The Real Estate Board of New York to The Committee on Housing and Buildings on Social Housing

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REBNY thanks the Committee on Housing and Buildings for the opportunity to provide feedback at today’s hearing on ‘social housing’, and on the need for New York City to prioritize housing production and preservation.

Supporting housing production and affordable housing preservation are two important goals that will require the collaboration of government, not-for-profit and for-profit stakeholders to find the best solutions. A report facilitated by AKRF last year identified a need to produce 560,000 units in the City by 2030, including the immediate need for over 227,000 units. While non-for-profit development should play a role in our future affordable housing needs, the units required to overcome the housing crisis far exceed the resources available from government and not-for-profit developers. Private for-profit development must play a part in housing production and preservation.

REBNY members are deeply committed to providing well-maintained safe buildings for their tenants, to the preservation and creation of affordable housing, to high quality construction and design, and efficient and sustainable operations. Before precluding or elevating one type of owner over another, the Council would be well served to do a real comparison, including on eviction filings and code enforcement. Additionally, the recent collapse of the Skid Row Housing Trust in Los Angeles is instructive to the financial challenge of building, preserving, and maintaining affordable housing over time for non-profit entities.

REBNY appreciates and supports the use of land banks and community land trusts as stabilization tools. For example, the successful use of land banks upstate in Kingston and Albany that were established to deal with swaths of vacant properties that were foreclosed on during the last recession offer a great case-study. However, these landbank programs were successful due in part to the ability to utilize public-private partnerships. Unfortunately, the proposed bills prohibit public-private partnerships as a preference category and exclude private developers as qualified entities, which will result in less housing and cost the city more money for the housing that is produced.

Affordable units are challenging to maintain regardless of ownership given the City’s tax system that penalizes multifamily rental buildings, which is exacerbated by the exponential assessment growth year over year for those same buildings. In addition, the math that it takes to build and operate affordable housing that is income restricted to the varying neighborhood AMI band needs while ensuring that costs are covered to effectively operate a building is always a difficult balance. Deeply affordable rents do not cover operation costs. Coupled with inconsistent contracting practices by the city, which controls the disposition process, term sheets, and regulatory agreements, affordable housing production and preservation is an incredibly challenging and capital-intensive process.

REBNY welcomes the opportunity to work with City Council to improve the legislation being heard today to further the solutions needed to address our housing crisis.

Bill-specific feedback is as follows:

BILL: Intro 0196-2022

Subject: A local law to amend the administrative code of the City of New York, in relation to giving qualified entities a first opportunity to purchase and an opportunity to submit an offer to purchase certain residential buildings when offered for sale.

Sponsors: Councilmembers Rivera, Nurse, Caban, Stevens, Hanif, Brewer, Won, Richardson Jordan, Restler, Krishnan, Hudson, Williams, Aviles, Sanchez, Joseph, Bottcher, Velazquez, Barron, Schulman, De La Rosa, Farias, Riley, Gutierrez, Narcisse, Ayala, Osse, Brooks-Powers, Louis, Brannan, and Speaker Adams, by the request of the Brooklyn Borough President.

This legislation, often referred to as the Community Opportunity to Purchase Act, or COPA, would give qualified entities a first opportunity to purchase and an opportunity to submit an offer to purchase certain residential buildings when offered for sale. The bill would require building owners to notify the Department of Housing Preservation and Development and a list of qualified entities when their buildings will be listed for sale. The entities would have the opportunity to submit the first offer and match any competing offers for the property.

REBNY believes this bill prioritizes one type of business model over another with no evidence demonstrating that not-for-profit development has a higher success rate in the preservation of affordable housing. Indeed, just like with for-profit ownership, not-for-profit owners who finance their buildings must demonstrate a return on investment, often via rent rolls, to secure financing for a building’s purchase. Unfortunately, this legislation proposes an overreach into private property transactions, raising legal concerns along the way. First, this bill raises the very same legal concerns that existed in 2005 when the City Council passed the Tenant Empowerment Act. That bill, like this one, was deemed preempted under State and Federal Law for being overly broad and for failing to take into consideration certain statutory rights of first refusal.

