New NIMBY Tool

City Council Member Margaret Chin and Manhattan Borough President Gale Brewer are seeking a rapid zoning change to retroactively block an approved development on the Lower East Side. In another chilling blow to as-of-right development, the pols are using a new law sponsored by Chin that became final without the Mayor’s signature, perhaps because he didn’t want to be associated with it or just didn’t want to challenge the Council with a veto.

Although the latest 421-a law provides benefits for condo projects, new City regulations will make them practically impossible. In order to apply for the tax exemption, developers must have a sales contract on every single unit in the project within a year of the building’s completion and agreement by each purchaser to remain a primary resident for five years. Because the developer has to make the deadline and clear other hurdles, buyers can’t know if they will get the exemption when they sign a contract.

Title insurance brokers can’t buy you lunch or take you to a golf outing anymore under new rules issued by the State Division of Financial Services effective December 18th. The DFS is cracking down on “marketing expenses” that it believes inflate rates.

The New York City Housing Authority confirmed to the Daily News this week that, until 2016, none of the NYCHA workers assigned to do lead paint inspections had Lead-Based Paint Visual Assessment certificates, which the U.S. Department of Housing & Urban Development (HUD) requires. And, until August, none of the NYCHA workers assigned to lead paint cleanup had the required Environmental Protection Administration (EPA) Lead Renovator Certification. Private owners would be facing huge fines and jail time for NYCHA’s failures reported in recent weeks.

In an unusual public move, the Manhattan Housing Court Advisory Council has ordered Judge Susan Avery removed from the bench for conflicts, delaying cases, and unprofessional behavior. Avery was deemed “not qualified” by the Bar Association, twice.

Meanwhile, the Appellate Division, First Department, recently refused to remove a non-primary resident in 92 Cooper v. Roughton-Hester, saying that the tenant’s Pennsylvania voter registration and tax filings weren’t dispositive by themselves and that a new trial was required.

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Council Fights Building Improvements

Be prepared to be publicly shamed on a “speculation watch list” if you buy a building with high leverage to fix it up under legislation passed by the New York City Council Thursday. Buying a building with large numbers of violations could also get you on the list, depending on criteria to be developed by HPD. A second bill will prevent you from getting a building permit to renovate apartments or fix many violations in certain neighborhoods without a Certificate of No Harassment issued by HPD after a hearing.

The Council also broadened the definition of harassment to include knowingly providing any false or misleading information to any resident of an apartment, making multiple false violation certifications, or materially misrepresenting the regulatory status or occupancy of a building on a permit application.

Ironically, the Council approved an East Harlem neighborhood rezoning at the same meeting, where hoped for development will be slowed by the above measures.

The Preliminary Maximum Base Rent Factor for 2018-2019 is 7.4%. The Division of Housing and Community Renewal held a hearing on the proposal Wednesday. Tenants and politicians called for a rent freeze, but DHCR has always adopted the number dictated by formula in the past. The biggest cost increase reflected in the formula is a 9% hike in property taxes.

In its continuing effort to be the City’s Worst Landlord, NYCHA planned to break into hundreds of apartments this week to do visual lead paint inspections. Don’t try this at home as we imagine the City would accuse a private owner doing this of harassment.

Housing is tight, but Newsday found rentals for most budgets available across Long Island in a recent survey, with one bedrooms ranging from $1400 in Patchogue to $2115 in Sayville.

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The Real Worst Landlord

The biggest scofflaw and tenant harasser in New York is, once again, the City Housing Authority. Late last week it was revealed that the Authority sent 1400 tenants mistaken eviction notices, and this week the Department of Investigation revealed that the Authority had lied about doing required lead paint inspections since 2013.

But the Housing Authority was conspicuously absent from Public Advocate Letitia James 100 Worst Landlords list, released Tuesday. Instead, James included several owners who are already suing her over highlighting vacant buildings slated for redevelopment and others who recently acquired properties hoping to renovate them.

The Housing Authority would also be exempt from a bill moving through the City Council that would require a certificate of no-harassment before obtaining a building permit. CHIP and ABO have opposed the bill.

Meanwhile, Upper East Side councilmen are still trying to block a new high rise that would block some influential constituents’ views. They won a rezoning this week to prevent similar future developments but the Planning Commission wants the planned project grandfathered. The full Council will decide.

