April 27, 2022
Sharing Your Home with Strangers
Debra Bechtel, Crystal Liu, Ernira Mehmetaj, and I have just posted Sharing Your Home with Strangers: Common-Interest Ownership and Financing Options to SSRN (as well as to bepress). The abstract reads,
As the affordable housing crisis in the U.S. escalates, housing policy analysts and advocates are re-examining, modifying, and combining ways of decreasing the costs of homeownership through shared owner-ship and shared financing while also, in some instances, preserving long-term affordability. This Article will touch upon the vast array of models and take a deep dive into one of them, the relatively new shared equity financing model. That model holds some promise and a lot of peril for homeowners.
April 27, 2022 | Permalink | No Comments
October 29, 2021
Reducing Land Use and Zoning Restrictions
The White House hosted an event today on Reducing Land Use and Zoning Restrictions. While the event was pretty short — an hour or so — it had a bunch of heavy hitters presenting, including Professor Edward Glaeser of Harvard. For many years, Glaeser has written about how local land use laws restrict the construction of housing. It is great to see the White House taking this issue so seriously as it has a massive impact on the affordability of housing as well as the ability of people to move to places with lots of jobs, like the Bay Area.
This effort is part of Biden’s Build Back Better Plan, which is intended, in part, to
- Incentivize the removal of exclusionary zoning and harmful land use policies. For decades, exclusionary zoning laws – like minimum lot sizes, mandatory parking requirements, and prohibitions on multifamily housing – have inflated housing and construction costs and locked families out of areas with more opportunities. President Biden’s plan seeks to help jurisdictions reduce barriers to producing affordable housing and expand housing choices for people with low or moderate incomes. The Build Back Better Plan will create an incentive program that awards flexible and attractive funding to jurisdictions that take concrete steps to reduce barriers to affordable housing production.
The Biden Administration seems to be picking up the gauntlet from previous administrations (here and here) that have made reducing land use restrictions on housing an initiative worth pushing. As opposed to the last two administrations, however, the Biden Administration is taking up the issue earlier in its tenure, so its push may have more legs than the ones that preceded it.
October 29, 2021 | Permalink | No Comments
October 7, 2021
Common Sense for the Shareholders of Fannie and Freddie
The United States Court of Appeals for the Eighth Circuit issued a mixed decision for Fannie & Freddie shareholders in Bhatti v. Federal Housing Finance Agency, No. 18-2506 (8th Cir. Oct. 6, 2021). While the Court ruled (consistent with the Supreme Court’s recent ruling in Collins v. Yellin, 141 S. Ct. 1761 (2021)) that the shareholders could sue for retrospective relief (damages), it otherwise ruled against the shareholders. The court ends on what I found to be a very commonsensical note in its discussion of the nondelegation claim:
Congress’s delegation of authority directs the FHFA to act as a “conservator,” with clear and recognizable instructions. 12 U.S.C. § 4617(a). “[T]he Agency is authorized to take control of a regulated entity’s assets and operations, conduct business on its behalf, and transfer or sell any of its assets or liabilities.” Collins, 141 S. Ct. at 1776, citing 12 U.S.C. §§ 4617(b)(2)(B)-(C), (G). “When the FHFA exercises these powers, its actions must be ‘necessary to put the regulated entity in a sound and solvent condition’ and must be ‘appropriate to carry on the business of the regulated entity and preserve and conserve [its] assets and property.’” Id. (alteration in original), quoting 12 U.S.C. § 4617(b)(2)(D). “Thus, when the FHFA acts as a conservator, its mission is rehabilitation, and to that extent, an FHFA conservatorship is like any other.” Id. There is one difference: “when the FHFA acts as a conservator, it may aim to rehabilitate the regulated entity in a way that, while not in the best interests of the regulated entity, is beneficial to the Agency and, by extension, the public it serves.” Id. But this difference clarifies that serving the public is one goal of the FHFA’s conservatorship; it does not render the delegation unintelligible. See id. (explaining how the FHFA works to rehabilitate housing in the public interest under the statute). In light of the Court’s identification of the principles guiding the FHFA, it is clear those principles are intelligible. See Saxton v. Fed. Hous. Fin. Agency, 901 F.3d 954, 960 (8th Cir. 2018) (Stras, J., concurring) (“The provision is broad but not boundless.”). Congress’s delegation in the Recovery Act was permissible. Id. at 963 (“Picking among different ways of preserving and conserving assets, deciding whose interests to pursue while doing so,
and determining the best way to do so are all choices that the Housing and Economic Recovery Act clearly assigns to the FHFA, not the courts.”). This court affirms dismissal of the nondelegation claim. Page 6.
