Tag Archives: rent regulation

Reiss at TechSalon on Tenant Rights

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I will be the lead discussant at a Technology Salon Brooklyn event on Thursday morning: How Are ICTs and Social Media Supporting Tenant Rights? The invitation reads,

Gentrification is top of mind of many Brooklynites, as they are pushed out of their communities by large-scale economic development and wealthier groups moving in. One effect of the gentrification process is often the shuttering of local businesses and skyrocketing rents for residents as landlords make way for those who can pay more.

The New York City Office of the Comptroller reported in April 2014 that median rents in the city had risen by 75% since 2001, compared to 44% in the rest of the US, while at the same time, real incomes declined overall for New Yorkers. At the same time, the numbers of rent-regulated properties has decreased. The harshest consequences of rising rents and lowering incomes are felt by the poor and working classes (those earning less than $40,000 a year).

This situation is contributing to an increase in homelessness, with the city’s shelters receiving an all time high number of people seeking support and services. The negative impacts of gentrification also tend to differentially impact on communities of color. Tenants do have rights — however, enforcing those rights can take years when landlords have deep pockets. In 2003, a tenant advocacy group found that in cases initiated by tenants, only 2% resulted in fines for landlords.

Residents of gentrifying areas have not been silent about the impact of gentrification. Numerous community groups have formed and are fighting to keep communities intact, cohesive and affordable for residents. Social media and better data and data visualization can help to track and create evidence bases that can support residents, or to connect them to support services and legal aid.

Please RSVP now to join us at the Brooklyn Community Foundation for a lively roundtable conversation on tenant rights and ICTs. We’ll hear from community organizations, technology developers, legal advocates and others with an interest in technology and social activism around tenant rights, including such questions as:

  • How are community organizations successfully using ICTs and social media to support tenant rights?
  • What is working well, and what are some of the lessons learned about using ICTs and social media for outreach?
  • What are some new ways that organizations could use ICTs to support their work?
  • What support do community organizations need to do this work?

Please RSVP now to join Technology Salon Brooklyn for a lively discussion! Be sure to arrive early to get a good seat, hot coffee, and morning snacks before we start.

ICTs, Social Media and Tenant Rights
Thursday, April 16, 2015, 9-11am
Brooklyn Community Foundation
1000 Dean Street, Suite 307
Brooklyn, NY 11238
RSVP is Required to Attend

The Foundation is a short walk from the A, C, S 2, 3, 4 or 5 trains (Franklin Av stop) (map).

Airbnb and Profiteering

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A NYC Housing Court judge issued a Decision/Order in 42nd and 10th Associates LLC v. Ikezi (No. 85736/2014 Feb. 17, 2015) that resulted in the eviction of a rent stabilized tenant who had rented his apartment through Airbnb at a rate much in excess of the rent approved by the NYC’s Rent Guidelines Board.

The Decision makes for a pretty good read in large part because of the incredible testimony of the tenant:

When questioned on Petitioner’s case whether Respondent charged anyone money to stay in the subject premises, Respondent first testified that he could not recall if he ever charged anyone money to stay in the subject premises for a tenancy, and then testified that he does not know if he ever charged anyone money to stay in the subject premises. Given that Respondent was being sued for eviction, that Respondent testified as such on January 21, 2015, and that Respondent’s tenancy commenced on October 10, 2014, three months and eleven days before his tenancy, Respondent’s inability to remember or know if he had charged anyone to sleep in the subject premises defies common sense. Such incredible testimony was of a piece with other testimony Respondent offered, such as his response to a question about how many nights he has slept in the subject premises with the answer that he does not keep a log of where he sleeps, Respondent’s inability to determine whether a photograph of a comforter on a bed in the ad was a comforter that he owned, Respondent’s lack of knowledge as to other addresses that might be his wife’s address, and Respondent’s testimony that he does not have an email address at the company that he is the president of. If Respondent was actually profiteering by renting out the subject premises as a hotel room, wanted to avoid testifying as such, and was trying to be clever about technically avoiding committing perjury, it is hard to imagine how Respondent would testify differently. (9-10)

The defendant’s testimony demonstrates what happens when the profit motive hits smack up against rent regulation’s policy goal of protecting tenants from large rent increases. Without defining it precisely, the Court refers to this as profiteering which it finds to be inconsistent with the goals of rent regulation and incurable to boot. Thus, the Court issued a warrant of eviction.

This seems like the right result on the law and as a matter of policy. Otherwise, more and more apartments would be informally removed from the regulated housing stock. Moreover, landlords and neighbors would be stuck with the costs of short-term stays while tenant scofflaws would get all the benefit.

Reiss on Airbnb

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MainStreet.com quoted me in Housing Activists Claim Airbnb Cuts Into Affordable Apartment Inventory in Manhattan. The story opens

Popular and trendy neighborhoods in Manhattan accounted for 30% of units booked as private rentals on AirBnB.com, according to information subpoenaed by New York Attorney General (AG) Eric T. Schneiderman that Airbnb fought against releasing.