Mayor de Blasio has promised to address property tax reform in his second term, but the first proposal is a stick, not a carrot. As part of his Housing 2.0 plan he wants to raise taxes on vacant land to force development. His plan also relies heavily on private activity bonds which may or may not survive tax reform in Washington.

The City Department of Housing Preservation this week posted a sample combined notice about smoke detectors, carbon monoxide detectors, and reporting gas leaks. CHIP still recommends inserting an optional line about notifying management below the gas provider information.

Stuyvesant Town gets to be Green and cut its electricity bill. The electric-inclusion property is installing the country’s largest multifamily rooftop solar array. Developers hope to generate 6% of their energy needs.

Rent control is popular with elected officials, but not always with voters. Portland, Maine residents rejected a proposal to regulate rents in a referendum last week, 64% to 36%.

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Preferential Rent Requirements

Legal rents must be shown in all renewals of preferential leases, according to an updated Fact Sheet quietly released by DHCR last week. The Fact Sheet also outlines the changes to vacancy allowances after a preferential lease per the Rent Act of 2015, and says penalties for tenants’ failure to qualify for prompt payment discounts aren’t enforceable under preferential rent rules.

The U.S. Senate released an outline of its proposed tax reform bill yesterday, calling for complete elimination of the state and local tax deduction but preserving the current home mortgage interest deduction. The release said that the Low Income Housing Tax Credit would be preserved, as in last week’s House plan, but it wasn’t clear if the Senate would restore the key private activity bond financing the House wants to kill. The tax exempt bonds are used for as much as half of the housing tax credit development

When Mayor de Blasio announced a 50% increase in his subsidized housing development and preservation plan last week he didn’t mention that the cost per unit will doubleThe extra 100,000 units will cost as much as the first 200,000.

The numbers behind the Mayor’s re-election “mandate” this week are also interesting. He actually got almost 70,000 fewer votes than in 2013 despite a slightly higher turnout.

The Democratic sweeps in Weschester and Nassau County elections, however, may have implications for next year’s State Senate races. One county legislature seat in Nassau and three in Westchester flipped from Republican to Democrat. In New York City Council races, winners tended to be the most vocal against development.

A federal jury in Brooklyn found the developer of the 5Pointz project in Long Island City guilty of violating the Visual Artists Rights Act in an “advisory” verdict. The judge will consider the jury’s opinion of whether the owner violated the law by destroying graffiti he allowed to be painted on the buildings.

What has rent control done for the San Francisco housing market? It spurred condo conversion and redevelopment that led to a 7% increase in rents over what they would have been without controls, costing tenants $5 billion, according to a new study.

Do you have all the required signage in your buildings? Probably not. Check out CHIP’s draft list of more than 100 required signs in the Resources section of the CHIPNYC.ORG website and let us know if we’ve missed any. Members only.

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Reform For Some

The House Tax Reform Bill introduced yesterday limits the home mortgage interest deduction to mortgages under $500,000 and the state and local tax deduction to $10,000 in property taxes. It preserves 1031 exchanges and the Low Income Housing Tax Credit, but eliminates the Private Activity Bond Financing behind 40% of low income housing deals and reduces the value of the LIHTC by reducing corporate rates. Business interest deductions, other than for real estate, would be repealed.

The number of new housing units produced in New York City is forecast to be 26,700 units this year, down from 37,700 in 2016, according to the Building Congress Construction OutlookLooking ahead, the Building Congress predicts 24,000 new units to be built in 2018 and 22,000 units in 2019.

The City Council passed legislation, Tuesday, to reduce the qualifications for building inspectors. In other action, the Council passed a bill allowing politicians to initiate accelerated zoning reviews in order to stop as-of-right developments they don’t like. Both items now go to the Mayor.

Meanwhile, six of the eight candidates for City Council Speaker supported commercial rent control at a forum Wednesday.

A study of 270,000 renters nationwide showed 79% looked at online reviews of prospective apartments/landlords before leasing.

Amazon Key, an electronic door lock to allow absent homeowners and tenants to receive package deliveries inside their homes, will be available on Long Island starting next week.

