This week on Housing New York, we're seeing more evidence that rent-stabilized buildings can't pay their mortgages. We'll explain why that's bad for everyone. And fires are a hot topic lately, so we will walk you through why building repairs are often slow following a blaze. Plus, we will update you on what's happening at the State Capitol. 

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 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 Housing New York. I'm your host, Kenny Burgos, CEO of the New York Apartment Association. Each week we take a look at the top stories impacting housing policy and put them in perspective for our listeners.

I'm taping this on Monday, February 3rd, 2025. 

Although January felt like the longest month known to mankind, I do worry the next two months will sort of be a mad rush to finish the state budget, and we'll continue to have whiplash from all the changes happening in the federal government. But we're going to stay calm and carry on with our push for better housing policies.

To that end, let's get to the news. 

[01:34] [Flagstar Bank dumps $142 million in rent-stabilized loans]

We're going to kick off the podcast with more bad news about the state of rent-stabilized buildings. This time it's coming from the banks. 

It was reported that Flagstar Bank, formerly New York Community Bank, offloaded more of its rent-stabilized assets. These loans have been repeatedly called toxic, and in their January report to stockholders, they said they saw a 500% increase in past-due debts from multifamily buildings. 

Flagstar says they have nearly three-quarters of a billion dollars in loans that are now more than 30 days past due. To address this major concern, Flagstar sold $142 million in rent-stabilized building loans to private equity firm Cantor Fitzgerald. The CEO of Cantor Fitzgerald is Howard Lutnick, who is about to be confirmed as the new Commerce Secretary. Maybe they have a special plan for these loans that they'd like to share with the rest of us…

Just to recap, The distress in rent-stabilized buildings is mostly caused by the 2019 rent law changes, but has also been brought on by the pandemic and high rent arrears, high inflation, and the failure of the Rent Guidelines Board to approve rent increases that come close to matching inflation; and of course, higher interest rates. 

Many had been hoping the Federal Reserve would be lowering rates this year, but at their meeting last week, they left the rates unchanged. Worse, they forecasted that there would only be two rate cuts in 2025. So it looks like there will be little relief for banks and building owners on interest rates. 

This landscape has led to a new term for lenders and building owners, “extend and pretend,” which sounds fun, but in reality is scary and completely unsustainable. If the older and stabilized buildings have no access to capital, then all repairs and upgrades will have to be funded by the rents. That's a recipe for disaster. 

It is clear that something has to give when it comes to New York City's rent-stabilized buildings. Either the laws need to change, or the government has to find ways to reduce costs, because it is clear there will be no relief coming from interest rates.  

[03:32 Fire Repairs]

Recently there have been stories in the news about fires, and discussions around why it takes so long for repairs to be made after a fire takes place. 

We wanted to break this down for listeners. First off, we want to acknowledge that fires are both devastating for tenants and the biggest fear factor for our members. In short, they're awful for everyone. 

Under the current laws, if a fire makes a building uninhabitable, the city will issue a vacate order to the tenants. They will have to find temporary housing elsewhere while repairs and renovations are made. In the case of rent-stabilized buildings, the tenants need only pay $1 a month to the building owner to hold their apartment. 

Due to the housing shortage, many renters struggle to find temporary housing; and this makes them even more frustrated if the building isn't repaired quickly. Building owners also want to fix their property as quickly as possible. There is no profitability in an empty building. 

Here's the problem, though. Most of these buildings do not have large cash reserves. They need to make a claim from the insurance company in order to fund the work. But in New York, the insurance companies typically offer a payment that is dramatically less than repairs, forcing the property owner to sue and delaying payments for months.  

One thing we hear from people is, Why don't owners pull money from other buildings or their personal wealth to fast track the repairs? 

In many cases, this is illegal. Each building is set up as its own business and any loan would have to be repaid. As we mentioned earlier in the podcast, there are not a lot of options to secure financing. 

What also gets lost in these debates is that there is already a process to push buildings to do quick repairs. Both DOB and HPD can fine the building for slow work. But typically when that happens, the building owner simply shows evidence that they haven't received the insurance settlement yet.

If we want to get buildings repaired more quickly, we need to look at insurance companies, not building owners.  

[05:23] [Glorifying rent-stabilized tenants]

Changing gears quickly, there was another story in The New York Times last week glorifying the low-rent apartments of a rent-stabilized tenant. 

