NYC Housing Rent Control Battle, Round: 99,999,999,999

whynot_31

http://www.cssny.org/userimages/downloads/NewHousingEmergencyMarch2011.pdf?tr=y&auid=8237079

As the supply of affordable housing continues to dwindle, and we continue to have budget deficits, what should we do?

cool the kid

Symptom of bigger problems

Have to ask why NYC RE is so freaking expensive, whether it's more relativel6y expensive now than it was in the past and if not what has changed

Also the fairness of the subsidy of rent based on income & location. An apt in Tribeca is like $10K/mo, should I be granted a subsidy because I want to live there? A reasonable solution would take some sacrifice.

whynot_31

In an attempt to protect renters, the government seems to be in the business of attempting to determine what rate of return on investment is reasonable.

As more apartments become free market, we are returning to an environment we have not had in decades.

Good or bad?

boygabriel

a free market w/o regulation isn't free.

cool the kid

Boygabriel said:a free market w/o regulation isn't free.

I think this statement is bogus, but I do think regulation is a necessary part of a system of commerce & finance that benefits everybody

But if NYC mandates for example that rents cannot grow beyond x% each year, and loans to develop new properties or revamp old ones start at 2x% each year, goodbye any new rental developments, hello the goofy super luxurious condos that threaten the people such a mandate is supposed to protect.

Regulation has to be smart... it has to protect the people, but cannot be so skewed that it makes the business of being a landlord completely unprofitable, and I don't think too many pro-renter types realize that

whynot_31

It is cumbersome that landlords must collectively argue for increases on the basis of such things as increased fuel costs. You'd think a simple index could be approved each yr, and the LL could just use it to add this cost.

Landlords have a right to make a profit on their investments, and gain/lose from neighborhood changes. The present rules seem to encourage absenteeism from communities.

boygabriel

I think this statement is bogus, but I do think regulation is a necessary part of a system of commerce & finance that benefits everybody

So we agree that there needs to be some amount of regulation.

Got it.

Regulation has to be smart... it has to protect the people, but cannot be so skewed that it makes the business of being a landlord completely unprofitable, and I don't think too many pro-renter types realize that

Everyone understands the pitfalls of over-regulation.

Here is the distinction you need to understand: people hesitate at the constant and predictable chorus from business interests about how even the smallest amount of regulation is going to bring about the economic apocalypse.

(Which is ironic of course when it is actually the exact opposite which almost caused an apocalypse in 2008.)

The bottom line is that housing costs have been outstripping lower and middle class income for decades, and are increasingly the single biggest burden on everyone except the wealthy.

I, for one, welcome extreme caution when it comes to deregulating things like the housing or rental market.

The middle and lower classes are struggling under rising costs of living, among the leading of which is housing costs.

whynot_31

Aren't landlords facing these same pressures?

Why should they have to bear the brunt of this inflation?

(are we about to be told all landlords are rich, and therefore not entitled to profits?)

Should landlords be able to use the conditions of thier apartments to make more money?Should hard work be rewarded?

cool the kid

I am all for smart regulation- i.e., not having the credit rating agencies be paid by the banks whose securities & assets they were rating.

But I am not for heartstring regulation... I think measures have to be taken, for example, to protect poor people from wholesale razing of their neighborhoods by developers & effective class rezoning, but poverty by its very definition is difficult, and outside of wholly subsidizing those below the poverty threshold to bring them up to median levels I am not sure what regulation can be fairly implemented to change that.

whynot_31

I think of landlords as being in a service industry, like wait staff.

As a result, I think the venue should be able to charge more for a clean, well maintained building.By preventing this, The present system removes most incentives to provide better service and conditions.

boygabriel

Cool The Kid said:I am all for smart regulation- i.e., not having the credit rating agencies be paid by the banks whose securities & assets they were rating.

But I am not for heartstring regulation... I think measures have to be taken, for example, to protect poor people from wholesale razing of their neighborhoods by developers & effective class rezoning, but poverty by its very definition is difficult, and outside of wholly subsidizing those below the poverty threshold to bring them up to median levels I am not sure what regulation can be fairly implemented to change that.

There are lots & lots & lots of tools at the disposal of national, state and local govts to encourage more affordable housing for all segments of society.

whynot_31 said:Aren't landlords facing these same pressures?

Why should they have to bear the brunt of this inflation?

It's not really inflation that's driving up housing costs, just like it's not inflation that's made health care costs skyrocket over the past 3 decades.

