We're seeing some more evidence that rent-stabilized housing is in deep distress, as federal regulators raise concerns about the 2019 rent laws. Plus, property tax assessments are going up on rental properties, even though building values are going down. And we talk about how the California wildfires might impact housing here.

Let's start housing in 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 we all must move from the position of No and say Yes. Housing will finally allow us to turn three generations of No into a city of Yes.”  

[INTRO]

Welcome to the Housing New York podcast. I'm your host, Kenny Burgos, CEO of the New York Apartment Association. Each week I talk about the important stories and developments with housing policy. 

Last week was a busy one. I was in Albany for the governor's State of the State address, which we'll talk about a little later in the podcast. I can tell you though, the vibe in Albany is almost as if there's not a housing crisis and everything is okay – which is concerning – but let's get to the news. 

[01:23] [SEC investigates NY banks’ exposure to “toxic” rent-stabilized loans] 

The big story this week came out in BisNow. They reported that the Federal Securities and Exchange Commission, the regulator of banks, had sent a letter to three regional banks that hold a lot of mortgages for rent-stabilized properties. The letter is pretty clear. It says that they are aware that the 2019 rent laws directly caused the values of thousands of buildings to plummet, and they need, quote, “greater detail about these toxic assets.”

Specifically, they wanted the banks to explain how the laws have impacted buildings’ ability to pay. In their response, one bank said that declining Net Operating Income, which has been detailed in RGB reports for the past two years, has led to, quote, “substandard loans.”  

This was inevitable. The 2019 rent laws dramatically limited rent-stabilized buildings' ability to operate. Since their passage, the Rent Guidelines Board has failed to adjust their approach to account for the change in the law. In fact, the RGB has actually advanced rent adjustments that have been worse than under the de Blasio administration. 

Those factors, coupled with the pandemic, high inflation and skyrocketing interest rates have put thousands of older rent-stabilized buildings in severe distress; and the banks holding those mortgages have little hope of ever being repaid.  

The future is grim. The failure of these buildings is inevitable unless a host of things happen. 

The laws have to change. The RGB has to advance responsible rent adjustments that keep these buildings adequately funded. The government has to help with rent arrears, either by providing more one-shot deals, or forcing Housing Court to follow the legally required timelines so non-payment cases don't take 12-to-18 months to reach resolutions.

If nothing happens, then thousands of buildings will fail, and when that happens, renters are the ones who suffer.  

[03:07] [Property Taxes]

Let's talk about property taxes. The tentative assessments for the upcoming fiscal year came out last week, and the average rent-stabilized apartment will pay an average of $104 more per apartment this year. 

That's due to the assessed values for rent-stabilized apartments increasing by 2.75%. Overall, rent-stabilized renters are sending almost $4,000-a-year of their check to the government.  

The data also continues to show that single-family homes and two-family homes in the city are paying significantly less than rent-stabilized buildings, even when they occupy the same amount of space in the same neighborhood.

If your rent is $2,500 in New York City, you're basically paying the same amount of property taxes as a million-dollar single family home; you just don't realize that that's where most of your rent check is going. 

This is simple to understand. If the government is raising the assessed value, they are raising the taxes. And when they raise the taxes, they're raising your rent.  

The people who benefit from this inequitable property tax scheme are single family and two-family homeowners and luxury developers. The majority of older rent-stabilized buildings get no tax break, and the high taxes they pay offset the tax breaks for others. That's just the truth of New York City's tax system.  

This is why property tax reform is critical. It should be across the board, but at the very least, rent-stabilized buildings shouldn't be overtaxed while they are simultaneously being defunded by rent adjustments that don't keep up with inflation. 

That money the government takes means there's less money to invest back into the building. A more fair tax system would lead to better quality housing and lower overall rents. We should work together to make that happen.  

[04:42] [Gov. Kathy Hochul’s State of the State Address]

If you asked me last week what story we would be leading with today, I would have probably guessed the State of the State Address. The fact that we are talking about it third should tell you all you need to know about the speech. 

Long story short, Governor Hochul didn't talk about housing much. When she did, she talked about some subsidies for nonprofits, some small changes to the current laws that won't do much to address the clear problem – which is the severe lack of supply.

In the speech, the governor announced initiatives to subsidize demand by giving first-time homebuyers a credit, which most economists agree will drive up housing costs. She also called for a 75-day waiting period for institutional investors buying single family or two-family homes, which is a problem in some parts of the country, but has been proven time and time again by experts and economists to have an insignificant impact on housing prices.

She also created a small fund for infrastructure if a local community advances pro-housing measures. And the most significant thing she proposed to address housing supply was a more streamlined environmental review process for small apartment buildings, which may reduce costs and could increase supply. 

We were obviously disappointed. The governor's address sets the agenda for the first three months of the legislative session heading into the budget, so the tone right now is that housing supply is not really a priority. That's unfortunate. 

As a basic political fact, housing costs and housing supply are a major issue for voters. The elected officials and the political party that addresses this issue first will see huge political benefits down the road. We encourage all politicians to take this seriously. 

[06:14] [Update: Local Law 97]

We have an update for you on Local Law 97, the ambitious climate change law that is in the process of being implemented on all buildings over 25,000 square feet.

In order to comply with the law, buildings need to meet strict standards or show good faith efforts to reduce your greenhouse gas emissions. If you haven't complied yet and want to seek an extension, then you have to make sure you have hired a registered design professional or retro-commissioning agent before February 1st. 

The compliance reports are due on May 1st, 2025, and building owners can ask for a 60-day grace period to file their reports. But we encourage all of our members to get ahead of this. If you need help addressing this, our office is always available.  

[06:53] [California climate migrants]

We're going to end the podcast talking about a story in Curbed. 

They wrote about the migration that has begun for Los Angeles area residents that have been displaced by the horrific wildfires, with many of them looking to move to New York City. Brokers here have started to field calls from people. Some Angelenos have been aggressively looking to move; others have just been gauging the possibilities as they plan their next chapter.

When it comes to hubs of arts, culture, finance and technology, there are only a few major cities in the United States. All of them are struggling with a housing shortage, as demand to live in these places remains very high. So the California wildfires are likely to have an oversized impact on New York City's housing market as people look to move back. 

If we had housing policies that could quickly increase the supply, then we could absorb the people looking to relocate without rents and housing prices skyrocketing. But this is just the latest example of people wanting to move to New York City, and many of them just not being able to afford it. 

The city is home to immigrants from hundreds of countries speaking thousands of languages. If there is unrest or economic troubles in a foreign country, many people want to move to New York because they know they'll be able to find fellow expats and hopefully jobs and opportunity. 

The current anti-housing policies in the city and state really are a counter to the rich history of New York. We are a place that welcomes people, absorbs their ideas and cultures, and that makes us better. But without housing, that tradition and identity will die. 

[OUTRO]

And that's it for today. Governor Kathy Hochul has just released her budget and the Legislature is now in session, so we're going to be closely watching Albany this week. And in next week's pod, I'm sure we will have updates for you on how things are going. 

If you want to stay informed, you can also follow us on social media. We are @housingny on most channels, and just @housing on Blue Sky.  

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 a good conversation.