Tag Archives: affordable housing

VIDEO: Retrenchment and Rollback in Consumer Protection and Housing

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The video for the ABA Professor’s Corner webinar on Retrenchment and Rollback: Federal Consumer Protection and Housing has been posted. Rosa Newman (Elon) moderated and I spoke alongside Kathleen Engel (Suffolk) and Julie Patterson Forrester Rogers (SMU). The session explored “the federal government’s retrenchment on consumer and civil rights protections during the Trump Administration and the consequences for housing. The panel will connect shifts in federal consumer protection frameworks to the on-the-ground impacts for affordable housing development, tenant stability, and fair housing enforcement.”

What’s Andrew Cuomo’s Plan to Help New York City Renters?

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The New York Times interviewed me in a video, What’s Andrew Cuomo’s Plan to Help New York City Renters? The transcript reads,

“Can you describe rent prices in New York?” “High.” “Expensive.” ”Out of control.” ”The rent here is absolutely crazy.” “Very, very unaffordable. Two verys — yeah very, very expensive.” Median asking rent in New York City is up more than 7 percent in just the last year. It’s now about $4,000 per month. That’s made the cost of housing a key issue in the mayor’s race, with the top candidates each proposing changes to a core New York City housing policy: rent stabilization. Nearly half of the apartments in New York are currently rent stabilized, which means that their rent increases are determined by a government agency controlled by the mayor. That makes rent stabilization a hot button issue for hundreds of thousands of voters. After front-runner Zohran Mamdani revealed what he pays in rent — “$2,300 for my one bedroom in Astoria.” — rival Andrew Cuomo argued he was unfairly occupying an affordable apartment and shouldn’t qualify for rent stabilization because he makes $142,000 a year. “Rent-stabilized units, when they’re vacant, should only be rented to people who need affordable housing.”

Many rent-stabilized tenants are low income, but about 16 percent of rent-stabilized households do earn at least $150,000 a year. If elected mayor, Cuomo says you could only qualify for a rent-stabilized apartment if your rent is 30 percent or more of your income. Let’s say this couple is looking for an apartment. Their salaries are $35,000 and $45,000 a year. They find a rent-stabilized apartment for $2,000 a month. That’s 30 percent of their income. So under Cuomo’s plan, this couple will face less competition for this lease because anyone who makes more than them could not apply for the the apartment. Means-testing is popular with voters. About 65 percent supported it in a recent Times-Siena poll.

But critics argue that Cuomo’s plan reflects a misconception that rent stabilization is an affordable housing program. In fact, it’s a form of market regulation with roots in the postwar era. “After World War II, you had returning G.I.s starting families.” The rent gets too damn high and the government takes a look to say, ‘Is there something we could do about it?’” Some apartments in this period were rent-controlled. The system that eventually effectively froze 1970s rents in place like the famously low-rent apartments from “Friends” and “Sex in the City.” “You have a rent-controlled apartment? I suggest you stay there.” In reality, only about 1 percent of apartments are rent controlled today. Most are now covered by rent stabilization, which first became law in 1969. “It really was this broad-based sense that tenants needed the government to come in and kind of limit that increase in their rent. Rent stabilization was not designed to take into account the income of the tenant at all. Rent regulation was really put into place to say when the vacancy rate is so low, landlords can’t use that as an opportunity to gouge tenants for increases in rents.” Today, rent stabilization applies to most apartments in buildings with at least six units that were built before 1974. That covers about one million units and two million New Yorkers. Rent increases are set by the mayor-appointed Rent Guidelines Board. “So you’re not at the mercy of your landlord solely. They can only go according to the increased percentage rate that the Rent Guidelines Board decides.”

Joanne Grell is a tenant advocate in the Bronx. She moved into a rent-stabilized apartment nearly 25 years ago and still lives in it today. “I moved here back in 2002 with a 2-year-old and a 5-year-old, not knowing exactly how I was going to be able to be a single mom and afford to live in the city. Fast forward 23 years later, I raised my children here.” When she moved in, her rent was about $950 a month. She earned a moderate income, but if means-testing had been in place, she wouldn’t have qualified for her unit. “When I moved in here 23 years ago, it might have been 20 percent of my salary. So if Cuomo’s means-testing proposal was in place when I applied for this apartment, I would have never been able to get it.” Now, she does spend more than 30 percent of her income on rent, which has gone up to $1,750 a month. Grell plans to vote for Mamdani this election because she believes his proposal to freeze the rent would help struggling tenants like her and 69 percent of voters in the Times-Siena poll agreed. “My upstairs neighbor said to me, ‘If I get another increase, I will not be able to keep my apartment.’ That’s how serious it is.”

