Two words: vacancy tax | NYC: More than 60,000 Rent-Stabilized Apartments Are Now Vacant

The City news website in NYC reports that "More than 60,000 Rent-Stabilized Apartments Are Now Vacant — and Tenant Advocates Say Landlords Are Holding Them for ‘Ransom’."  From the article:

During a worsening housing affordability crisis, New York City landlords are keeping tens of thousands of rent-stabilized units off the market — a phenomenon tenant activists call “warehousing.” 

An internal state housing agency memo obtained by THE CITY shows that the number of rent-stabilized homes reported vacant on annual apartment registrations rose to over 61,000 in 2021 — nearly doubling from less than 34,000 in just a year as the city emerged from COVID lockdown.  ...

The Coalition to End Apartment Warehousing, a collective of tenants and 15 community organizations, has been calling attention to the trend, claiming that landlords are fabricating housing scarcity to manipulate legislative changes in Albany. “Creating fake scarcity to raise prices is not a fair way to run the housing market, and it deprives New Yorkers of needed housing,” coalition members wrote in a recent op-ed.  ...

The Housing Stability and Tenant Protection Act of 2019 (HSTPA) repealed both vacancy bonuses and vacancy decontrol. It also sharply limited how much landlords could pass along the costs of renovations to tenants through rent increases, practices that housing advocates and lawmakers criticized for spiking rents and fueling displacement. 

Prior to 2019, landlords could make a lot of money by emptying out rent-stabilized apartments. HSTPA essentially revoked any financial incentive to do so. ...

But landlords are still legally permitted to keep their rent-stabilized apartments empty indefinitely.

It still has loopholes ("D.C.’s problems with vacant, blighted properties haven’t gone away, residents and officials say," Washington Post), but DC's vacant residential property tax is 5x the regular rate.  It does move properties back into the market. 

And they aren't a universal solution ("Cities Now Use Taxes to Fight Blight. Is It Working?," Governing).  They work better in strong markets, where the demand to develop and the demand to rent are both high.  

In weak markets, vacancy taxes encourage demolition, because of low demand, and demolition generally isn't the best way to move revitalization forward ("Demolition isn't always a solution").

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-- "Rents are rising everywhere: with continued supply-demand mismatch, shouldn't renter protections be universal?," 2022

No more housing filtration? (at least in big cities)

Filtration is an old concept in urban planning (also called "ecological succession," "invasion-succession theory," or "concentric zone theory").

I thought from the University of Chicago sociologists in the 1920s, but it actually was first posited in the UK.  

It presumes that people with more money move outward from the core.  As they do so they are replaced by people who on a relative basis, have improved their circumstances compared to lower income deciles.

The Toronto Star reports ("Curse of the renter: In some neighbourhoods, not owning a home now costs more than owning one") that renters there are paying more for housing than housing owners in some parts of the city.  From the article:

Homeowners have long outspent renters in Toronto’s census metropolitan area; a decade ago, their average bills were $1,516 per month versus tenants’ $1,043. That trend is still visible in areas like Toronto’s Little Italy, or a large swath of southwest Brampton.

But over the last decade, the gap has been narrowing. Where owners in all areas spent 45.35 per cent more than tenants in 2011, it fell to 38.84 per cent in 2016, and to 30.28 per cent in 2021.

Statistics Canada has noted a countrywide trend, meanwhile, of renters’ bills climbing faster than homeowners. The average tenant in Canada last year paid 17.6 per cent more than they did in 2016. The average homeowner’s bills increased by 9.5 per cent over that period. 

Toronto is home to some more extreme examples, such as the area between Queen Street and Wright Avenue, from Lansdowne to Sorauren avenues. Here, though owners are still paying several hundred dollars more per month — $2,092 to renters’ $1,790 — renters’ bills are growing much faster. From 2016 to 2021, renters’ average bills went up 48.2 per cent, versus just five per cent for owners.

“It’s quite startling,” Majid said. Generally, the area in and around Parkdale has contended with gentrification, she said, and an increase in housing “financialization” as large companies have come in and purchased older rental apartment blocks as investments. In several cases, those companies have applied for above-guideline rent increases, Majid said, requesting Landlord and Tenant Board permission to charge higher rents for reasons such as major repairs.

If older tenants are pushed out by those costs, she said the rents could surge even higher.

The concept of filtration presumes that older properties remain lower cost.

