Mamdani and Affordable Housing Development

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

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.

Tech Entrepreneurship Clinic in NYC

Cornell has just formally announced the creation of its first NYC law clinic, a branch of the law school’s Entrepreneurship Law Clinic, to be located on the Cornell Tech campus. You can read more here.

 

NYC Rent Guidelines Board Final Vote Interview

I was interviewed on WCBS AM’s Drive Time about the vote of the New York City Rent Guidelines Board. Click here to hear it.

How to Fake-Own the New Yorker Hotel

Reinhold Möller, CC BY-SA 4.0

New York magazine’s Curbed interviewed me for their explainer, How to Fake-Own the New Yorker Hotel. It reads:

The story of how a guy named Mickey Barreto came to own, at least on paper, the New Yorker hotel is a weird one. It started in June 2018, when Barreto first booked a night at the Art Deco landmark for $149. He had plans to stay a while: Using an obscure clause in the city’s rent-stabilization law, Barreto requested a six-month lease to live at the hotel. The gambit worked. Even as the owner of the hotel, which happens to be the Unification Church despite the fact that it operates as a Wyndham, tried to boot him, the judge ordered them to let him back in.

Around the same time he requested the lease, and despite the fact that he did not own the New Yorker, Barreto filed a deed transferring ownership of the hotel from himself to something called Mickey Barreto Missions. Why did Barreto believe he owned the building? As he told a judge in 2019, the “building was never subdivided. It’s all one lot. It’s all one parcel.” Which meant, at least to him, that because he had a legal claim to room 2565, he had a legal claim to the whole thing: “What affects that part of the building called 2565, whatever happens in there, happens to the whole lot, the whole parcel.” He then went around presenting himself as the owner, attempting to collect rent from the building’s street-level businesses and at one point calling the Fire Department to have the building evacuated and, per court documents, identifying “himself as the owner of the subject property.” In the end, the judge found Barreto’s deed, which was extremely fraudulent, to be extremely fraudulent.

But Barreto wasn’t done! The Commercial Observer reports that Barreto made another play at ownership this month, with a 2021 deed transfer from Mickey Barreto Missions to … Mickey Barreto Missions. (Barreto only signed the document earlier this month, and the Department of Finance made it public shortly after.) All of which raises some important questions: Why is it so easy to fake-own a building in New York City? And what is this rent-stabilization law Barreto took advantage of? To help make sense of everything, and potentially try it myself, I reached out to David Reiss, a professor at Brooklyn Law School, who explained everything.

This interview has been edited and condensed for clarity.

Can we start with fake-owning a hotel? Barreto managed to file documents transferring ownership of the hotel to himself. Can someone just … do that?
The government looks at deeds and says: Do they meet our technical requirements for a deed? Is it on the right kind of paper, is it the right size? Does it have a notary stamp on it? If it meets all those technical requirements, then it is recordable. The way you sell a property is based on the fact that most people are doing the right thing and they’re not doing shenanigans. But if you record something that is fraudulent, that doesn’t make it real. A fraudulent deed conveys nothing, and really nobody’s going to be misled by this. It just needs cleaning up. The true owner has to go to court and get this deed declared fraudulent so that it could be removed from the recording documents.

You may not remember this famous headline some 20 years ago when the New York Daily News transferred ownership of the Empire State Building to itself. The notary was Willie Sutton, the famous bank robber, and one of the witnesses of the deed was Fay Wray from King Kong. They got a big headline, but it’s less interesting than the headline suggests.

They were trying to prove a point. 
I believe what they were trying to demonstrate is that regular people can have their properties swept away from them through deeded theft, which is another name for this. And this can be a serious problem for people living in relatively modest homes, typically in the outer boroughs. And typically the victims are elderly people, and it’s a way to steal people’s property. This is a horrific fraud.

Barreto’s fraud was more like the Empire State Building fraud. Barreto told the restaurant to pay rent to him and all these things, but no sophisticated person is going to fall for this. They’re going to call the property manager and say, “What’s going on?” It’s not going to change anything.

So it’s mostly a hassle. 
If this happened to you, you’d be miserable and you’d probably have to hire a lawyer. It would be a pain in the butt. But it doesn’t happen that often. And when you think about all of the transactions that happen whenever you design a government system like the recording system, you want to balance ease of use versus potential for fraud. Maybe it’s a cost we accept as a government because it doesn’t happen very much.