The bill also raises serious scope and implementation concerns. The program is incredibly far reaching in subject properties, with purchase timelines that may be seen as too long and unworkable as to interfere with reasonably backed expectations for the transfers of property. In addition to interfering with the private marketplace, they also do not help not-for-profits, as the timelines are not consistent with the timing to negotiate necessary tax exemptions and financing to make the purchase work with subsidy. There is no regulatory regime to manage contract disputes, and it does not carve out buildings in foreclosure or mortgage default that may be operating on court ordered timelines different than the one laid out in this bill.

The number of eligible properties coupled with no funding mechanism would leave HPD resource starved to implement what the bill requires, and then forces an overzealous and punitive penalty structure on private property owners if they are unable to comply with a system that HPD will struggle to facilitate.

Lastly, the list of qualified owners as proposed are just not-for-profits. The exclusion of any private entity and any private-public entity from the qualified entities list is both pernicious and based on false valuation of good versus bad for business practices.

BILL: Intro 0714-2022

Subject: A local law to amend the administrative code of the city of New York in relation to creating a land bank.

Sponsors: Councilmembers Brewer, Hanif, Sanchez, Nurse, Louis, Restler, Hudson, Joseph, Aviles, Schulman, De La Rosa, Farias, Riley, Gutierrez, Abreu, Caban, Won, Narcisse, Ayala, Krishnan, Osse, Menin, Bottcher, Stevens, Powers, Marte, Brannan and Rivera in conjunction with the Brooklyn Borough President.

This bill would establish a land bank for New York City, which would be tasked with acquiring, warehousing, and transferring real property to develop, rehabilitate and preserve affordable housing. The bill would require that when conveying, leasing as lessor or otherwise disposing of real property for a use that would result in the creation or preservation of affordable housing units, the land corporation shall prioritize disposition to a community land trust, a community housing development organization or a nonprofit organization, and shall prioritize disposition for a proposed use that will maximize the number of affordable housing units at the zoning lot containing the property and the affordability of such units.

Private sector investment is important to the housing stock, as for-profit entities have capital to withstand uncertainty and progress development. Larger affordable housing developments require millions of dollars of pursuit costs with no guaranty of the project moving forward. Given the ambitious and necessary housing goals set by Speaker Adams, the Mayor and the Governor, such limitation would be counter-intuitive to the end goal of increasing affordable housing. REBNY fails to see the rationale of taking away for-profit entities from stimulating housing at scale.

REBNY appreciates and supports the use of land banks and community land trusts as stabilization tools. We are impressed by the successful use of land banks in small cities such as Kingston and Albany in upstate New York. Land banks provided a much-needed framework for these small cities to deal with swaths of vacant properties that were foreclosed on during the last recession. These programs seek to place distressed and delinquent properties back on the tax rolls while addressing capital needs, and in many cases, these land banks have turned fallow properties into homes with the help of public private partnerships. Private developers are better equipped to navigate the myriad of complexities that arise in renovating tenanted properties, and we fail to see why New York City would want to limit the pool of qualified developers who are able to assist in preserving and increasing affordable housing throughout New York City, particularly with such a need for housing production.

In addition, the establishment of a land bank to effectively purchase property to then dispose of to qualified entities for housing uses is a significant process that will have to respond to the same market parameters that currently exist for all perspective development sites in the city, requiring significant city investment to be effective.

BILL: Intro 0637-2022

Subject: A local law to amend the New York City charter, in relation to the disposition of real property of the city

Sponsors: Councilmembers Restler, Nurse, Caban, Krishnan, Sanchez, Mealy, Rivera, Hudson, Aviles, Osse, Brewer, Gutierrez, Richardson Jordan, Abreu, De La Rosa, Won, Marte, Farias, Hanif, Joseph, Narcisse, Bottcher, Velazquez, Barron, Schulman, Riley, Ayala, Williams, Brooks-Powers, Louis, Powers and Brannan in conjunction with the Brooklyn Borough President.