In today's economy properties are being priced as if they are new, regardless of condition, age, etc.  Maybe it's just about the price per square foot, regardless of condition.

This results in part because an increasing share of the rental housing sector is owned and managed by large firms.

And because demand is greater than supply, especially for comparatively lower cost housing.

An urban planner quoted in the article suggests a greater role for the nonprofit social housing sector as a way to counter constant repricing upward.

-- "Rents are rising everywhere: with continued supply-demand mismatch, shouldn't renter protections be universal? ," 2022

Rents are rising everywhere: with continued supply-demand mismatch, shouldn't renter protections be universal?

The Washington Post has an interactive map where you can see the average rent increase for every county in the US ("Rents are rising everywhere. See how much prices are up in your area").

The media are replete with reports on housing rent increases ("Lack of new construction and corporate landlords contributing to skyrocketing rent," CBS "60 Minutes," "Rent jumped 17% since last year, hitting a new record," CNN, "Rents skyrocket near MBTA stops, new report finds," Boston Globe, "Rents Are Roaring Back in New York City," New York Times), including one instance of a rent increase from year to year of over 100% (" 'Coral Gables Woman Hit With 106% Rent Increase After Property Sold To New Landlord: ‘I Couldn’t Believe It'," ).

Apparently, New Orleanians pay upwards of 60% of household income on rent, and average rent increases are 20%+ ("As rents soar in New Orleans area, friction between tenants, landlords increases," New Orleans Times-Picayune), while some communities face high rates of eviction ("Maryvale is home to rising rents — and many of Phoenix's top evicting apartment complexes," Arizona Republic).

The Post has an article, "Stop blaming millennials for the housing crisis."  Who ever said that millennials are the cause of housing price appreciation? While others believe they will be permanently priced out of owning a house ("Renters are growing pessimistic they will ever own a home as prices keep rising," CNN).

Forbes argues that the supply problem is partly a function of a rise of single person households, which they surmise will drop as people take on roommates to reduce housing cost ("Rising Home Prices And Apartment Rents Will End Soon: The Mystery Of The Missing Roommate").

With the supply-demand mismatch not likely to be slackened anytime soon, all places need some form of renter protections.

For example, Connecticut has created "fair rent commissions" ("As rents rise, Connecticut legislators vote to mandate fair rent commissions in some towns," Hartford Courant).  From the article:

At a time of rising rents, Connecticut legislators voted late Wednesday night to mandate fair rent commissions for all communities with more than 25,000 residents. Currently, the commissions are voluntary, and 24 municipalities statewide already have them, legislators said. The total under the bill would be expanded to 45 communities. 

Democrats said the mandatory commissions are needed now to help renters around the state at a time when many rents are increasing as the coronavirus pandemic continues. 

The commissions would have the power to investigate complaints about rents, convene public hearings, issue subpoenas to force people to appear, and eventually force landlords to lower rents under certain circumstances. The commissions can be created in each municipality through action by the local city council or board of selectmen by July 1, 2023.

Tampa is proposing a 60-day notice for rent increases, but not a cap ("Tampa City Council proposes 60-day notice requirement for rental increases," NewsChannel8).

But more should be done.  I argue in part that controls in rent are justified because limits on housing production create the stage for extranormal rents.

From the previous entry "City Rising PBS SoCal series on gentrification":

1.  Most legacy cities were built out by the 1930s, but since then the nation's population has increased  by 1.5x.  (And communities built out after WWII tend to be built much less densely compared to earlier periods, further restricting housing supply.)

2.  Residents typically fight new development.   Even when new supply is added, typically it's high priced because it's built at today's prices for land, labor, and materials.  And because even with new additions to supply, demand is still unmet, prices for housing don't go down.

3.  So prices rise.

4.  More people want to live in the city, which further drives demand.  And ultimately, people with more money are always able to outbid people with less money.  This raises prices and in later stages of change, pushes displacement.  (Usually in earlier stages of neighborhood change, buildings taken by new residents tended to be vacant, so displacement wasn't an issue.)

5.  Since supply is constrained, it's reasonable to put in rent controls and tenant protections.  When demand is greater than supply, desperate people can be taken advantage of by unscrupulous property owners.

6.  But in return for rent controls, residents must agree to new construction of housing--market rate, accessory dwelling units, infill apartments, etc.

7.  To preserve affordability, governments need to be proactive in terms of purchasing properties, fostering land trusts, cooperatives, and other land tenure forms which prioritize maintaining affordability rather than price escalation.

