Tag Archives: tenant

Abusive Non-Rent Fees for Rent Stabilized Tenants

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The Urban Justice Center’s Community Development Project has issued a report, The Burden of Fees: How Affordable Housing is Made Unaffordable. The introduction reads,

Tenants in New York City’s poorest neighborhoods are under attack. Despite the existence of laws such as rent stabilization to protect tenants from high rents, landlords are creating new ways to push rent stabilized tenants out of their homes. One such tactic is the use of non-rent fees, a confusing and often times unwarranted set of charges that are added to a monthly rent statement . . .. These include fees on appliances (air conditioner, washing machine, dryer, and dishwasher), legal fees, damage fees, Major Capital Improvement (MCI) rent increases and other miscellaneous fees. Often these fees appear on a tenant’s rent bill without any explanation. If a tenant fails to pay, even if they are unaware of why the fee was imposed, they are sent letters that make them feel that they are being harassed and are threatened with eviction by the landlord. Most tenants have a right to object to many of these fees, and landlords are legally prohibited from taking tenants to Housing Court solely for non-payment of additional fees. But many tenants don’t know their rights about the fees and often pay them when they shouldn’t. For low-income and working class tenants who struggle each month to pay rent, these fees add up and make their housing costs unaffordable. While some of the fees are legal, many of them are not, and the consistency and pattern of the way the fees are being charged and collected suggests that some landlords are intentionally increasing tenants’ rent burdens to push out long- term, rent stabilized tenants.

This problem is proliferating in the Bronx, where New Settlement’s Community Action for Safe Apartments (CASA) works to improve living conditions and maintain affordable housing. This is particularly apparent in buildings owned by Chestnut Holdings, a company that is fast becoming one of the biggest landlords of rent stabilized buildings in the Bronx.

*     *     *

All survey respondents live in rent stabilized buildings owned by Chestnut Holdings. In total, the coalition collected 172 surveys from 23 buildings, representing 13% of the number of apartments in those buildings. The research sample accounts for 4% of all the apartments that Chestnut Holdings owns, and 28% of the buildings. Researchers also collected rent bills and other supplemental materials (including letters to and from landlords, housing court decisions, and more) from 196 Chestnut Holdings tenants. Coalition members chose to focus on these buildings because they are rent stabilized and located in the neighborhoods where each organization is actively working. Data in this report comes from surveys, recent rent bills collected from Chestnut Holdings’ tenants and interviews with tenants.

Overall, we found that the problem of non-rent fees is serious and widespread in the Bronx. 81% of the tenants we surveyed had been charged some sort of fee. From the rent bills we reviewed for this report, the average tenant had $671.13 in non-rent fees on their most recent rent bill. (1-2)

This document is obviously an advocacy document and not a piece of objective scholarship. Moreover, its methodology may not be rigorous enough to allow us to extrapolate much from its findings. That being said, the survey responses themselves reveal a serious problem: alleged average non-rent fees of nearly $700 for each survey respondent seems very, very high, even if we limit the findings to the respondents themselves.

In the 1970s, predatory landlords hired bruisers with bats and pit bulls to frighten tenants into leaving their homes. In the 2000s, a new generation of predatory landlords used abusive court filings to achieve the same purpose. There is a very real risk that high non-rent fees represent a new tactic for predatory landlords to drive out rent-regulated tenants with under-market rents. To the extent that non-rent fees represent a new tactic to harass tenants, government regulators should actively seek to end it and punish those who employ it.

Tax Expenditure Wars: Wealthy Households v. Poor

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Henry Rose has posted How Federal Tax Expenditures That Support Housing Contribute to Economic Inequality to SSRN. This short article examines “how federal income tax laws benefit more affluent owner households but provide no benefits to economically-strapped renter households.” (1) Housing policy analysts (myself included) constantly bemoan the regressive nature of federal tax policy as it relates to housing, but it is always worth looking at the topic with updated numbers. And this article contains some tables with some interesting numbers.