Intro 637 would require that when the city disposes of land for affordable housing, or for any other public use or purpose, it prioritizes not-for-profit developers and community land trusts despite no evidence demonstrating these types of entities are better equipped to develop, preserve, or stabilize rental buildings to maintain long-term affordability.

Affordable units are challenging to maintain regardless of ownership and often the rents obtained do not cover operational costs. Whereas the private sector has the capital and capability to deal with the prohibitive costs associated with developing housing, in very few instances have not-for-profit entities demonstrated the ability to do so alone at scale. Permitting public-private partnerships will help stimulate much needed housing, and this legislation would benefit from allowing these types of partnerships to be prioritized if this legislation were to move forward.

BILL: Intro 0932-2022

Subject: A local law in relation to a study on the feasibility of establishing a social housing agency.

Sponsors: Councilmembers Nurse, Restler, Osse, Hudson, Richardson Jordan

This proposal would require a study for the feasibility of creating a city agency focused on social housing. While the goals are laudable, this proposal is inefficient and only further complicates the collective goals of providing social housing for our fellow New Yorkers who need it. The City already has an agency dedicated and focused on housing, inclusive of the goals of social housing as described in the memos for many of the bills being heard today. This includes the development of permanently affordable housing on city-owned and formerly city-owned land, administering the Neighborhood Pillars Program to help community organizations purchase rent stabilized buildings, and funding and supporting community land trusts.

This study would take away precious resources from an already starved HPD, cannibalizing talent and capacity for a study to tell us what we already know – the City does not need additional agencies, it needs people and resources to execute on programs that already exist.

BILL: Resolution 38-2022

Subject: A resolution calling on the State Legislature to pass and the Governor to sign, legislation mandating that any owner intending to sell a multi-unit residential dwelling, must first make an appraised offer of sale to the tenants within the residence before making any sale offers to third parties. This state legislation is often referred to as the Tenant Opportunity to Purchase Act, or TOPA.

Sponsors: Public Advocate Williams, Councilmembers Caban, Restler, Krishnan, Joseph, Won, Velazquez, Barron, Hanif, Hudson, Bottcher, Nurse, Williams, Louis, Osse, in conjunction with the Brooklyn Borough President.

This resolution is in favor of a statewide bill referred to as the Tenant Opportunity to Purchase Act, or TOPA. Like COPA, TOPA would severely undermine the residential building transaction market, putting at risk much needed housing production, limiting tax revenue to the State, and significantly extending the timeline to complete transactions.

Additionally, there is no consideration whatsoever on the interplay with the Martin Act, New York state’s ‘blue sky’ anti-fraud law. Under this law, since these transactions could be considered a syndication if the non-profit takes a penny from the tenants or any other third party to effectuate the sale, it could thereby subject these parties to enforcement actions by the New York Attorney General, who has recently taken an aggressive stance against syndicates, including those involving affordable housing.

While REBNY supports increased affordable homeownership opportunities in New York, like as proposed in COPA, the timeline outlined in TOPA is far too lengthy and limits the pool of potential buyers for private property transactions. The bill exempts non-profits but requires an affirmative application for exemption without regard for how long it would take for an application to be put together. The timelines also appear unrealistic for tenants when attorneys specializing in these types of deals shared it typically takes two years of planning with a property owner that volunteers for such arrangement.

BILL: Resolution 344-2022

Subject: Resolution calling on the New York State Legislature to pass, and the Governor to sign, A.3701B/S.2804B, in relation to establishing a housing access voucher program

Sponsors: Public Advocate Williams, Councilmembers Sanchez, Stevens, Mealy, Restler, Joseph, Hudson, Farias, Abreu, Nurse

REBNY strongly supports the adoption of the Housing Access Voucher Program (HAVP) (S568/A4021), a permanent, statewide Section 8-like rental assistance program as part of the state budget. Direct rental assistance is a proven cost-effective method of ensuring people can stay in their homes and access new ones if so preferred. Enabling additional and more effective use of rental assistance, especially in high-amenity areas, will expand housing choice for New Yorkers across neighborhoods and should be a key component of any holistic housing plan.

