Budget Slams Real Estate

Real Estate got slammed in the State Budget approved Monday morning, including an increase in the real property transfer tax statewide on residential transactions over $3 million and other transfers over $2 million (from $2 per $500 to $3.25 per $500), plus an additional .25% to 2.9% on residential transactions in New York City (Part OOO).


Another hit eliminated the sales tax exemption for energy purchased from Energy Service Corporations (Part H). The budget also added language making source of income discrimination in rental housing illegal statewide (Part T).


On the rent regulation front, the budget increased the appropriation for Rent Administration from $43.5 million to $66.7 million (Page 441). Policy issues were put off, but Governor Cuomo told listeners to WNYC radio Tuesday that MCIs should be temporary: “You put in a new boiler, I’ll pay you for a new boiler, but I’m not going to pay you for a new boiler for the rest of my life…Once it is paid for the rent increase should stop.” Assembly Speaker Heastie, meanwhile, echoed the Governor and said he wanted to extend rent regulationstatewide.


CHIP Executive Director Jay Martin and Kara Rakowski, Attorney with Belkin Burden Wenig & Goldman, LLP gave their takes on the proposed changes in rent regulation on the Realtyspeak.nyc podcast this week. Jay Martin’s defense of MCIs also appeared in Crain’s.


The New York City Rent Guidelines Board kicked off its annual process, Thursday, with new reports on Tenants’ Income and Affordability and Owners’ Income and Expense. Tenant income to rent ratios have declined and evictions have dropped. Almost one quarter of eviction cases that go to trial are brought by the City Public Housing Authority. The I & E report found average stabilized rents citywide in 2017 were $1353 ($1006 in the Bronx, $2247 in core Manhattan); and average expenses were $984. Property taxes remain the biggest expense, averaging $319 per apartment per month.


Vicki Been, former HPD Commissioner and Furman Center faculty director, was named Thursday as Mayor de Blasio’s Deputy Mayor for Housing and Economic Development, succeeding Alicia Glen.


We always thought the New York City Council was for the birds (groan, we know, we couldn’t resist). Speaker Corey Johnson and Councilman Rafael Espinal Jr. have introduced legislation that would require new buildings to use patterned or treated glass designed to reduce bird strikes. The measure could raise costs anywhere from 5% to 50%.


Sometimes more is less. A Streeteasy analysis found that despite New York City adding 36,353 new housing units last year, the number of units in some areas with new housing actually shrunk due to alterations, conversions and the combinations of multiple units into one. 1241 new buildings across the city had fewer units than buildings they replaced.

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Tenants v. Tech

Tenants are fighting new technology in Manhattan—where they don’t want to use the Latch phone app for building entry instead of keys (Sharpe v. 517-525 West 45 LLC)—and Brooklyn, where they are challenging a facial recognition access system. Assemblywoman Linda Rosenthal has introduced a bill that would require landlords to provide a “traditional” means of entry, and, ironically, HPD is touting facial recognition for affordable housing projects in the Bronx as a “State of the Art” amenity.
 
National Grid is threatening to reject all new firm gas applications in New York City or on Long Island after May 15th if a new cross harbor pipeline is not approved. The decision echoes Con Edison’s southern Westchester policy and leaves regional developers wondering what to do when government discourages oil and capacity limits gas.
 
State Supreme Court Judge Robert Kalish this week refused to dismiss a class action overcharge complaint against Bronstein Properties organized by the Housing Rights Initiative. Bronstein had argued that—as another Judge agreed last year—the individual apartment histories and fact patterns were not appropriate for class action. In something of a Catch 22 ruling, Kalish indicated that discovery of more facts would be needed to determine that.
 
The Suffolk County Water Authority approved a basic 6.6% rate increase effective April 1st, but added an additional 15% penalty for excess consumption based on pipe size “to reduce water consumption.”
 
New scoping documents issued this week for the proposed Gowanus rezoning anticipate the potential for 8,200 new apartments in the neighborhood.
 
The Community Service Society this week issued a report claiming that free tenant attorneys had reduced evictions most in targeted zip codes and about 800 overall from 2017 to 2018. They did not mention that the number of one shot deals reported in the Mayors Management Reports increased by about 5,000 in the same period.
 
A California appellate court ruled this week that a facial challenge to a mobile home rent control ordinance in El Monte could proceed on the question of whether the policy was rational and based on fact.
 