The plain reading of the Housing and Economic Recovery Act gave the FHFA broad authority to act on the public’s behalf. The FHFA acted within that broad authority. The court therefore rightly defers to the FHFA’s response to the financial crisis. Case closed?
October 7, 2021 | Permalink | No Comments
July 21, 2021
Escalation Clauses in a Tight Market
I spoke with Business Insider about the use of escalation clauses in hot housing markets. The article (behind a paywall) opens,
With people around the US competing in a tight housing market, many are turning to a unique strategy: escalation clauses.
Escalation clauses are meant to help buyers beat the competition for an in-demand property. When would-be buyers put an offer on a home that they anticipate will have other offers, it automatically increases the buyer’s original offer by a specified amount in an effort to outbid everyone else.
Whether the buyer is notified before a seller applies an escalation clause depends on the particular contract terms, according to David Reiss, a law professor at Brooklyn Law School specializing in real estate. Some real-estate agents encourage clients to use escalation clauses, though not every state or seller allows them.
These clauses can give you a fighting chance by allowing you to skip some of the negotiation and back-and-forth, but can be harmful in that they show sellers how much buyers are willing to spend.
Insider spoke with several home buyers who used escalation clauses to understand the risks and rewards they come with.
July 21, 2021 | Permalink | No Comments
April 5, 2021
Rent Regulation from NY to NZ
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Indira Stewart (left) and the rest of the TVNZ Breakfast Team
I was interviewed by Indira Stewart on the TVNZ Breakfast show, the biggest morning news show in New Zealand, about New York City’s system of rent regulation (I serve as the Chair of the NYC Rent Guidelines Board). You can find the interview here.
April 5, 2021 | Permalink | No Comments
March 25, 2021
Shared Equity Financing
Financing by Nick Youngson CC BY-SA 3.0 Alpha Stock Images
Ernira Mehmetaj and I published The Promise and Perils of Shared Equity Financing in the ABA’s Probate and Property magazine. It opens,
It is the rare homeowner, or even lawyer, who thinks twice about why mortgages are part of so many real estate transactions. Real estate is expensive, and few have the money to pay for a home all in cash. As a result, people enter in transactions with mortgage lenders and are exposed to all of the risks that come along with that type of financing: default, late fees, foreclosure.
If you stripped away all of our history and our current practices in financing home ownership with mortgages, you might ask how could people with limited assets acquire something as expensive as a home? It turns out that there are all sorts of ways to slice and dice the rights and responsibilities of homeownership to offer households just the aspects they want and no more.
A new development, shared equity financing, will make us all think twice about mortgages. Its sharing of the risks and rewards of a home purchase will be attractive to many, but it also has its own share of perils that are unique to it.
March 25, 2021 | Permalink | No Comments
March 24, 2021
Can NYS Rename Trump State Park?
Politifact quoted me in Can New York State Rename Donald J. Trump State Park? It reads,
Even after officially decamping for Palm Beach, Fla., former President Donald Trump has continued to stir emotions in his previous home state of New York.
New York Assemblywoman Sandy Galef, a Democrat, said she believes a park currently named for Trump north of New York City should be renamed. Trump donated the land for the park, and it was agreed at the time it would be named after him.