As designed, a minimum of fifty percent of HAVP's resources will be dedicated to help homeless New Yorkers across the state find stable housing, while the remainder will go toward eviction prevention for households at risk of becoming homeless. HAVP is designed to be maximally accessible, flexible, and non-discriminatory, making it the most effective program for moving homeless households into stable, permanent housing. A state housing voucher would reach those New Yorkers left unserved by the underfunded federal Section 8 program and solve for the byzantine rules for eligibility of other like programs.

REBNY is proud to be a part of a statewide coalition led by Enterprise Community Partners advocating for the adoption of this critical program.

BILL: Resolution 506-2023

Subject: Resolution calling upon the New York State Legislature to pass, and the Governor to sign, A.5573/S.3082, in relation to prohibiting eviction without good cause.

Sponsors: Nurse, Brewer, Restler, Caban, Aviles, Osse, Farias, Hudson, Hanif, Richardson Jordan

The adoption of the currently introduced Good Cause bill (A4454/S305) would exacerbate our housing shortage and does nothing to address tenants’ rent burdens nor failures of code enforcement by local governments.

This bill would adversely impact 1.4 million apartments in New York City alone. This bill has remained unchanged since 2019 and therefore, despite misinformation by tenant advocates and its bill sponsors, does apply an arbitrary cap that has no relationship to expenses and can be challenged in any calendar year to both renewals and initial leases. This legislation does apply to the 300,000 co-op units in the city, and completely undercuts any existing regulatory agreements to render them useless. This will disrupt current lending agreements and diminish the ability to access capital when major repairs are needed. The uncertainty of any rent increase potentially being subject to litigation also creates a liability risk that will then translate into higher interest, higher insurance costs.

As mentioned, the bill will regulate units with existing and expired regulatory agreements, thus eliminating the ability of market rate apartments to cross-subsidize affordable units, overriding government contracts used to create affordable housing for the lowest income New Yorkers and superseding local authority.

Additionally, the bill imposes severe limitations on property owners seeking to reclaim units, which is especially problematic for condominium or co-op owners and short term or seasonal rentals. For example, under the bill’s definition of family and immediate need, a grandparent could not take back a unit for a grandchild to live in, and a co-op owner that temporarily re -located for a job or to take care of an ill family member could not move back into their own apartment. If an elderly homeowner wished to take a unit for a caregiver, they would not even have the option if the tenant were also elderly. Additionally, under this bill the homeowner would be precluded from consideration of anything beyond one unit under the regressive rules proposed by the State Legislature, creating serious implications for families with two kids or two of any family members.

Advocates and officials have at times misled the public noting its adoption in other parts of the country. This bill is vastly different than other similarly titled statutes in other states such as California, Oregon, and New Jersey. Those bills promote housing quality by recognizing that rent growth must keep pace with rising costs. Furthermore, those states also have a vastly different paradigm as rental properties are taxed much lower in those states, which in turn places less upward pressure on rents.

Supporters claim the bill will provide protection against reporting code violations and will improve housing conditions. To the first goal, the 2019 rent laws already grants protection to tenants against retaliatory actions by property owners. To the second goal, the policies prescribed in S305 will have the opposite impact and will instead result in degraded housing quality over time and fewer affordable housing options on the market. Limiting rent growth does not improve building conditions. The correlation between reduced investment and rent control is well documented over multiple decades by non-partisan entities such as the National Bureau of Economic Research, Brookings, and the Manhattan Institute.

Finally, it is worth nothing that the bill also fails to address the most critical challenge faced by renters today as it does not provide direct assistance to rent burdened New Yorkers to prevent them from falling further behind. Further, the bill does nothing to address rental arrears due to loss of jobs and income because of the pandemic. Therefore, we fail to see how this proposal and supporting it will do anything to impact the 80% of eviction filings related to non-payment.

For these reasons, adoption of S305 will discourage the creation of new rental housing and make our city’s housing challenges worse. The City Council should not support it.

Thank you for the consideration of these points.