Housing Crisis in New York

Michael Greenberg in NYRB identifies the lack of affordable housing as a humanitarian crisis.

The cause of the crisis is the removal of rent stabilized apartments,

among the city’s most precious resources, as critical to its well-being, I would argue, as its transit system and public parks. In view of this extraordinary level of regulation, it may seem surprising that New York faces a crisis in affordable housing. But rent-stabilized apartments are disappearing at an alarming rate: since 2007, at least 172,000 apartments have been deregulated. To give an example of how quickly affordable housing can vanish, between 2007 and 2014, 25 percent of the rent-stabilized apartments on the Upper West Side of Manhattan were deregulated.

Although rent caps are eliminated when the rent of an apartment exceeds $2,700 monthly, owners purchasing buildings at boom prices increasingly prefer to push out a building’s tenants in order to raise rents to cover astronomical financial costs to ownership. Indeed, sellers of buildings expect this to happen:

The clearing out of rent-stabilized tenants has become such a common real estate practice that it is added to a building’s value even before the fact. Landlords have found enough loopholes in tenant protection laws to make widespread displacement a viable financial strategy. A building in Crown Heights with one hundred stabilized units and a rent roll of $1.2 million might now fetch $40 million or more—and every tenant must be forced out for the investment to be recouped.

Perhaps not surprisingly the players in this game, with access to sufficient cash and credit to buy whole New York buildings, and to pay lawyers and court costs to see evictions through, are private equity investment firms, which makes Greenberg seem almost longing for the days of the “individual slumlord” of the outer boroughs.

Landlord-tenant relations are totally out of whack. One of the most perverse mechanisms Greenberg identifies is “preferential rent.” When landlords opt not to increase rents on stabilized apartments up to the full limit of the law, they effectively accrue the potential to ask for sudden, large increases of the sort that can induce tenants to move. After that, vacancy and capital improvements are often sufficient to raise rents above the $2,700 ceiling for rent controls. There are about a quarter million rent-stabilized apartments in New York where the tenants are paying preferential rent, and Greenberg makes clear that the residents of all of them are at risk.

These rent machinations throw the housing stock of affordable outer borough neighborhoods into the maw of the political-economic-cultural storm of gentrification, as apartment finding services create new frontiers for young, educated, and often white tenants. The cultural cachet of hipness, however, is less attractive to longtime tenants who perceive it, correctly, as a harbinger of pressure to move. Greenberg helps us to understand clearly that gentrification of this sort is not simply a “market” process. Financially interested actors intervene daily in the lives of tenants (not just when a building sells or a vacant apartment is leased) in ways that are often explicitly oriented toward pushing them out. Landlords harass tenants:

Some landlords bring tenants to court for putting up bookshelves (which may violate the letter of a lease that prohibits renters from drilling into walls) or for having a roommate or, in one case I know of, a pet canary. “Most people here don’t believe in the courts because they’re used to it working against them,” said Nefertiti. “That’s what landlords count on.” Many renters are unaware of the laws protecting them and have little knowledge of how New York’s intricate housing bureaucracy works, so they are easily intimidated by determined owners. A court date is also a missed day at work. Landlords don’t expect to win all of these skirmishes, but the barrage of lawsuits helps set the stage for a buyout: financially and emotionally ground down, the tenant agrees to relinquish his rights and depart.

An artist I know in South Williamsburg took flight after her landlord paid a homeless man to sleep outside her door, defecate in the hallway, invite friends in for drug-fueled parties, and taunt her as she entered and left the building. In East New York a mother tells of a landlord who, after claiming to smell gas in the hallway, gained entry to her apartment and then locked her out. In January, a couple with a three-month-old baby in Bushwick complained to the city because they had no heat. In response, the landlord threatened to alert the Administration for Children’s Services that they were living with a baby in an unheated apartment. Fearful of losing their child, they left, leaving the owner with what he wanted: a vacant unit.

