Affordable housing at risk again in NYC

June 22, 2015

The living conditions of millions of low-income New Yorkers are at stake in backroom negotiations among a trio of state government powerbrokers, writes Don Lash.

FOR THE second time in five years, nearly 2 million families in New York City are awaiting a deal to restore the protections of the rent stabilization law.

The state legislature passed a retroactive five-day extension of the law until June 23 and agreed to extend the legislative session by several days in order to finish negotiations and hold votes on several pressing legislative items.

Some 40 percent of low-income New Yorkers--those making less than 200 percent of the federal poverty line--live in regulated apartments, and the stakes are high for these tenants. Rents in regulated apartments occupied by low-income tenants are on average 14 percent lower than for those in unregulated apartments.

This disparity has even greater significance when the percentage of household income needed for rent is taken into account. For regulated tenants, this percentage has increased since 2011, the last time the law was renewed, to more than 45 percent--already a high proportion of household income to spend on housing.

New York Gov. Andrew Cuomo
New York Gov. Andrew Cuomo (Azi Paybarah)

But in unregulated housing, the rent burden for low-income housing typically exceeds half of household income--meaning that working-class tenants need more protection, not less. For tenants living at or below the federal poverty line, the rising rent burden is approaching 65 percent.

One reason for the dramatic increase in rent burden is that, adjusted for inflation, per capita income for low-income New Yorkers has actually declined during the Great Recession--by about 15 percent between 2007 and 2013. Median rent, meanwhile, increased during the same period by about 30 percent in unregulated apartments and 20 percent in regulated apartments.

This crisis in affordability has resulted in a near doubling of the city's homeless shelter population since 2007, topping 60,000 in November 2014. Some 42 percent of shelter residents were children.

Part of the problem is the steady loss of regulated housing stock. Legislative loopholes lobbied for by landlords--who provide some of the most reliable sources of campaign financing for politicians--have resulted in the loss of nearly a quarter million rent-regulated apartments since 1981, with 35,000 lost since the 2011 renewal alone.

Landlords can increase rents steadily for occupied apartments under a schedule of increases authorized by the city's Rent Guidelines Board, which uses calculations designed to protect landlords by guaranteeing their profits. So tenants can expect their rents to rise every year even if their incomes stagnate or decline.

But the largest loophole is a provision allowing landlords to increase the asking rent by 20 percent for a vacant apartment. They can increase it even further if they make--or claim to have made--improvements to the apartment.

Landlords can recover the cost of claimed improvements by adding 2.5 percent of the cost to the monthly rent. Cheating by landlords in reporting improvements is unlikely to be detected and is often referred to as "1/40th fraud." And if landlords succeed in pushing the rent above $2,500 a month, landlords can evade regulation entirely by what is called "luxury decontrol."

When luxury decontrol was added to the law in 1997, the landlord lobby claimed it would only affect high-income tenants in affluent neighborhoods. In the ensuing years, however, rent rose fastest in working-class neighborhoods, so apartments in these neighborhoods are now creeping into the category of "luxury housing." For example, between 2002 and 2014, rents increased by 90 percent in Central Harlem and by 63 percent in Bedford-Stuyvesant.

ALTHOUGH RECENT polling shows 76 percent of city residents support rent regulation, the decision will not be made by them or by elected officials accountable to them.

In 1971, the state legislature stripped the city of control of its own rent laws, so New Yorkers depend on a three-way deal between the leadership of the Democratic-controlled State Assembly, the leadership of the Republican-controlled Senate, and Democratic Gov. Andrew Cuomo.

This means that rent regulation gets caught up in the corruption, cronyism and political posturing of the power players in Albany. Rank-and-file legislators have little influence in Albany, as the most significant decisions get made by what has been described--thus far accurately--as "three men in a room."

This year, two of the men are new. Carl Heastie, a Democrat from New York City, became Assembly Speaker when long-time former Speaker Sheldon Silver was indicted on corruption charges. John Flanagan, a Republican from suburban Long Island, became Senate Majority Leader in May when former Majority Leader Dean Skelos was also indicted on corruption charges.

As the saying goes, Albany is a marvelous environment for coincidence Gov. Cuomo, as it happens, has embarrassingly close associations with players in both the Silver and Skelos scandals, and those associations have everything to do with the role of real-estate lobby donations in Albany.