David Reiss said that Mamdani’s rent freeze would help tenants in the short term, while Cuomo’s means-testing would be an administrative nightmare that could make life difficult for many. Ultimately though, he said neither of these policies address the root cause of high prices: that there aren’t enough apartments to go around. Both mayoral candidates have said they support building hundreds of thousands of units to help address the housing shortage. “We need more housing, a lot more.” “Get the supply up. The rents will come down.” But Reiss says neither candidate’s plans would meet the demand and don’t account for factors like population growth or apartments being demolished. “Politicians from President Trump to Andrew Cuomo to Zohran Mamdani, have all proposed policies to address housing affordability. But it can’t just be doing what we’re doing now, but a little bit better. Fundamentally, if you want to increase affordability, you have to build more housing.”

Retrenchment and Rollback: Federal Consumer Protection and Housing

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I will be speaking on Retrenchment and Rollback: Federal Consumer Protection and Housing in an ABA Professor’s Corner webinar on October 14th at 12:30 ET with

Kathleen Engel, Suffolk Law School

Rosa Newman, Elon School of Law

Julie Patterson Forrester Rogers, SMU Dedman School of Law

This session will explore

the federal government’s retrenchment on consumer and civil rights protections during the Trump Administration and the consequences for housing. The panel will connect shifts in federal consumer protection frameworks to the on-the-ground impacts for affordable housing development, tenant stability, and fair housing enforcement.

You can register here.

Mamdani and Affordable Housing Development

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CNN quoted me in Zohran Mamdani Has Big Housing Plans. Here’s What Stands in The Way. It reads, in part,

Mamdani’s rent freeze plan could undermine his goal of building 200,000 publicly subsidized, rent-stabilized, permanently affordable homes over the next decade for low-income households and seniors.

That’s because the private sector may be dissuaded from participating if these buildings don’t include market-rate housing. The private sector has a “very important role” to play in building housing, Mamdani has said.

“A rent freeze will change how a conversion might pay off for the developer,” said David Reiss, a law professor at Cornell University who served on the Rent Guidelines Board under Mayor Bill de Blasio.

And to be permanently affordable for extremely low-income renters, it will require deeper government subsidies than Mamdani has pledged, experts say. Previous New York City mayors have attempted to produce housing for a wide range of incomes to help offset higher subsidies for deeply-affordable units.

“It’s in the right direction to focus on people with the greatest affordability challenges,” said Alex Schwartz, an urban policy professor at The New School and a current member of the Rent Guidelines Board. “It’s important to recognize that the capital dollars won’t go as far in terms of total numbers of units if they only go toward people with extremely low incomes.”

Mamdani wants the city to borrow $70 billion to build affordable housing over the next decade, on top of the roughly $25 billion it already plans to invest.

That’s no easy task – he will need state approval since the plan would exceed the city’s debt limit by around $30 billion, as well as the New York City Council’s approval of zoning reforms that would make it easier to build.

“This would be a significant increase in city capital to produce deeply affordable housing,” said Rachel Fee, the executive director of the New York City Housing Conference, a non-profit affordable housing policy and advocacy organization. “It’s not something he can just implement on his own. It will take a political coalition to make this happen.”

 

Rent Freezes in NYC

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Zohran Mamdani, Democratic Nominee for Mayor of NYC

The New York Times quoted me in Free Buses and Billions in New Taxes. Can Mamdani Achieve His Plans? It reads, in part,

A major pillar of Mr. Mamdani’s economic plan is housing: He wants to build 200,000 units of affordable housing and freeze rent on the city’s nearly one million rent-stabilized apartments.

But to build, he has said the city will have to borrow $70 billion, exceeding its debt limit by some $30 billion. Going over the limit would require state approval.

Freezing rent, on the other hand, is relatively straightforward and has precedent. But there are consequences.

Mayors cannot freeze rent on their own, but they do appoint the nine members on the Rent Guidelines Board, which sets rents on the city’s rent-stabilized units.

David Reiss, who served on the board under Mr. de Blasio, said that before it voted, members generally considered the overall state of housing in the city, including affordability, landlord expenses and economic conditions.

He said that members could decide that affordability was the most important factor and vote to freeze rents, as they did in 2015, 2016 and 2020.

“A rent freeze would meet the needs of a lot of people who are having a hard time keeping up with their rent,” Mr. Reiss said, “but it’s an unsustainable operation.”

Landlords, including those whose buildings have a large majority of rent-stabilized units, are increasingly saying that they are not collecting enough rent to maintain units.

