Analyzing the Mayor's Housing Plan - Part 2

Analyzing the Mayor’s Housing Plan – Part 2: Preserving the Affordability & Quality of Existing Housing Stock. 

This is the second of five blog posts analyzing Housing New York, the Mayor’s new ten-year plan for affordable housing development, chapter-by-chapter. This week focuses on Chapter Two: Preserving the Affordability and Quality of Existing Housing Stock.

A central plank of the Mayor’s housing plan is the recognition that preserving our existing affordable housing is the most cost-effective way to fight for the homes that New Yorkers need. Building new housing is always far more expensive then preserving the current affordable housing that is under threat. And preserving the existing housing avoids the difficult policy choices that we will have to make to find new places to build in our already densely constructed city.

Preserving affordable housing is mostly a matter of carrots and sticks. The government has incentives in its toolbox – tax abatements and low-interest loans chief among them – it can use to trade a building owner for an agreement to keep housing affordable for low- and moderate-income people. It also has certain powers it can use to do the same, and also make sure an owner keeps the building in good repair – for instance, it can issue Housing Maintenance Code violations and levy liens and foreclose on them if an owner keeps a building in such bad condition that the City has to make emergency repairs. In the second chapter of the Mayor’s Housing New York plan, Preserving the Affordability and Quality of the Existing Housing Stock, the key to understanding the approach is to look for what new carrots and sticks the city proposes, and how they plan to use existing ones differently.

Most of the administration’s new incentives focus on tax abatements, and ways to extend them to buildings in danger of losing affordability. Tax abatements are the biggest carrot the city has, however many of them were developed decades ago and designed to spur development, not provide affordability.  The result is a patchwork system of incentives better suited for the situation of the New York of the 1980s than the New York of today. Many developments get abatements they don’t need, and many buildings that need abatements in order to preserve affordability don’t have one available.  The new housing plan proposes developing new tax abatements for buildings in danger of converting to condominiums or exiting Rent Stabilization. The city could also explore a tax abatement for preserving affordable rental units in already-converted co-ops or condos, and a Good Neighbor tax credit for owners of 1-4 family homes who commit to keeping their rentals affordable. The city could also actually make tax abatement reform revenue-neutral, by also reforming some of the unneeded incentives as well, most notably the 421a program, to balance these added expenditures.

These new incentives look promising, but it is more effective utilization of existing tools that is at the heart of the administration’s preservation strategy. They lay out several current programs they plan on expanding and making more efficient, such as preservation of Mitchell-Lama and former Mitchell-Lama buildings, preservation of buildings built under the Low Income Housing Tax Credit Housing program (which they are expanding to State and HDC-sponsored buildings as well), and preservation of HUD-sponsored multifamily housing. The most notable addition is that the city has committed to fully partnering with the New York City Housing Authority (NYCHA) to create a comprehensive preservation strategy for public housing. With all of these efforts, details will be forthcoming.

As far as the new sticks go, the Mayor’s plan focuses on better utilizing the city’s authority to levy and foreclose on liens. The city is proposing to increase the interest on Emergency Repair liens from 7% to 18%, which would give it an added a bit of leverage when it comes to getting bad actors to keep their buildings in good repair. The city is also committed to reviving the Third Party Transfer (TPT) program, with a focus on transferring physically distressed properties to responsible not-for-profit developers. Reforming the TPT law to capture more distressed buildings, and also committing to using the city’s authority to directly foreclose on liens on a case-by-case basis when needed, instead of routinely selling the liens to outside investors, would also be welcome. The City has already set up an entity – Preserving City Neighborhoods (PCN) – that is able to acquire overleveraged properties and take them through the foreclosure process, and further utilization of this tool would also add to the preservation pipeline.

In a very significant departure from previous years, the plan addresses our biggest preservation challenge – preserving our rapidly depleting rent-regulated stock. We have lost well over 100,000 affordable, Rent Stabilized units to vacancy deregulation over the last 12 years, most of it in higher-rent neighborhoods where affordable housing is the scarcest. Any affordable housing preservation program must have an aggressive defense and strengthening of Rent Stabilization at its core, and the city commits to going after the biggest fish available – repeal of the Urdstadt Law.

The main impediment to changing Rent Stabilization rules is that much of the Rent Stabilization law is controlled by the State, with the City, under the Urdstadt Law, forbidden to make stronger rules than the State allows. For the first time in at least 20 years we have an administration fully committed to repealing this law and gaining local control over Rent Regulation. However, while the administration is explicitly committed to the repeal of the Urdstadt Law as a policy, executing this will be a matter of priorities and political will. Political bodies do not give up authority easily, and it is to be expected that getting the New York State Legislature to give up much of its legislative authority in the area of Rent Regulation will be a challenge. It will take a sustained and tireless campaign by New Yorkers, as well as a real leadership and full commitment by the administration, to accomplish a repeal of the Urstadt Law. However, by doing so, New York can potentially gain the most valuable tool by far in its fight to preserve an affordable and equitable city – the right to enact stronger rent protections for New York City without interference from the State Legislature.

While granting home rules to New York City on the issue of Rent Regulation is the largest and most effective policy change that can happen, there are also smaller measures the city is proposing in order to preserve our rent-regulated stock. Much of our rent-regulated apartments are lost through illegal or semi-legal means. The plan commits to exploring how to utilize HPD’s housing code enforcement authority to also assist in protecting Rent Stabilized units, and commits to finding more funding for legal representation for tenants facing eviction. These are both good and necessary additions. Exploring ways for HPD’s legal department to also help enforce tenant protection laws would be another good and necessary step because, while Housing Code enforcement will always be the center of HPD’s housing preservation mission, in the current real estate environment the major threat to affordable rental housing increasingly comes not from classic slumlord tactics, but from landlords aggressively trying to raise the rent roll by pushing out low-rent-paying tenants through illegal and semi-legal means to. To fulfill its mission, HPD must use every means at its disposal to help tenants face these pressures.

The plan also commits to continuing work in two areas where the City has already made substantial progress: reducing building utility and energy costs, and improving oversight and asset management of City-subsidized properties. The Plan also commits to working further on storm resiliency retrofits and to reduce the cost of Flood Insurance. Reducing and properly managing building costs is important to keeping affordable housing in good repair – these buildings have very limited ability to increase revenues, so reducing costs is imperative to keeping them financially stable – and maintaining and expanding this focus is good to see.

The Plan included small section on affordable homeownership, focusing on utilizing current programs. However, there is a large homeownership preservation opportunity the City is overlooking – that of our HDFC Cooperatives. Many HDFC Cooperatives that were developed as affordable housing in the 1980s and 1990s have severe loopholes in the definition and enforcement of the affordability restrictions. The result is affordable housing either being sublet or sold for market prices. And many cooperatives that do try and keep their buildings affordable face unfair tax burdens, ever-compounding tax and water/sewer arrears, and lack of ability to borrow for building maintenance and improvements. A program to extend tax relief and financing to these buildings in exchange for new resale and sublet restrictions that come with effective monitoring could potentially preserve tens of thousands of affordable homeownership units.

ANHD’s blog schedule on the Mayor’s Housing Plan:

• Wednesday, May 28th:  Fostering Diverse, Livable Neighborhoods
• Wednesday, June 4th:  Preserving the Affordability and Quality of the Existing Housing Stock
• Wednesday, June 11th:  Building New Affordable Housing for All New Yorkers
• Wednesday, June 18th:   Promoting Homeless, Senior, Supportive, and Accessible Housing
• Wednesday, June 25th:  Refining City Financing Tools and Expanding Funding Sources for Affordable Housing