Wholesale Legislation

The New York City Council Housing Committee held hearings, Thursday, on 37 bills aimed at increasing penalties for violations by building owners, discouraging tenant buy-outs, and making it harder to get building permits. CHIP and ABO, along with industry partners, opposed most of the proposals.

State Senator Brian Kavanagh, who represents parts of lower Manhattan and Brooklyn, will be the new chairman of the Senate Housing Committee under Democratic leadership in January.

The Furman Center released a policy brief this week on increasing legal assistance for tenants in Housing Court. The brief focused mostly on the need for better planning and training in other municipalities that are considering giving tenants lawyers, but did note that, thanks to New York City’s free legal programs, the number of pretrial motions increased 19.1 percent from 2014 to 2016 – prolonging cases and raising owners’ legal costs.

Mayor de Blasio is out with a new ten year plan for reforming public housing this week. He expects to raise $3 billion from private developers building on New York City Housing Authority sites and buying air rights, along with the sale of private management rights announced last week.

Apartment owners aren’t the only ones targeted by 311 complaints. The New York Times reports that someone has “weaponized” 311 calls with sign complaints against small commercial businesses. Over 200 calls about unauthorized signs in Brooklyn were reportedly made last month, up from 23 during the same month last year.

Waterfront development is taking on a whole new meaning on the East End of Long Island. The East Hampton Town Board is studying the legal and land use issues of moving downtown Montauk  inland, away from rising seas.

 

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Who? What?

The programmers behind tenant complaint websites heatseek.org andjustfix.nyc have launched Who Owns What to help tenants identify all the properties owned by a single entity despite multiple LLCs. Using public records and relying on office addresses, it may be more reliable at finding agents than owners.

Mayor de Blasio has announced that the City is close to acquiring 17 buildings with 729 units in order to convert 468 of the units currently used for cluster housing for the homeless into permanent residents. No prices were revealed and the City is “negotiating” with the owners under the threat of using eminent domain.

The Mayor and Comptroller, meanwhile, are battling over which taxes to raise to pay for subsidized housing. The Mayor wants to add a 2.5% surcharge on residential sales over $2 million while the Comptroller wants to eliminate the mortgage recording tax but boost property transfer taxes up to 8%. Either plan would require approval by the State.

The State Division of Housing and Community Renewal has confused owners in Ossining, where the Village recently adopted rent stabilization, by extending the deadline for initial registration and fee payments to unspecified dates. TheHCR website says they will send a letter to those affected when they know what they are doing.

It is Co-op City’s 50th anniversary and Curbed has an interesting history alluding to its multiple government bailouts and socialist roots. The early population of more than 60,000 has dropped to about 45,000 and the project is considered the nation’s largest naturally occurring retirement community.

Friday the 7th is the last day to buy discounted tickets for the International Builders Show, February 19-21st in Las Vegas. ABO members get an additional break.

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Council Doubles Down

More than a dozen bills increasing the penalties for false statements onbuilding permit applications, increasing public availability of information about overcharges, requiring that tenants get copies of notices of violations, increasing DOB inspections, and other provisions affecting apartment operators were introduced in the New York City Council Wednesday. Speaker Corey Johnson indicated his support for the package (Int 1280-2018Int 1279-2018Int 1278-2018Int 1277-2018Int 1275-2018Int 1274-2018Int 1258-2018Int 1257-2018Int 1256-2018Int 1255-2018Int 1247-2018Int 1242-2018Int 1241-2018).
The January 1st deadline for submitting bedbug infestation histories to the City Department of Housing Preservation and Development has been extended to January 31st because HPD doesn’t expect the online reporting tool to be available until at least December 17th.
Mayor de Blasio announced that Requests for Proposals for private management of 21 public housing projects will be issue in December. A total of 62,000 units could be involved, including several developments already in the works.
Meanwhile, the City Independent Budget Office has concluded, not surprisingly, that rehabbing public housing is cheaper than building new.  The IBO estimated rehab at $260,000 per unit and replacement with new construction at $410,000 per unit—not including land or demolition costs.
The New York City Planning Commission has begun the formal seven-month review process for zoning changes around Bay Street, Staten Island, to allow 1,800 more residential units to be built.
While the City Council mulls commercial rent control proposals, the Real Estate Board of New York reports that retail rents in 15 of 17 corridors in Manhattan have fallen an average 25% in three years. Perhaps the market is self-correcting after all.
Amazon’s plans for Long Island City appear to be just a drop in the bucket. Curbed.com has identified more than 40 residential projects already planned or in development in the neighborhood.
Westchester County has passed legislation requiring Co-op boards to report any buyer rejections to the county Human Rights Commission for investigation. New York City and New York State are both considering similar legislation.
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Sold Out