“Are we going to be pushing a distinct portion of the housing market into great distress because their expenses are outstripping their income?” Mr. Reiss said.

The Importance of Mentorship for New Lawyers

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I interviewed Connor Blancato, an up-and-coming real estate lawyer, for the New York Real Property Law Journal. The interview emphasizes the importance of mentorship  for new lawyers.

Click on the picture to read the interview.

Move Fast and Break the Mortgage Market

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Bill Pulte, FHFA Director and Chair of Fannie Mae & Freddie Mac

I was quoted in the American Prospect’s story, Move Fast and Break the Mortgage Market. It reads, in part,

This week, the Donald Trump–appointed chief regulator for the two quasi-governmental companies that own or control about half of the residential housing market anointed himself the board chair of both those companies. This maneuver could signal a host of shenanigans: the culmination of a 17-year hedge fund get-rich-quick scheme, a balance-sheet fiction to justify tax cuts, a new favor factory for apartment developers with ties to the president, a data transfer so Elon Musk’s everything app can learn how to sell mortgages, or something equally problematic.

But what gives former board members, market observers, and officials at the regulator greater concern is the distinct possibility that mucking around with the $7.7 trillion secondary mortgage market could lead to breaking it.

If that happens, homebuyers may not be able to get mortgages, homebuilders may be reluctant to break ground, and uncertainty would abound in a market that has brought down the economy on more than one occasion in U.S. history, most recently in 2008. “It could freeze sales, freeze refinances, stop people from forming households, cause people to be afraid of moving, freeze up developers of housing and the secondary market,” said David Reiss, a professor at Cornell Law School.

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Multifamily Glad-Handing

The GSEs have a pretty sober business on the single-family side, and since the housing collapse really originated there, a lot of work was done to clean up that part of the business. But Fannie and Freddie also make loans in the multifamily market to support building of apartments and condos. A former official with one of the GSEs told me that business is a little looser, with ways to enhance those loans.

This president, of course, is a multifamily real estate developer himself, who has friends in multifamily real estate development. Hamara, one of the new board members, is a vice president at Tri Pointe Homes, a major homebuilder. You could imagine these relationships leading to the GSEs pushing risk limits, loosening credit standards, or raising loan-to-value ratios for favored borrowers. There is a secret mortgage blacklist at Fannie Mae for condos without enough property insurance or in need of repairs; controlling the board could make that blacklist go away, at least for certain developers.

This kind of setup resembles the opportunity zones that were a feature of the 2017 Trump tax cuts. They gave significant tax breaks to investors in certain communities deemed in need of development. Trump administration officials credit opportunity zones with increasing housing construction, but critics argue that the investments were rife with corruption and favor-trading.

That could also be the case here: New criteria guiding the new boards might lead to more multifamily housing, but with uneven results, favors to friends, and idiosyncratic deals that would be more about boosting allies than building housing. And as Calabria has pointed out, Fannie and Freddie are likely under Trump to cancel affordable-housing initiatives, meaning that sweetheart deals might only extend to the developers, rather than the public. Plus, there is the potential for dramatic losses if lending standards erode.

Reiss, of Cornell, agreed that this was all a possibility. “If someone gets to one of the directors, and they are there not acting as a fiduciary for the company, it opens the door to political favoritism,” he said.

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What If It Breaks

Pulte is expected to force job cuts at the GSEs, which employ roughly 15,000 people. He has already been making familiar noises about DEI and remote work. One possibility on the table at the GSEs is merging Fannie and Freddie; you don’t usually have the same person chair the boards of two direct competitors. The regulatory agency is also likely to see cuts; already at FHFA, according to one source, fair lending and consumer protection groups have been put on administrative leave, along with employees at the Division of Research and Statistics.

Controlling the boards would limit dissent about these actions. But cuts in the name of efficiency could strain or even rupture the numerous functions the GSEs carry out, with consequences for the entire housing market.

Due to the conservatorship, the GSEs are limited in what they can pay their employees, which has led to a talent drain. Some systems have not been integrated, and others are not up to industry standards. Fannie and Freddie have a cautious internal culture that doesn’t move quickly. Hacking away at their already weakened structure could easily create operational harm.

But Reiss explained that nothing has to overtly break to lose the confidence of the markets; even a lack of workforce to move the paper around could create that impression, and disrupt the flow of credit. “If there is any kind of uncertainty, the spread between Fannie and Freddie securities and Treasury bonds will increase,” he said. “Investors will ask if the government will make good on Fannie and Freddie bonds. This uncertainty and direction could increase costs over time for all borrowers.”