Author Archives: David Reiss

Hillary’s Housing Agenda

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United States Department of State

Hillary Clinton’s housing policy platform is included in her Breaking Every Barrier Agenda. I quote the key passages below and provide my two cents on them. Overall, the proposals strike me as reasonable, progressive ones.

  • Support families as they save for sustainable homeownership. Clinton will support initiatives to match up to $10,000 in savings for a down payment for those who earn less than area median income.

I like that this down payment assistance proposal because it requires that homebuyers have skin in the game (and $10,000 is a lot of skin for many first-time homebuyers). Down payment assistance programs that do not require skin in the game can turn out to be unmitigated fiascoes for homebuyers and government programs alike (for instance, see my discussion of the American Dream Down Payment Act of 2003 here).

  • Easing local barriers. Clinton will encourage communities to implement land use strategies that make it easier to build affordable rental housing near good jobs by increasing funding available to those that do through both her infrastructure bank and competitive grant programs, like the Department of Transportation’s TIGER initiative.
  • Build more affordable rental housing near good jobs and good schools. Clinton will increase support for affordable rental housing in the areas that need it most and encourage communities to implement land use strategies that make it easier to build affordable rental housing near good jobs.

I like these proposals because they acknowledges the outsized effect that local land use policies can have on housing construction. The federal government can use its considerable set of incentives to push local governments to allow for housing where it is needed.

  • Overcome pockets of distress. Clinton will provide the resources necessary to overcome blight, giving communities a chance to rebuild and renew with new businesses, new homeowners, and new hope. And she will connect housing support in high-poverty neighborhoods to economic opportunity.

I am not sure if this proposal is specific enough to respond to, but I am concerned that it does not account for the fact that some communities are blighted because the local economy has failed. Decisions to address blight must be made without sentimentality or we will just be throwing good money after bad.

  • Connecting housing assistance to community development. Clinton will build on the Choice Neighborhoods and Neighborhood Revitalization Initiative programs, both of which provide communities with support for housing as part of a multifaceted strategy to address the complex challenges of poverty. She will make resources available for economic development, health care, environmental improvement, and more.

Housing policy is clearly just one aspect of social policy, so it makes sense for Clinton to treat it as one thread in a broader fabric. This proposal is also a little short on details, so it is hard to see what she is intending to do, other than continuing current Obama policies.

  • Giving recipients of assistance more choice. Clinton will work to expand the choices that recipients of housing vouchers have in deciding where to live. Today those with vouchers must often choose among the very pockets of poverty the vouchers are intended to allow them to leave. Clinton believe we should expand their range of options to include neighborhoods with more jobs and better schools.

I am a big fan of giving low- and moderate-income households more choice when it comes to their housing options, so I think it is great that Clinton wants to expand the voucher program.

  • Support counseling programs for the significant financial commitment of homeownership. Clinton will increase funding and broaden credit terms for housing counseling programs shown to help borrowers become sustainable homeowners.

I am not sure that the evidence is there that homeownership counseling works, so I would caution the Clinton campaign to look at the research on this topic.

  • Enforce fair housing and fair lending laws. Clinton will make sure that the Department of Justice enforces fair lending and fair housing laws and will work closely with regulators to make sure that Fannie Mae, Freddie Mac and the nation’s lenders meet their responsibility to provide lending in communities that have been historically underserved.

No question, fair housing and fair lending enforcement should be a priority for the DoJ. I would like more details about Clinton’s expectations for Fannie and Freddie though. It is important that any policies implemented through Fannie and Freddie are designed to encourage sustainable homeownership, not just homeownership that can end up being a part of a cycle of purchase and default.

  • Reducing the cost. Clinton will defend the current supply of Low Income Housing Tax Credits and provide additional credits in communities where the demand for these credits far exceeds the supply. The additional credits will be allocated through a competitive process to those cities and states that are in the best position to use them effectively.