One table provides an overview of the estimated tax savings (in billions) in FY 2014 for five federal tax expenditures for owners of housing that they occupy:

Mortgage Interest Deduction  (MID)                                                 $66.91

Property Tax Deduction (PTD)                                                        $31.59

Capital Gains Exclusion on Sales                                                   $35.54

Net Imputed Rental Income Exclusion                                            $75.24

Discharge of Mortgage Indebtedness Exclusion                            $3.1

Total                                                                                                 $212.38

The next table provides an estimated distribution of two of these tax expenditures (FY 2014, savings in millions):

Tax-Filer AGI                PTD Tax Savings         MID Tax Savings                

Below $50,000              $693                              $1,443

$50,000-75,000             $2,190                           $4,330

$75,000-100,000           $3,478                           $6,581

$100,000-200,000         $13,648                         $27,421

$200,000+                     $11,798                         $29,340

Total                              $31,806                         $69,115                               

The article concludes by noting that despite

the great disparity in economic positions between owners and renters, federal tax expenditures lavish tax savings on primarily affluent owners and provide none for renters. The federal tax expenditures for owners are so generous that interest can be deducted on mortgage balances up to $1,000,000 and can also be taken on second homes, even yachts, as well as primary residences. It is difficult to conceive of a federal public policy that more directly promotes economic inequality than the federal tax expenditures that support owners of housing but are not available to renters. (9-10, footnote omitted)

I don’t expect this disparity to be addressed any time in the near future, given the current political environment, but it is certainly one that should stay at the top of any list of reforms for those concerned with promoting equitable federal housing policies.

Airbnb and Profiteering

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A NYC Housing Court judge issued a Decision/Order in 42nd and 10th Associates LLC v. Ikezi (No. 85736/2014 Feb. 17, 2015) that resulted in the eviction of a rent stabilized tenant who had rented his apartment through Airbnb at a rate much in excess of the rent approved by the NYC’s Rent Guidelines Board.

The Decision makes for a pretty good read in large part because of the incredible testimony of the tenant:

When questioned on Petitioner’s case whether Respondent charged anyone money to stay in the subject premises, Respondent first testified that he could not recall if he ever charged anyone money to stay in the subject premises for a tenancy, and then testified that he does not know if he ever charged anyone money to stay in the subject premises. Given that Respondent was being sued for eviction, that Respondent testified as such on January 21, 2015, and that Respondent’s tenancy commenced on October 10, 2014, three months and eleven days before his tenancy, Respondent’s inability to remember or know if he had charged anyone to sleep in the subject premises defies common sense. Such incredible testimony was of a piece with other testimony Respondent offered, such as his response to a question about how many nights he has slept in the subject premises with the answer that he does not keep a log of where he sleeps, Respondent’s inability to determine whether a photograph of a comforter on a bed in the ad was a comforter that he owned, Respondent’s lack of knowledge as to other addresses that might be his wife’s address, and Respondent’s testimony that he does not have an email address at the company that he is the president of. If Respondent was actually profiteering by renting out the subject premises as a hotel room, wanted to avoid testifying as such, and was trying to be clever about technically avoiding committing perjury, it is hard to imagine how Respondent would testify differently. (9-10)

The defendant’s testimony demonstrates what happens when the profit motive hits smack up against rent regulation’s policy goal of protecting tenants from large rent increases. Without defining it precisely, the Court refers to this as profiteering which it finds to be inconsistent with the goals of rent regulation and incurable to boot. Thus, the Court issued a warrant of eviction.

This seems like the right result on the law and as a matter of policy. Otherwise, more and more apartments would be informally removed from the regulated housing stock. Moreover, landlords and neighbors would be stuck with the costs of short-term stays while tenant scofflaws would get all the benefit.

Who Benefits from the Low Income Housing Tax Credit?