Subsidized housing developers sold out private housing owners this week, joining with tenant activists to petition the State Legislature to end luxury decontrol and eliminate preferential rents—regulations that don’t matter to their programs. Members of the New York State Affordable Housing Association are evidently more concerned with currying favor from officials that fund their programs than with private housing economics.
 
Amazon announced it would bring at least 25,000 jobs to Long Island City with roughly $3 billion in incentives from State and City sources detailed in aMemorandum of Understanding. Part of the deal was to bypass the City Council approval process, which ruffled some political feathers, but others applauded the deal which is expected to produce a net benefit in tax revenues of more than $27 billion and almost 100,000 indirect jobs.
 
Days before the announcement, the City’s Independent Budget Office reported that there was no evidence that the  Commercial Expansion Program, which provides tax incentives for job creation outside Manhattan and is part of the Amazon package, caused any employment growth beyond what would have happened anyway.
 
The Deal of the Century? The Metropolitan Transportation Authority has agreed to purchase Grand Central Terminal and Metro North’s Harlem and Hudson line tracks for $35 million from an entity that acquired the property after the Penn Central bankruptcy. There had been a 280 year lease in effect. MTA officials noted that ownership of the northern lines could create new opportunities for trackside development.
 
New York City issued violations last month to 20 individual condo owners who were putting their units on Airbnb for short term rentals. According to news reports this week, all were owners at the Atelier on West 42nd Street, where units are on sale from about $1 million to $85 million.
 
A federal judge, Wednesday, rejected a proposed consent decree calling for an additional $2 billion in funding and appointment of a court monitor to ensure that the New York City Housing Authority deals with lead, mold, vermin, heat violations. He said the requirements for action by the Authority and the powers of the monitor were too vague, and that funds were insufficient. He also noted that, under federal law, HUD was really responsible for taking over NYCHA and cleaning up the mess.
 
Why do politicians do what they do on housing policy? A new interactive map created by the Community Service Society lets you analyze rent regulated and other types of housing by Assembly and Senate district.
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Feeling Blue

Tuesday’s blue wave in New York could lead to a battle on rent regulations, with the Governor’s office confirming that he wanted to “advance additional tenant protections, including the elimination of vacancy decontrol and limiting rent increases for building and apartment improvements.”
The voters spoke directly on rent regulation in California, overwhelmingly defeating Proposition 10, which would have allowed expansion of rent controls there.
Another election result is the rise of several New York representatives toleadership of House committees that could affect the economy and housing, including Nita Lowey as chair of the Appropriations Committee, Nydia Velazquez as chair of the subcommittee on small business, and Carolyn Maloney as chair of the subcommittee on capital markets.
Amazon may be bringing 25,000 jobs to Long Island City, if the localCouncilman and State Senator can’t discourage them. Both are raising the usual NIMBY concerns. Google, meanwhile, is expanding to about 20,000 jobs in the City with less fanfare.
The December 1st deadline for construction workers to get safety certificates for 30 hours of training has been delayed until June 1st because of the lack of training resources.
The City Department of Sanitation released its formal proposal for new commercial carting zones, beginning what is likely to be a multi-year approval process. The idea is for a limited number of carters to be licensed for each neighborhood to reduce energy consumption and corruption.
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Speculative Criteria

New York City, Tuesday, published the first Speculation Watch Listidentifying buildings purchased for less than the median cap rate of all apartment building transactions in each borough. Buildings on the watch list will be subjected to increased inspections and scrutiny to prevent tenant harassment.The initial list contains 51 buildings purchased with cap rates (determined by the Department of Finance) to be below 3.345% in Manhattan, 3.129% in Queens, 3.671% in Queens and 3.665% in the Bronx between April and June 2018. The City also published a list of all the transactions considered for reference. No effort was made to look at the reasons someone might have accepted a lower cap rate, location within the borough, the investment expectations, financing, or any other more relevant information.
 