HUD Secretary Ben Carson charged, Thursday, that Facebook violated the Fair Housing Act with discriminatory advertising practices, just one week after Facebook settled a discrimination suit brought by civil rights groups and changed several of the questioned policies.
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Albany Fight Gets in Gear

CHIP, along with REBNY, RSA, and SPONY, this week launched a TV and print ad campaign to fight proposed changes to the rent laws that would reduce housing quality and tenant choice. We’ve also increased our direct lobbying efforts, as Executive Director Jay Martin explained in this article Thursday.

It now seems clear that rent regulation will not be taken up in the State Budget negotiations, as Governor Cuomo originally proposed, and negotiations on the details are just beginning.

Tenants in illegal basement apartments in one and two family homes responded to new laws allowing owners to legalize the units by complaining that if the units were legal the rents could go up and that legal tenants can be brought to court for non-payment.

Ten Democratic congressmen from New York urged the State to adopt a new $400 million rent subsidy program to prevent homelessness. State officials were cool to the proposal by Assemblyman Andrew Hevesi, concerned that it would actually result in higher rents generally.

Meanwhile, two Democratic presidential candidates, Kamala Harris and Cory Booker, have each introduced legislation to provide direct tax credits to rent-burdened tenants.

The State Division of Homes and Community Renewal has redesigned its website, so all your old bookmarks are no good.

New York City Councilman Richie Torres and the Housing Rights Initiative are grabbing headlines for going after the Kushner companies for what they consider violations of Certificate of Occupancy requirements, and the what the Department of Buildings calls common “paperwork lapses” that don’t threaten tenant safety.

Rent regulation fever continues to sweep across oceans and up rivers. Spain has just adopted rules limiting rent increases to the rate of inflation and requiring lease terms of at least five years. Barcelona is fining banks millions of dollars for keeping foreclosed buildings vacant while trying to sell them. And the City of Hudson, NY voted to ask the State Legislature to extend the Emergency Tenant Protection Act statewide despite a local Census-reported housing vacancy rate of 17%.

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Following the Amazon Model

Now that Queens pols have killed Amazon’s development plans and 25,000 jobs, a Brooklyn pol is threatening 15,000 jobs at Industry City where developers want to rezone a manufacturing area for office, retail and hotel. Councilman Carlos Menchaca says the seven month Uniform Land Use Review Process doesn’t allow enough time for community input.
 
City Comptroller Scott Stringer criticized Mayor de Blasio’s 2020 preliminary budget plan, particularly for spending on the Department of Buildings and the Department of Homeless Services. He noted that the City had already added 78% more construction inspectors since 2014 but only completed 32% more construction inspections. Spending on homeless services has more than doubled in six years to $2.87 billion, but the shelter population has increased from 50,000 to 60,000. Oh, and overall spending exceeds likely revenues.
 
Con Edison has applied to increase gas rates 11% and electric rates by 6%.
 
HUD Secretary Ben Carson has given two years notice. He said he will quit at the end of President Trump’s first term whether he wins reelection or not.
 
HUD, meanwhile, has been studying why landlords do or don’t participate in the Section 8 voucher program. In a report this week, they noted that landlords had varying degrees of issues with voucher amounts and tenant quality (real or perceived), but a majority seemed to agree that dealing with local Public Housing Authorities and paperwork were the biggest headache.
 
Pot or cot? Governor Cuomo says if the Legislature doesn’t legalize marijuana to provide sales tax revenue for his transportation plan, the next best choice is a pied-a-terre tax.
 
The Building and Construction Trades Council has apparently agreed to let Hudson Yards negotiate with individual unions rather than commit to a project labor agreement, settling a long and bitter dispute.
 
Oregon adopted statewide rent control last week and local emergency rent control measures such as one in Ingleside, California, this week, are gaining momentum. But NPR’s Planet Money notes that economists still agree rent control is counterproductive, but that the best answer of eliminating local zoning and density limits is politically difficult. They suggest exploring five other ideasthat might be better than rent regulation.
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From Bad to Worse

New York State could ill afford the loss of jobs and tax revenues from blowing the Amazon deal, and the damage from proposed changes to the rent laws will be even worse, CHIP Executive Director Jay Martin explained in a column Thursday on City and State.
 
State Senator Michael Gianaris, the chief culprit in killing Amazon’s plans, turned his attention to killing the real estate industry altogether this week. Last year he proposed having government give owners a tax credit for some Major Capital Improvement costs instead of billing tenants. Now he just wants to eliminate MCIs going forward and roll back any increases taken in the past seven years.
 
Rent control fever is infecting the country. The Oregon State Legislature gave final approval to a bill imposing statewide renewal rent caps of 7% plus inflation (about 10% total this year) and limiting the ability to evict tenants or refuse to renew leases. The Governor has indicated that she will sign the bill this week. Interestingly, according to Rent Guidelines Board reports, New York’s renewal increases, luxury decontrols, MCIs, and other lawful increases combined haven’t topped 7% in any year since at least 1990.
 
