Tag Archives: New York City

Luxury Rental Turned Into College Dorm

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photo by Ann Larie Valentine (no changes made) https://creativecommons.org/licenses/by-sa/2.0/

Realtor.com quoted me in ‘Help! My Luxury Rental Was Turned Into a College Dorm’. It opens,

Finally! After years of scraping by in cramped apartments in sketchy neighborhoods, you’ve made it—into a luxury rental with a doorman, concierge service, gym, bike room, and other posh amenities. It seems perfect.

Then you meet your neighbors, sunning themselves on the roof deck. Topless.

Sound like the opening to a Skinemax flick? On the contrary, it’s a reality for residents at The Azure, a new high-end apartment building in Brooklyn, NY.

“There were girls sunbathing topless up there,” one tenant with a child told the New York Post. “My wife was, like, ‘WTF?!’ There are a lot of families [here].”

You see, The Azure was facing significant vacancies, so the management company decided to rent out 30% of its units to King’s College, a liberal arts school in lower Manhattan. The result? Families who paid top dollar to live in a building with a business center, cold storage space for grocery deliveries, and other luxe features suddenly found themselves in what felt like a college dorm. A “dormdominium”! And you know what that probably means: late-night parties with eau de weed wafting through the halls and, um, some awkward bump-ins during rooftop barbecues with bikini-clad (or unclad) residents. And noise. Lots of noise.

“We bought into the luxury experience of the nice rooftop,” another tenant lamented. “We didn’t expect it to be packed with 18-year-olds.”

When luxury apartments turn into dorms: Why it happens

This rude awakening for well-heeled renters isn’t as unusual as you might think. It’s just what many luxury developers may find themselves doing now that the high-end rental market is softening, leaving empty apartments that must be filled to make ends meet.

“Building owners stuck with vacant properties will try to rent them to whoever they can within reason,” says Aaron Shmulewitz, a real estate attorney with Belkin Burden Wenig & Goldman in New York City. “When the economy goes bad, building owners have to scramble.”

Part of the problem is that a few years ago, the housing market was going so strong, developers got bullish on building—only to find themselves in a more sluggish market once their structures were complete.

“Opening a residential building is a many, many-year process,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “You have to acquire the site, you have to get financing, perhaps you have to get zoning approvals, you have to get your plans approved … then you have to build it and then you have to market it. You’re talking about years of work.”

Many of these builders were likely banking on the possibility that rental demand would just keep going up and up—but they bet wrong.

“We have a large amount of supply that came into the market within a fairly short period of time,” says Edward Mermelstein, a real estate attorney with One and Only Holdings in New York City. “At the same time, the demand has waned substantially.”

How do college kids afford a luxury rental, anyway?

While luxury rentals in any other city might be hurting right about now, New York is well-positioned to solve this problem, thanks to its high student population and limited dorm space.

“Renting to college students in Manhattan or Brooklyn has always been a trend, as there’s a total of almost 250,000 active students on this small island,” says Michael Jeneralczuk, a real estate agent with REAL New York. “With that said, luxury apartments are usually outside of student budgets.”

While a luxury rental might be outside of any individual student’s budget, a larger group of students can make it work. According to the Post, the King’s College students are paying a combined $6,000 per month for a two-bedroom apartment housing four people, which comes to $1,500 per person. This is more affordable than trying to rent alone; even a studio apartment at The Azure starts at $2,399 per month, according to the building’s website.

Meanwhile, the nonstudent rate for a two-bedroom apartment at The Azure starts at $3,391 per month. So by renting to King’s College students, the building is also making almost twice as much per apartment. So, at least for these two parties, it’s a win-win.

“It’s an opportunity to fill vacant apartments and collect rent,” says Becki Danchik, a real estate agent with Warburg Realty in New York City.

Given that the luxury rental market is slowing down nationwide, does this mean renters across the country might expect college-aged neighbors soon, too?

According to Reiss, it depends on development levels. In Los Angeles, construction has stalled, so apartments are filling up. Seattle, on the other hand, is facing similar issues as New York City.