The City Council, meanwhile, rejected efforts Wednesday to transfer 13 tax delinquent and mismanaged low income co-ops to third party ownership. Council members have expressed concern for the resident shareholders losing their equity, but haven’t addressed the residents’ inability to pay or the buildings’ physical issues.
 
The Council also passed legislation amending the Building Code to require retroactive installation of carbon monoxide detectors in all commercial spaces, effective in 270 days.
 
Enforcing 2015 legislation on cooling towers seems to be a problem due to inexperienced and confused inspectors. An analysis of 15,700 cooling tower violations challenged at the Office of Administrative Trials and Hearings found that 14,000 had to be dismissed for various errors.
 
Due to software glitches, the U.S. Veterans Administration has failed to pay rental assistance to thousands of veterans receiving student assistance for two months or more, causing many to be late on rent. Mayor de Blasio has offered extra assistance to tide the vets over, so if you have a tenant who relies on VA help you can steer them to the City.
 
Not only did Manhattan come in second to Brooklyn in the number of new and converted apartments offered for sale last year, Queens is set to pass them both in the next two years.
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Good Time for Qualms

Even the de Blasio administration had qualms about proposed commercial rent control legislation at a hearing Monday, but Council Speaker Corey Johnson implied the bill could pass after amendments to exclude larger tenants.

The IRS issued proposed rules for new Opportunity Zones that will allow investors to defer and perhaps avoid all capital gains taxes on qualifying real estate developments. The NAHB also released a quick FAQ on the Zone rules.

The latest New York City Construction Outlook from the Building Congress forecasts non-residential construction will peak this year at a record $39 billion, falling slowly in 2019 and 2020, while residential construction will continue at about 20,000 units per year.

The Daily News editorialized against high property taxes on apartments this week, noting that rental units make up 9% of the City’s property wealth, yet are stuck paying 16% of the property taxes.

Texting is becoming the preferred way to communicate with younger tenants, but owners need to know that the technology comes with regulatory requirements. The latest NAA Units Magazine explains that texting falls under the FCC’s telephone regulations and requires some record of tenant consent, including written consent for marketing texts.

The Regional Plan Association, Wednesday, issued a report saying roughly 2 % of buildings had “bad landlords.” A “bad landlord” was defined as one having both more than ten violations on a building and having brought evictions actions against 30% of tenants within about 2 years. Even that very broad definition of a bad landlord shows that 98% of all buildings have, as we have always said, good and effective landlords.

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Not Amused

The federal judge hearing claims about the New York City Housing Authority’s failure to comply with lead paint rules was not amused by City defense arguments that the condition of the apartments is so poor that tenants must have known and accepted the risks.

The New York Post also reported this week that, when Mayor de Blasio announced that between 2014 and 2016 there were only four children with elevated blood lead levels in NYCHA apartments that needed repair, he had just been told that the number from 2010 to 2015 was 202.

The U.S. Supreme Court, meanwhile, might have opened up property owners, painters and other businesses to new lead liability by refusing, Monday, to review a California State Court decision finding lead paint manufacturers liable for lead contamination in houses painted before 1951, when the companies stopped advertising lead paint for residential use. In an amicus, the U.S. Chamber of Commerce expressed fear that the decision could expose all sorts of businesses to liability for decades-old activities that were legal at the time.

Homeless cluster housing residents placed in apartments by the City through non-profit contractors are not entitled to rent stabilization protections, according to a State Supreme Court decision reported this week in Crains and the New York Law Journal (subscription required).