Those neighborhoods include the Lower East Side, Chinatown, Chelsea, Hells Kitchen, Greenwich Village and SoHo. “Removing rental units from the marketplace by operating them as illegal hotels damages the availability of housing,” said Roxanne Earley, a blogger with the Association for Neighborhood & Housing Development (ANHD).

Another tidbit from the AG’s report based on subpoenaed records is that commercial users of the home-sharing website collected $168 million in rent last year, controlled one in five AirBnb units and one in three bookings. “Although Airbnb is marketing itself as a company that helps the majority of its hosts make some extra money to keep their homes, the reality is that a multi-billion dollar business is helping a small portion of commercial users rake in a disproportionate amount of profit,” Earley told MainStreet.

“The markup on short-term rentals is much higher than that of long-term residential use of apartments and this has resulted in landlords breaking the law and using their units, sometimes whole buildings as illegal hotels,” said Earley.

And that’s eating into affordable housing units that city residents could be living in. “Commercial users earn an incredible markup on short term rentals and take units that may otherwise be affordable off of the market for long term occupancy,” Earley said.

The existence of rent regulation is unique to cities like New York and San Francisco and further complicates the Airbnb factor. Administered by a court or public authority, rent regulation limits the changes in price that can be attached to renting a home, which balances the negotiating power of landlord to tenant.

“If rent regulated apartments become profit-centers, tenants may also be incentivized to hang on to their apartments longer than they would otherwise, negatively impacting the availability of affordable housing for those who would use it purely for their own personal residence,” said David Reiss, professor at Brooklyn Law School.

 

Lending to Keep Housing Affordable

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New York State Comptroller DiNapoli issued a critical audit of a loan program of the New York City Department of Housing Preservation and Development. HPD disagreed with many of the audits key findings. For the purposes of this blog post, however, I am more interested in the Article 8A loan program itself. The program derives its name from its enabling statute, Article 8A of the New York State Private Housing Finance Law.

According to the audit, the program is intended

to improve living conditions and to preserve safe and affordable housing for low- and moderate-income households. The Program attempts to achieve this goal by providing low interest rate loans, of up to $35,000 per unit, to owners of rent-regulated, multiple dwelling buildings in New York City (City). The loans are to be used to correct substandard or unsanitary conditions, to replace and rehabilitate building systems (i.e., heating, plumbing, and electrical work), or for other necessary improvements. (4)

To become eligible for this program, building owners “applying for Article 8-A loans must submit an application demonstrating that the physical condition of the property in question, and the owner’s property-related finances, warrant Program funding; and the applicant was unable to obtain a loan from at least two traditional lenders.” (5)

This is an interesting program design because it makes low-cost City funds available to owners who are already required to provide affordable housing pursuant to applicable rent regulation statutes. Given that many other owners of rent regulated buildings are able to operate their buildings without subsidized loans, one wonders why the relatively small number of buildings in this program should receive special treatment.

Legitimate policy rationales could include (i) preventing rent-regulated units from being left vacant due to their poor condition or (ii) preventing units from exiting rent regulation because they are eligible for the “substantial rehabilitation” exception to further rent restrictions. But better than assuming that a particular subsidized loan was made consistent with a legitimate policy rationale, would be for the City to make a specific finding of what it was getting in return for this subsidy. If subsidized loans were just going to (i) owners who had made bad choices in the past that led them to be rejected by private lenders or (ii) to owners in the “know” about this program, that would be a poor use of public funds.

Is NYC Rent Too Damn High?!?

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Husock and Armlovich of the Manhattan Institute for Policy Research have posted an Issue Brief, New York’s Rent Burdened Households: Recalculating the Total, Finding a Better Solution. The brief makes some important points, but they are almost lost because of its histrionic tone.

First, the good points. The authors write this brief in reaction to the de Blasio administration’s plan to build or preserve 200,000 units of affordable housing. They believe, however, that the administration has exaggerated the need. They write: “the housing needs of low-income New Yorkers must be acknowledged and addressed. Still, they should not be exaggerated by numbers that fail to reflect the income and in-kind assistance that benefit poor households.” (6)

They argue that the administration’s claim that more than 600,000 households are “severely rent-burdened” is flawed, resulting in an overestimate of the need for affordable housing. While I am not in a position to evaluate the underlying work, they make a reasonable case that the administration did not properly account for the impact of Section 8 housing subsidies and a variety of other programs that offer financial assistance to low-income households in arriving at their number.

They also argue that the administration’s proposed solution, permanent affordability, is flawed because some households that may be income-eligible at the commencement of their tenure in an affordable unit may end up with a significantly higher income down the line. Indeed, this has been a long-time issue with the Mitchell-Lama program.

These are some serious issues for the de Blasio administration to chew over. Clearly, we should be working from the best data we can about the extent to which households are severely burdened by housing costs. (Indeed, another recent study also indicates that the administration is working from too high of an number.) And just as clearly, the solution chosen by the administration should work as effectively as possible to reduce the rent burden for low- and moderate-income households.