If any of that sounds farfetched, here’s one San Francisco building owner’s confession: He conspired to burn his own building down to renovate it without the burden of its tenants. Of course not all landlords are criminals, but the market in “hot” cities gives even honest property owners strong incentives to push their tenants out.

So what can be done? As Greenberg notes, the city currently does work to preserve affordable housing under certain provisions, and offers tax incentives to developers to include below-market apartments in new buildings. The problem with 421-a is that it contributes to the oversupply of high-end housing, which might, under ordinary conditions of glut, slow down. The program also is projected to deprive New York of more than $10 billion in property tax receipts by 2020. And, perhaps most troubling, developers in partnership with the city have secured an expansive definition of need for housing assistance, such that a grossly disproportionate share of 421-a apartments are priced to cost the requisite 30 percent of the income of a household taking in the low six figures. Once developers have skewed the median rent of a neighborhood to approach five figures, it’s reasonable to declare that the modestly well-off can’t afford market rate rents. But the approach does little to help the lowest income New Yorkers. Nearly 3 million New Yorkers filed applications for a lottery to rent 4,174 apartments in 2013-15. One in 700 were successful, overall, but the count disguises a much lower rate of success, owing to low supply, of placing low-income tenants:

In a rush to rack up “affordable” units and get to the 80,000 he promised, de Blasio appears to have stocked the program with housing for upper-middle-income tenants who don’t need it. It costs more to subsidize the poor because they can pay so little themselves; the logical fiscal alternative is to subsidize those who can pay more.

This approach accounts for the hostility Greenberg reports between residents of neighborhoods like East New York and East Harlem for rezoning plans that would allow high-rise apartment towers. Residents feel, with ample reason, that the net effect of the projects, even with subsidized apartments, will be to displace the poor, leaving the city’s public housing system, with a waiting list of more than 255,000 families for 176,000 apartments as the last, inadequate, refuge for poor New Yorkers.

The political economy of housing is profoundly shaped by a problem that is familiar to me: the conflict between urban constituencies and suburban- and rural-dominated state legislatures. In Albany, representatives of suburban districts are prime targets for developer lobbyists, as they can oppose tenant protections and rent controls that affect New York City without political risk. Perhaps New York City should secede from New York State.

Short of that solution, Greenberg suggests a simple, yet radical solution: a significant local-option sales tax for New York City dedicated to actually providing housing. The proposal would allow New York to generate fiscal resources to create and preserve low-income housing independent of Albany and Washington, and would also, hopefully, bind New Yorkers together around two core ideas: affordable housing is a problem at many income levels, and, since New Yorkers are all affected by public policies toward private developers, an aggressive public commitment to affordable housing is not a special interest but a public interest.

With a sales tax devoted to housing, affordable buildings needn’t be confined to land the city already owns; enough money would be available to purchase lots all over the five boroughs, not just in poorer districts. The buildings could be woven into the fabric of the city, rather than clumped together in self-enclosed enclaves that promote a kind of psychological as well as physical segregation. New affordable housing would no longer be contingent on giving tax exemptions to the builders of private, market-rate projects: luxury developers would be free to charge whatever the market will bear for all of their units, not just 70 or 80 percent of them, and the city, in turn, could collect from these developers the billions in property taxes that it now forfeits under 421-a. Housing built with money from a special tax fund would be 100 percent affordable. Over time homelessness would decrease—especially among low-wage working families—as would the amount (currently about $1.6 billion per year) that the city spends on homeless services.

This would be an overturning of three decades of urban housing policy, repudiating the shrinking of the public sector and the corresponding turn toward the market. It would overturn the Bloombergian political economy of the city. It would be extreme. It may be the only thing that can help another generation of working class New Yorkers afford to live decently in the city.

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2 comments on “Housing Crisis in New York

  1. […] capital in poor areas bears no necessary connection to housing the residents of those areas (I blogged a while back on Michael Greenberg’s outstanding NYRB article on New York’s deficient […]

  2. […] is in some ways a fitting cap to decades of financialization of urban housing–of turning the provision of space for dwelling and commerce into a financial transaction in […]

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