Wheeler, Dealer

Corey Johnson, elected Wednesday  as the new Speaker of the New York City Council, wants to staff up the Council’s Land Use Division so that instead of members simply vetoing projects in their neighborhoods, the Council can wheel and deal. He has the personal experience, after winning a historic district and reduced project size in exchange for approval of a planned St. John’s Terminal development with Pier 40 air rights a year ago.

Governor Cuomo’s State of the State message this week didn’t offer any new housing programs, but hinted at moving the Red Hook container port, extending a subway from Manhattan, and opening up a massive waterfront development site. He also plans to advance plans for new rail lines on existing Long Island routes that should improve service and encourage nearby development.

The MTA is also offering a unique development opportunity: 3.8 acres above the Bay Ridge Freight Rail branch along 61st Street in Brooklyn.

As expected, Wednesday, Mayor de Blasio announced that a law requiring HPD to develop a Speculation Watch List went into effect. The department has ten months to develop an online listing of building purchases it considers to be over-financed, resulting in potential tenant harassment, displacement, and gentrification.

While the Mayor urged tenants of private buildings to call 311 with any heat problems during yesterday’s snowstorm, the New York City Housing Authority had about 3,000 apartments without heat, according to press reports.

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Double Standards

The year couldn’t end without another New York City Housing Authority lead-paint scandal. The Daily News reported last week that NYCHA placed families in apartments with known lead paint, abated by uncertified workers, without any of the required disclosure notices.
Private property owners may be more affected by a Federal Appeals Court ruling, Wednesday, ordering the U.S. Environmental Protection Agency to propose long considered modifications to the lead hazard levels for paint, dust, and soil within 90 days and adopt any changes within a year.
The State Division of Housing and Community Renewal wound up the year with a new Tenant FAQ on Major Capital Improvements, advising tenants that grounds for challenging MCI rent increases include “defects in the installation of the new equipment, improper cost documentation, complaints of harassment by the owner, outstanding violations of record, lack of registration filings, the issuance of DHCR rent reduction orders,” and “failure to meet useful life requirements for the item being replaced.”
Commercial real estate owners and operators did pretty well in the tax bill signed by President Trump, Friday. The National Association of Realtors published an industry summary, including examples of the effects on developers’ personal taxes.
Looking ahead, pension funds, insurance companies and other institutional investors are reportedly over the urban luxury apartment boom and looking to suburban multifamily development and class B apartments for higher yields.
New York City, meanwhile, is predicting slower job growth for the next several years and wage and tax growth in the 3-4% range.
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Council Slams Owners

Building owners, managers, and developers were slammed with new requirements on everything from mold to energy to construction noise as the New York City Council wrapped up its term, Tuesday, passing almost 40 new laws.

  • If signed by the Mayor, as expected, owners will soon have to due annual mold and allergen inspections, similar to lead paint inspections, and hire certified mold assessors and abatement workers.
  • Buildings will have to post letter grades on their energy use, similar to restaurant grades, based on their energy benchmarking score. Every building with a score from 50 to 90 will have to post a “B” in the lobby, for example.
  • Under another bill, the City Housing Department will create a new online listing of building addresses by owner name, reporting violation totals and harassment findings.
  • Amendments to the noise code will require new regulations defining noise limits for  indoor renovation.
  • And, the Buildings Department is directed to develop more stringent energy conservation standards for construction than the national and state standards.
  • Subsidized housing projects, including 421a buildings, will be required to list all apartments, building amenities, rents, and vacancies on a central City listing portal. Efforts by CHIP, ABO and other industry groups succeeded in exempting stabilized buildings generally from the City portal listing requirement as originally proposed.

Details on these and other measures affecting the industry will be in the February New York Housing Journal.

Tuesday was a bad day for building owners in the State Court of Appeals as well, with a decision overturning the lower court ruling in Prometheus Realty that blocked a City water bill credit to single family homeowners at the expense of multifamily owners and other customers. Mayor de Blasio immediately announced that homeowners would get a $183 credit, but it wasn’t clear how or when it would be applied or how it might affect other owners’ bills.

The new tax law passed by Congress this week was kinder to housing developers, preserving 1031 exchanges,  private activity bond financing for affordable housing and low income housing tax credits among other business tax changes. On the homeownership side, Zillow estimated that the new  $750,000 cap on home mortgage interest would drop the number of homeowners nationally for whom it paid to itemize from about 44% to 14% . In Nassau County, it would decline from almost 100% to 68%, and in Rockland from 97% to 50%. In Manhattan, however, the percentage would only decline from 100% to 99.8%.

Look out WeWork. It turns out that one of the hot new amenities for new apartment developments and renovations in Westchester is co-working space. Also, pet-washing facilities.

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Dogs and Fleas

Sleep with dogs, wake up with fleas. Or, rent to the City of New York and have your property condemned. Mayor de Blasio last week announced he would use eminent domain to take buildings with large numbers of homeless families placed in them under the “cluster housing” program. It is not clear how this solves the homeless problem.
The Mayor’s other new plan to address housing shortages is to help finance 200 condos or co-ops a year for middle income families with an Open Door” program. It will help a whopping 1300 families by 2026 and joins the Neighborhood Pillars program, the Mitchell-Lama Reinvestment ProgramSeniors Firstand HomeFix programs, among others.
The City Council, meanwhile, has issued a 72 page report on the problems of retailers. Among the ideas: require building owners to report retail vacancies of more than 90 days, new zoning to require street retail in some residential areas (presumably to create more vacancies), and tax incentives because taxes are too high.
The Council was also busy on the housing front last week, passing legislation to add “an individual’s actual or perceived romantic, physical or sexual attraction to other persons” to protected classes; and prohibiting building owners from requesting identification from tenants or prospective tenants that would indicate citizenship status, unless such documentation is otherwise required by law (i.e., a tax i.d. for a security account) or is requested for a specific and limited purpose such as, perhaps, a credit check.
The Council also amended the J-51 law to increase the assessed value per unit for eligibility from $30,000 to $32,000 and index it for inflation.
The latest episode of Housing Authority screw-ups included the Authority sending “breach of lease” notices to tenants who may or may not have missed lead inspection or repair appointments, and a report, Wednesday, that 81% of 8900 units inspected in 2017 (after four years of missed inspections) had potential lead hazards. Buried in the story, however, is the fact that more than half those units are believed to be lead free and may just have peeling paint.
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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, see all the latest updates in the 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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