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HUD’s Office of Policy Development and Research has released a report, Understanding  Whom  the  LIHTC  Program  Serves: Tenants  in  LIHTC  Units  as  of  December  31,  2012. By way of background,

The Low-Income Housing Tax Credit (LIHTC) Program provides tax credits to developers of affordable rental housing. The tax credits are provided during the first 10 years of a minimum 30-year compliance period during which rent and income restrictions apply. The LIHTC Program, although established in the U.S. Internal Revenue Code (IRC), is structured such that state-allocating agencies administer most aspects of the program, including income and rent compliance, with the Internal Revenue Service (IRS) providing oversight and guidance. Local administration allows states to address affordable housing needs specific to their populations. (1)

 Here are some findings of note:

  • Approximately three-fourths of reported households include disability status for at least one household member.
  • 36.4 percent of reported LIHTC households had a least one member under 18 years old.
  • Nearly 33 percent of reported LIHTC households have an elderly member, and 28.6 percent of reported LIHTC households have a head of household at least 62 years old.
  • The overall median annual income of households living in LIHTC units was $17,066, ranging from $8,769 in Kentucky to $22,241 in Florida. By comparison, the median income of HUD-assisted tenants was $10,272 in 2012.
  • Approximately 60 percent of reported households nationwide had incomes below $20,000.
  • The study found that approximately 39 percent of all LIHTC households paid more than 30 percent of their income for rent, thus making them housing cost burdened. Ten percent of all LIHTC households faced a severe housing cost burden, paying more than 50 percent of their income towards rent.
  • In 23 states, HUD was able to collect some data on the use of rental assistance in LIHTC units, which can eliminate cost burden for households who have it. Approximately half of reported households receive some form of rental assistance, with the greatest use in Vermont (64 percent) and least use in Nevada (23 percent).

The Housing and Economic Recovery Act of 2008 requires that this information be collected on an ongoing basis. It should be of great value as policymakers formulate federal housing policy for low-income households going forward.

Reiss on Airbnb

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MainStreet.com quoted me in Housing Activists Claim Airbnb Cuts Into Affordable Apartment Inventory in Manhattan. The story opens

Popular and trendy neighborhoods in Manhattan accounted for 30% of units booked as private rentals on AirBnB.com, according to information subpoenaed by New York Attorney General (AG) Eric T. Schneiderman that Airbnb fought against releasing.

Those neighborhoods include the Lower East Side, Chinatown, Chelsea, Hells Kitchen, Greenwich Village and SoHo. “Removing rental units from the marketplace by operating them as illegal hotels damages the availability of housing,” said Roxanne Earley, a blogger with the Association for Neighborhood & Housing Development (ANHD).

Another tidbit from the AG’s report based on subpoenaed records is that commercial users of the home-sharing website collected $168 million in rent last year, controlled one in five AirBnb units and one in three bookings. “Although Airbnb is marketing itself as a company that helps the majority of its hosts make some extra money to keep their homes, the reality is that a multi-billion dollar business is helping a small portion of commercial users rake in a disproportionate amount of profit,” Earley told MainStreet.

“The markup on short-term rentals is much higher than that of long-term residential use of apartments and this has resulted in landlords breaking the law and using their units, sometimes whole buildings as illegal hotels,” said Earley.

And that’s eating into affordable housing units that city residents could be living in. “Commercial users earn an incredible markup on short term rentals and take units that may otherwise be affordable off of the market for long term occupancy,” Earley said.

The existence of rent regulation is unique to cities like New York and San Francisco and further complicates the Airbnb factor. Administered by a court or public authority, rent regulation limits the changes in price that can be attached to renting a home, which balances the negotiating power of landlord to tenant.

“If rent regulated apartments become profit-centers, tenants may also be incentivized to hang on to their apartments longer than they would otherwise, negatively impacting the availability of affordable housing for those who would use it purely for their own personal residence,” said David Reiss, professor at Brooklyn Law School.