March 5, 2015
New York City’s Department of Housing Preservation and Development (HPD) has released its initial findings of its 2014 Housing and Vacancy Survey. There are some interesting findings about the housing stock, particularly for those of us who follow the NYC housing markets closely:
- There were 1,030,000 rent-stabilized units, which amounted to 47 percent of the housing stock.
- There were 27,000 rent controlled units, which amounted to 1.2 percent of the housing stock.
- The city-wide homeownership rate was 32.5 percent, although the rate varied significantly among the boroughs.
- The rental vacancy rate was 3.45 percent.
- There were 55,000 vacant units that were unavailable because of occasional, seasonal or recreational use.
- The median annual income for all households (renters and owners) was $48,040. The median annual income for renter households was $38,500 and for homeowner households was $75,000.
- The median contract rent-income ratio was 31.2 percent.
There were also some interesting findings about housing and neighborhood conditions:
- “In 2014, housing and neighborhood conditions in the CIty were good.” (8)
- “The proportion of renter-occupied units with five or more of the seven maintenance deficiencies measured by the 2014 HVS remain extremely low; only 4.3 percent” (8)
- “The proportion of renter households that rated the quality of neighborhood residential structures as “good” or “excellent” was very high: 71.7 percent” (8)
Crowding remains a problem in the City, a finding that is unsurprising to all who are familiar with this housing market. The proportion of renter households that were crowded was 12.2 percent.
These numbers should inform numerous debates about housing in NYC, including those relating to rent regulation, foreign ownership of apartments and affordable housing goals, to name a few. It is important that these debates be data driven if we are to arrive at policy choices that are good for New Yorkers and good for the long term health of NYC itself. The whole document is worth a read for those who care about the City’s housing market and its impact on the overall health of the City.
March 4, 2015
Circuit Judge Elliott of Missouri Circuit Court issued a Judgment in Holm v. Wells Fargo et al. (No. 08CN-CV00944 Jan. 26, 2015) that awarded nearly three million dollars in punitive damages. This is just one of a number of searing judicial opinions that I’ve discussed on the blog. The Court found that
Wells Fargo and its agents expended immeasurable, if not incomprehensible, time and effort to avert reinstatement. The result of Wells Fargo’s egregious conduct was to impose approximately six and one-half years of uncertainty, lost optimism, emotional distress, and paralysis of Plaintiffs’ family.
The evidence established that Wells Fargo’s intentional choice to foreclose arose from its own financial incentives. Dr. Kurt Krueger testified that Wells Fargo had financial incentives to seek reimbursement of its fees at a foreclosure sale. This economic motivation collided with the well-being of David and Crystal Holm, and was clearly contrary to the interests of Freddie Mac. In other words, in this case, a powerful financial company exerted its will over a financially distressed family in Clinton County, Missouri. The result is predictable. Plaintiffs were severely damaged; Wells Fargo took its money and moved on, with complete disregard to the human damage left in its wake.
Defendant Wells Fargo is an experienced servicer of home loans. Wells Fargo knew that its decision to foreclose after reinstatement was accepted would inflict a devastating injury on the Holm family. Wells Fargo’s actions were knowing, intentional, and injurious. (7)
It is not certain that this judgment will be held up on appeal. If it is, it is still worth asking whether the occasional verdict of this magnitude is sufficient to change the behavior of servicers. There have been many efforts to change the incentives that servicers have, but cases such as these make one wonder if there is some deeper problem that has not yet been identified and addressed. One cannot imagine how Wells Fargo employees could have let this go on for so long in this case. But they did.
- American Dream in Flux: The Endangered Right to Lease a Home, by Andrea J. Boyack, Real Property, Trust and Estate Law Journal, Vol. 49, No. 2, 2014.
- A Guide to New York State Commercial Landlord-Tenant Law and Procedure, by Gerald Lebovits & Michael B. Terk, 87 N.Y. St. B.J. 22, February 2015.
- Super-Liens to the Rescue? A Case Against Special Districts in Real Estate Finance, by Christopher K. Odinet, Washington and Lee Law Review, Vol. 72, 2015. (Discussing availability of creditors willing to “make real estate-backed loans in special district areas”).
How to Make America Walkable, by Michael Lewyn, 42 Real Est. L.J. 512 & Touro Law Center Legal Studies Research Paper. (Discussing the necessity to make cities walkable, and thus more accessible, in areas where public transportation is lacking).
Unemployment as an Adverse Trigger Event for Mortgage Default, by Chao Yue Tian, Roberto Quercia, & Sarah F. Riley, Journal of Real Estate Finance and Economics, Forthcoming.