“Seattle has had a construction boom, which means there are a lot of empty apartments,” says Reiss. “You face a similar situation where landlords are going to look to find some way to rent those out and make their money back.”

 

The Hunger Games: Amazon Edition

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photo by SounderBruce

The New York Law Journal published commentary of mine, The Hunger Games: Amazon Edition. It opens,

Last week Amazon finally announced that New York and Northern Virginia would be the sites of its planned major expansion. While many are caught up in the excitement of Amazon bringing 25,000 high-paid jobs to both metropolitan areas, it is worth thinking through the costs that beauty contests like this one impose on state and local governments. Amazon extracted billions of dollars in concessions from the winners and could have extracted even more from some of the other cities courting them.

It is economically rational for companies to create such Hunger Games-type competitions among communities. These competitions reduce their costs and improve their bottom lines. But is it economically rational for the cities? As long as governments are acting independently, yes, it is rational for them to race to the bottom to secure a win. So long as they are a bit better off by snagging the prize than they would have been otherwise, they come out ahead. But the metrics that politicians use are unlikely to be limited to a hard-nosed accounting of costs and increased tax revenues. Positive buzz may be enough to satisfy them.

Consider Wisconsin Governor Scott Walker’s deal with Foxconn. Just over a year ago, he was touting the $3 billion state subsidy for FoxConn’s manufacturing plant. This was the year leading up to his hard fought election fight, a fight he ultimately lost. His public statements focused on Foxconn’s promise to create 13,000 jobs. While that was a lot of jobs, it was a hell of a lot of subsidy—more than $230,000 per job, more than six times the largest amount Wisconsin had ever paid to subsidize a promised job. Walker got his campaign issue, FoxConn got its $3 billion and Wisconsin residents got … had. The $3 billion dollar subsidy has grown to over $4 billion at the same time that Foxconn is slowing down its investment in Wisconsin. So now taxpayers are subsidizing each job by well over $300,000 each. Nonpartisan analysts have determined that it will take decades, at the earliest, for Wisconsin to recoup its “investment.”

Likewise, hundreds of millions of dollars are thrown at stadiums and arenas even though economists have clearly demonstrated that those investments do not generate a positive financial return for the governments that provide these subsidies. Fancy consultants set forth all of the supposed benefits: job creation, direct spending by all of the people drawn to the facility, indirect spending by those who service the direct spenders. This last metric is meant to capture the increase in restaurant staff, Uber drivers and others who will cater to the new employees, residents and visitors to the facility. But as has been shown time and time again, these metrics are vastly overstated and willingly accepted at face value by politicians eager to generate some good headlines. They also ignore the opportunity cost of the direct subsidies—monies spent on attracting a company is money that can’t be spent on anything else. While we don’t know what it would have been spent on, it is likely to have been public schools, mass transit, roads or affordable housing in many communities.

 

Noise Pollution and Property Values

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photo by Luis Miguel Bugallo Sánchez

Realtor.com quoted me in What Is Noise Pollution and How Does It Affect Property Values? It opens,

When it comes to a home’s value (and your sanity), noise pollution can be a major downer. But what is noise pollution exactly? Most people have different definitions of what noise pollution actually is—anything from sirens to a barking dog, or the noise of traffic on the street outside.

While outside noise isn’t totally escapable (even the prairie has ambient noise), home buyers will want to be on the lookout for excessive noise pollution, because it could affect a property’s value. After all, you don’t want to live in (or have to eventually unload) a place that requires a lifetime supply of earplugs.

First, let’s define what noise pollution actually means.Re

What is noise pollution?

In defining noise pollution, there are several variables in the mix.

“Noise pollution is basically any noise that you don’t like, but I guess we would define it as noise that most people generally don’t like,” says Brooklyn Law School Professor David Reiss, research director for the Center for Urban Business Entrepreneurship. “When governments regulate noise, however, it is usually based on how loud a noise is.”

