Thursday, May 30, 2013

Analysis: Housing Supply and Changes Reports

At their final public meeting this morning, the New York City Rent Guidelines Board released their last reports of the year: the 2013 Housing Supply Report, and Changes to the Rent Stabilized Housing Stock in New York City in 2012. These reports look at additions and subtractions to the universe of rent stabilized apartments, as well as patterns in new construction, renovation, conversion and other changes to the general New York City housing stock.

Lurking behind the figures in these reports is a quirk in the rent regulations. Since 1993, New York’s rent stabilization system has contained a poison pill- the Vacancy Decontrol system, whereby empty apartments that could rent for over $2,500 are brought out of the regulatory system and into the “free market”. This has given landlords a target to reach, creating an even greater incentive to exploit every loophole available in the system to raise rents. As a consequence, landlords will seek high turnover in their apartments, so that they can collect “vacancy bonuses” and Individual Apartment Improvements between tenancies. To extract higher rents from long term tenants, they rely on Major Capital Improvements and Rent Guidelines Board increases, and lobby for the highest imaginable increases annually. Eventually, their apartments hit the magic number of $2,500, and loose the price and eviction protections associated with rent stabilization.

In the face of deregulation- primarily through Vacancy Decontrol- New York City’s rent stabilized housing stock continues to decline much faster than it expands. According the RGB’s “Changes” report, at least 9,499 apartments left rent stabilization last year. (Most likely far more were taken out of rent stabilization, but this figure reflects the number of apartments that formally registered with HCR as deregulated.) That is a staggering number: it’s more New Yorkers than complained about bed bugs at the peak of their reign of terror; it’s more New Yorkers than were killed by cigarettes last year; it’s more New Yorkers than are on the organ donor waiting lists. It’s an ongoing crisis in this city, and one that the RGB must take into account as it considers an abnormally high preliminary range of rent increases.

The city did add some rent stabilized apartments to the housing stock, but many of them are far beyond the realm of affordability. A very large portion of new rent stabilized apartments come from tax abatement programs that mandate temporary rent stabilization. But in the case of 421-a, a tax credit that added 2,509 rent stabilized apartments to the stock, the average rents are $3,106. For that to be considered affordable by federal standards, residents would have to make $124,240; the average income for rent stabilized tenants, however, is less than one third of that figure- just $37,000. Much of the new rent stabilized housing, therefore, is not only temporary but out of reach for most prospective renters.

Perhaps as a consequence of the disappearance of affordable rent stabilized housing, and the paucity of vacant rent stabilized homes, rent stabilized apartments are also some of the most crowded. About 14% of rent stabilized housing is overcrowded; 5.6% is considered “severely” squished.

In the meantime, like oil in Texas, real estate in New York continues to thrive. After the downturn in construction in 2009, new permits have risen every year for the past three years, with permits for 10,344 apartments issued last year. The Bronx is especially booming, with a 128.7% rise in new permits in 2012.

Approximately 9,455 new apartments were constructed, matching nearly 1-to-1 the number of apartments that were deregulated. Many- if not most- of these new apartments are of the luxury variety, and do nothing to stem the loss of affordable housing in New York City.

The two reports issued today depict a rent stabilization system facing planned obsolescence, and a resilient real estate industry that expanding while other segments of the economy contract. An oversized rent increase will hasten both of these trends, and push the city further into its housing crises. For these reasons, and for all those articulated in previous Rent Guidelines Blog analyses, we contend that the board should act with restraint and pass as low a guideline as possible.

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