This time it was the child of a successful wine store owner who was able to hold onto her apartment after a succession rights case that went to the Court of Appeals.

The law is the law. We don't have anything bad to say about this individual person, who admits they are quote, “Aware of how privileged they are.” 

What these stories don't touch on is the larger impact of a policy where wealthy individuals are able to keep low-rent apartments for decades. 

In this case, the building has been converted to condos. The apartment could be upgraded to be more energy efficient and sold to a family that is likely struggling to find a place to buy in the city, since there are so few affordable condos for sale anymore. 

What's also missing in the story is the other condo owners in the building are subsidizing this individual's rent with higher HOA fees. And the whole process of succession rights and the inability to regain possession of an apartment has prevented rent-stabilized buildings from being built to their full zoning allotment. 

We estimate that the city could have 100,000 more apartments if there were a fair and cost-effective pathway to allow rent-stabilized buildings to be completely renovated so they had higher density and were more energy efficient.

We get why it's nice to tell a story of a really lucky New Yorker benefiting from a quirky system, but it would be great if more people talked about the consequences of this policy.  

[06:48] [Upstate update: rent stabilization in Kingston]

And now we're headed upstate, to Kingston, where the legal battle over rent stabilization continues. As a quick recap, the city conducted a housing and vacancy survey in 2022 using internal staff and declared a housing emergency, which triggered rent stabilization.

Property owners in Kingston said the survey was flawed, specifically miscounting several buildings, and they sued. The survey was upheld in two lower courts, and now the case heads to the Court of Appeals.  

Here's the thing, when Kingston conducted the survey in 2022, they said they would need to do another one in 2025. This is similar to New York City, which conducts its housing and vacancy survey every three years. 

So while both renters and property owners await the verdict on the 2022 survey, which will determine if rent stabilization can actually be fully implemented, the city has begun conducting the 2025 survey. 

Let's say the city wins their case and the 2022 survey is deemed valid, but the 2025 survey shows a vacancy rate above 5%. Then the city wouldn't be able to declare a housing emergency — or the exact opposite could happen.  

The confusion around this has led tenant groups to advocate for an end to housing and vacancy surveys. They want a local government to just be able to declare an emergency even if there's a vacancy rate above 5%. Translation: even if there's enough housing, they still want to declare an emergency.  

As we have said before, New York is the only place in the world that ties rent stabilization to perpetual housing shortage, creating an inherent incentive to keep housing supply low. So it wouldn't be surprising if the government just abandoned the farce that rent stabilization is meant to be a temporary bridge to more supply, when they continually do very little to increase the supply of housing in the state.  

[08:35] [Albany legislative session]

We're going to end this podcast with our Albany update. 

The legislative session was summed up in Politico, where they called it Hochul’s housing pivot. They went on to say she took a chill pill on increasing supply in this year's budget.  

The main focus of Hochul’s agenda this year is to provide carrots to communities that pass pro-housing policies. But as we have said before, that is a pathway that has failed to work in the past and is likely going to yield little result going forward.

It looks like tenant groups are also less focused on advancing an agenda in Albany this year. They've pivoted away from lobbying for change and partnered up with the Working Families Party to mainly focus on elections – specifically, they want to influence the mayor's race and target lawmakers who accept money from the real estate industry for the sin of actually wanting housing supply to be increased. 

This general trend is bad news for renters and building operators. The vibe in Albany is basically, “Check back in with us next year.”

We do think there may be some movement on looking at skyrocketing insurance costs for affordable housing. And we have heard from some lawmakers that they are willing to find property tax relief for older buildings that do energy upgrades. 

It's not enough, but it's an admission by many that they need to do something to keep operating costs down.

[OUTRO]

That's going to be the end of the podcast for today. But before we go, we did want to note the recent social media videos from Congressman Ritchie Torres. 

He's been talking about the exorbitant transfer fees that building owners have been paying for natural gas, and specifically called out Con Edison for charging far more than National Grid. We appreciate this, since the cold winter and the heightened transfer fees are really putting a financial crunch on older rent-stabilized buildings this year. We will talk more about this in the coming weeks. 

As always, you can follow us on social media. We are @housingny on most channels; on Bluesky, we are just @housing.

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.