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.

June 5th: Tenants host Bronx RGB hearing

Have you noticed anything different about this year’s RGB hearing schedule? Whereas for the past 8 years, the RGB has held two public hearings for tenants and landlords to testify, this year there is just one. Whereas for the past 8 years one of those hearings has been in the Bronx, Brooklyn or Queens, this year the only hearing is in Manhattan. And whereas in the past the hearings have been scheduled to go well into the evening, this year’s hearing will only accept registrants until 7 pm.

Why is this year different than all other years?

Tenants & Neighbors has been seeking an answer to that question, to no avail. When asked, the RGB chair responded that renting a space is expensive, and testimonies have dwindled at public hearings. We countered with the offer of a large space in the Bronx, available free of charge, and a mobilized base of tenants who are genuinely interested in testifying before the RGB. In a letter dated April 26^th, Tenants & Neighbors and New Settlement Apartments’ Community Action for Safe Apartments (CASA) invited the RGB to a public forum we are hosting on June 5^th. The letter read as follows:

Dear Members of the New York City Rent Guidelines Board, 

We would like to invite you to an exciting public hearing to discuss issues in rent stabilized housing in the Bronx on Wednesday, June 5^th, at 5PM.

As you know, it has been customary for the Rent Guidelines Board to hold one public hearing in Manhattan and one in an outer borough, in the evening. This year, however, there has been just one hearing scheduled for June 13^th in Manhattan.  We are concerned that only holding a day-time hearing in Manhattan will make it impossible for tenants in the rest of the city to testify.  Many tenants cannot afford to take time off work to testify, since doing so for many New Yorkers means risking a day’s pay and even their jobs.  We therefore urge you not only to attend this evening hearing in the Bronx but to also make this hearing an official RGB Public Hearing. 

While we acknowledge that turnout at outer borough hearings has been waning in recent years and that the RGB’s budget is constrained, this year tenants have been reaching out to us and demanding another opportunity to be heard. Demand for this hearing has been most concentrated in the Bronx, where, as UNHP’s Gregory Lobo Jost discussed in his invited testimony, tenants are facing severe crises of affordability.

To meet this demand, New Settlement Apartments’ Community Action for Safe Apartments (CASA) and Tenants & Neighbors invite you to participate in a forum on Wednesday, June 5^th at New Settlement’s Community Campus, 1501 Jerome Avenue (at 172^nd St) in the Bronx, starting at 5:00 pm. We expect a full house of tenants who would otherwise not be able to testify.

We strongly encourage the Board to attend this community-supported Public Hearing and to add it to the RGB’s calendar of official hearings. We know that you are all busy, but we believe it is incredibly important to provide this community with an opportunity to have its voices heard, and share crucial testimonies that may inform your deliberations. This year, tenants in the Bronx are coming together to speak out about the affordability of their homes. Will you be there to hear them?

Many thanks, 

Susanna Blankley
Director of Housing Organizing
CASA- New Settlement Apartments

Sam Stein
Rent Regulation Campaign Coordinator
Tenants & Neighbors

This letter was distributed to every member of the Rent Guidelines Board; to this day, we have received no response. We strongly encourage members of the Rent Guidelines Board to attend, and hear from a broader range of testifiers than those available to speak during the day in Manhattan. This will be an important event with a large showing. It is a gesture in good faith, and an opportunity for the Board to make itself available to people in one of the most densely rent stabilized districts in the city, as well as the tenants from all 5 boroughs who will convene there.

Whether or not the RGB holds an outer-borough hearing, the people will speak out. Will the Rent Guidelines Board be there to listen?

This community-sponsored RGB hearing will take place Wednesday, June 5^th at New Settlement’s Community Campus, 1501 Jerome Avenue (at 172^nd St, near the 4 or D train stops at 170^th street) in the Bronx, starting at 5:00 pm. All are invited to attend, speak, and listen.

Urban rents and suburban poverty

The New York Times published an article today on a new study from the Brooking Institution that shows rising poverty in the New York suburbs. How does this relate to the NYC RGB? The Times reports that one of the leading factors behind this phenomenon is the disappearance of affordable housing in the city. 

"Christopher Jones, vice president for research of the Regional Plan Association, blamed higher housing prices for the demographic shift. The rising cost of shelter pushed poorer people out of Manhattan and Brooklyn, in particular."

