Friday, April 5, 2013

Analysis: Income and Affordability Study

On April 4th, the Rent Guidelines Board staff released their 2013 Income and Affordability Study. This is one of the most important reports the board produces, as it looks closely at the factors determining affordability for tenants. The Income and Affordability study aims to assess economic conditions based on “relevant data from the current and projected cost of living indices” (Section 26-510b of the Rent Stabilization Law). The essential question it seeks to answer is: how are tenants doing in the current economy?

The answer is: not all that well. The report reads like a traditional Irish ballad, in which circumstances keep getting impossibly worse for the protagonist. Each page details another desperate hardship facing renters in this city.

We can- and will- get into the reports’ details, but it is important to look first at the overall picture the report paints. In that there is anything positive in the data, it is that the New York City economy, like the overall US economy, continues to grow. But this is growth without equity and, for many, growth without jobs. While the national unemployment rate continues to fall, joblessness rises relentlessly in New York City.

We have come to naturalize high rents in this city. To justify the high cost of living in New York, many people will casually remark that “things simply cost more here than the rest of the country.” While there is some truth to this, the data in the Income and Affordability Study shows that rents are truly out of proportion with other consumer costs in New York. From 1968 to 2012 (the period during which rent stabilization has been in effect), overall prices rose by 600%, and rents rose 677%. This is the inverse of the rest of the country, where rents rose at a slower pace than other consumer prices.

More than anything else, what the Income and Affordability study tells us is that housing costs have become unmoored from the overall economic conditions of renters in this city. As tenants struggle to keep apace, rents continue to rise ever higher.

As for the data, here is what we learned:

Unemployment amidst Growth:
  • The New York City economy grew by 2.2%, compared to 2% last year. At the same time, however, unemployment rose to 9.2%.
  • Even as national unemployment drops, joblessness in NYC rises.
    • The gap between local and national unemployment is the largest in 9 years. Local unemployment has risen 4 times in the last 5 years.

Falling wages (except for landlords):
  • Over the past 12 months, real (i.e. inflation adjusted) wages declined by 4.5%.
    • Tenants in rent stabilized apartments earn, on average, $15,000 less than their market rate counterparts.
    • Real estate is one of just three sectors where real wages actually rose last year!

Poverty in the City:
  • Poverty rates continue to rise, hitting 20.9% citywide.
    • Poverty rates are even higher for children, nearly 30% of whom are living in poverty.
  • Poverty rates rose this year in every borough but Staten Island.
  • Applications for welfare programs rose by 2.6%, while job placement among cash assistance recipients dropped by 2.8%.
  • The top 20% of NYC residents makes more than 25 times the lowest 20%, making NYC one of the most unequal cities in the country.

Unaffordable Housing:
  • The average rent stabilized tenant puts about 35% of their income towards the cost of housing.
  • As discussed below in Wages and Rents pt. 1, most tenants are paying higher rents than they can afford, according to HUD standards.
  • Nearly 1/3rd (30.6%) of tenants are paying more than half of their income in rent.
  • Rent burdens have grown for the past four years.

The Cost of Living:
  • While overall consumer prices rose by 2%, rental costs rose on average by 2.4%.
  • Electrical costs, paid largely by tenants, rose by 3.7%.

Homelessness and Evictions:
  • As has been widely reported in the press, New York City is experiencing crises of homelessness.
    • An average of 43,295 people stayed in city shelters each night, up a massive 14.6% from last year. This is about double the average in the 1990s.
    • Last year, the number of households placed from shelters into permanent housing dropped precipitously following the end of the Advantage program. This year, the number continued to drop by another 7.5%.
  • Housing court:
    • While the number of housing court cases are down from last year- suggesting that more landlords are receiving their rent in full- the number of evictions rose by 4% to the highest level ever recorded in any I&A study.
    • While not referenced in the Income and Affordability Study, we highly recommend taking a look at CASA and the Urban Justice Center’s recent report on evictions in Bronx Housing Court, entitled “Tipping the Scales”.

Taken together, the 2013 Income and Affordability Study presents a distressing picture of tenants caught between rising unemployment, falling wages, rising costs, and prevalent homelessness. If the Rent Guidelines Board is asking whether tenants can afford another rent increase, the answer is clear: no, we cannot.

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