Lower and middle class incomes haven't increased much in decades. Is that true of revenue for real estate owners? I doubt it.

Yet housing costs continue to rise.

whynot_31

Fine, don't call it "inflation" if you don't want to.

Um, why should landlords be the one to bear the brunt of these increased costs?

Are we try to set how much money they should be able to make?

boygabriel

What increased costs are the landlords facing?

More importantly:

How has land-ownership profit (or value) looked over the past few decades?

cool the kid

Boygabriel said:What increased costs are the landlords facing?

More importantly:

How has land-ownership profit (or value) looked over the past few decades?

Increased energy costs, maintenance costs, property taxes, real estate agent fees, litigation fees, etc.

And these costs are even more prevalent when you combine NYC's super expensive base RE costs with low income tenants. Profit margins pretty much disappear w/o gov't subsidies. And even outside of the base financial challenges, in my experience they tend to bring a lot of issues that cost landlords big time. It's not as simple as you're trying to make it.

whynot_31

yup.

Smart landlords are also aware that two things are possible:

1. The real estate market could collapse.2. The federal and local governments aren't going to provide for their retirements.

I know it is a crazy concept, but some of them may be actually using any profits they may be earning in this "good period" in order to save it for a rainy day.

Shouldn't we encourage this?

cool the kid

Ehhh I don't know if policy based on the good landlords *might* be doing is policy worth exploring

But to write the landlords off as evil oligarchs is counterproductive. Everyone at the table has to come away (and give away) something, that's the essence of compromise.

whynot_31

I hear you.

If the landlords just want to spend the profits at the local bar, thats their prerogative.

brooklynpotter

as an owner in a coop building that *still* has rented apartments 25+ years after the building turned over, i am quite confident in saying that rent control/stabilization laws lower our property values. when we have to raise maintenance to a high rate to merely cover basic bills--when some tenants are paying under $200 a month for rent--it makes it harder for me to get a great price if i sell.

i was a tenant for a LONG time, and i am all for very strong laws for renters, but there has to be a middle ground here for everyone. we landlords, in small buildings, we're bleeding $$ to keep things afloat.

armchair_warrior

rent regulations don't make any sense, if all supplies are regulated would make sense, but only a select, its half ass as gun control laws.

with the current system its a fail system. either regulate them or or don't bother with any.

boygabriel

I'm not saying things are simple. Far from it. And I don't know much about the market forces of housing and real estate.

But as a general concern, I'd like to see rising costs and profits/value all in the same context. (in addition to other economic factors like taxes, and all the other things you guys have mentioned)

Basically my hunch is that housing costs, like most things in our country, are rising disproportionately to inflation, minimum wage, and income of non-wealthy Americans.

It is in everyone's interests, even middle class landlords or the wealthy, for us to have a functional middle and lower class who don't get crushed by costs of living such as housing or health care.

Cool The Kid said:I am all for smart regulation- i.e., not having the credit rating agencies be paid by the banks whose securities & assets they were rating.

But I am not for heartstring regulation... I think measures have to be taken, for example, to protect poor people from wholesale razing of their neighborhoods by developers & effective class rezoning, but poverty by its very definition is difficult, and outside of wholly subsidizing those below the poverty threshold to bring them up to median levels I am not sure what regulation can be fairly implemented to change that.

bohuma

The current system of rent regulation in NY benefits large landlords that invest in the luxury end of the market (they benefit from high prices) and NYS politicians that can be the providers of largesse. Everyone else loses. Tenants get stuck with overpriced substandard housing because landlords don't have to invest in improving their properties and the pro-tenant rent laws discourage investing in new housing for the bottom 50% of the market. Small landlords lose because they are obliged to renew the leases of regulated tenants even if they would prefer to empty the apartment and renovate it to improve their investment, it is also hideously expensive in time and resources to evict a tenant who is violating the lease.

What NY needs is balance rent laws. Laws that protect both landlord and tenant, who should be seen as equal before the law, but protected from the scoundrels on both sides. There are landlords that try to gouge tenants, so tenants need to have some redress against rent increases that are above the market rate. There are tenants that decide not to pay rent or destroy their landlord's property, landlords should be able to have these tenants evicted in an expeditious manner.

If we provide a level playing field in terms of residential tenancy laws, a broader range of people will be prepared to invest in rental housing at all levels of the market. This will have a downward pressure on rent levels, and upward pressure on the quality of housing.