New York's rent regulations were spurred by an urgent "housing crises."  That crises continues to rage today, and is causing working and middle class households to leave the city in search of lower cost options. If New York City hopes to retain these residents and workers, it must consider the impacts of high rent increases for rent stabilized apartments, and issue the lowest possible guideline in 2013.

Here's the article that appeared in today's New York Times:

Suburbs’ Share of Poor Has Grown Since 2000

By SAM ROBERTS

 

The suburbs, which in 2000 accounted for 29 percent of the region’s poor people, a decade later were home to 33 percent of metropolitan New Yorkers living below the federal poverty level, according to an analysis of the latest census results.

The analysis, released on Monday by the Metropolitan Policy Program of the Brookings Institution, also found that while the number of poor people in New York City and Newark declined by 7 percent, or 120,000, the number in the suburbs rose by 14 percent, or 100,000, from 2000 to the census’s rolling 2008-10 American Community Survey.

The poor have typically been concentrated in big cities and rural America. Increasing poverty in the New York metropolitan area’s historically affluent suburbs mirrored a national trend detailed in the analysis, “Confronting Suburban Poverty in America” by Elizabeth Kneebone, a fellow at the Metropolitan Policy Program, and Alan Berube, a deputy director of the program.

The first decade of the 21st century was a tipping point, the authors wrote. Suburbia, they said, is now home to the “fastest-growing poor population in the country.”

While New York and Newark’s combined share of poor people in the region dipped from 71 percent to 67 percent, the cities were home to twice the 800,000 or so people who officially qualified as poor in the suburbs in 2010.

“It seems like as the city prospered and got more expensive over the 2000s, poverty crept up in a lot of the region’s older suburban communities,” Mr. Berube said.

“It might not have been people moving from city to suburban neighborhoods per se, but as the region creates more low-wage jobs, and attracts more new immigrants, low-income households that in the past might have located in the Bronx or Brooklyn are now settling in places like northern New Jersey and Westchester County.

“It’s telling that the city’s ‘suburban’ borough, Staten Island, is the only one that saw its poor population increase over the 2000s.”

Christopher Jones, vice president for research of the Regional Plan Association, blamed higher housing prices for the demographic shift.

The rising cost of shelter pushed poorer people out of Manhattan and Brooklyn, in particular.

Also, he said, a smaller percentage of workers from suburban areas like Nassau County were commuting to high-paying jobs in Manhattan, and the jobs that were in their hometowns were at shopping malls, in health care and in landscaping, and generally paid less.

At the same time, tenants were doubling up and living in illegal apartments.

Dozens of smaller cities, townships and boroughs registered double- and even triple-digit increases in their poverty rates over the decade.

Among the places where the population of poor residents increased since 2000 were, in New Jersey, Bayonne, Bergenfield, Clifton, Edison Township, Garfield, Hoboken, Hunterdon County, Lakewood, Linden, Mount Olive, New Brunswick, Passaic, Paterson, Perth Amboy, Raritan, Summit, Teaneck and Woodbridge; on Long Island, Brookhaven and Glen Cove; in Westchester, Ossining; in Putnam County, Carmel; and in Rockland County, Ramapo.

Poverty rates increased in some places even after the recession officially ended in 2009, according to the Brookings analysis, but the poor population declined from 2000 to 2010 by 11 percent in Brooklyn and by 10 percent in Manhattan.

It rose 18 percent on Staten Island.

According to federal guidelines, the current poverty level for a family of four is annual income below $23,350.

THE WORST ROOM

So you've been displaced from your rent stabilized apartment because you couldn't afford the rising rents. Where can you go? Take a look at "THE WORST ROOM" for a sampling of what's available in New York these days.

THE WORST ROOM is getting a lot of buzz (see here, here, here, here, ...). But it wouldn't be funny if it weren't true. There's a terrible shortage of apartments in New York City, and what's available is often laughably uninhabitable at infuriatingly high rents. Another year of high guidelines would undoubtedly send many renters over the edge, and into a market full of unaffordable "affordable housing" and luxury-priced shoe boxes.

(Un)affordable Apartments

A good apartment is hard to find. As two recent stories documented, even those supposedly “affordable” units included in large developments are out of reach for the average New Yorker.

Curbed pointed out that the “affordable” apartments in one new TriBeCa tower are only available for households with incomes ranging from $73,166 to $150,325. That would exclude the vast majority of renters, whose average income is about half the low end of this scale. “Affordable” rents in this building begin at over $2,000, nearly double the average rent per unit citywide.

