Friday, October 24, 2014

NYC and Rent Regulations--a resurgence or the continuation of a slow death?

Has anyone else noticed that since Mayor de Blasio announced his affordable housing plan (AHP) last May--in which the benefits of saving and/or preserving rent regulated housing are extolled--more and more of such apartments appear to be under siege?

The plan explicitly says: The City needs to protect tenants in rent-regulated units more aggressively. We cannot allow landlords to harass tenants and drive them out of our rent-regulated housing stock. Keeping those units affordable is critical to our overarching goals of addressing inequality.

Yet, here are just a few examples between July and September of tenant harassment:


Pelham Parkway/University Heights

East Harlem




Upper West Side


East Village

East Village, Little Italy, Lower East Side, Stuyvestant
This guy has notoriously been harassing tenants for almost 20 years!

East Village
Donald Trump's family gets in on his old act.

Chinatown, LES, East Harlem

Chinatown, LES

So, the question is, how seriously is the mayor and his inner circle of real estate insiders really taking the problem, and how strong is his commitment to the rent regulation system in general? The record has been decidedly mixed over the ensuing months.

It's already been mentioned here the AHP disappointed many affordable housing activists for what it didn't say in this area. Specifically, there was no mention of repealing vacancy decontrol, though de Blasio did advocate repealing Urstadt

There is no question the overall effect of vacancy decontrol has been devastating--which was its intent all along. And as owners are not obliged to notify any government agency when an apartment is decontrolled, it's impossible to quantify exactly how many units have been lost. According to tenants rights organization, Metropolitan Council on Housing, "Vacancy deregulation is causing the number of stabilized apartments to shrink by tens of thousands every year." 

Some 250,000 units were lost since 1994, according to the Rent Guidelines Board (RGB). In the RGB's report issued this year about changes in the regulated housing stock in 2013, high rent/vacancy deregulation accounted for the biggest reason units were removed, at 63 percent.

What's not so clear is if in fact NYC had home rule, would it really pass stronger tenant protections? Because, based on the actions of the last few mayors and City Council, that answer would not be a definitive 'yes.'

Then, consider this combined with the debacle at the RGB's final vote in June, where the mayor all but promised a rent freeze for stabilized apartments--especially during the campaign. At the last minute, two of his own appointees making up the majority instead approved a one percent increase on one-year leases, and 2.75 percent for two--modest increases yes, but following years of excessive ones. In a practical sense, a rent freeze wouldn't have made a huge difference except symbolically, after so many years of landlords raking in giant profits enabled by the city.

It was widely speculated the reason for the last minute change came down to interference from deputy mayor for housing and economic development, Alicia Glen. Given her background (see prior entries), it's hard not to see this as a tacit message to the Real Estate Board of New York (REBNY) and the like, that they will still get their way.  

What's really curious is how the renewal rate approved for two-year leases ended up almost three times what was approved for a one-year renewal.

Some post-vote analysis speculated the machinations occurred behind Mayor de Blasio's back. Regardless, the mayor is ultimately responsible as it was his appointee, so it must reflect back on him. If in fact those reports are true, how can he stand for such insubordination? If they aren't, and the mayor was aware what Glen was doing, then we must infer the rhetoric was meaningless.

Plus, the three individuals singularly responsible for implementing the affordable housing plan are all well connected to the real estate industry. They are also rich. That would be Glen, City Planning Commission Chair, Carl Weisbrod, and Housing Preservation and Development (HPD) Commissioner, Vicky Been. That's not to say one cannot be wealthy to understand the acute affordable housing shortage, or to be sympathetic (but not empathetic.)

But to have all three so economically advantaged demonstrates a stunning tone-deafness, a disconnect within the de Blasio administration. After all, Glen openly celebrated bringing yuppies to Harlem. Has any one of them ever known what it's like to worry about paying the rent? Because I have, as have many people I know throughout the city. That's where empathy might have come in handy....

Incidentally, several sources (both inside and outside government) have confirmed to me Been isn't exactly working out in her new job. "She is in over her head," at least two people told me. Apparently, despite Been's background in academia, and writing about housing policy, she isn't necessarily equipped to actually implement it.

Recently, the mayor signed a bill essentially intended to 'shame' landlords guilty of harassing tenants, by publicly posting their names on HPD's website--which seems rather meager. But the problem itself is very real. Even the pro-landlord, pro-real estate New York Times wrote, "Such efforts have been on the rise in gentrifying neighborhoods of the city where market-rate rents have soared and some landlords try to engineer vacancies to make room for higher-paying tenants."

As expected, a flak from the Rent Stabilization Association 
(RSA) said it would do little more than taint and “vilify” property owners and “curry favor with the tenant movement,” which is just laughable. “Should a tenant have their name published for failing to pay rent?” he added.

