What Makes NYC Crowded

"Manhattan from Weehawken, NJ" by Dmitry Avdeev

NewsDocVoices quoted me in What Makes NYC Become More and More Crowded. It reads, in part,

Yuqiao Cen, a graduate engineering student at NYU, makes sure to shower before 10pm every night, otherwise she is criticized for making too much noise in her apartment. She lives with her landlord and his family of five in a 3-bedroom apartment on 11th Avenue in Brooklyn.

Similar to Cen, Yanjun Wu, a newly admitted graduate student at Fordham University, barely stays in his living room because she feels uneasy wearing pajamas while her male roommates are around. She lives with 4 roommates in a 4-bedroom apartment on the Upper West Side.

Cen and Wu are not the only ones forced to share an apartment. Many of their classmates and friends living in New York are also doing the same thing. In fact, a recent study conducted by the New York City Comptroller Office suggested that NYC has become much more crowded in the past 10 years with the crowding rate being more than two and a half times the national average.

The study “Hidden Households” was conducted by Scott Stringer, New York City Comptroller, highlighting the growing crowding rate in housing in NYC. According to the study, New York City’s crowding rate has rose from 7.6 percent in 2005 to 8.8 percent in 2013. The number of crowded housing units grew from 228,925 in 2005 to 272,533 in 2013, representing an increase of 19 percent.

The increase in the crowding rate is city-wide. The Comptroller’s study indicates that the proportion of crowded dwelling units increased in all of the five boroughs except Staten Island during this time period. Brooklyn has the largest increase with 28.1 percent, Queens has 12.5 percent and 12.3 percent in the Bronx.

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“Fundamentally, this is a story about supply and demand,” said David Reiss, professor of Law in Brooklyn Law School, and research director of Center for Urban Business Entrepreneurship. “The increase of the housing supply has been very slow, while the increase of the population was very fast, and that is the recipe for crowding. Because people can’t afford to live where they want to live, their choices would be continuing to live where they want to live and be crowded, or to switch to location with more space for your dollar.”

The data confirm Reiss’s observation. According to the U.S. Census Bureau, NYC’s population in 2013 was 8.43 million, increasing from t8.2 million in 2005. However, the 2014 Housing Supply Report, conducted by New York City Rent Guidelines Board, also indicates that the number of permits issued for new construction of residential units had reached its peak – 34,000 in 2008, but the number decreased greatly to 6,000 in 2009. Although the number kept gradually going up, and reached to 18,000 in 2013, the market is no longer as hot as before the financial crisis of 2008.

Contrary to common belief, income does not in itself drive crowding. Although “Hidden Households” shows that 23.6 percent of crowded households reported household incomes in the City’s bottom quartile, it also revealed that 18.5 percent of crowded households have incomes in the City’s top quartile and 5.2 percent of crowded households have incomes in the 90th percentile or higher.

In the beginning of apartment hunting, Wu and her roommates wanted to rent a five-bedroom apartment so that everyone could have their own private space. “The market is too busy in New York,” said Wu. “Once we were going to pay the [lease] for an apartment on Roosevelt Island, but someone was ahead of us by just a few minutes.”

After weeks of apartment hunting, Wu and her roommates decided to make a compromise – two of them would have to share a bedroom, in order to get a decent apartment at an acceptable price – $4,900 per month, with neither an elevator nor a laundry room.

“Land is very expensive, and there is not much left for residential development but a tremendous number of people want to live in New York,” said Albert Goldson, Executive Director of Indo-Brazilian Associates LLC, A NYC-based global advisory firm. “Real estate prices started to go up, so you have people who are middle class or who have modest salaries who can no longer afford [to pay a] mortgage. And what many of them would have done, either single people or a family, was ‘double up’. Like single people who bring in a roommate, now have several roommates in a unit.”

Most experts in the urban planning industry believe that the underlying cause of the growing crowding rate is the affordability of housing. Goldson argues that the city needs to be more available for middle-class people who are actually working here and potentially leaving the city if it is too small or uncomfortable to live here anymore.

From Reiss’ perspective, the way to solve affordability of housing is to amend its zoning code to encourage the construction of housing. Vertical construction is a trend and a solution to the crowding situation. But in the meantime, with more people living in taller buildings, the density would definitely increase. “If the city is really committed to increasing the affordability of housing, you have to be committed to increase the housing density as well,” said Reiss.