Property owners who buy fuel or electricity from Energy Services Companies (ESCOs) could take a hit if Governor Cuomo’s plan to eliminate the current sales tax exemption on these power purchases is approved. His State Budget proposal anticipates  $128 million in revenue from the move, unless ratepayers mobilize enough opposition.  Click to add your voice.
 
The Village of Ossining took a half step back, Monday, from their imposition of Rent Stabilization last September. The Village Board approved a new exemption (see item E) for buildings of 20 units or less, and allowed larger buildings to opt-out by accepting a perpetual affordable housing requirement on 20% of their units—although it is not clear why anyone would do so without tax breaks or other offsets.
 
As we reported a couple of weeks ago, the City’s statistics on evictions don’t add up. A New York Post investigation this week confirmed that the Mayor and Council can’t explain where their numbers came from.
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Paperwork Cuts Two Ways

While the State Legislature debates legislation barring source of income discrimination by building owners who don’t want to deal with Section 8, the Town of Eastchester has joined numerous other towns and counties in the metro New York area that won’t process Section 8 vouchers anymore because the paperwork is too burdensome and expensive.
Another 250 buildings were added to the Alternative Enforcement List by the City Department of Housing Preservation and Development this month. Buildings on the list have excessive violations and emergency repair liens, but the Department has made errors in the past, so see if any of your properties are listed.
Half the subsidized housing built under Mayor de Blasio’s Housing New York Plan is in neighborhoods where the typical household earns too much to qualify to live in it, according to an Independent Budget Office report issued this week. Another 25 per cent was built in neighborhoods where typical households don’t earn enough to qualify for the moderate and middle income units.
Vacant land prices in New York City have returned to 2015 levels after tanking for much of the past three years, The Real Deal reports, but land sales volume is way down as development just doesn’t pencil out. The borough price differences are startling, with a buildable square foot going for $684 in Manhattan below 96th Street and $74 in the Bronx.
Glug. The Army Corps of Engineers issued reports this week outlining plans to deal with storm surges and six feet of sea level rise expected in the New York metro area over the next hundred years. Alternative projects for barriers at different locations range in cost from $15 to $118 billion—but the cost of doing nothing is estimated at about $7 billion a year through 2085 alone.
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Bezos Rejects Another Extortion Attempt

Amazon announced, Thursday, that it was withdrawing plans for HQ2 in Long Island City due to local political opposition.
The preliminary New York City budget for 2020 anticipates a 6% increase in property taxes generally and more than a 10% increase in billable assessments on class 2 apartments.
 
In a side note that might be of interest to owners preparing tax appeals in Ossining, which just adopted rent stabilization, or other ETPA communities, the 2020 City Department of Finance assessment guidelines suggest that the median outer-borough rent stabilized pre-1974 apartment building is worth about 22% less than a comparable unregulated building.
 
The City Council, Wednesday, passed a bill that requires owners to absolutely correct mold, mildew and indoor allergen conditions, amending last year’s law that simply called for owners to take “reasonable measures” to correct the conditions.
 
Councilman Keith Powers introduced two bills, Wednesday, that would limit security deposits and brokers fees to one month’s rent. Both bills are brief. Read literally, it seems that the broker’s fee bill would limit the total of commissions and fees for, say, credit applications, to the value of one month’s rent.
 
The development of 9000 apartments, plus millions of square feet of office and retail space at the former Pilgrim Psychiatric Hospital in Brentwood is being stalled by the unprecedented failure of a Suffolk County Legislature committee to approve a sewer connection. The developer is suing.
 
The Oregon State Senate, Tuesday, approved a statewide rent control bill limiting annual rent increases to 7% plus the change in the consumer price index. It now goes to the State House of Representatives, which also has a Democratic majority.
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Statistics, Shmatistics

