are always shifts and changes because it is a dynamic city, but the jobs that are mostly replacing the finance jobs are in healthcare and social assistance, which relies heavily on government funding from Congress or the state.

The result of all this is that wages in New York City have declined adjusting for inflation, while they have increased in the rest of the country. The growth in the tech sector has helped ease this transition away from finance, but for the most part, the city is failing to attract new industries fast enough to cover the loss in revenue from the finance sector decline.

The main reason for this is, you guessed it, the cost of living. That's mostly housing costs, but also taxes are higher on corporations in New York City. 

It seems increasingly clear that New York City's fiscal survival is tied to its ability to make the city more affordable for all, so that businesses actually want to move here.

[09:04] [Housing lessons from Vienna]

I'm gonna end the podcast today talking a little about my trip to Vienna, Austria. I've spent the past week in Vienna meeting with housing experts, researchers and residents who live in what many call a “renters utopia.” 

My team and I sat down with officials from Wiener Wohnen, Vienna and Europe's largest public housing authority. We toured nonprofit developments and sat with people who live in Vienna's social housing every day. 

We filmed every step of this journey for an upcoming documentary exploring the Viennese housing model — from how it's funded and built to how it's managed and maintained. 

What I'll say is, I came here to learn about housing and I came back realizing we weren't even speaking the same language.

Their model was built from centuries of different history. It grew out of empire, land reform and a tax system New York abandoned a hundred years ago. So stay tuned for this content. It should be coming out in the next few weeks, and I think you'll find it incredibly interesting just as I did.

[OUTRO]

That's a wrap for today's episode. The Q3 Housing New York Magazine is out now. The issue covers pension funds, losses from rent stabilized housing, the broken property tax system, how voters believe New York's housing policy is broken, which elected officials have the most rent stabilized units in New York and much more.

You can read on our website at housingny.org. I'll be back with you in two weeks. In the meantime, follow us on Instagram, TikTok and X @housingny to stay up to date. And remember, good housing policy starts with good conversation.