For example, Reiss explains that according to A Guide to New York City’s Noise Code, in that city, “Noise that exceeds the ambient sound level by more than 10 decibels (dB) as measured from 15 feet from the source as measured from inside any property or on a public street is prohibited.”

Of course, the ambient sound level in NYC is considerably louder than in a rural area.

How to measure noise pollution near a home

Although decibels are used to measure the intensity of a sound, there are more accurate ways to identify noise pollution around a particular house. When it comes to getting ballpark figures for typical noise levels, Tom Davies, Co-Founder and Manager of the property buying company Accelerate Homes, suggests that most buyers figure out the day-night average sound level (Ldn) or the day-evening-night average sound level (Lden), which are measurements that can help assess the impact that road, rail, air, and general industry has on the local population. Either of these measurements give a potential buyer a much more accurate assessment of overall noise pollution near their home. To measure these levels, get a regular decibel meter, take hourly readings, and plug those numbers into this online noise calculator.

You can also check this interactive national transportation map created by the U.S. Bureau of Transportation Statistics to get a general idea of noise pollution levels created primarily by interstate highways and airports in your area. Just type in your address (or the address of any home you’re considering) and get a general reading. Red means loud—think vacuum cleaner (like 60dB-80 dB), and purple means even louder, like the constant sound of a garbage disposal (80 dB and up).

Identifying noise pollution culprits

It’s not always easy to figure out what’s making all the noise, but it is possible.

“While some of the main factors could be easily spotted—like the proximity of highways, stadiums, airports, train, and bus stations—other factors like specialized traffic (regular truck deliveries or rubbish removal), or the presence of neighbors with loud dogs, are far less likely to be spotted at first sight,” says Davies. The only way to get to the bottom of it is to talk to the neighbors.

Reiss also suggests taking it a step further.

“Visit at different times of the day. For example, if there is a bar across the street, drive by on a Saturday night,” he says. “Also, ask local government officials, like community board district managers, about noise complaints.” Basically, it’s up to you to do your due diligence on sound.

How noise pollution affects property prices

High noise levels don’t automatically correlate with lower prices, Reiss says. Some of the most expensive homes in New York City are located in midtown Manhattan, a busy area that’s home to the theater district, the tourist magnet Times Square, and many major corporate offices.

“But within a certain market, there will be those who value quietness and those who value being in the middle of the action,” he says.

To get a true reading on how noise pollution will affect the value of a property, “you would need to distinguish short-term noise—like a neighboring construction site—from permanent noise—like from a neighboring firehouse,” says Reiss.

Cities With the Worst Rent

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photo by Alex Lozupone

Realtor.com quoted me in Cities With the Worst Rent: Is This How Much You’re Coughing Up? It opens,

Sure, rents are too dang high just about everywhere, but people living in Los Angeles really have a right to complain: New analysis by Forbes has found that this city tops its list of the Worst Cities for Renters in 2018.

To arrive at these depressing results, researchers delved into rental data and found that people in L.A. pay an average of $2,172 per month.

Granted, other cities have higher rents—like second and third on this list, San Francisco (at $3,288) and New York ($3,493)—but Los Angeles was still deemed the worst when you consider how this number fits into the bigger picture.

For one, Los Angeles households generally earn less compared with these other cities, pulling in a median $63,600 per year. So residents here end up funneling a full 41% of their income toward rent (versus San Franciscans’ 35%).

Manhattanites, meanwhile, fork over 52% of their income toward rent, but the saving grace here is that rents haven’t risen much—just 0.4% since last year. In Los Angeles, in that same time period, rent has shot up 5.7%.

So is this just a case of landlords greedily squeezing tenants just because they can? On the contrary, most experts say that these cities just aren’t building enough new housing to keep up with population growth.

“It is fundamentally a problem of supply and demand,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “Certain urban centers like Los Angeles, San Francisco, and New York are magnets for people and businesses. At the same time, restrictive local land use regulations keep new housing construction at very low levels. Unless those constraints are loosened, hot cities will face housing shortages and high rents no matter what affordable housing programs and rent regulation regimes are implemented to help ameliorate the situation.”

