Sadly, we got another sign that rent stabilized buildings are in deep distress; we break that down. Plus, the FARE Act finally passes, which is sure to shake up the brokerage industry, potentially causing chaos. And we recap the Supreme Court's most recent ruling to deny cert to challenges to rent stabilization. 

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 thousands of people with rent vouchers and no place to use them. Housing needs to be addressed from literally every angle, and what that means is we're all going to have to compromise…”

[INTRO]

Hello friends, housing supporters. I'm Kenny Burgos, the CEO of the New York Apartment Association. This is Housing New York, our weekly podcast discussing all the stories and developments that impact housing policy in this great state. 

We're taping this on Monday, November 18th, which is an interesting time of year. We're about two weeks post election and still a few weeks out from a new administration coming in, and an entirely new legislative session, so this should be an interesting next few weeks. 

Now it's time to get to the news. 

[01:14: Rent-stabilized housing is unsustainable]

We want to kick off the podcast talking about a story that was in Crain’s New York last week. It outlined the financial struggles of a 161-unit apartment building in Flushing. The story said the building owners had to chip in more than $1 million to hold onto the building during a refinancing. The disclosure showed how operating costs have increased faster than rents, and when you factor in the mortgage payments, the average rents of $1,550 on the property were not enough to cover the operating costs. So when the building went to refinance, the bank required him to put forth another $1 million. This is because loan amounts are based on the net operating income, which is rent minus operating costs. The biggest operating cost remains property taxes.

In this building, $444 of every rent check goes to property taxes. That's about 30% of the $1,550 average rent. Compare that to an apartment building on the same street: It was built six years ago. The average rents are more than $2,750 and the building pays no taxes. 

This is unsustainable. 

This is a perfect example of a building that provides quality, affordable housing, but it's failing to make ends meet. The owners are maintaining the building well, which is why it has almost no violations, but they are only able to do so because they are investing personal capital and losing money. The current housing policy, in a nutshell, is to tax old rent-stabilized buildings into bankruptcy and give new buildings huge tax breaks, even though they have less affordability. 

We need to have a serious discussion about what we are doing here. If we want to preserve older rent stabilized buildings, we can't be punishing owners who are doing a great job maintaining those buildings. We need to find ways to reduce the cost, starting with property tax relief.  

[02:58: Passage of the FARE Act]

Okay, let's turn now to the FARE Act, better known as the Broker Bill, which passed last week in the New York City Council.

“The FARE Act is simple, it requires that whoever hires a broker in a rental transaction, whether landlord or tenant, pays the broker fee.”

That's Councilmember Chi Osse, speaking at City Hall last Wednesday. Let's listen to a little more of his speech from the Chamber. 

“Tenants have been forced to hand over thousands of dollars in fees to brokers they never hired nor wanted. The harm of this practice cannot be overstated. Families seeking to grow, forgo having children because they can't afford to move into a larger place. Children aging out of their parents homes are pushed into different neighborhoods or even cities because they can't afford to rent an apartment in their own community.”

This is undoubtedly a big win for Councilman Osse, who has led this charge and effectively communicated about the issue on social media. We would caution pause for renters claiming victory. 

As we have said in the past, this is going to shake up the snow globe. The old system generally featured brokers asking property owners to market their apartments. Because there was no cost to property owners, they agreed to do this. What happens next is that property owners and brokers are going to renegotiate the nature of this relationship. In many cases, the owners aren't going to be willing to pay the broker. That will lead to massive disruption of the housing market and renters should be aware of that. 

As we have said before, the only way to actually increase affordability in the city is by increasing the supply of housing. 

[04:21: Parking Minimums]

Sticking with the City Council, they are expected to vote on the City of Yes soon. The main point of contention in this plan to upzone the city is parking minimums. These are requirements that basically say every housing unit must have a parking spot.

The Furman Center released a report that outlined how this leads to a massive cost increase for housing and specifically talks about how the strict requirement is leading to the overbuilding of parking spots in many parts of the city where there is a low rate of car ownership. 