In a Jan. 14 letter to Erik Kulleseid, the Parks, Recreation and Historic Preservation Commissioner in New York, Galef wrote, “It is my understanding that Mr. Trump did not sign the appropriate documents with the state, rendering any claim of breach of contract moot. We can and should rename the park.”
In an interview, Galef added that the park “really hasn’t been fixed up” and that efforts to do so would be hobbled by having Trump’s name on it. Galef said she believes the park should instead be named after former New York Gov. George Pataki, a Republican.
“Around this area, when you have ‘Trump’ on the name of something, it doesn’t go over very well,” Galef said. “My concern is that people aren’t going to want to put money into Trump Park, whether it’s state dollars or any private dollars.”
Galef has support in her quest to rename the park: On Feb. 11, a bill advanced in the Assembly to continue talks on renaming the park.
But the former president may pursue litigation against the state if the Parks Department decides to rename the park, a Trump spokesman said.
“Despite the fact that the state has done a horrible job running and maintaining the park in question, an utter disgrace to such incredible land and a generous donation, the conditions of this gift, formally documented and accepted by the state of New York, could not be clearer: the park must bear Trump’s name,” Trump’s office said in a statement. “This would be breaching its agreement by removing Trump’s name, and Trump will take whatever legal action that may be necessary to fully enforce his rights under this agreement.”
Is Galef right that New York state could change the name without too much difficulty? The answer isn’t clear enough for us to render a Truth-O-Meter verdict. But we decided to take a look at the issue and explain what we found.
Donald J. Trump State Park sits on the border of Putnam and Westchester counties along the Taconic Parkway. Trump gave the land to New York State in 2006 after the former president failed in building a golf course on it.
The land deed for the property does not include any naming provisions, but the state named the park after Trump based on a letter of agreement between the Parks Department and Trump’s lawyers.
The letter outlined several terms, one of which is the following: “Each of the properties will bear a name which includes Mr. Trump’s name, in acknowledgment of these gifts. The name will be prominently displayed at least at each entrance to each property.”
The letter includes signatures by Trump’s lawyers and by Trump himself, and it was “acknowledged and accepted” by James Sponable, who was then the Parks Department’s director of real property.
The New York State Attorney General’s office referred questions about the park’s possible renaming to the Parks Department. The Parks Department did not respond to multiple requests for comment.
But legal experts say it isn’t clear how ironclad the terms in the letter are.
“The land is called a gift, so this seems to be memorializing the terms of a gift,” David Reiss, a real estate law specialist at Brooklyn Law School, told PolitiFact. “So, one question is, ‘What’s the enforceability of this letter?’ It’s not obvious to me that this would be analyzed as a contractual dispute.”
Reiss said because the letter does not clearly state that it is a binding contract, it is unclear how a court would treat it if the state were to rename the park and Trump legally challenged it.
“The letter says, ‘We have this understanding,’ but it doesn’t say what would happen if the understanding isn’t held to,” Reiss said. “It doesn’t say what would happen if, at some later time, it changed. There is no promise that the naming would be perpetual. So it’s unclear what Trump’s rights would be to enforce this based on the language of this document.”
Ultimately, Reiss said, “the one sure thing is there could be a lot of litigation about these issues, if the parties chose to litigate.”
As an alternative, Galef said Trump’s name could be removed from a sign on the Taconic Parkway, which is the most common way for motorists to see it. The letter “doesn’t say you have to have a sign on the Taconic Parkway, … That could come down,” Galef said in the interview.
Reiss, the legal expert, agreed with Galef’s interpretation and said that it might be a feasible option.
“The sign on the Taconic is not the entrance of the park, so you could comply with the letter and still take that sign down,” he said. “It might be confusing to people if you say, ‘Unnamed State Park, next right,” but if you stuck to the black letter of this letter, you could say, ‘Right at the entrance of the park is where we’re going to put the sign, but nowhere before.’”
March 24, 2021 | Permalink | No Comments