Micro Apartments and The Housing Crisis

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photo by BalazsGlodi

The NYU Furman Center has posted 21st Century SROs: Can Small Housing Units Help Meet the Need for Affordable Housing in New York City? The policy brief opens,

Throughout much of the last century, single-room occupancy (SRO) housing was a commonly available type of low-rent housing in New York City, providing housing to people newly arrived in the city, low-income single New Yorkers, and people needing somewhere to live during life transitions. SRO units typically consisted of a private room with access to full bathroom and kitchen facilities that a renter shared with other building occupants. As the city fell onto hard times, so did SRO housing. During the second half of the last century, many SROs came to serve as housing of last resort, and policymakers enacted laws limiting their construction and discouraging the operation of SRO units. Many SROs were converted to other forms of housing, resulting in the loss of thousands of low-rent units in the city.

New research and analysis from the NYU Furman Center addresses the question of whether small housing units (self-contained micro units and efficiency units with shared facilities) can and should help meet the housing need previously served by SROs. In this policy brief, we present a summary of the paper, 21st Century SROs: Can Small Housing Units Help Meet the Need for Affordable Housing in New York City? We provide an overview of the potential demand for smaller, cheaper units, discuss the economics of building small units, analyze the main barriers to the creation of small units that exist in New York City, and suggest possible reforms that New York City can make to address these barriers. (1)

The policy brief makes a series of recommendations, including

  • reducing density limitations for micro units near transit hubs
  • permitting mixed-income and market-rate efficiency units
  • creating a government small unit program to promote the construction of micro apartments

There is no doubt that the lack of supply is a key driver of the affordable housing crisis across the country. Small units should be part of the response to that crisis, not just in New York City but in all high-cost cities.

Regulatory Approaches to Airbnb

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photo by Open Grid Scheduler

Peter Coles et al. have posted Airbnb Usage Across New York City Neighborhoods: Geographic Patterns and Regulatory Implications to SSRN. Two of the co-authors are affiliated to Airbnb and the other three are affiliated to NYU. The paper states that “No consulting fees, research grants or other payments have been made by Airbnb to the NYU authors . . .” (1) The abstract reads,

This paper offers new empirical evidence about actual Airbnb usage patterns and how they vary across neighborhoods in New York City. We combine unique, census-tract level data from Airbnb with neighborhood asking rent data from Zillow and administrative, census, and social media data on neighborhoods. We find that as usage has grown over time, Airbnb listings have become more geographically dispersed, although centrality remains an important predictor of listing location. Neighborhoods with more modest median household incomes have also grown in popularity, and disproportionately feature “private room” listings (compared to “entire home” listings). We find that compared to long-term rentals, short-term rentals do not appear to be as profitable as many assume, and they have become relatively less profitable over our time period. Additionally, short-term rentals appear most profitable relative to long-term rentals in outlying, middle-income neighborhoods. Our findings contribute to an ongoing regulatory conversation catalyzed by the rapid growth in the short-term rental market, and we conclude by bringing an economic lens to varying approaches proposed to target and address externalities that may arise in this market.

I found the review alternative regulatory approaches to be particularly helpful:

City leaders around the world have adopted a wide range of approaches. We conclude by reviewing these alternative regulatory responses. We consider both citywide as well as neighborhood-specific responses, like those recently enacted in Portland, Maine or in New Orleans. A promising approach from an economic perspective is to impose fees that vary with intensity of usage. For instance, in Portland, Maine, short-term rental host fees increase with the number of units a given host seeks to register, and a recent bill from Representatives in the Commonwealth of Massachusetts (H.3454) propose taxes that vary with the intensity of usage of individual units. Such varying fees may help discourage conversions of long-term rentals to short-term rentals and better internalize externalities that might rise with greater use. That said, overly-customized approaches may be difficult to administer. Regulatory complexity itself should also be a criterion in choosing policy responses. (2-3, citations omitted)

We are still a long ways off from knowing how the short-term rental market will be regulated once it fully matures, so work like this helps us see where we are so far.