March 3, 2015
HSH.com has posted a study to answer the question — How much salary do you need to earn in order to afford the principal, interest, taxes and insurance payments on a median-priced home in your metro area? The study opens,
HSH.com took the National Association of Realtors’ fourth-quarter data for median-home prices and HSH.com’s fourth-quarter average interest rate for 30-year, fixed-rate mortgages to determine how much of your salary it would take to afford the base cost of owning a home — the principal, interest, taxes and insurance — in 27 metro areas.
We used standard 28 percent “front-end” debt ratios and a 20 percent down payment subtracted from the NAR’s median-home-price data to arrive at our figures. We’ve incorporated available information on property taxes and homeowner’s insurance costs to more accurately reflect the income needed in a given market. Read more about the methodology and inputs on the final slide of this slideshow.
The theme during the fourth quarter was increased affordability.
Home prices declined from the third to the fourth quarter in all of the metro areas on our list but one. But on a year-over-year basis, home prices have continued to trend upward.
“Home prices in metro areas throughout the country continue to show solid price growth, up 25 percent over the past three years on average,” said Lawrence Yun, NAR chief economist.
Along with affordable home prices, mortgage rates fell across the board which caused the required salaries for our metro areas to decline (again, except for one).
“Low interest rates helped preserve affordability last quarter, but it’ll take stronger income gains and more housing supply to help meet the pent-up demand for buying,” said Yun.
On a national scale, with 20 percent down, a buyer would need to earn a salary of $48,603.82 to afford the median-priced home. However, it’s possible to buy a home with less than a 20 percent down payment. Of course, the larger loan amount when financing 90 percent of the property price, plus the need for Private Mortgage Insurance (PMI), raises the income needed considerably. In the national example above, a purchase of a median-priced home with only 10 percent down (and including the cost of PMI) increases the income needed to $56,140.44 – just over $7,500 more.
This sounds like a pretty reasonable methodology, but there are a lot of assumptions built into the ultimate conclusions. They are generally conservative assumptions — buyers will get a 30 year fixed rate mortgage instead of an ARM, buyers will have 28% debt ratios. I would have liked to see some accounting for location affordability, because transportation costs can vary quite a bit among metro areas, but you can’t have everything.
As always, I am particularly interested in NYC, the 24th most expensive of the 27 cities. NYC requires an income of $87,535.60 to buy a median home for $390,000. By way of of contrast, the cheapest metro is Pittsburgh, which requires an income of $31,716.32 to buy a median home for $135,000 and the most expensive was San Francisco, which requires an income of $142,448.33 to buy a median home for $742,900.
- H.R. 1142 was introduced in Congress to amend the Internal Revenue Code of 1986 to make permanent and expand the temporary minimum credit rate for the low-income housing tax credit program, an identical bill was introduced into last year’s Congress (text of H.R. 1142 is not yet available).
- HUD waives Rental Assistance Demonstration 20% Cap on Project Basing for the San Francisco Housing Authority
March 2, 2015
A NYC Housing Court judge issued a Decision/Order in 42nd and 10th Associates LLC v. Ikezi (No. 85736/2014 Feb. 17, 2015) that resulted in the eviction of a rent stabilized tenant who had rented his apartment through Airbnb at a rate much in excess of the rent approved by the NYC’s Rent Stabilization Board.
The Decision makes for a pretty good read in large part because of the incredible testimony of the tenant:
When questioned on Petitioner’s case whether Respondent charged anyone money to stay in the subject premises, Respondent first testified that he could not recall if he ever charged anyone money to stay in the subject premises for a tenancy, and then testified that he does not know if he ever charged anyone money to stay in the subject premises. Given that Respondent was being sued for eviction, that Respondent testified as such on January 21, 2015, and that Respondent’s tenancy commenced on October 10, 2014, three months and eleven days before his tenancy, Respondent’s inability to remember or know if he had charged anyone to sleep in the subject premises defies common sense. Such incredible testimony was of a piece with other testimony Respondent offered, such as his response to a question about how many nights he has slept in the subject premises with the answer that he does not keep a log of where he sleeps, Respondent’s inability to determine whether a photograph of a comforter on a bed in the ad was a comforter that he owned, Respondent’s lack of knowledge as to other addresses that might be his wife’s address, and Respondent’s testimony that he does not have an email address at the company that he is the president of. If Respondent was actually profiteering by renting out the subject premises as a hotel room, wanted to avoid testifying as such, and was trying to be clever about technically avoiding committing perjury, it is hard to imagine how Respondent would testify differently. (9-10)
The defendant’s testimony demonstrates what happens when the profit motive hits smack up against rent regulation’s policy goal of protecting tenants from large rent increases. Without defining it precisely, the Court refers to this as profiteering which it finds to be inconsistent with the goals of rent regulation and incurable to boot. Thus, the Court issued a warrant of eviction.
This seems like the right result on the law and as a matter of policy. Otherwise, more and more apartments would be informally removed from the regulated housing stock. Moreover, landlords and neighbors would be stuck with the costs of short-term stays while tenant scofflaws would get all the benefit.