It was also funny to me that he transferred the deed from Mickey Barreto Missions to Mickey Barreto Missions. 
I mean, his deed was really weird because the deed was from himself to himself. So that’s even more fraudulent on its face. If David Reiss transfers to David Reiss, that doesn’t really even do anything. This is just nonsense, right?

Right. 
I mean maybe he was magically thinking that this would give him ownership of the building or just wanted to gunk up the works for them or is just a little wacky. Whatever his reasoning, trying to interpret it as a legal matter doesn’t get you anywhere because he had no rights and he kind of made it up. It’s like if your kid was writing a deed.

Okay, so he was not using magical thinking when it came to claiming a lease at the New Yorker Hotel. Can you tell me about that clause? 
So, this is part of the rent-stabilization law that allows guests at single-room occupancy (SRO) hotels to become tenants, usually by living there continuously for six months or by staying there for one night and requesting a lease. They’re a very specialized, small part of the New York City housing stock that are very complex. Most of them are in very bad condition. They’re kind of a holdover from an earlier era — after World War II a lot of them filled up with single men who would come to New York City to make their way in the world. They fell on very hard times in the ’70s and ’80s and kind of phased out. Then the government came up with a supportive SRO model where it had a similar type of housing space with services on-site. But we’re not talking about very many units.

But the New Yorker Hotel is kind of nice. Is it an anomaly?
The New Yorker Hotel is owned by the Unification Church, the Moonies church. I’m guessing it’s a complicated story. It’s not your typical hotel owner.

And Barreto knew about this odd little provision on rent-stabilized hotels. 
He clearly knew what he was doing. He was either advised by somebody or had done his own research and realized that he was able to request a lease. Some not-for-profit legal entities will even provide form letters to tenants so that they can do this, because for some people this is a very attractive housing option. It’s very reliable compared to being in a men’s shelter or a women’s shelter or something like that. So it’s obscure, but it’s doable. There have been other cases about this, and owners will often fight with a tenant about it because they would rather use it as a hotel unit where they can rent it out at a higher nightly rate. But that’s not complying with the law. So what he did in regards to rent stabilization and getting the lease is not extraordinary, although it’s rare.

And he paid $149 for one night at the hotel, but I assume once the court said he could stay, he would have paid a much lower rent?
That’s right. It can’t be higher than the legal rent. And the legal rent is set by a combination of what the initial rent was back in the day, and then whatever increases had been allowed over time under the rent-stabilization law.

So if someone gets a six-month lease, can they stay indefinitely because it’s a rent-stabilized lease?
Effectively, yes.

Are there similarly obscure laws tenants or people can use to try to get leases from properties like this?
If you become a family member of a rent-stabilized tenant, you can succeed tenancy upon their death, but that’s really well known. You can’t be evicted without a court process if you’re a resident for more than 30 days in an apartment, and you sometimes hear horror stories of a roommate who doesn’t leave and gets tenancy rights. But I don’t know if I’m familiar with a thing that’s so similar to this.

Housing Supply and The Housing Crisis

By James Cridland from Brisbane, AU - Crowd, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=74365875

Opportunity Now interviewed me about how limited housing construction impacts the housing crisis:

Dynamic metropolitan areas like the Bay Area, LA, and New York City suffer from longstanding mismatches between the supply of housing and demand for it. Local communities control the zoning, and local voters (typically existing homeowners) have little incentive to increase the supply of housing. After all, more supply will likely increase the tax burden as new residents increase the demand for services (more schools, more infrastructure, more public safety). Homeowners are already in the market and generally like the way things are, notwithstanding their political views about the high cost of living for others and the epidemic of desperate homelessness that plagues all of these areas. The result of all of these local land use decisions is that very few units of housing are built in these communities, given the size and growth of the population.

Many coastal cities are high-opportunity areas, offering jobs to immigrants, young adults, and strivers of all stripes. They drive up the demand for housing even hours from urban centers, living in overcrowded units in many cases.

When demand outpaces supply, prices rise. Government can try to limit the effect of this pressure through a variety of means: rent controls, housing subsidies, right-to-shelter legislation. All of these interventions can assist certain segments of the housing burdened — current renters, new renters, homeless people — but to a large extent, they just reallocate scarce housing from one burdened group to another. That is not necessarily bad public policy given the current political realities, but it does not address the fundamental problem these communities face: There is not enough housing for all of the people who live in them. A broad coalition of decision-makers needs to face this reality and develop long-term strategies to build a lot more housing where all of these people want to live — for access to economic opportunity, for proximity to family, for all of the reasons that people want to relocate and build a life for themselves and their loved ones.

Rent Regulation from NY to NZ

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.