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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AC Rates Up With Fall Arriving

Air conditioner charges in rent stabilized and rent controlled apartments with electricity included in the rent will increase to $26.42 per month effective Monday, October 1st, per the Division of Housing and Community’s Renewal’s latest Operational Bulletin 84-4 update, posted online yesterday.

A State Supreme Court judge this week denied New York City’s motion to dismiss the complaint by Tax Equity Now, a coalition of community and real estate groups, that City property taxes are assessed unfairly.

City Comptroller Scott Stringer counted wrong. First he said the City ‘lost’ one million apartments renting for less than $900 since 2005; then he said it was 425,000. In a report Tuesday (corrected Wednesday) he blamed deregulation of stabilized units for rising rents, ignoring the Rent Guidelines Board’s latest findings that operating expenses for the average apartment, without profit or debt service, rose from $679 to $985 a month since 2005, including property taxes that have more than doubled.

The City Council held hearings Thursday on 23 lead safety bills opposed by CHIP. Supporters complained in a new report this week that HPD enforcement is lax because only  two violations have been issued since 2005 for failure to do interim controls on apartment turnover, but downplayed the 307,000 peeling paint violations in the same time. Meanwhile, the City’s Independent Budget Office revealed that lead in water is rare, and confined mostly to smaller, older buildings with under 2 inch service lines in a handful of neighborhoods.

The New York Times, Monday, ran a profile of Aaron Carr of the Housing Rights Initiative in advance of a press conference with Councilman Ritchie Torres accusing landlords of failing to check of the box that they have rent stabilized tenants on building permit applications. Torres wants owners prosecuted.  A Department of Buildings spokesman explained that, at most, the filing errors found involve just 3 percent of construction permits. “More importantly, checking the wrong box on a permit application does not mean that any improper work happened.”

In a decision with significance for Long Island development generally, the Suffolk County Legislature’s Public Works Committee voted down a plan for 9000 apartments and offices in Brentwood because of concerns over sewer capacity and the water aquifer.

Mayor de Blasio appointed Sarah Carroll as the new Chair of the Landmarks Commission. She was the executive director since 2014 and has been on the Landmarks staff for 24 years.

The link for ABO member savings from the National Association of Home Builders in September’s New York Housing Journal was broken. The correct link is www.nahb.org/savings.

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Lead Time

The New York City Council holds hearings Tuesday on a package of lead bills, opposed by CHIP and ABO, that would require property owners to abate all apartments on turnover (as opposed to current interim controls), test and abate soil outside buildings annually, and lower the allowable lead in paint tests so that previously cleared properties might be subject to new abatement requirements. This despite new reports this week that the number of children with elevated blood lead levels continued to decline in fiscal 2018, down 11 percent.

The Department of Housing Preservation and Development finalized rules for a speculation watch list, to be posted online beginning October 27th, that will highlight buildings acquired at any cap rate below the borough median for the prior twelve months. The theory, apparently without any particular evidence, is that this will be an indicator of likely tenant harassment.

NIMBYs (and tenant activists) may complain about traffic, displacement, gentrification, and architectural integrity, but what really irks them is developers making money, according to a new research report from UCLA. Opposition to new development proposals increased by 20 percent when test subjects were given the argument that a developer was likely to earn a large profit from a building.

The latest tariffs on Chinese goods will add $1 billion to the cost of housing production, and additional levies set for January will bring the tally to $2.5 billion, according to the National Association  of Homebuilders. Products affected include granite, portland cement, framing lumber, cast iron pipe, nails, kitchen cabinets and electrical fixtures, among others.

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Primaries Next Thursday

State primaries on Thursday could offer a view into what may happen in the November elections. We’ll be watching and will report to you.

Zephyr Teachout, endorsed for Attorney General by the New York Times this week, has expressly called for targeting the real estate industry.

More than $1.5 billion in Buildings and Sanitation fines are unpaid, according to a report this week, not counting $500,000 just levied on the Kushner Companies for failing to check the box that they had stabilized or controlled tenants on building permit applications.

Another $285,000 in fines was just levied on building owners accused of illegal short-term rentals through Airbnb, although the largest amounts seem to be against an SRO disputing whether its use is illegal and a single-family homeowner.

DHCR updated five fact sheets concerning new leases and renewals on its website Thursday, including:

  • Fact Sheet #5: Vacancy Leases in Rent Stabilized Apartments – [ PDF ]
  • Fact Sheet #26: Guide to Rent Increases for Rent Stabilized Apartments in New York City – [ PDF]
  • Fact Sheet #31: Guide to Rent Increases for Rent Stabilized Apartments in Nassau County – [ PDF]
  • Fact Sheet #31a: Guide to Rent Increases for Rent Stabilized Apartments in Rockland County – [ PDF]
  • Fact Sheet #31b: Guide to Rent Increases for Rent Stabilized Apartments in Westchester County – [ PDF]

Westbury, on Long Island, has begun the process to rezone 25 acres near the LIRR station for transit oriented development.

A Westchester single-family home development is suing the State for permission to convert to condominium status solely to get its property taxes reduced. The case has wider implications for the taxation of apartment buildings, as it fuels arguments by legislators who have already proposed eliminating the assessment of coops and condos as if they were rentals.

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