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2.2% Solution

The State Division of Housing and Community Renewal this week issued Policy Statement 2017-2 “Collectibility of 421-a Tax Benefit/2.2% Surcharges for Market Rate Units” which states for the first time that the 2.2% annual surcharge on 421-a units is not applicable to the affordable units, only the market rent units.
Stabilized lease riders will have to be revised by February under legislation signed by Governor Cuomo, Monday, requiring DHCR to include an explanation of what none-rent charges can be lawfully included.
Mayor de Blasio, Tuesday, increased his affordable housing goal from 200,000 to 300,000 units created or preserved, and committed an additional $1.3 billion per year through 2026. So far this week, he has announced $150 million more for non-profits to buy existing buildings and $250 million to, presumably, sweeten Mitchell Lama deals to keep units in the program…but nothing that really adds housing.
The Mayor announced Wednesday that he will seek legislation and regulatory changes to keep loft units rent stabilized, including extending tenancy rights to persons not named on the lease.
City Comptroller Scott Stringer wants timely tenant rent payments to be reported to credit agencies to help them establish better credit scores, but even tenant attorneys are skeptical and a NYCHA pilot program enrolled only one tenant.
The Department of City Planning is considering a rule that would permit Chelsea property owners to buy additional air rights directly from the City at about $500 per square foot, although the latest private sales have been at about $800.
A 10 percent increase in Airbnb listings can create an average 0.39 percent increase in rents and an average 0.64 percent increase in home prices over what would otherwise occur, according to a four-year 100-city study by researchers at UCLA.
Freddie Mac issued a report this week showing dramatic rent changes in 100,000 units it financed twice between 2010 and 2016. At first financing, 11 percent of the  rental units were deemed affordable for very low-income households. By the second financing, when the units were refinanced or sold, just 4 percent of the same units were categorized as affordable.
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MCIs and Professional Fees

The State Division of Housing, this week, issued Policy Statement 2017-1 on the Eligibility of Non Construction Costs, i.e. professional fees, to be included in Major Capital Improvement Rent Increases. Bottom line, if the services of an architect or engineer are required to get a permit, then it is included. Also, as urged by CHIP, professional fees for architects and engineers will be allowed when they are “necessary and customary” for the job.  Construction management fees, however, are generally not allowed. Municipal filing fees are not covered, and profit and overhead figures in cost-plus contracts will be considered if “reasonable.”
A lender is suing a Manhattan owner to prevent the sale of air rights on a property, which is claimed as collateral on the mortgage because of its inherent tie to the land. While the issue wends through the courts, borrowers are advised to protect themselves in mortgage language on new loans.
In case you missed it, effective October 1st, air conditioning charges for electric inclusion buildings were reduced 63 cents a month to $26.02 under the latest update to DHCR Operational Bulletin 84-4.
Cambridge, Massachusetts eliminated rent control in 1995, but the good news keeps coming. Researchers this week reported that the elimination of rent control led to a reduction in crime.
TRData is selling a database of construction timeline information culled from New York City records as a way for buyers to spot troubled projects, but the norms aren’t so hot either—it takes an average of 1205 days (3.3 years) for a 25-50,000 sq. ft building project to go from first DOB filing to certificate of occupancy.
Thousands of protesters rallied at New York City Hall, Monday, to call for 15,000 new units of senior housing on public housing authority land, at a cost of$3.83 billion, rather than Mayor de Blasio’s current public/private affordable housing development plans. There was apparently no discussion of the roughly 11,000 individuals, mostly seniors, currently under-occupying NYCHA apartments and refusing to trade units with larger families.
Yonkers property owners are suing to get their buildings inspected more often, or at least get a refund for fire inspection fees they pay without getting any service. The plaintiffs say their buildings were not inspected for a decade despite paying annual fees. The City budget shows that $3.5 million in fees are collected annually for the fire inspection program, but only $1.7 million is spent.
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It’s Not So Cold Anymore

