Tag Archives: rent regulation

NYC’s (Affordable) Housing Crisis

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The Citizen’s Budget Commission is releasing a series of Policy Briefs on affordable housing in New York City. They raise interesting questions. The first policy brief, The Affordable Housing Crisis: How Bad Is It in New York City, compares the affordable housing situation in 22 large American cities and finds that NYC is not the worst, notwithstanding how many New Yorker’s feel about it. Some of the particular findings included,

  • New York City relies more heavily on rental, as opposed to owned, housing than all other large cities; more than two of every three occupied housing units are rental.
  • The increase in housing supply since 2000 was slower in New York City than in every other large city with population growth.
  • New York City does not have the highest average rents. New York City median rent ranks sixth most expensive among the 22 cities, slightly worse than 2000, when it ranked seventh.
  • New York City is not the most unaffordable: New York City ranks ninth worst in rental affordability, defined as the percent of households spending more than 30 percent of income on gross rent. This is slightly better than its eighth worst ranking in 2000, although the share of renters with burdensome rent increased from 41 percent to 51 percent.(1)

For me, the real story is the second bullet point.  New York City had the fourth slowest growth in the number of housing units out of the 22 cities, notwithstanding the fact that it has always had a limited supply and compounded by the fact that its population has been growing significantly for quite some time. It is depressing to learn that “the number of housing units in New York City increased” only 5.8 percent between 2000 and 2012. (2) This leaves New York City with a vacancy rate of 3.6 percent in 2012, which means that we are a long way off from making a serious dent in the affordability problem. The de Blasio administration has made affordable housing a centerpiece of its agenda. This report reminds us that part of the solution to the affordable housing puzzle is just building more housing overall. We have lots of pent up demand, we just don’t have the supply. That is one reason the rent is too damn high!

Rent Regulation and Housing Affordability

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NYU’s Furman Center issued a fact brief, Profile of Rent-Stabilized Units and Tenants in New York City, that provides context for the deliberations of the Rent Guidelines Board as it considers a rent freeze for NYC apartments subject to rent stabilization.

Rent regulated (rent stabilized and rent controlled) apartments clearly serve households that have lower incomes than households in market rate apartments. Median household income (fifty percent are below and fifty percent are above this number) is $37,600 for rent regulated and $52,260 for market rate households.Thus, market rate households have median incomes that are nearly 40% higher than rent regulated ones.

The median rent is $1,155 for rent regulated and $1,510 for market rate households.Thus, median rents are about 30% higher for market rate tenants.

Despite these differences, the number of households that are rent burdened (where rent is greater than 30% of income) is similar for the two groups: 58% for rent regulated and about 56% for market rate households. (4, Table D)

The Furman Center brief provides a useful context in which to consider NYC’s rental housing stock as well as the households that live in it. Given the nature of NYC households, however, I would have wished for a more finely detailed presentation of household incomes and rents.

NYC’s distribution of income is skewed toward the extremes — more low-income and high-income households and therefore fewer middle-income ones than the rest of the nation. Given this, it would have been helpful to have seen the range and distribution of incomes and rents, perhaps by deciles. The Furman Center brief indicates that updated data will be available next year, so that may provide an opportunity to give a more granular sense of dynamics of the NYC rental market.

Mayor de Blasio’s housing plan outlines his commitment to preserving affordable housing. One element of that commitment is to preserve rent regulated housing. Understanding that market sector and the households it serves is essential to meeting that commitment.

NYC’s Housing Affordability Challenge

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NYC’s Comptroller Stringer has issued The Growing Gap: New York City’s Housing Affordability Challenge. The report tells

a sobering story—of stagnant incomes, rising rents, and a deepening affordability crunch, especially for the working poor and others at the lower end of the income spectrum. This financial squeeze comes despite significant housing investments during the 12 years of the Bloomberg mayoralty. From 2000 to 2012, this report found:

• Median apartment rents in New York City rose by 75 percent, compared to 44 percent in the rest of the U.S. Over the same period, real incomes of New Yorkers declined as the nation struggled to emerge from two recessions.

• Housing affordability—as defined by rent-to-income ratios—decreased for renters in every income group during this period, with the harshest consequences for poor and working class New Yorkers earning less than $40,000 a year.

• There was a dramatic shift in the distribution of affordable apartments, with a loss of approximately 400,000 apartments renting for $1,000 or less. This shift helped to drive the inflation-adjusted median rent from $839 in 2000 to $1,100 in 2012, a 31.1% increase. In some neighborhoods – among them Williamsburg, Greenpoint, Ft. Greene and Bushwick in Brooklyn, average real rents increased 50 percent or more over the 12-year period.

• The elderly and working poor are making up a growing portion of low-income households with 40 percent of the increase tied to households in which the head is 60 years or older.

• In 2000, renters earning between $20,000 and $40,000 in inflation-adjusted dollars were dedicating an average of 33 percent of their income to rental costs. Twelve years later that average jumped to 41 percent. Their housing circumstances became more precarious even though their labor force participation rates soared.

It is clear that affordable housing remains one of New York City’s most pressing needs. Mayor de Blasio has laid out a goal of creating or preserving 200,000 units of affordable housing over a 10-year period, an ambitious increase over the 165,000 units pledged under Mayor Bloomberg’s 12-year New Housing Marketplace Plan.

Now, with the winding down of one major housing initiative and the launching of another, it is appropriate to take stock of the City’s housing circumstances, to evaluate the changes that have taken place in the city’s housing ecology, and to outline strategies for future housing investment that are informed by the city’s evolving housing landscape. (1)

While the report diagnoses many of the problems in the housing market, it does much less in terms of proposing solutions to them. It also fundamentally misunderstands the role that new housing plays in the housing market (see page 24). The report only focuses on the high rents for the new units without taking into account the fact that those new units reduce the pressure on rents for older units of housing, a process that housing economists refer to as “filtering.” There is no question that the CIty needs to increase the supply of housing if it wants to reduce the cost of housing overall. The de Blasio Administration understands this. We will have to wait and see how the Mayor’s housing plan, to be released in May, will tackle the under-supply problem head on.