Uptown a bit, The Daily News found that the promised “affordable” apartments in the Hudson Yards development have not materialized in the promised quantities, and those that have been built are tiny. They write:

“Many of those units are tiny studios and one-bedrooms of 400 to 600 square feet — often far smaller than similar market-rate units in the same buildings. At one site, the twin 60-story Silver Towers on W. 42nd St. and 11th Ave., developer Larry Silverstein erected a separate 88-unit 'affordable' building at the back of his complex. 

The towers boast spacious and luxurious lobbies and the biggest indoor pool in the city. The affordable building has a dark, tiny lobby that faces the back of an MTA bus depot and the entrance to the Lincoln Tunnel.”

Community Board 4, when they first rejected this plan, described this housing as “separate and unequal,” saying that it has “the look and feel [of] the maids’ quarters for the rest of the project.”

It’s important to keep this in mind when people point to subsidized housing- often in “80/20” packaging- as an alternative for those priced out of rent regulated housing. The apartments created through these incentives are no replacement for affordable, integrated rent stabilized housing.

At the preliminary vote, a landlord representative stated that rent regulated housing is not the “housing of last resort” for poor tenants. If they are priced out of rent regulated housing, they are clearly not going to find a home in these “affordable” apartments. Waiting lists are growing for public housing. Where, exactly, should tenants go if rising annual rent increases price them out of rent stabilized housing?

NY Observer: "The Return of Hooverville"

The New York Observer has published an important feature about the explosion of homelessness in New York City. More and more families are entering the shelter system every day. Many of them have been priced out of their apartments, and cannot find new affordable accommodations. This is one piece of the growing affordability crises in New York, which tenants described to the Board in testimony on April 25th (see samples here and here).

The RGB alone cannot solve homelessness, but they have the power stop to the rent increases that have put so many families on the street. The "Supplemental Rent Increases" the board has considered in recent years have disproportionately hurt very low income tenants; stopping this practice would be an important step in the right direction.

An excerpt from "The Return of Hooverville: The Deepening Crises of Family Homelessness":

Brooklyn is now the second most expensive place to live in America (after Manhattan), with townhouses that sell for $12 million and jars of pickles that sell for $9, but nearly half of its population can’t afford to live there. According to a recent study from the Center for an Urban Future, almost 40 percent of the borough’s population works in low-wage jobs, making less than $27,000 a year. At that salary, affordable rent (affordable is defined as costing no more than 30 percent of income) tops out at $675 a month. Minimum-wage workers can’t afford to pay more than $375 a month—a virtual impossibility.

A lot of people make do, of course. They triple up with relatives, live four to a room, work two jobs, display the scrappy ingenuity and hardscrabble bravado that we like to think of as quintessentially New York, until something goes wrong.

The huge increase in families seeking shelter is proof of how precarious the lives of New York’s working poor are.

Click here to read the full article.

Testimony: Gregory Lobo Jost, UNHP

At the apartment tenants' Invited Group Testimony before the RGB, University Neighborhood Housing Program Deputy Director Gregory Lobo Jost presented some extremely important information gathered and presented in UNHP's new report, Nowhere to Go: A Crises of Affordability in the Bronx. UNHP's testimony and report take a comprehensive look at the housing affordability crises in the Bronx, and ask how it is that in many neighborhoods, more than half the renters spend in excess of 50% of their income on rent. Nowhere to Go looks at numerous factors, including changes in the regional economy, immigration patterns, historic ebbs and flows of population, rates of eviction in Bronx housing court, and more. One thing is certain: with Bronx tenants suffering through outrages rent burdens, a high RGB rent increase will be a severe hardship for many tenants.

The Preliminary Vote

Last night, the RGB conducted their preliminary vote, and set a range of percentages for the board to consider at the final vote in June. For the most part, the proceedings went according to schedule: the owner representatives proposed a high guideline (7% for 1-year leases and 11% for 2-year leases); the tenant representatives proposed a rent freeze; both were rejected by the public members, who instead voted as a block for the Chair’s proposal (3.25% - 6.25% for 1- year leases and 5% - 9.5% for 2-year leases). A similar dynamic was at play for the SRO vote: landlords proposed a 3% increase, and were rejected; tenants proposed 0%, and were rejected (with one abstention); the Chair proposed a range of 0% - 3% increases, effecting only buildings with 85% or more occupied SROs, and it was passed unanimously. This is what was reported in the press, which tends to focus on the familiar “ horse race” element of the RGB. With landlords and tenants unhappy, this trope implies, the RGB must be doing the right thing.