8.  Ideally, priority for reuse of government-owned land should be 100% affordability, while balancing revitalization and other goals.

9.  Regardless, master planning should include specific planning for "social housing" and allocate lots within the master plan to social housing providers.  (Helsinki does this.  Vienna does a form of this.)

Stepping up on response to local "disasters" that are small, but big to the victims

Emergency personnel on the scene of an apartment fire and possible explosion in the 2400 block of Lyttonsville Road in Silver Spring on March 3, 2022. (Bonnie Jo Mount/The Washington Post)

There is a letter to the editor in the Washington Post ("What's next for tenants displaced by the Lyttonsville fire?") about the aftermath of a multi-building fire at an apartment complex in the Greater Silver Spring area of Montgomery County, Maryland, where two buildings were destroyed, and two still standing buildings have been condemned.

The letter makes the point that substantive resources and help aren't being provided to the tenants, who need a lot more than the ability to sign up for recreation classes--one of the offerings made available at a recent "community fair" aimed at helping the victims of the fire.

This piece, "Revisiting stories: the need to provide programs to step in and deal with multiunit properties as they age," focuses on building safety a bit more generally, not about providing assistance to tenants as a result of building failure.  That should be reconsidered.

FEMA is a behemoth, providing aid to disaster aid to victims of hurricanes, earthquakes, floods, wildfires, etc.  But it doesn't respond to localized disasters of a micro-scale.

But could it be a model for localities, organized perhaps at the state level, for a way to provide a coordinated response and substantive help in a case such as this, the Surfside condo collapse, condominium condemnations ("Residents of SE DC condo forced to move out due to unsafe conditions," WJLA-TV), etc.?

Resources to review for developing program models include those produced for large scale disaster management, victims of crime and terrorism, etc., for example:

-- "Helping Victims of Mass Violence & Terrorism: Planning, Response, Recovery, and Resources: Planning," US Department of Justice
-- "Disaster Relief: Help Now, Help Later, Help Better," University of Pennsylvania
-- "Immediate Relief/Individual Support," Disaster Philanthropy Playbook

In the post-9/11 world, most communities have created agencies for emergency management, separate from police, fire and other emergency services.  

This kind of function could be added to those agencies.  Although the advantage of organizing at the state scale is that in most communities such events are infrequent, meaning directing ongoing resources to such functions could be seen as "a waste," and people don't have the ability to develop substantive expertise.  Then again, at the state scale, concern and capacity could be pretty distant from local needs.  Definitely a conundrum on how to organize such programs.

Strong real estate markets, lack of supply have extranormal negative effects on low income households: confirmation by research

This isn't news exactly.  In the blog for years we've discussed how the strong residential real estate market has many effects, including (1) a repricing upward of Class B, C and D housing and (2) persistent demand for sub-standard housing, allowing property owners to stint on maintenance ("Understanding the DC housing market: demand for urban living, not the construction of new housing, is the driving force").

19. In the rental market, because of the demand-supply mismatch, substandard housing (Class B, C and D) rents for higher prices than would prevail in a weaker market. (This phenomenon of higher prices for less well maintained housing bleeds across the DC border into Prince George's County.)

Illustrating this fact, NPR reports ("Housing Conditions In This Low-Income Neighborhood Pushed Tenants To Sue The Landlord") in Prince George's County Maryland, that predominately Latino low-income tenants, with the support of CASA de Maryland, are suing the property owner and managers of the Bedford Station and Victoria Station apartments in Langley Park, for lack of maintenance.  

Comparatively speaking, PGC doesn't have a particularly robust set of tenant protections.  

In the past, there was a neighborhood stabilization program under previous County Executive Rushern Baker, called the Transforming Neighborhoods Initiative, and it included the Langley Park area.  I don't know what the status is of that program under his successor.  But Langley Park and additional neighborhoods were removed from the program, switched to a community led initiative rather than the more top-down TNI program, which shifted its focus to the most distressed communities in the program.