The Appellate Division, First Department, Tuesday, upheld a zoning decision that calls for open space requirements to be met on a ‘zoning lot’ rather than a building by building basis, contrary to the City Department of Buildings’ recent policy. The issue was whether rooftop open space that was only accessible to a particular building’s residents could be counted as part of the total available open space in the zoning lot when considering a new project. The Court said no. Only space open to everyone on the lot counted.

Proposition 10, the California referendum on expanding rent control, is only supported by 35% of likely voters according to a poll released this week. Forty-six percent oppose the measure. Rent regulations are most popular among 18-49 year-olds and least popular among those over 65.

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Class Not Dismissed

Two Housing Rights Initiative suits against property owners, both involving deregulation of units in buildings with J-51 benefits, were granted class action status by judges in Manhattan and the Bronx. These are the first cases of more than 40 initiated by HRI where class action status was granted.
 
Adding to the list of anti-owner legislation on the so-called progressive agenda, State Senator Brian Benjamin has introduced legislation to extend the statute of limitations on rent overcharge complaints from four to six years.
 
Federal subsidies, particularly for public housing and Section 8, are the solution to meeting affordable housing needs according a report issued Thursday by theCitizens Budget Commission. Analyzing 2017 Housing Vacancy Survey Data, the report found that 921,000 New York City households paid more than 30% of income for rent, and half of them paid more than 50%, after accounting for rent and nutrition subsidies. Looking at low income households that aren’t rent burdened, the report noted that 91,000 received Section 8 benefits; 82,000 were in public housing; and 50,000 were in rent stabilized apartments.
The IRS hasn’t finalized rules and the suggested census districts won’t be officially adopted until April, but it is already getting late to begin organizing investment funds for the Opportunity Zones created by the 2017 Tax Cuts and Jobs Act. The progam will allow real estate investors to exclude capital gains from investments in the zones held for ten years, and also exclude gains from sales elsewhere that are reinvested in the zones.
 
The New York City Council is moving forward October 22nd with a hearing on the “Small Business Jobs Survival Act” which would entitle any commercial tenant to a ten year renewal lease, arbitration of terms with the building owner, and right of first refusal on leases negotiated with new prospective tenants.
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But the facts are…

New York’s City Health and Housing Commissioners gave strong lip service support to the Council’s package of lead poisoning prevention bills at a hearing last week, but the written testimony suggests that virtually all the bills need amendment and some make no sense. Regarding requiring every property owner to test and abate soil and water lead, the Department of Health reported that an analysis of 219 children who had blood lead levels above 15 mcg/dl in 2017 found one child with an exposure to lead in soil and one with an exposure to lead in water, but that both were also exposed to paint hazards.

City rules covering Living in Communities (LINC) rental assistance; the City Family Eviction Prevention Supplement and City Family Exit Plan Supplement (CITYFEPS) programs; the Special Exit and Prevention Supplement (SEPS) program; and the HRA HOME Tenant-Based Rental Assistance Program (HRA HOME TBRA) and New York State Family Eviction Prevention Supplement are being amended and merged beginning October 29th. Anyone with tenants in these programs should review the changes.

The New York Times investigation into President Trump’s taxes this week explores an alleged scheme in the early 1990s to inflate the costs of individual apartment improvements and major capital improvements by running purchases through a family-owned company before reselling them to the properties. The State Division of Homes and Community Renewal has indicated it will look at the claims.

Sackman Enterprises is proposing giving the City of White Plains $260,000 cash in lieu of 18 parking spaces at a downtown apartment development site because the units will be targeted at Millenials.  “Millennials don’t have cars, as a practical matter. They’re big users of Uber and Zip Cars,” a spokesperson said. Parking requirements have long been a target of affordable housing developers as well.

The Brooklyn District Attorney, Wednesday, announced the indictments of five people and two businesses for illegally removing asbestos, filing false instruments with the Department of Buildings, forgery, reckless endangerment and other crimes related to renovating four properties.

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