Mayor de Blasio announced Monday that, due to increased tenant legal services, evictions dropped to a record 18,000 in 2018. But, on the same day, Council Speaker/Public Advocate Corey Johnson announced an interactive map of where evictions occur showing 19,970 evictions in 2018. And, looking at the underlying database the Public Advocate map links to, the actual number was 21,811—not a record and consistent with good economic times of the past.
Crain’s reported exclusively this week on a secret deal between the de Blasio administration and Local 32BJ to require prevailing wage rates for building workers in new affordable housing over 30 units, despite the administration’s long opposition to prevailing wages in subsidized housing construction.
The leadership of the City’s housing team continued to jump ship this week with the departure of Commissioner Maria Springer-Torres from the Department of Housing Preservation and Development.
Perhaps that’s why the Mayor turned to Sanitation Commissioner Kathryn Garcia to take over as temporary chair of the New York City Housing Authority. Even she expressed surprise at the choice, and was immediately faced with new claims of previously unreported issues of lead in paint and water in Authority projects.
Governor Cuomo also issued a press release, Monday, touting Rent Connect, a new interface for tenants and owners to reach mostly pre-existing online forms at the Division of Housing and Community Renewal for rent overcharge complaints, complaints related to a decrease in services, high rent decontrol, and owner restoration.
DHCR, meanwhile, this week posted a new hard copy form for Nassau and Westchester County tenants to apply for Senior Citizen Rent Increase Exemptions.
The deadline for submitting 2017 energy benchmarking data to New York City originally due May 1, 2018 was extended first to December, then February 1st, and now to February 15th due to “technical issues.”
The Building Congress reported that local construction costs rose 5% in 2018, with premium offices running $575 per square foot (highest in the U.S.) and high-rise multi-family running $375 per foot in hard costs (actually less than in San Francisco or Chicago). More details are in the Rider Levett Bucknallconstruction cost report.
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Lead Test

Mayor de Blasio this week proposed lowering the allowable lead in paint to .5 micrograms per square centimeter, half the current level and below levels at which testing equipment is currently certified for accuracy. The City Council is also looking at a package of lead rule changes and is reportedly planning to act at its February 13th meeting.
 
The definition of “universal rent control” has been unclear throughout the campaign season, but new State Senator Julia Salazar introduced her proposal, Wednesday, providing that owners statewide cannot terminate tenancies except for just cause; must offer 1-4 year renewal leases at the tenant’s option; and establishing a rebuttable presumption that rent increases exceeding the local consumer price index by 50% are unconscionable.
 
Also, Wednesday, the Citizens Budget Commission issued a report warning that efforts to end high rent/high income decontrol and limit capital improvement increases would be a gift to 28,000 rent stabilized households with incomes over $200,000 and would hurt housing quality.
 
HUD Secretary Ben Carson, Thursday, announced that HUD and the U.S. Attorney for the Southern District would appoint a monitor for the New York City Housing Authority and require the City to appoint a new NYCHA chairperson that they approve. The agreement with the City sets lengthy timelines for correcting lead, heat and mold issues and doesn’t provide any additional federal funds.
 
The Division of Housing and Community Renewal has announced 2019 fuel adjustments for rent controlled units. All fuels cost more except for Con Edison electricity. As of Thursday, the online filing system hadn’t been updated, but the forms should be here soon.
 
The New York City Council has raised the threshold for when an income-producing property is required to provide a certified statement of income and expense in order to receive an assessment reduction by the Tax Commission from an assessed value of $1 million to an assessed value of $5 million.
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Legislative Cart Before Research Horse

Governor Cuomo introduced budget legislation (see page 415) this week calling for ending high rent/high income decontrol, repealing preferential rent provisions, and limiting major capital improvement charges “based on a report” to be prepared by the Division of Housing and Community Renewal on or after March 1st.
The Governor’s agenda, laid out in his State of the State address (pg 112 et seq), Tuesday, also includes enacting statewide legislation prohibiting source of income discrimination and limiting security deposits to one month on all apartments, not just regulated ones. He would also bar housing built with state aid from using credit scores to screen tenants.
Earlier in the week, the State Legislature passed legislation to limit political contributions by LLCs, a move aimed squarely at the real estate industry. Thebill is not completely clear, but limits any single LLC from contributing more than $5,000 and requires apportioning the contribution among members so that individual contribution limits can be enforced against members of multiple LLCs. 
The local community board on Staten Island rejected the proposed Bay Streetrezoning while the City Planning Department began the process of developing a new plan for the SOHO/NOHO neighborhood…also likely to face community opposition.
New York City, this week, filed suit against a real estate brokerage it claims earned more than $20 million from illegal rentals on the Airbnb platform. And astudy funded by the Hotel Trades Council concluded that  45% of all New York Airbnb reservations last year were illegal, accounting for 66% of revenue.
The ABO Workers Compensation Safety Group this week declared a 22.5% dividend for 2018 in addition to the up-front 25% discount applied to premiums. ABO and CHIP members are eligible to participate in the group. Contact Matt Durnan if you are not already a member.
Registration for BuildingsNY 2019, April 2nd and 3rd at the Javits Center, is now open. CHIP and ABO will be holding seminars at the Show on new environmental laws, lead paint, and Albany’s actions on rent regulations. Click here to sign up for free.
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