New night time hearing requirements (62 degrees regardless of outside temperature) took effect Sunday and the long range forecast indicates it will become an issue Wednesday. Coincidentally, that’s when we hold a seminar on the subject at 8:30 a.m. at Scandinavia House, 58 Park Avenue. You should attend if 1) You need to comply with the new night time heating requirements, 2) You own or manage a building between 25,000 and 50,000 sq. ft. subject to new benchmarking requirements, or 3) You use energy in your property for heating, cooling, or light. RSVP now.
The City Planning Commission this week approved an East Harlem rezoning aimed at increasing density an affordable housing. It now goes to the City Council for a vote.
Renters are different than just ten years ago, according to the National Rental Housing Landscape report issued by the Furman Center yesterday. Median renter household income is higher because, in part, the universe of renters is better educated. The percentage of renter households where someone has a college degree rose from 28.6% in 2006 to 35% in 2015 and the percentage with some college education rose from 24.4% to 28%, while the percentage with high school or less dropped almost 10 points. The less educated, lower income renters, however, are more severely rent burdened than before, the study showed.
Mayor de Blasio’s plan to stop using hotels for the homeless isn’t working out so well. Five hotels are no longer being used, but twelve new ones have been added at rents of about $5,000 a month per unit.
On Tuesday, the Mayor named Vincent Sapienza, a 35-year veteran of the department, as the new commissioner of the Department of Environmental Protection.
Edgewater, New Jersey is the latest community to oppose waterfront development that includes affordable housing, apparently thinking a public works storage facility is a better use of the old Hess oil site.
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Save Energy, Or Else

Mayor de Blasio, yesterday, announced he would introduce legislation to fine owners of up to 14,500 commercial and residential buildings over 25,000 square feet if they don’t meet energy conservation goals by 2030. Details are not yet available.

Meanwhile, beginning next winter, heating oil in Westchester, Nassau and Suffolk counties will have to contain at least five percent biodiesel under legislation signed Wednesday by Governor Cuomo.

The Governor also signed a bill requiring every board member of a co-op or condo in the State to file an annual statement, beginning in 2018, indicating whether or not they voted on any contracts with related parties.

DHCR issued a new Fact Sheet this week on discrimination against foreign born tenants, including, for example, that “ An owner who only requests background information and proof of citizenship status from individuals of South Asian origin and not all others will be in violation of the law.”

The New York Times analysis of Tuesday’s primary elections began: “If voters sent any discernible messages in the contested Democratic primaries for New York City Council, they were that gentrification is bad…”

We’re not the only ones with crazy politicians. The Newark City Council last week responded to a tenant initiative by reducing the amount of rent increase an owner could get from improvements to a vacant apartment costing one year’s rent to 10 percent, vs. the previous 20% for an expenditure equal to eight months’ rent.

The National Apartment Association has published its annual survey of apartment operating expenses. Not surprisingly, the average cost nationally of property taxes on a mid to high rise apartment in 2016 was $1653—about half what it is in New York. The median cost to income ratio nationally for mid to high rise units was about 46%, vs. around 64% in New York.

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Gas Shut-offs Rising

Gas shutoffs are increasing due to a combination of a crackdown on illegal connections; publicity about gas safety, including a new City law requiring owners to advise tenants to call 911 if they smell gas; and a new statewide requirement for utilities to inspect pipes all the way to the building meter instead of just to the curb connection. Beginning in 2019, City law will also require inspection of exposed pipe and gas detection tests every five years. CHIP, ABO and other industry representatives met Wednesday with Con Edison to work on protocols to minimize shutdowns and limit the portions of buildings effected. We will keep members informed as new information is developed. Please contact the CHIP office if you have specific questions or concerns.
Rensselaer is the latest of thirteen New York counties that have decided that if they can’t stop Airbnb, they can at least tax it. They reached a deal to have the home sharing company collect hotel taxes for them on rentals.
The New York City Council, yesterday, approved a Downtown Far Rockawayrezoning plan to encourage more and higher density housing. At the same time, they approved an East Shore Resiliency plan limiting development in areas of Oakwood Beach, Graham Beach and Ocean Breeze prone to flooding.
If you want to have a personal hand in rezoning the City, the Deputy Mayor for Housing and Economic Development is recruiting a Senior Advisor on Land Use. Good luck.
Meanwhile, the City Council yesterday also amended its recent law expanding the definition of tenant harassment to include acts by owners of one and two family homes…but unlike multifamily owners, the small owners aren’t guilty until proven innocent.
Not everything is about real estate. Oh, wait. It is. Turns out the sale of the NY Daily News this week was all about the value of its Jersey City printing plant and 25 acres next to Liberty State Park.
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