Possibly a valid point, if all things were equal,  and if it weren't for reality. Just a few of the major constant obstacles facing tenants include
the dysfunctional and underfunded state housing agency that has years worth of backlogs, the city's overburdened housing court, and the lack of money or political will to better assist tenants through public legal services. Simply put, landlords have a disproportionate amount of power and say on both the city and state levels regarding policy, oversight, enforcement and accountability.

And anyway, this already happens--through the tenant blacklist , which isn't solely based on tenants who are in rent arrears. It can be any tenant sued by a landlord in housing court for any reason--legitimate or frivolous--and it's much more encompassing than HPD posting the names of the minuscule number of owners who are found guilty of harassment.

An important gage of how serious such laws are is to see how the real estate lobby reacts. One veteran tenant activist told me REBNY or the RSA put in "token objections for the media's sake, but that's essentially all they do." An examination of the transcript before the City Council's Housing and Buildings Committee in April revealed no registered opposition or testimony from landlord or real estate groups during the anti-harassment hearings. I checked with the committee chair's office just in case, but they never got back to me. 

Furthermore, the 2008 'Tenant Protection Act' (TPA) on which this law is based, was already considered pretty weak, and it should never be forgotten that its driving force was former Council Speaker, Christine Quinn. Next to Peter Vallone, big real estate didn't have a better friend or protector. So, it stands to reason nothing really harmful or with teeth could ever have passed the Council.

Maximum fines are doubled from $5,000 to $10,000 but minimum fines remain at $1,000, and a judge isn't compelled to fine even the minimum amount. Many simply don't, and some don't even fine owners at all. Frankly, even the new fine levels and the reluctance of many judges to appropriately penalize such bad actors means it's still cheap enough to keep harassing tenants as part of the cost of doing business. Between the anemic oversight and gross underfunding of both the city and state agencies tasked to oversee these issues, the odds are greatly stacked in favor of landlords. They can, and often do, get away with such behavior, and if they are caught, the repercussions are generally inconsequential. 

As several witness revealed at the hearing--many from various free legal service organizations--there's more economic incentive than ever before to get tenants to vacate, especially seniors and other long-term tenants. The longer someone has lived in an apartment, the more likely a landlord will want them out, because the rewards are so great, thanks in part to the 20 percent vacancy bonus permitted. Couple that with something called a 'longevity' bonus, which allows owners to calculate greater increases based upon how long a unit was occupied, and even a bonus for apartments renting for less than certain amounts, and voila, the rent exceeds $2,500 and the apartment becomes destabilized. And as mentioned, there's so little oversight to verify a landlord acted legally, why wouldn't one simply fake it?

People whom I've interviewed, as well as some of the aforementioned witnesses, discussed the growing plague of 'predatory equity,' a particularly sleazy form of real estate speculation. We've seen it over and over again--some investment group obscenely overpays for a building, while leveraging equally ridiculous amounts. When they figure out they can't make the kind of return they anticipated, well, it's always bad for tenants. Think the Pinnacle Group

And even with both laws, harassment is still considered difficult to prove. HPD's representative revealed at this hearing only 44 cases initiated out of 3200 since the 2008 TPA were substantiated by the agency. "2195 are discontinued, dismissed or withdrawn," and another 608 were settled, often without the tenant's consent or understanding, reported HPD's associate commissioner for enforcement and neighborhood services. Furthermore, she said, "It is unlikely that a property owner will settle if the settlement includes admitting harassment."

A landlord can still haul a tenant into housing court for literally no reason. If the tenant doesn't appear, there is a very real risk he or she could lose their home. However, if the owner doesn't appear--or even send a representative--there is no downside to the landlord, or even a potential cost. Sometimes, a tenant can be liable for an owner's legal fees if the case is determined frivolous, but rarely is it the other way around. At best, only about 10 percent of tenants at housing court appear with an attorney, while 90 percent of landlords do. That doesn't even take into account time and the amount of work a tenant is forced to take off to appear in court, while that's all part of the job for landlords. 

As John Fisher from wrote, "One real problem is getting to the point where a finding of harassment may be made. The vagaries of the definition of harassment has always been a stumbling block, and from what I've seen, still is. While the 2008 law spelled out the definition in a bit more detail, in many instances, obtaining a finding has to do with proving landlord intent, and that is very difficult to do.... and even put(s) the burden on the tenant. The result can be years of litigation at great expense to the tenant."

The newer version of the anti-harassment law doesn't address these chronic inequities. HPD's response when queried about other measures or policies the administration might currently be considering to stop tenant harassment and increase landlord accountability is interesting. "We are starting to look at other options to discuss." This isn't exactly a new problem! "So we don't have... anything substantive  to put on the table for you today, but this is definitely a work in progress." Astounding. 

This sense of ambivalence from the administration is not completely unexpected. As noted, there's the problem of who his closest advisers are, particularly when it comes to land use matters--which are ultimately tenant issues. 