This narrative, however, glosses over some interesting moments in the margins. It fails, for example, to look historically at these rates. Since the RGB began using a range for their preliminary vote in 2004, the average range has been 2.89% – 5.14% for 1-year leases, and 5.1% – 7.69% for 2-year leases. Last night’s vote resulted in an uncommonly high range.

The public narrative also fails to interrogate the source of these approved preliminary guidelines. As the Chair stated during the vote, they come straight out of the Price Index of Operating Costs (PIOC) report, which closes with a sample set of guidelines that would keep landlords profits steady. Readers of the Rent Guidelines Blog know that we are critical of the PIOC’s centrality in Board decisions- it is just one report produced by RGB staff, and it is not in and of itself an accurate measure of landlord costs. As discussed earlier, it is simply a measure of prices, not costs.

The PIOC names a “‘Net Revenue’ Commensurate Adjustment with Vacancy Increase”, which is an estimate of how much rents would have to rise to keep landlords’ Net Operating Incomes steady, with the assumption that some percentage of tenants will leave and the landlords will receive vacancy bonuses. What would that increase be? 3.25% for1-year leases, and 6.25% for 2-year leases, exactly the low-end of the increase proposed by the Board Chair and approved by all of the public members. The PIOC also names a “‘Net Revenue’ Commensurate Adjustment”, assuming no vacancy bonuses will be taken by the landlord. This figure is listed as 5% for 1-year leases, and 9% for 2-year leases. The high end of the range voted on last night comes directly from these figures: 5% for 1-year leases, and 9.5% for 2-years. (It is not at all clear, however, why the Board voted to grant the landlords an extra half percent on the high end of the 2-year lease range.)

After months of public meetings, pouring over scores of data and debating their merits, the board settled on the figures provided for them in the PIOC to keep landlords whole. What about the Income and Affordability study, which outlined the woeful economic circumstances for tenants? What about the Income and Expense study, which showed rising revenues for landlords in an otherwise stagnant economy? What about the Mortgage Survey, which showed a healthy market for buying and selling rent stabilized properties? What about the report from the Furman Center, which spoke to the crises facing thousands of tenants after Hurricane Sandy? What about the testimonies from Bobby Sackman, Tom Waters, Gregory Lobo Jost and Barika Williams, which spoke both to tenant hardships and opportunities for landlords to reduce costs at no expense to tenants? For that matter, what about the landlord’s testimony, which confirmed that the vast majority of rent stabilized apartments are owned by very large real estate companies, often controlled by private equity? All of these factors should have pointed to a lower preliminary guideline. The fact that the Board voted on the numbers straight out of the PIOC, and even inflated them slightly, is discouraging to tenants and their advocates.

It is also interesting that this year’s range starts at a rate higher than last year’s final guideline, all but assuring a rise in the rate of rent increases for 2013. Even if they disagree on the merits of a rent freeze, it is disappointing that the board seems to have foreclosed on the possibility of a lower rent increase this year.

Finally, the Board Chair rejected amendments from both owner and tenant representatives to carve out more specific guidelines. The owner representatives, as usual, proposed a “supplemental rent increase,” imposing a disproportionate rent increase on lower rent apartments. As CSS’ testimony shows, this increase falls primarily on low income tenants, and can therefore be characterized as a poor tax. We commend the Chair for rejecting this supplemental increase, and urge the Board to reject it at its final vote in June.

The Board also rejected provisos from the tenant members, which would have limited rent increases to buildings with a solid majority of rent stabilized apartments. Buildings that are 60% or more market rate, they argued, do not need RGB rent increases to meet expenses. This proviso was also rejected as a matter of procedure- the Chair decided that provisos will only be heard at the final vote, after tenants and owners have had a chance to testify before the board. We therefore encourage tenants to talk about how much of their building they believe has been decontrolled, and we encourage board members to ask landlords what percent of their stock is subject to rent regulation.

This year's preliminary vote established a historically high range of rates. We urge the board, in its internal deliberations and its final vote, to consider establishing the lowest possible guideline.