The candidates for New York City Mayor are talking about housing. We have some thoughts on what they're saying. Plus, we recap the City Council's busy week, including their passage of a new J-51 tax break. And we'll tell you why federally backed lenders are concerned about climate change, and why it may be bad for affordable housing.

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, 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, December 9th from sunny San Francisco, California. We're on the West coast meeting with several people to discuss how they are tackling their housing crisis and to learn more about how the state handles the placing of voucher holders. And of course, we want to compare rent control schemes with New York. We will be reporting back to you with what we learn. And please keep in mind, I'm recording this currently in a vehicle inside of a parking garage, so if the sound quality is a bit off, bear with us. Now it's time to get to the news. 

[01:26] [Mayoral Forum]

This weekend there was a mayoral forum to discuss housing and tenant rights. It was hosted by Jeff Coltin of Politico. It focused on several key topics, but it led off with a discussion about freezing rents for rent stabilized apartments. Several of the candidates pandered to the crowd and said they would absolutely force the rent guidelines board to freeze rents. Other candidates were more nuanced and spoke about their desire to appoint members to the board that would put tenants first. 

Our take on this is not controversial. The law clearly states that the Rent Guidelines Board is an independent body that must consider a host of factors before making a decision.

One of these factors is operating costs. The RGB is not a group of pawns for a wannabe king to manipulate – which is what mayoral candidates are doing when they promise to completely obliterate the independence of the RGB and tell them what to do. 

More importantly though, this type of pandering does nothing to actually help reduce rents. The way to do that is to reduce the operating costs, and the mayor has a lot of power to reduce costs. They can direct the Department of Finance to more fairly assess rent-stabilized buildings so they are not overtaxed – credit to one candidate who mentioned this when calling for a rent freeze. The mayor can also expand voucher access so more tenants can pay rent, which would be immensely helpful for older rent-stabilized buildings. 

Ultimately, reducing the cost of providing housing is the real key to providing rent relief to tenants without putting the quality of housing in jeopardy. Hopefully, more lawmakers will start talking about ways we can work together to improve housing policy instead of politicizing the issue.  

[02:55] [J-51 Tax Break]

We are going to talk about the City Council now.

They were busy last week passing the City of Yes for Housing Opportunity. That same day, they also passed a bill authorizing the restart of the J-51 program with several amendments. 

For those unfamiliar, J-51 is a tax abatement program that has had various versions over the years. The crux of it is that older and [rent-] stabilized buildings that need renovations and upgrades can apply for a tax break after completing the work.

The latest version was authorized by the state government almost two years ago to replace the previous version that expired in 2022. But the City Council didn't get around to finalizing the tax break until now. Under this version, any approved renovation work that was done between June 2022 and extending to June 2026 would be eligible for a tax abatement, assuming your building qualifies. 

Our take on this is that it is not that helpful to the thousands of rent-stabilized buildings in distress. First, the timing is not great. There are only about 19 months until it expires, so owners would be on a tight window to do any additional work and get a tax break. 

Second, it doesn't provide much relief. If a building spends $100,000 on an upgrade, they could be eligible for a tax abatement of up to $70,000 under the program – in theory. The reality is that the listed cost of repairing things by the City Department of Housing Preservation and Development is dramatically lower than what things actually cost.

Let's say upgrading the plumbing actually costs $75,000 in the real world. HPD puts out a document called the cost schedule, and it says it should only cost like $50,000. So an owner is getting an abatement that is 70% of an approved cost that is like two-thirds of the actual cost. That's not just us complaining about it. Nonprofit housing providers and independent housing experts also agree that the cost schedule is whack. 

Building owners that were forced to do work in the past few years might be able to get some tax relief from this program, so we are going to do our best to help them. And HPD has to amend the call schedule as part of this passage. So we are going to hopefully work with them on that as well. But what really needs to happen is that the city government and the state government need to work together on crafting a J-51 program that is actually helpful, so that when this one expires, we can have one that actually works in 2026.  

[05:10] [Building Bankruptcy]

We are going to talk about some new reporting from The Real Deal about bankruptcy data for rent-stabilized buildings.

In the analysis piece, they talk about the clear evidence that bankruptcies are increasing, but the data is not really tracked. The reporter makes the point that the Rent Guidelines Board should probably know what is happening and take it into consideration when adjusting rents.  

We obviously agree. We have pointed out before that for the last three years, the RGB has adjusted rents at a rate that was about half of inflation. And in the last 10 years, the rent adjustments are roughly 10% to 15% behind inflation. This has led to massive declines in building values, which is a main reason we have seen a spike in bankruptcies and why we will continue to see bankruptcies increasing. 

Our organization is working to compile detailed mortgage information that we can share with the RGB next year. We hope this helps them with their decision. Ultimately though, the RGB is just one component of a healthy rent stabilization system. There are easily more than a thousand rent-stabilized buildings in severe distress that are getting no help from the government right now. The programs in place are not sufficient to help them, so we need to do better. 

[06:17] [Climate Change]

Let's talk about climate change for a second. The New York Times is out with an in-depth dive into how the two main federal lenders, Fannie Mae and Freddie Mac, are processing the growing risk of climate change on financing housing.

Under the Biden administration, the agencies compiled reports detailing the severe risks to loans for buildings or homes that are near flood zones or at risk of wildfires. The conclusion was that the agencies would likely need more cash reserves to protect against what is expected to be an increase of climate-related disasters. But despite being aware of the risk, they haven't changed any policies yet. 

This highlights one of the fundamental problems that many people seem to miss when talking about affordable housing: the simple fact that housing has costs, whether it is new housing or preserving old housing. Those costs are typically paid for through financing, and if those financing housing are going to be stingy with giving money – for whatever reason – then housing doesn't get built and older housing doesn't get renovated or maintained.

We really need to shift our mindset about housing to a more modern approach. We need to understand that the cost of building and preserving housing has changed dramatically in the past 10 years. We can't advance policies thinking that the costs make sense when insurance costs have risen, when labor costs have risen, and property taxes have gone up to pay for the added costs of funding the government.

Policies crafted today must account for all these added costs, or older housing will deteriorate, and new housing will never be built.  

[07:47] [Rent Inflation] 

We're going to end this podcast talking about rent inflation. A story in the online publication Observer looked at how rent increases inflation in New York and San Francisco.

Specifically, they looked at the latest Consumer Price Index report and figured that roughly two thirds of the increase was from rent increasing. This is something that is common in places where there is dramatic lack of supply in housing. What's interesting about this is that inflation is now directly tied to rent increases for many renters.

This is due to good cause eviction, which calculates allowable rent increases using the CPI. Economists have known for a long time that increasing the supply of housing will lead to lower rent as the market becomes more competitive. But the increase in supply and resulting lower rent will also lead to a lower allowable rent increase for tenants receiving required lease renewals under the new law. It's just another argument for increasing the supply of housing and striving for abundant housing.  

[OUTRO]

That's the end of the podcast. You can follow us @housingny on most social media channels. On Bluesky, you can find us @housing.bsky.social

The Housing New York podcast is a proud product of the New York Apartment Association. Please keep sending us feedback on our website or in the comments below. 

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.