The Low Income Housing Tax Credit has bipartisan support as an engine of housing construction for low-income households, so it seems reasonable that Clinton would want to expand it in the current political environment.

*     *     *

I will review the other candidate’s housing platforms in the coming weeks.

Your Neighbor’s Dog

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SheltieBoy

Realtor.com quoted me in Salma Hayek’s Dog Shot by Neighbor: Was He Right? It reads, in part,

Actress Salma Hayek is mourning the death of her dog Mozart—a dog she nurtured from birth, according to her Instagram post. The 9-year-old pooch, a Belgian Malinois, was found dead on her Washington state ranch on Friday with a visible wound close to his heart. And this sad story only got worse once police discovered the culprit: Hayek’s neighbor.

According to TMZ, the neighbor was sick of Hayek’s dogs, several of whom regularly trespassed on his territory and attacked his dogs. So on that fateful Friday, this neighbor responded to a dogfight in his garage by shooting an air rifle just to scare off the one attacking his dog, the Associated Press reports. Mozart, who was hit, ran off and died from internal bleeding. In fact, the shooter’s wife Kim Lund told the AP, “We didn’t even know we killed a dog. I’m in shock.”

Claiming a pellet gun would normally not be deadly, the police ruled the shooting justified, but plan to send the case to prosecutors for additional review.

*     *     *

According to “When Killing a Dog Is Legally Justified” on Nolo.com, most state laws do not allow homeowners to shoot dogs that are merely running loose on their property. And even if they’re attacking your own dog or cat, you’re not off the hook.

“Someone who does injure a dog that’s chasing another dog … may be liable for damages to the dog’s owner,” writes . “And the killer may also be guilty of cruelty to animals.”

In other words, Hayek’s neighbor could pay for pulling the trigger. Plus there’s the bigger picture, points out David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School: “How’s it going to be to continue living next door to your neighbors after you shot their dog?”

Imagine how awkward it will be for this guy to run into Hayek from now until the end of his days there. Maybe he could have tried to fix the problem earlier with something other than rubber bullets.

“There certainly are steps you could take before shooting the dog,” Reiss says. “You could call animal control or law enforcement. In some places, if a dog owner has received a warning about his or her pet, he or she could face liability for allowing it to roam free.” 

Bottom line: Talk first, shoot only as a last resort. 

Airbnb Host Tax Break

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photo by 401kcalculator.org

Newsday quoted  me in Tax Breaks You May Have Overlooked: Airbnb, Dental Bills. It reads,

It’s time for that dreaded annual date with Uncle Sam.

You worry about how much it’s going to cost you. He’s usually not one to settle for a movie and McDonald’s. Relax, maybe there might be tax breaks you’ve overlooked.

– Deduct advice

The IRS will let you deduct certain expenses incurred on your taxable investments over and above 2% of your adjusted gross income (AGI). This could be investment counsel and advice, including subscriptions to financial publications, software or online services used to manage your investments, says Kyle Ryan, executive vice president of Personal Capital Advisors in Redwood City, California.

– Cash in on the dentist

Many people overlook medical expenses because you can only deduct the amount that exceeds 10% (7.5% if you’re over 65) of AGI, but dental work, which, even if you have insurance, can have high out-of-pocket costs, may qualify for a medical deduction, says David Isaacs, a CPA with UHY Advisors in Manhattan.

– Home sweet home

Maybe you jumped on the Airbnb bandwagon and rented out your home. If you did for up to two weeks, David Reiss, a Brooklyn Law School professor, specializing in real estate has good news, “that income is tax free.”

Vacant Land in NYC

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photo by Eric Fischer

NYC Comptroller Stringer has released an Audit Report on the Development of City-Owned Vacant Lots by the New York City Department of Housing Preservation and Development. Stringer has  taken some cheap shots on Mayor DeBlasio’s housing plans before (here for instance). This report amounts to another one. The Audit Findings and Conclusion read,

Our audit found that the City owns over a thousand vacant lots that could be developed under existing urban renewal programs, but many of these lots have been allowed to languish and remain undeveloped for up to 50 years or longer.  While HPD contends that over the years it has disposed of most of the lots it has been responsible for, we found that as of September 18, 2015, HPD listed 1,131 vacant lots under its jurisdiction.  Further, we found that although HPD solicits developers to build on these properties, it has not established plans with realistic time schedules to actually transfer City-owned vacant properties to developers.

