Are we going to say yes to the City of Yes housing opportunity? The major rezoning effort is now heading to debate before the City Council. If it passes, we’ll take one step forward in solving New York City's decades-old housing emergency. Let's start Housing New York.

[THEME]
“We need 800,000 units to meet the demand today… What we have right now in the United States and what we have right now in New York City is almost a crisis of absurdity… We have to figure out a way to get these vacant units back online in a reasonable way that sets a rent that's affordable for most people… We will end America's housing shortage by building 3 million new homes and rentals…” 

[INTRO]

Welcome to Housing New York. It is Tuesday, October 15th. I'm your host, Kenny Burgos. I hope you all had a nice long weekend. I spent some time with my family pumpkin picking this weekend. Reluctantly, I might add. If you're not familiar with the Housing New York podcast, we recap the top stories from the past week and put them in perspective.

We do this to help foster a conversation about how we can fix housing in New York so it is both better for renters and their housing providers. Let's get to the news. 

[THE NEWS]

[City of Yes]
We kick off this week's podcast with a look ahead, as well as a recap of what happened last week. We're talking about the New York City Council's decision to set a public hearing date for the mayor's major rezoning initiative, the City of Yes for Housing Opportunity. For those unaware, this proposal would make small changes to zoning regulations everywhere in the city.

The general idea is that if you live in a neighborhood with single family homes, you might be able to build a duplex. If you live near mass transit, you could build something slightly larger than what is allowed now. It does several other things to increase housing supply as well. It removes costly parking mandates for buildings in areas where cars are not necessary.

It allows basement apartments in some places where they are illegal right now. All of these little changes are expected to increase housing supply by about 100,000 apartments, tackling about 20 percent of the city's supply needs over the next 10 years. Our organization backs this bill. We really hope it is not watered down by the City Council.

Our view is that it doesn't go far enough to address the housing emergency that has gripped New York City for 50-plus years. For example, it does little to help run stabilized buildings, increase their density, or even build to the full zoning allotment they have now. These buildings make up roughly one third of all the housing in New York City. 

We expect contentious debate over this issue. Many members of the City Council want to scale back measures of this proposal, and it is likely they will be successful. That said, I think it's important to take stock of the current position we are in. Five years ago, a zoning change like this would never have passed, so we are making progress.  

[Declining Values of Rent-Stabilized Buildings]
There was a story in Crain’s last week that we wanted to touch on. Brokers at an event explained how the value of rent stabilized buildings had declined since the passage of the 2019 Rent Laws. Specifically, they said on average the value has gone from 15 times the rent roll to 5 times the rent roll.

To put this in more perspective, the average rent stabilized building in the Bronx is about 30 apartments and has an average rent of around $1,100 according to documents owners are required to file with the city. So since 2019, the value of this average building has gone from $6 million to $2 million.

What is important for people to understand here is that this dramatic loss of value doesn't just hurt the building owner. It hurts tenants who live in that building. The loss in value has eliminated any possibility for the owner to secure capital to invest in the building in order to make repairs or mandatory upgrades.

The building is functionally bankrupt and the only way it is going to be maintained going forward is if there is a subsidy from the government or if the owner invests personal capital into the building and loses money.  What is getting lost in this conversation is the scale of the problem. There are hundreds, if not thousands of buildings in this situation.

Some of them might be sold. Some of them might be able to end up with non profit housing providers. But the city does not have the budget revenue to absorb all of the buildings that are now functionally bankrupt. Without small changes to the current regulations or a massive influx of funding from the government, the quality of affordable rent stabilized housing is going to decline and many hard working New Yorkers are going to suffer.

Don't take our word for it. The NYU Furman Center outlined this very serious concern in a report they released a few years ago when they urged the Rent Guidelines Board to make sure rent increases were in line with inflation.  Over the past decade, the RGB has advanced rent increases that are less than half of inflation. This is why we refer to what's happening as an intentional defunding of older rent stabilized buildings, and why we spend so much time trying to educate lawmakers on what is happening.  

[Water Bills]
Staying with the topic of higher costs, the New York City Independent Budget Office analyzed the city's water and sewer system and unsurprisingly found that multifamily residential buildings are paying far more than other property types, even if they are not using more water.

The reason this is happening is because of how the system is set up with what the Water Board calls rent payments tied to bonds. The IBO report also found that multifamily properties that chose to pay by unit instead of usage are typically paying more than if they were to use a metered system that looks directly at usage.

Our biggest concern is the impact this has on rent stabilized buildings. This is another example of the government increasing costs they control on buildings they rely on to provide affordable housing in New York City. The reality is that multi-family buildings with capped rents should be given some kind of relief on water and sewer costs when the rents in a building are low.

But instead, the city is gouging these buildings while other properties in the city don't pay their fair share. Changing policy at the Water Board is unlikely, but at NYAA we intend to make sure that elected officials are aware of the impact these government backed costs have on older and stabilized buildings and how they negatively impact affordable housing. Thankfully, there are many non-profit housing providers that are also sounding this alarm. We're hoping to work with them to get relief for these apartment buildings.  

[Insurance Fraud]
Seems like the theme of this week is high costs, and we've spoken a lot about the rising costs of insurance. A recent investigation at ABC7 snuffed out one of the biggest causes of this, insurance fraud scams. 

Their report looked at construction workers filing cases who all live at the same address and in the same general area. The report talks to leading law enforcement experts who say this is a telltale sign of fraud and organized crime. We want to highlight this story because many NYAA members are seeing the same thing happen with slip and fall claims against building owners in the Bronx and Northern Manhattan.

They follow a similar pattern, where someone shows up on a motorcycle in front of a building and then proceeds to take a hammer or pickaxe to break the sidewalk. Then they drive away and 5-10 minutes later a person trips and falls on the same spot and claims injury. What we see in this scam is similar to the ABC7 report. The people making the claims live in the same area and file the lawsuits with the same attorney. 

Our members have flagged these examples for local law enforcement and we are optimistic they will be taking action. Ultimately, that will help lower insurance costs for everyone, which means more of the tenants' rent money will go back into the buildings they live in. 

[OUTRO]
And that's it for this week's episode. Stay tuned every week, where we'll be updating you on some of the main issues in the City Council, the state Legislature, our political takes, and so on. Be sure to follow us on all our social media handles @HousingNY – that's for Instagram, for X. We're producing tons of content, videos, and we are formulating conversations that are vital in our effort to move toward better housing policy.

The Housing New York podcast is a proud product of the New York Apartment Association. We appreciate your feedback and you can leave us a comment on Substack or wherever you're listening to this podcast. You've been listening to Housing New York with Kenny Burgos and I'll see you all next week. And remember, good housing policy starts with good conversation.