We support the City of Yes. We support the limitations on parking minimums as well. 

The reason is because this [parking minimums] is a regulation that is driving up the cost of housing and is not providing a benefit to the community, especially communities that are transit rich with multiple train lines and bus services. We oppose many other costly regulations forced onto building owners that we believe are not benefiting tenants or the larger community, so we see no reason to back a policy of government-forced overbuilding of parking spots.

Much like housing, people have strong personal opinions about cars and parking. Because of this, much of the City Council is worried about backlash of allowing market forces to determine the amount of parking built in the city, and it is very likely they are going to gut the City of Yes bill to make sure a small number of angry residents are comforted.

We hope they don't, but we expect that is what will happen.  

[05:35: A message from Mayor Eric Adams]

Turning to some political news, New York City Mayor Eric Adams was on The View last Friday, and he said something that I think is important for everyone to hear. Let's take a listen.  

“...When you saw in this city and this election, when you saw a shift in the city and the state becoming redder, it's because we stopped talking about working class people's issues. [When] mom and pops are afraid, ‘I can't pay my college tuition.’ Uh, the rent is too damn high. Um, healthcare is too expensive. We stopped talking to everyday New Yorkers and Americans. When I'm in the street talking to them, they're not asking me, ‘Eric, tell me about, uh, fascism.’ They're talking about finance. They're not talking about Hitler, they're talking about housing. We need to talk to everyday working class people and we stopped doing that.”

It's clear to everyone involved in New York politics that voters need to hear more about affordability – but also opportunity. The majority of New Yorkers want better housing. They want better jobs. They want better schools and better mass transit. 

We believe housing is the first step to all of that. If we build new housing, if we invest more in our aging housing stock to make sure it can last another 50 years, everyone benefits. 

Moving forward, we are going to be centering our advocacy for better housing around the idea of making the city better, more prosperous for the working class, and ultimately, we hope lawmakers advance policies that do this as well. We need to reject the idea that simply redistributing wealth is going to make things better. We need to continue to grow the wealth of New York City and the best way to do that is through building abundant housing.  

[07:06: Supreme Court housing case update]

We're going to wrap up the podcast talking about the decision that came out of the U.S. Supreme Court last week. They denied a cert petition from property owners in New York who had brought two cases challenging the rent stabilization law. The denial came with a note from Justice Neil Gorsuch, who said he would have granted cert to the cases, which challenged physical and regulatory takings precedent.

We continue to believe that parts of the rent stabilization law are unconstitutional. For example, New York is the only place in the country that has strict vacancy control and provides no pathway to renovate apartments and reset rents. We think the right case on this issue could be successful.

Everyone also agrees that the Rent Guidelines Board process is broken and too political. New York's rent control scheme is the only one in the country that allows for rent adjustments to be lower than inflation. We think this may also be ripe for challenge. 

Also, many constitutional scholars think the idea of an emergency that has been in existence for more than 50 years may be unconstitutional.

Finally, the rent stabilization law in New York makes it virtually impossible for property owners to exit the system and change the usage of their property. With the correct case, that may also be deemed unconstitutional.  

The problem with lawsuits is that they take a long time, and they require a lot of luck to get to the Supreme Court and change precedent. Challenging the law in court is one tool in a fight for better housing policy, but it is not a silver bullet. The pathway to real relief is through advocacy and working with lawmakers to make incremental change. Any court challenges that are filed can help push for reform, but it can't be a primary focus. 

[OUTRO]

That's the end of the podcast. We want to quickly promote our latest social media channel: We are on BlueSky now, with the handle @housing.bsky.social – just @housing. You can find us everywhere else @housingNY – that includes Instagram, X, TikTok, and YouTube. 

The media landscape is changing quickly. We know certain people are abandoning certain platforms, but we think housing is an issue that touches everyone. So we are going to be talking to people on whatever platform you use to get your news. 

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.