Tag Archives: New York City

Housing and Vacancies in NYC

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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.

Economic Segregation in NYC and the USA

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Richard Florida and Charlotta Mellander have released Segregated City: The Geography of Economic Segregation in America’s Metros. The executive summary reads,

Americans have become increasingly sorted over the past couple of decades by income, education, and class. A large body of research has focused on the dual migrations of more affluent and skilled people and the less advantaged across the United States. Increasingly, Americans are sorting not just between cities and metro areas, but within them as well.
This study examines the geography of economic segregation in America. While most previous studies of economic segregation have generally focused on income, this report examines three dimensions of economic segregation: by income, education, and occupation. It develops individual and combined measures of income, educational, and occupational segregation, as well as an Overall Economic Segregation Index, and maps them across the more than 70,000 Census tracts that make up America’s 350-plus metros. In addition, it examines the key economic, social, and demographic factors that are associated with them. (8)
Although it reads like a jeremiad at times, there is a lot of thought-provoking information in this report. For instance, it examines “the segregation of the three major occupational classes—the creative class of knowledge workers, the even faster growing but lower-paid service class, and the declining blue-collar working class.” (36) It shows that there is a lot of segregation of these classes. This is unsurprising given the correlation between occupational class and income.
As a New Yorker, I immediately focused on the findings relevant to NYC. The report finds that the New York Metro area exhibits a high degree of economic segregation. This is not surprising, but it is interesting to learn where it stands vis a vis other large metro areas — it is sixth highest in the country.
I am not sure what the policy implications are of this report, but it does tell a tale of two cities in one place, one rich and one poor.

Tenants in Foreclosure

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Judge Demarest issued a Decision and Order in 650 Brooklyn LLC v. Hunte et al. (No. 504623/2013 Feb. 5, 2015). The defendants moved for dismissal because the foreclosing plaintiff failed to comply with a relatively new NY statute that requires that the “foreclosing party in a mortgage foreclosure action, involving residential real property shall provide notice to: (a) any mortgagor if the action relates to an owner-occupied one-to-four family dwelling; and (b) any tenant of a dwelling unit in accordance with the provisions of this section . . ..” (12, citing NY RPAPL section 1303(1))

The Court dismissed defendants’ motion, relying on the plain language of the statute. The Court also noted that the purpose of the RPAPL notice provision, according to the 2009 Sponsor’s Memorandum, was to “establish protections for tenants residing in foreclosed properties” and noting that

20% of all foreclosure filings across the country were in non-owner occupied properties . . . Often, renters have been unaware that their landlords are in default until utilities are shut off or an eviction notice appears on their door . . . This [notice] provision will allow tenants to be fully aware of the status of the property and allow them to make informed decisions about whether they should remain in such property. (15)

Given the straightforward language of the statute, this seems like the right result as a matter of law. It also seems like the right result as a matter of policy. Certain dense jurisdictions, like NYC, have a lot of of tenants living in 2-4 family buildings. Many of these buildings are in areas that have been hard hit by the foreclosure epidemic. Indeed, according to the State of New York City’s Housing and Neighborhoods in 2013, “most of the foreclosure filings in 2013 and other recent years have been on 2–4 family properties.” (3) Many foreclosures have unnecessary collateral damage and improving notice to affected parties like tenants seems like a small and reasonable step for any jurisdiction to take.

Nation of Renters

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NYU’s Furman Center and Capital One have produced an interesting graphic, Renting in America’s Largest Cities. The graphic highlights the growing trend of renting in urban communities, but also the increasing expense of doing so. The press release about this study provides some highlights:

  • In 2006, the majority of the population in just five of the largest 11 U.S. cities lived in rental housing; in 2013, that number increased to nine.
  • As demand for rental housing grew faster than available supply, rental vacancy rates declined in all but two of the 11 cities, making it harder to find units for rent.
  • Rents outpaced inflation in almost all of the 11 cities. Rents Increased most in DC, with a 21 percent increase in inflation-adjusted median gross rent, and least in Houston, where rents were stable.
  • In all 11 cities, an overwhelming majority of low-income renters were severely rent-burdened, facing rents and utility costs equal to at least half of their income.
  • Even In the most affordable cities in the study, low-income renters could afford no more than 11 percent of recently available units.
  • In five major cities, including New York, Los Angeles, San Francisco, Boston and Miami, moderate-Income renters could afford less than a third of recently available units in 2013.

Rental housing clearly has an important role to play in providing stable homes for American households, particularly in big cities. While rental housing has been the stepchild of federal housing policy for far too long, it is good that it is finally get some attention and resources.

I look forward to the Furman Center’s follow-up report, which will provide more detail than the graphic does. I am particularly curious about whether the researchers have addressed the difference between housing affordability and location affordability in the longer study. I would guess that the relative affordability of the cities in this study is greatly impacted by households’ transportation costs.

Lawyering up for Housing Affordability

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The New York City Independent Budget Office issued an estimate of the cost of providing “free legal representation to individuals with incomes at or below 125 percent of the federal poverty level who are facing eviction and foreclosure proceedings in court . . ..” (1) The IBO nets the cost of this proposal against the potential savings that the City would reap by reducing admissions to homeless shelters. The IBO concludes that this proposal would have a net cost of roughly 100 million to 200 million dollars.