Pursuant to General Municipal Law § 502, HPD has devised urban renewal plans for areas that include its vacant properties.  However, we found that the projected schedules are often pushed to a later date and sometimes no date is specified at all, notwithstanding the fact that the law requires “a proposed time schedule for the effectuation of such plan.”  Accordingly, it appears that schedules with adequate procedures to enable the transfer of City-owned properties to developers in accordance with those schedules have not been consistently formulated.  Finally, we identified an additional 340 City-owned vacant lots under the jurisdiction of other City agencies that could be considered to be used for residential construction. (2)

Even the language of this summary reveals the Comptroller’s spin. It is laughable to say that the City has allowed vacant land “to languish and remain undeveloped  for up to 50 years or longer.” The fact is that the City took ownership of much of this land during the ’60s and ’70s because it was abandoned by the owners who did not pay their property taxes. Much of the land had absolutely no value for decades.

This has certainly changed in the last 20 years or so, so it is worth evaluating whether the City should be taking more aggressive steps to get this land developed. Certainly one would think that this Mayor would want to do just that. And indeed, the Comptroller’s report shows that the Mayor has slated over half of those parcels for development over the next few years. The City’s response to the Audit indicates that many of the remaining parcels pose development challenges for residential development.

My take (having written extensively about abandoned land in NYC, here for instance) is that Stringer is making a mountain out a molehill. Every mayor from Koch through De Blasio has attempted to develop or sell much of the vacant land owned by the City. This audit fails to demonstrate that the City has a serious problem on this count.

Docs You Need for A Mortgage

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photo by LaurMG

HSH.com quoted me in The Documents You Need To Apply for a Mortgage. It opens,

When it comes time to apply for a mortgage in 2016, you might be surprised at how much documentation you’ll need when applying for a home loan.

J.D. Crowe, president of Southeast Mortgage in Lawrenceville, Georgia, says most of the documentation should be familiar to you if you have applied for a mortgage loan in the last five years. If you’re new to the mortgage market this year, he says, this is all new.

The new Qualified Mortgage rules that took effect on January 10, 2014 make this paperwork even more important. To meet the new Qualified Mortgage rules, lenders will be even more diligent in collecting the paperwork that proves that you can afford your monthly mortgage payments.

David Reiss, professor of law at Brooklyn Law School in Brooklyn, N.Y., says that while the documentation requirements under the new Qualified Mortgage rules might come as a shock to those who haven’t applied for a mortgage since 2008, they are common-sense requirements for the most part.

“These are really common-sense rules,” Reiss says. “The new rules say that mortgage lenders are no longer allowed to throw out the common-sense standards of lending money during boom times, when they might be tempted to overlook long-term financial goals for quick profits. If the rules help that happen, they’ll be a good thing.”

Challenging Wrongful Foreclosures

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photo by Oparvez

The California Supreme Court issued an opinion a few days ago that has been getting a lot of attention, Yvanova v. New Century Mortgage Corp., S218973 (Feb. 18, 2016). The opinion opens by noting that

The collapse in 2008 of the housing bubble and its accompanying system of home loan securitization led, among other consequences, to a great national wave of loan defaults and foreclosures. One key legal issue arising out of the collapse was whether and how defaulting homeowners could challenge the validity of the chain of assignments involved in securitization of their loans. (1)

The Court concludes that

a home loan borrower has standing to claim a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void, depriving the foreclosing party of any legitimate authority to order a trustee’s sale. (30)

First, let us be clear what it is NOT saying: “We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s right to proceed.” (2) This is an important distinction between challenging a nonjudicial foreclosure and having standing to bring a wrongful foreclosure tort action.