Silver is accused of taking massive kickbacks from law firms. One was a tiny firm whose major client was a real-estate developer named Leonard Litwin, who happens to be the largest political donor in the state and who gave a cool $1 million to Cuomo's reelection campaign. Cuomo's administration helped a Litwin-controlled company secure a $260 million low-interest loan from the state for a Manhattan luxury residential building. The indictment against Majority Leader Skelos cites the same developer.

Thus far, Cuomo has resisted calls to return the donations he got from the developer implicated in both scandals. Nevertheless, the governor is reportedly fearful--"paralyzed" by fears, to be precise--that investigations by U.S. Attorney Preet Bharara may eventually lead to him.

WHATEVER THE reasons, the negotiations over rent regulation have been about insider Albany politics and not the well-being of tenants.

Cuomo has changed course several times. He initially resisted calls for strengthening tenant protections and closing loopholes in the law by failing to include them in his budget, so Senate Republicans couldn't block them. Then he endorsed an Assembly bill that included added tenant protections. But shortly thereafter, he said there wouldn't be time to negotiate the changes during the closing days of the legislative session.

Cuomo also tried to tie his support for protection for tenants to his own proposal to create a tax credit for donations to private schools, a measure that would facilitate wealthy supporters of charter schools funneling more cash--at state expense--to charter schools.

For his part, Democratic Mayor Bill de Blasio, who has positioned himself as a progressive alternative to Cuomo within the Democratic Party, has linked support for increased protection for tenants to his plan to renew and expand the so-called "421-a program" to create affordable housing through tax subsidies for developers.

The 421-a program expired at the same time as the rent stabilization law, and de Blasio is calling for renewal of the program--but with changes that would supposedly increase production of affordable housing by increasing the maximum period of tax exemption from 25 years to 35 years.

In exchange, developers would have to modestly increase the percentage of apartments in developments designated as "affordable." Most of these apartments, however, would be affordable in name only. According to one analysis, "less than 10 percent of the 163,000 new apartments subsidized with taxpayer dollars are anything approaching affordable, with rents usually limited to fit the budgets of households with incomes around $45,000 for a family of three."

Cuomo has opposed the mayor's plan, accurately, though hypocritically, calling it a giveaway to developers. The governor, who attacked public-sector unions when he took office, was also concerned that de Blasio failed to include any requirement that developers benefiting from 421-a subsidies employ union labor.

Cuomo has shown no inclination, however, to fight for the strengthening of rent regulation or the creation of affordable housing. So far, he has indicated that he is comfortable maintaining the status quo of rent regulation and 421-a tax subsidies, which favor landlords and developers over working-class tenants.

The 421-a program costs approximately $1 billion a year in lost revenue, and yet has failed to incentivize big developers to build adequate housing affordable to working-class and poor New Yorkers. It has also resulted in such indignities as the "poor door"--separate entrances for those occupying the "affordable" units within luxury developments.

TENANT ADVOCATES have threatened to mount a primary challenge to Cuomo if and when he runs for reelection in 2018.

By signaling their intent to contain the challenge to Cuomo within the Democratic Party, however, they have limited their effectiveness. Taking on Cuomo within the Democratic Party is not a productive strategy. Zephyr Teachout mounted a primary campaign against Cuomo in 2014 and was soundly defeated, although many among Cuomo's base were likely more in agreement with Teachout than with the incumbent.

It also makes little sense for tenants to rally around de Blasio, who has coupled his advocacy for an end to vacancy increases to expansion of the 421-a. The most that New York City tenants can hope for from Democrats is "winning" a continuation of the status quo--an increasing rent burden, tax giveaways to big developers, gentrification and loss of regulated housing.

Mobilization of tenants is needed to demand the extension and expansion of rent regulation, uncoupled from tax subsidies for developers or charter schools. Tenants should demand the end of 421-a program and the investment of reclaimed revenue in truly affordable housing. Instead of hoping that New York City Democrats can negotiate the best deal possible from Republicans whose constituents live outside the city, New Yorkers should demand a return to home rule regarding the city's housing stock.

The potential power of 2 million tenants is awesome, but can't be realized through the threat of Democratic primary challenges in the distant future. Tenants will need to demonstrate their power and their numbers independently of elected officials.

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