The IBO notes that “there are benefits to reducing evictions that extend beyond the city’s budget, such as the potential for reducing turnovers of rent-regulated apartments, which would slow rent increases for those units, as well as avoiding the long term physical and mental health consequences associated with homelessness.” (1-2)

Seems to me that this is money well spent in 21st century New York City. Market forces are such that landlords can frequently raise rents significantly whenever a tenant leaves.  Unscrupulous landlords harass their tenants in a variety of ways in order to encourage them to leave sooner.  This might be done through the abuse of legal process, with a landlord trying to evict a tenant multiple times when the tenant has not violated the terms of the lease. Or it might be done through improperly maintaining the property, for instance, cutting off the water repeatedly. In either case, though, tenants are being subject to a lot of illegal behavior in this hot real estate market.

Housing court is a mess for both tenants and landlords, but typically only landlords have lawyers to help them navigate it. This proposal would even the field a bit. Mayor de Blasio’s affordable housing goals would be greatly augmented by this proposal.

Perhaps housing court reform should also be put on the table so that these cases are adjudicated equitably, but that is a topic for another day . . ..

Hockett on NYC Eminent Domain

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Bob Hockett has posted ‘We Don’t Follow, We Lead’: How New York City Will Save Mortgage Loans by Condemning Them to SSRN. The abstract reads,

This brief invited essay lays out in summary form the eminent domain plan for securitized underwater mortgage loans that the author has been advocating and helping to implement for some years now. It does so with particular attention in this case to New York City, which is now actively considering the plan. The essay’s first part addresses the plan’s necessity. Its second part lays out the plan’s basic mechanics. The third part then systematically addresses and dispatches the battery of remarkably weak legal and policy arguments commonly proffered by opponents of the plan.

Hockett has been advocating this plan for some time in the face of concerted opposition from the financial industry. One industry argument that I have found to be over the top is that lenders will refuse to lend in communities that employ eminent domain to address the foreclosure crisis. Hockett writes,

Another policy argument made by some members of the securitization industry is that using eminent domain to purchase loans will dry up the sources of mortgage credit, rendering the American dream of homeownership unattainable. The financial services industry and its legislative supporters have made this kind of claim against regulatory and consumer protection proposals emerging from national, state, or municipal legislatures.

One problem with this argument is that private credit has not flowed to non-wealthy mortgage borrowers since the crash. Federal lenders and guarantors are nearly the only game in town, and they are likely to remain so until the underwater PLS loan logjam is cleared.

Another problem with the credit withdrawal argument is that it characterizes a benefit as a burden. The housing bubble was, like most of the more devastating bubbles through history, the upshot of an over-extension of credit. Lenders extended excess credit through reverse redlining and other predatory lending practices perpetrated or aided and abetted by participants in the securitization industry itself. Hence the securitization industry’s warning that credit might not be overextended in the future is a warning of something that might well be desirable. (142-43, footnotes omitted)

Given that lenders always rush to lend to countries that have recently defaulted on their sovereign debt, I don’t find the credit withdrawal argument to be particularly convincing here. But it may succeed in convincing some local governments not to proceed with their eminent domain strategies. I do hope, however, that at least one locality will follow through during the current foreclosure crisis. That way, we will at least have a proof of concept for the next foreclosure crisis.

 

Manufacturing Jobs in NYC

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The New York City Council released a report, Engines of Opportunity: Reinvigorating New York City’s Manufacturing Zones for the 21st Century. I am always worried that discussions of increasing manufacturing jobs, especially in a city as expensive as New York, are informed by a romantic vision of a past that cannot be recaptured. This report seems to be aware of that trap. It focuses on marginal improvements that can be made to support the kind of manufacturing and creative economy jobs that can survive the brutal competition for space and skilled employees that New York companies have to deal with.

The report makes three land use policy recommendations:

1) Industrial Employment District – A zoning district which provides the space for those industries which are critical to the economic well-being of thousands of New Yorkers and the health of the overall economy. In places where a concentration of  manufacturing/ industrial activity exists — in many of the existing “Industrial Business Zones” for instance — a re-writing of the use regulations to focus on the protection and growth of these industries is essential, as is allowing for additional density to create the option for more space for new and existing firms to expand. Combined with strategic incentives and targeted enforcement, these districts will provide a stable regulatory framework for investment.
2) Creative Economy District –A dynamic new combination of industrial space and commercial office space. These creative economy districts would no longer be hindered by competition with incompatible uses like mini-storage or nightlife or blocked-out by unproductive warehousing of property in hope of future residential rezoning. With the additional density, property owners would gain much more lucrative development opportunities than under the current zoning while growing the City’s employment base. Robust workforce development strategies will need to be implemented in tandem with these new districts to ensure a wide variety of New Yorkers will have access to these new jobs.
3) A Real Mixed Use District–Mixed-use industrial-residential-commercial neighborhoods like parts of SoHo or Long Island City or Williamsburg or the Gowanus have a unique dynamism that has made them tremendously desirable. Other cities are increasingly trying to emulate the dynamic synergy of these mixed-use neighborhoods. The creation of the “MX” zone acknowledged the value of mixed-use neighborhoods and tried to find a solution that could increase the residential capacity while maintaining their dynamism. Unfortunately because MX allows but does not require a mixture of uses, the economics of real estate have lead residential development to dominate and displace other uses. A zone which supports and requires the creation of commercial and compatible industrial space alongside residential would create dynamic new neighborhoods instead of just residential development. (5)
The big problem with this (and similar reports) is that it does not directly address the opportunity cost of such proposals.  What are we giving up when we create these new zoning districts? For one thing, we make less land available for residential uses, which tend to crowd out other uses because of the immense demand for housing in New York City right now.
More generally, how do we properly balance the various needs of the City in our overall zoning plan?  There is no right answer to such questions, but they should be asked and proposals like this should put their answers on the table for others to consider.