Agalarov Oligarchs Sell NYC Real Estate

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By Vugarİbadov - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=19869321

Emin Agalorov, son of Aras Agalarov

The Daily News quoted me in Oligarch family in Trump Russia dealings sells $2.8M Manhattan apartment. It opens,

The oligarch tied to President Trump’s dealings in Moscow sold a multimillion-dollar apartment in Midtown as his family’s name began to surface in the Russia investigation.

Irina Agalarova, the wife of Kremlin-connected billionaire Aras Agalarov, closed the sale of her pad on W. 52nd Street at the end of June, according to city property records.

The two-bedroom property fetched more than $2.8 million, up only $300,000 from what the Agalarovs paid for it last February.

It was not immediately clear why the wealthy family, whose patriarch rose from his roots in the former Soviet republic of Azerbaijan to become one of the biggest real estate developers in Russia, chose to sell its Manhattan digs.

The sale, which had not previously been reported, closed roughly 15 months after the apartment was purchased.

Agalarov’s connections to Trump came under scrutiny as part of the probes into alleged Moscow meddling in the 2016 election.

Property documents list the Midtown apartment contract date as May 11, as investigations into possible Kremlin collusion with the Trump campaign heated up with the firing of FBI Director James Comey.

The family’s connections to Trump go back further, however, to when Emin Agalarov, the pop-star son of Aras, featured Miss Universe in a music video.

That choice that later led to the family bringing Trump and his Miss Universe pageant to Moscow in 2013, with the then-reality TV star trotting out his catchphrase, “you’re fired,” in another of Emin’s Europop videos.

Trump and Agalarov also had discussions about creating a Trump Tower Moscow, which never materialized.

While Aras Agalarov had a passing mention in the unverified “dossier” against Trump published in January, his family was brought back into investigators’ orbit after Trump’s son-in-law, Jared Kushner, unveiled his list of foreign contacts in late June.

Those contacts included a June 2016 meeting at Trump Tower with a Russian lawyer promising dirt on the Clinton campaign that Aras Agalarov had obtained from Moscow’s top prosecutor.

Emails show that Rob Goldstone, the British publicist for Emin Agalarov, told Trump Jr. that the information was part of the Russian government’s “support for Mr. Trump.”

Trump Jr. and others have said that nothing came of the meeting, which also included Trump campaign chair Paul Manafort, Kushner, Goldstone, Russian lawyer Natalia Veselnitskaya, Russian-American lobbyist Rinat Akhmetshin, a translator and Agalarov employee Ike Kaveladze.

News of the June 2016 Trump Tower meeting sparked interest in the oligarch family’s dealings, including that Aras Agalarov had put his posh home in Bergen County, N.J., up for sale in mid-June.

Real estate website Zillow shows that the listing was removed on July 14, in the aftermath of the Trump Jr. emails.

Scott Balber, a lawyer representing the Agalarovs in the U.S., told the Daily News Wednesday that the timing was not in any way a reaction to swirling investigations in Washington.

“There is absolutely no connection between selling these two properties to anything in the news,” Balber said.

“I can assure you that Mr. Agalarov knows a lot more about real estate investment than you or I do,” he said.

In fact, the Agalarov clan’s properties in New York, which public records show include two other apartments, are just a few tacks on the map of foreign buyers gobbling up Manhattan real estate.

David Reiss, a real estate expert at Brooklyn Law School, told The News the buyers from abroad can have numerous motivations for coming to New York including “getting real estate as an asset class, taking money from their home country and bringing it abroad so it can’t be clawed back by the local government, or to have another home for family members.”

While Balber trumpeted his client’s investment acumen as a reason for the sale, Reiss said that the $300,000 gain may have actually been a loss after other fees are included, raising questions about its use as an investment.

“In the context of the Agalarovs’ portfolio this is probably a very small item so it was unlikely that this was considered a significant investment by the family,” he said.

While Reiss said there are no indications of wrongdoing on the Agalarov’s part, money laundering has become a persistent worry as multimillionaires and billionaires stash possibly ill-begotten cash in Manhattan apartments.