Security of tenure in rental housing is a sacred cow that has to be slaughtered if we are to make any progress. But before anyone worries that they're going to be kicked out of their house, no rational landlord throws a responsible tenant out, good clients are hard to come by. Even when a landlord wants a particular apartment back, they'll want to keep a good tenant and will offer them an apartment in another building.

cool the kid

Boygabriel said:I'm not saying things are simple. Far from it. And I don't know much about the market forces of housing and real estate.

But as a general concern, I'd like to see rising costs and profits/value all in the same context. (in addition to other economic factors like taxes, and all the other things you guys have mentioned)

Basically my hunch is that housing costs, like most things in our country, are rising disproportionately to inflation, minimum wage, and income of non-wealthy Americans.

Well, not to be snarky in any capacity, but you should do some digging. Median home prices have dropped precipitously around the country, and even in NYC home prices have dropped about 10% since 2007. I distinctly remember a period of panic during which landlords were damn near giving failed condos away as rented apts with all kinds of perks, and I even managed to talk my landlord into lowering my rent when it was time to renew the lease on my CH place. So that's out.

Plus w/o some serious (and IMO dangerous) intervention, I'm not sure how the powers that be could safely and fairly ensure all the prices of things increase in tandem. Esp w/the exponential growth of entitlement programs, and the dollar destroying games the Federal Reserve is playing. All the stimulus money everyone is begging for was generated through a subtle tax that is the reason why gas will probably hit $5/gallon per year. That's too complex an issue to even begin to pick apart, but I'll just summarize by saying w/o some really careful analysis it's a dubious request.

Boygabriel said:

It is in everyone's interests, even middle class landlords or the wealthy, for us to have a functional middle and lower class who don't get crushed by costs of living such as housing or health care.

I don't think anyone has ever suggested otherwise, but when you factor all the other forces at play into the equation things get complicated. To suggest that the pricing out of the poor and middle class in NYC is due to a general lack of concern or value for them is a bit of a reach and not necessarily true. But the onus is not on the landlords, it is (or I guess was) on the city government and city planners to protect those parts of the population. It is much harder to fix now that the juggernaut has gained momentum.

water ice

CTK, how do you know that house prices hav dropped in NYC? I've never seen such a specific statistic for the city, and would like to see such data.

Rent regulation in NY borders on insanity. You get situations where I may be a protected tennant, and then (illegally) sublet my apartment for far higher than I rent it for and pocket the difference. That difference in rent could be used for reinvestment, further stimulating the housing market. The market for homes in cities like Dallas remains flat (or slight growth), year in and year out (adjusted for inflation). But of course Dallas has something in abbundance which we do not: LAND. They can just keep building. Nonetheless, most rent regulation should be scrapped or just redesigned.

Some other thoughts I have: Where are entitlements growing exponentially? That's wicked fast growth, and I'd like to sign up for such entitlements. Or do you mean that the super wealthy benefited to the tune of several trillion dollars at tax payer expense? Then I would agree. I'm not sure I'd like to be entitled and poor (or working class or middle middle class). Most others would probably agree. It's one thing that people made some bad decisions, like buying too much house, but in each individual case that person made that bad decision just once (or maybe twice, or perhaps, in extreme cases, three times). Many financial institutions made the same mistake hundreds of thousands of times (or even millions) and were ultimately rewarded. Now that's entitlement.

whynot_31

Water Ice and CTK,The folks at Furman center have been writing reports just for you.

http://www.furmancenter.org/research/sonychan/

cool the kid

Water Ice said:

CTK, how do you know that house prices hav dropped in NYC? I've never seen such a specific statistic for the city, and would like to see such data.

http://www.jparsons.net/housingbubble/new_york.html

Now obviously, this is aggregate and in no way reflects the highly granular nature of the NYC market... for example, in Rosedale (the south east corner of contiguous Queens), home values dropped by 2/3 in some cases, whereas in Manhattan it was probably more like 1/10th (if at all). Rent followed.

Rent regulation in NY borders on insanity. You get situations where I may be a protected tennant, and then (illegally) sublet my apartment for far higher than I rent it for and pocket the difference. That difference in rent could be used for reinvestment, further stimulating the housing market. The market for homes in cities like Dallas remains flat (or slight growth), year in and year out (adjusted for inflation). But of course Dallas has something in abbundance which we do not: LAND. They can just keep building. Nonetheless, most rent regulation should be scrapped or just redesigned.