It is also extremely telling the AHP does not call to make newly created affordable units rent stabilized, focusing only on current apartments. The RGB credited other affordable housing programs (which are actual subsidies or tax incentives) like 421a and 420c for adding rent stabilized units, so the overall net loss was smaller. But under the mayor's favored program of mandatory inclusionary zoning (IZ), there was nary a reference. Don't get me wrong--I'm not a fan of paying developers off for anything. It's just that given de Blasio's stated support of rent regs, I expected him to advocate adding units, both because he believes it to be the right thing to do, as well as to help strengthen the system, overall.

There's also the perennial problem that when it comes to rent regulations in general, local media has consistently done an appallingly poor job explaining what exactly they are, how they work, and whom they most benefit, and the overall narrative has been anti-tenant for decades. Does anyone recall the Daily News used to run a tenant advice column in the 1980's?

After all these years, there are still reporters who can't distinguish between rent control and rent stabilization, either because they are too lazy to make the effort, or for more cynical reasons. Remember, most of the dailies have real estate holdings, and some of the newer journalism venues and online sites are unabashedly biased in favor of this all-powerful industry. Often, the funding behind the venture comes from real estate pockets. Unfortunately, even some of the old journalistic stalwarts have lost their way, as well.

Rent regulations continue to be described specifically as subsidies. They aren't. defines 'subsidy' as: a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like. Yet, no money is actually ever exchanged, paid, lent, borrowed, transferred etc. 
And in fact, rent regulations are among the most effective and cheapest affordable housing programs in the history of NY State, in part because the biggest expense is administrative overhead.

But for the approximately two million tenants now living in regulated apartments, there is the very real possibility of being priced out. Between regular RGB increases and the ever expanding number of loopholes which also permit owners to add on to the rent, even so-called affordable regulated units are quickly becoming unaffordable for many New Yorkers. Examples are increases from Major Capital and Individual Apartment Improvements, which are in perpetuity, and something called 'preferential' rent.

Without telling you any details regarding the size of my apartment, or where it's located, my own rent has increased between 80-90 percent in about 20 years. I can assure my income has not grown comparably. How many other items have increased by such drastic proportions over the same time period? College tuition, gas prices, and healthcare costs come to mind, and all three are the result of shady practices committed by at least one greedy actor.

Another very important element of rent stabilization in particular usually ignored by the media is the automatic right to a lease renewal; the few remaining rent controlled apartments don't have leases. This is absolutely critical. If you are a good tenant, there should be no reason you are denied the stability of not only having a sense of your upcoming (inevitable) rent increase, but also that a new lease will be forthcoming when it's time.

Think of it from the perspective of a market rate tenant: you spend money on a broker, then pay first and last month's rent, as well as a security deposit. That's usually thousands of dollars. Then, after a year or two, your apartment's or building's owner simply decide you are no longer an acceptable tenant, or perhaps your rent is increased by 50 percent, and you can't afford to remain. All that money you've already spent, and all that time searching, is gone in a flash, due to greed or capriciousness. How is that fair?

There's potentially some reason to be optimistic. Several tenant organizers with whom I spoke for a separate article were all reasonably hopeful about next year's rent renewal fight in Albany. For the first time in 20 years, they at least have an executive who is not openly hostile to rent regulations, as was the case with Mayors Giuliani and Bloomberg--both of whom did their damnedest to ensure wildly excessive increases totally out of proportion with actual owner costs. In particular, much credit and praise was given to de Blasio's Albany lobbying team. At least, it seems, smart and effective people are in place for 2015. That has to count for something.
Something else to consider which apparently has gone virtually unnoticed: Recently, Goldman Sachs' Urban Investment Group--of which Glen was head for years--announced it will help provide $75 million dollars in equity in a joint venture that will leverage $250 million in new residential development. That's more than three times a return on their outlay. 

At the very least, this gives the appearance of a conflict of interest. Glen may not benefit from this deal in the short-term, and in fact had to cut financial ties with her old firm to take her current job. However, as the article about her largess discusses, Glen's, "stock portfolio overflows with "GS" funds, like the "GS Tax-Advantaged Global Equity Portfolio," in which she has holdings of more than $500,000," so there's a probability she'll benefit from these investments in the long-term. And does anyone really believe she will never discuss with any of her former colleagues--even casually--city plans for neighborhood or infrastructure improvements, and the like?

It's like a form of insider trading, or how the old boys' network used to work on male-only golf courses. Remember that comment about yuppies in Harlem? That can easily translate into a "wink wink, nudge nudge--know what i mean?" (Bad Python pun intended: Glen's mother officiated at Eric Idle's wedding in 1981, I was told at the time.)

Even if this is completely kosher across the board, the role of the UIG just underscores the interdependent relationship between the permanent government and the real estate industry in New York. Just business as usual. And that's the least 'progressive' thing we could ever see.