But the brief’s tone, unfortunately, masks these insights. First, the brief opens by questioning the basis for the mayor’s affordable housing plan — that many New Yorker’s are severely rent burdened. But the authors acknowledge that at least 300,000 households are severely burdened, even after they make their adjustments to the administration’s numbers. That hardly undercuts the policy rationale for the Mayor’s affordable housing initiative.

Moreover, some of the adjustments made by the authors are themselves suspect. For instance, the authors exclude households “that report severe rent burdens while paying more than the 90th percentile citywide of per-capita” out-of-pocket rent. (5) They state that “Logic dictates that such households have significant existing savings or assets themselves, or they receive assistance from family or other sources.” (5) That seems like an extraordinary “logical” leap to me. While it may describe some households at the 90th percentile, I would think that it is also logical that it includes some people who barely have enough money to buy food.

As to the solution of permanent affordability, the authors write,

a household member could win the lottery, or sign a multimillion-dollar major league baseball contract, and an affordable unit’s rent would remain unchanged. Affordable units would be “permanently” affordable, creating what economists term a “lock-in effect,” limiting the likelihood that such units will be vacated. This is problematic for a city housing policy that seeks to decrease the overall number of severely rent-burdened households. (6)

This is just silly. Very few people have such windfalls. And very few of those who do have such windfalls live in small apartments afterwards. The more common problem is that young, educated people get affordable units when their earnings are low and then become middle-class or upper-middle class over the years. This is a serious program design issue and it means that the administration should think through what permanent affordability should mean over the lifetime of a typical household.

As I noted, this brief raises some serious issues amongst all of its heated rhetoric. One hopes that the administration can get through the hot air to the parts that are informed by cool reason.

 

Location Affordability

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Following up on an earlier post on NYC’s (Affordable) Housing Crisis, I turn to the Citizen Budget Commission’s report on Housing Affordability Versus Location Affordability. The report opens,

How much more would you pay for an apartment just a short walk from your job than for an equivalent apartment that required an hour-long commute by car to work?

This question highlights two important points about the links between housing costs and transportation costs. First, transportation costs typically are a major component of household budgets, usually second only to housing. Second, a tradeoff between housing costs and transportation costs often exists, and taking both into account can provide a better measure of residential affordability in an area than only considering housing costs.

In recognition of these important points, the U.S. Department of Housing and Urban Development (HUD) has developed a Location Affordability Index (LAI) that measures an area’s affordability based on housing and transportation costs relative to income. This policy brief uses the HUD data to compare costs for a typical household in New York City to those in 21 other cities . . .. (1, footnote omitted)

The report finds that “Low transportation costs and high incomes make New York City relatively affordable: New York City is in third place in location affordability. Housing and transportation costs for the typical household are 32 percent of income in New York City, with lower ratios only in Washington, D.C. (29 percent) and San Francisco (31 percent). This is well within HUD’s 45 percent affordability threshold for combined costs as a percent of income.” (1)

This report makes a very important point about the cost of living in different cities. It should also reframe some of the national discussion about affordable housing policy. It would be great if there were a way to account for length of commute in the Location Affordability Index to make a better apples to apples comparison among cities when it comes to the housing choices that are available to households.

NYC’s (Affordable) Housing Crisis

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The Citizen’s Budget Commission is releasing a series of Policy Briefs on affordable housing in New York City. They raise interesting questions. The first policy brief, The Affordable Housing Crisis: How Bad Is It in New York City, compares the affordable housing situation in 22 large American cities and finds that NYC is not the worst, notwithstanding how many New Yorker’s feel about it. Some of the particular findings included,

  • New York City relies more heavily on rental, as opposed to owned, housing than all other large cities; more than two of every three occupied housing units are rental.
  • The increase in housing supply since 2000 was slower in New York City than in every other large city with population growth.
  • New York City does not have the highest average rents. New York City median rent ranks sixth most expensive among the 22 cities, slightly worse than 2000, when it ranked seventh.
  • New York City is not the most unaffordable: New York City ranks ninth worst in rental affordability, defined as the percent of households spending more than 30 percent of income on gross rent. This is slightly better than its eighth worst ranking in 2000, although the share of renters with burdensome rent increased from 41 percent to 51 percent.(1)

For me, the real story is the second bullet point.  New York City had the fourth slowest growth in the number of housing units out of the 22 cities, notwithstanding the fact that it has always had a limited supply and compounded by the fact that its population has been growing significantly for quite some time. It is depressing to learn that “the number of housing units in New York City increased” only 5.8 percent between 2000 and 2012. (2) This leaves New York City with a vacancy rate of 3.6 percent in 2012, which means that we are a long way off from making a serious dent in the affordability problem. The de Blasio administration has made affordable housing a centerpiece of its agenda. This report reminds us that part of the solution to the affordable housing puzzle is just building more housing overall. We have lots of pent up demand, we just don’t have the supply. That is one reason the rent is too damn high!