And let us be clear as to what it is saying: if a homeowner argues that that an assignment of a deed of trust is void, that can provide the basis for a wrongful foreclosure action because it “is no mere ‘procedural nicety,’ from a contractual point of view, to insist that only those with authority to foreclose on a borrower be permitted to do so.” (22) Quoting Adam Levitin, the Court finds that

“Such a view fundamentally misunderstands the mortgage contract. The mortgage contract is not simply an agreement that the home may be sold upon a default on the loan. Instead, it is an agreement that if the homeowner defaults on the loan, the mortgagee may sell the property pursuant to the requisite legal procedure.” (23, italics changed)

Sounds like common sense to me.

 

The Future of the Sharing Economy

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photo by Dennis Yang

I was interviewed on PBS’ Nightly Business Report (produced by CNBC) about the near-term future of the sharing economy in the wake of the horrible shootings in Kalamazoo, allegedly by an Uber driver while he was working for the service. You can find the interview here (my segment appears right after the 22nd minute). A transcript of the interview follows:

SUE HERERA: So, will the tragic Uber shooting spree over the weekend change the way that people feel about the sharing economy?

Let’s turn to David Reiss for his thoughts. He’s professor of law at Brooklyn’s Law School Center for Urban Business Entrepreneurs.

Nice to have you here, David. Welcome back.

DAVID REISS, BROOKLYN LAW SCHOOL PROF. OF LAW: Thank you.

HERERA: I guess that is the question. Do you think it will change the way people feel about the sharing economy, this case in particular?

REISS: I think we have to look at the short term and long term. In the short term, we’ll see people will think twice about it. But in the long term, and as I think people think about their experience with sharing economy services and seeing how frequently terrible and tragic incidents like this occur, I think we’re going to see a return to probably some growth in that area as people put this into perspective.

BILL GRIFFETH: Are you surprised as our reporter Kate Rogers pointing out here that in their conference call just now, they seem to be digging in their heels on not changing their background check policies here. Why not, as I said, do that if only for PR reasons just to reassure the public? I mean, this is a PR problem for them right now, isn’t it?

REISS: It is. And I think they’re probably in crisis response mode. They’re probably not wanting to make big promises about big changes to acknowledge that their business model is intrinsically flawed and they will probably want to make changes on their own time.

HERERA: There have been more calls for more regulation of the sharing economy, specifically by those who are impacted in a negative way by the sharing economy. We have to put that out there. But do you think it opens the door a little bit wider for regulation?

REISS: I certainly do. I think there’s been this attitude of it’s better to ask forgiveness than to ask permission and an incident like this and all of its tragic consequences raise the argument that maybe that’s not the right way to go, that getting it right the first time is better than kind of seeing how it unfolds.

GRIFFETH: Growing pains in the sharing economy or is this a real dent? What do you think?

REISS: I think it’s growing pains. I think the sharing economy has been growing so rapidly with so many innovations. But I think it’s here to stay. I think people are voting with their feet in terms of using the services and government is trying to figure out how to adapt and how to regulate and what’s the appropriate level of regulation.

HERERA: Does it change, though, their liability? Do they have to change some of their policies, all of their policies because there’s a liability issue? And the weekend’s horrible events really point that out.

REISS: I think businesses react to lawsuits and to large judgments, and if courts and juries find that this behavior was negligent or reckless, they will get a clear message and they will change to adapt. I think that regulators are going to look carefully at them. So, I think a lot of this is in flux and I’m sure there’s going to be changes. I don’t know what they will be.

GRIFFETH: Have you used Uber and will you think twice, if not?

REISS: I’ve used Lyft, and I would continue to do.

HERERA: All right. On that note, David, good to see you again. Thanks for joining us.

David Reiss with Brooklyn Law School’s Center for Urban Business Entrepreneurs.