Totally agreed.

Some other thoughts I have: Where are entitlements growing exponentially? That's wicked fast growth, and I'd like to sign up for such entitlements. Or do you mean that the super wealthy benefited to the tune of several trillion dollars at tax payer expense? Then I would agree. I'm not sure I'd like to be entitled and poor (or working class or middle middle class). Most others would probably agree. It's one thing that people made some bad decisions, like buying too much house, but in each individual case that person made that bad decision just once (or maybe twice, or perhaps, in extreme cases, three times). Many financial institutions made the same mistake hundreds of thousands of times (or even millions) and were ultimately rewarded. Now that's entitlement.

Well, a good place to start would be rent laws. I'm pretty sure my downstairs neighbors pay nowhere near what I pay in rent, thanks to rent protection or w/e. Somewhere between my rent and theirs lies a "true" market rate. Rent control advocates insist that the skew should be even more extreme, but to me, putting the needs of a few completely at the expense of everyone else just doesn't seem right. This problem is a symptom of a much more complex problem with a very complex (and difficult) solution that I've talked about ad nauseum elsewhere. What that has to do with the rich, I dunno, never defended rich people welfare.

whynot_31

I think the major problem with these regulations are that they require the landlord (or coop owners, as bklynpotter points out) to incur the costs.

An additional problem is that they are based on the unit, and not the needs of the tenant occupying them.

As a result, the stabilized tenant can become well off, yet their rent can not be raised.

Ditto, a tenant can occupy a large apartment long after their kids move out, and that space could be better used to house a large family.

The policies violate the "from each according to their ability, to each according to their needs" ethos.

....and I think that is part of the reason that the politicians are slowly letting the regulations expire.

vidro3

whynot_31 said:

As a result, the stabilized tenant can become well off, yet their rent can not be raised.

What do you mean cannot be raised? Afaik even stabilized rents go up by 2-3% per year for a 1yr lease and usually 4.5% for a 2 year lease. Which admittedly is not much but it does go up.

One of the more pernicious taxes to affect landlords is the property tax based on assessed value. Just because the building is worth more doesn't mean that one has more money to pay a tax with or that one consumes more government services. Increasing assessed values is a way of increasing taxes without enacting a tax rate increase. And it kinda sucks.

whynot_31

I was alluding to the fact the rent can not be raised in response to a tenants inrease in income.

Yes, it can be raised if the rent control board allows ALL units to increase, but this policy is so board that many receive the benefit who do not need it.

The present policy seems to assume that all rent controlled and stabilized tenants are in need of protection, which isn't the case in actuality.... There is no yearly income verification like there is on Sect 8

vidro3

the apartment can be deregulated if the tenant's income is above $175,000 and the rent is over $2,000, (which means it was around $1450 ten years ago.)

these are admittedly high bars but I would be surprised if many of the rent stabilized buildings on Prospect Park West were not close to these limits.

To my mind that income level is way too high; knock it down and then allow it to increase yearly at an indexed rate. And the rent limit doesn't make much sense either - if the rent gets high, then it can go way higher but if the rent is low it has to stay low.

Landlords can submit requests for income verification and you can lose your stabilization if you do not respond in time.

cool the kid

I don't know that that threshold is too high....

Plus, a family of four might have that income, and then be subject to rent hikes that force them to move every year. I don't know that that is in the best interest of everyone.

Maybe the answer lies in some kind of valuation program... "appropriate" rent would be calculated by the city through an algorithm based on property values, amenities, school district quality, crime stats etc. Basically not far off from how the free market prices apts... but w/various caveats setting it apart from rent control:

- rents on apts would not be free to change when a tenant left

- rents could go up more freely with the market (i.e. not capped at some goofily low rate like 3%)

- rents would be lower than market rate, but not "a grandma living in the same apt since 1950" low; $500/mo for an apt ANYWHERE is low, but in NYC its a giveaway

- system would be voluntary, of course w/some tax perks (revenue that would be lost could be gained back by the new income from tenants willing to pay market rate prices etc)

Combine that w/some housing at those super low rates corralled off for the old folks who've stayed in those rent controlled apts and I think we begin to approach a system that works for everybody

Though I won't lie, it does kind of stink of gentrification a bit... displacement of old folks too at that

whynot_31

Everyone dislikes displacing old people, which is probably why these regulations are being able to slowly expire.

SCRIE also exempts them from most increases