Wednesday’s Academic Roundup

Wednesday’s Academic Roundup

Thursday’s Advocacy & Think Tank Round-up

  • Corelogic’s Second Quarter U.S. Equity Report indicated that over three-quarters-of -a-million properties regained equity, while 4.4 million remain in negative equity over the same period. Aggregate negative equity fell $28 billion from $338 billion to $309 billion. According to Corelogic this reduction is caused both by foreclosure completions and home price appreciation.
  • According to a study by the National Association of Realtors (NAR) new home construction is trailing job growth in major metro areas. NAR sees this as the primary reason for the affordability crisis now gripping the nation in many of the same areas.
  • The National Fair Housing Alliance (NFHA) has filed a complaint with the U.S. Department of Housing and Urban Development (HUD) against certain real estate agencies and individual realtors who are alleged to have treated black and latino buyers in Jackson Mississippi in drastically different ways than they treated equally qualified white buyers. According to the NFHA complaint white buyers were shown a wider variety of homes while black and latino purchasers were largely steer into majority minority neighborhoods.
  • The NHFA, in a related vein, also released a study entitled Where You Live Matters – 2015 Fair Housing Trends Report which draws a stark parallel between the historic lack of investment in communities of color and the racial disparities in educational, social, and economic outcomes that have resulted.
  • NYU’s Furman Center has released a Brief entitled Black and Latino Segregation and Socioeconomic Outcomes which finds that the burgeoning Latino population in the U.S. is largely “inheriting the segregated urban structures experienced by African Americans.” This segregation seems to lead to reduced socioeconomic prospects when compared with whites, including lower earnings, more violent crime, less access to credit and lower homeownership rates.

Bank Break-ins

"Balaclava 3 hole black" by Tobias "ToMar" Maier. Licensed under CC BY-SA 3.0 via Wikimedia Commons - https://commons.wikimedia.org/wiki/File:Balaclava_3_hole_black.jpg#/media/File:Balaclava_3_hole_black.jpg

Chris Odinet has posted Banks, Break-Ins, and Bad Actors in Mortgage Foreclosure to SSRN. The abstract reads,

During the housing crisis banks were confronted with a previously unknown number mortgage foreclosures, and even as the height of the crisis has passed lenders are still dealing with a tremendous backlog. Overtime lenders have increasingly engaged third party contractors to assist them in managing these assets. These property management companies — with supposed expertise in the management and preservation of real estate — have taken charge of a large swathe of distressed properties in order to ensure that, during the post-default and pre-foreclosure phases, the property is being adequately preserved and maintained. But in mid-2013 a flurry of articles began cropping up in newspapers and media outlets across the country recounting stories of people who had fallen behind on their mortgage payments returning home one day to find that all of their belongings had been taken and their homes heavily damaged. These homeowners soon discovered that it was not a random thief that was the culprit, but rather property management contractors hired by the homeowners’ mortgage servicer.

The issues arising from these practices have become so pervasive that lawsuits have been filed in over 30 states, and legal aid organizations in California, Florida, Michigan, Nevada, and New York report that complaints against lender-engaged property managements firms number among their top grievances. This Article analyzes lender-engaged property management firms and these break-in foreclosure activities. In doing so, the paper makes a three-part call to action, which includes the implementation of bank contractor oversight regulations, the creation of a private cause of action for aggrieved homeowners, and the curtailment of property preservation clauses in mortgage contracts.

This is a timely article about a cutting edge issue. All too often I have heard pro-bank lawyers claim that banks almost never foreclose improperly. The news reports and lawsuits discussed in this article counter that claim. And yet, I hope that some empirically-minded person could quantify the frequency of such misbehavior to better inform policymakers going forward.

Wednesday’s Academic Roundup

Reset Tsunami

Cyclone home

Newsday quoted me in When Home Equity Lines of Credit Reset when your plan resets. It reads,

A decade isn’t really a long time – just ask the millions of homeowners whose 10-year-old home equity lines of credit are resetting.

There are two types of HELOC resets: Variable interest rates can reset, and an interest-only repayment plan can reset to amortize. That means payments will switch to include principal and interest, explains David Reiss, a law professor specializing in real estate at Brooklyn Law School.

Many are in for a shock. If you’ve been making interest-only payments for 10 years, “the switch to amortizing over the compressed 20-year period [remaining on a 30-year loan] can lead to an increase of 100 percent or more,” says Peter Grabel of Luxury Mortgage Corp. in Stamford, Connecticut.

If your HELOC is resetting, know what to expect.

“You will no longer be able to draw on the equity line,” says Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage.” You’ll have a specific time to pay off the loan.

Consider your goals: “What is your purpose for having a HELOC?” says Ray Rodriguez of TD Bank in Manhattan. That drives the options.

Plan for change: “Prepare for the end of the draw period. Find out what your new payment will be,” says Kevin Murphy of McGraw-Hill Federal Credit Union in Manhattan. Cut expenses to make up for the jump.

Explore options: Consider refinancing your debt into a longer-term fixed-rate loan, suggests Ben Sullivan of Palisades Hudson Financial Group in Scarsdale. Replace the HELOC with a new one, or combine your first mortgage with your HELOC into a new interest-only ARM. Talk to a mortgage counselor.