The NPR article mentions a journal article, "Do the Poor Pay More for Housing? Exploitation, Profit, and Risk in Rental Markets," published in the American Journal of Sociology (124:4, 2019), detailing the effects of strong housing markets on low income households.  The research results discussed in the article confirms my hypothesis as laid out in Item 19 above.  From the article:

This article examines tenant exploitation and landlord profit margins within residential rental markets. Defining exploitation as being overcharged relative to the market value of a property, the authors find exploitation of tenants to be highest in poor neighborhoods. Landlords in poor neighborhoods also extract higher profits from housing units. Property values and tax burdens are considerably lower in depressed residential areas, but rents are not. Because landlords operating in poor communities face more risks, they hedge their position by raising rents on all tenants, carrying the weight of social structure into price. Since losses are rare, landlords typically realize the surplus risk charge as higher profits. Promoting a relational approach to the analysis of inequality, this study demonstrates how the market strategies of landlords contribute to high rent burdens in low-income neighborhoods.

Code enforcement.  While often used as a displacement mechanism, some communities use regular inspections of rental properties as a mechanism for ensuring quality maintenance.  In Prince George's County, the incorporated city of Hyattsville does this, although I don't know if it is done every year, upon renewal of the rental license.

Upping code enforcement requirements on rental properties in the unincorporated sections of PGC would be an important tenant protection mechanism. 

Inequality in sociology and planning.  The journal article is devastating in its discussion of inequality as an area of study in sociology. 

It quotes extensively from a review by famed sociologist Arthur Stinchcombe of the book Inequality by Jencks et al.  Stinchcombe criticized the book for focusing on inequality as a failing of individuals as opposed to the result from power differentials between the well off and the impoverished, and class.

This schism -- personal failings versus power differentials -- shapes how inequality is addressed to this day in policy differences between Republicans and Democrats, the idea of the "deserving poor," and discussions of "structural racism," "multi-generational poverty," and investments in people or place versus people and place.

-- "Equity planning: an update," 2020
-- "St. Louis: what would I recommend for a comprehensive revitalization program? | Part 1: Overview and Theoretical Foundations," 2021
-- "St. Louis: what would I recommend for a comprehensive revitalization program? | Part 2: Implementation Approach and Levers" (forthcoming)

Rare instances of digital applications empowering employees and consumers

1.  A firm has automated the cumbersome process of filing arbitration claims.

The normal processes are set up to favor corporations, but through digital applications, large numbers of claims can be organized, making the power of the whole much more significant compared to an individual claimant vis a vis the corporation ("New Tactic In Arbitration: Raise Volume," New York Times).

Fair Shake is a firm specializing in consumer arbitration matters.

2.  JustFix.NYC is an app created by a tenant advocacy organization, which automates the process of filing a tenant's repair complaint ("This app allows New York tenants to sue their landlord for emergency repairs," CNN), in situations where the tenant has a statutory right for state of good repair and the property owner is failing to perform such repairs.

Of course, property managers have plenty of enterprise-scaled applications at their call, including programs that automate eviction filings.

Housing Eviction

I haven't read the book Evicted: Poverty and Profit in the American City  It won the Pulitzer Prize for Nonfiction in 2017 and argues that eviction causes poverty more than it is a function of it.

-- NYT Book review by Barbara Ehrenreich

Smoking triggers eviction in Silver Spring, Maryland.  While I have no problem with smoking restrictions in multiunit housing, an article ("She was spotted smoking in ‘smoke-free’ rental housing. Now, she may be kicked out") in the Washington Post describes how a low income tenant in social housing was served an eviction notice for smoking in the common areas of the complex, which has a smoking restriction clause in the lease. 

One of the commenters made a good point, that the property manager, before taking the extreme action of eviction, could offer smoking cessation classes as a type of warning.

That makes sense to me.

The eviction machine.  In the vein of the book Evicted, the Guardian has an article on "America's eviction epidemic," focusing on Richmond, Virginia, North Carolina, and Atlanta.  In Richmond, the city housing authority is a major proponent of eviction.

Evading tenant protections in Toronto.  The Toronto Star reports ("This Toronto renter fought eviction from a man who bought just 1 per cent of the house. After 7 months, she’s giving up") on a workaround for property owners in markets with tight protections for renters, they can sell as little as 1% of the ownership of the house to a third party, who then can claim they will be moving into the unit. From the article:

... Jacky Bai Jun Liu, a first-time homebuyer in his early 20s, had acquired the landlord title after he was sold just a one per cent stake in the house in midsummer. McKenzie told the Star that Liu had told her during a phone call he was a Ryerson student and intended to move his friends into the house.

Almost immediately after the sale, Liu moved to evict seven tenants from two units, in June serving them with an N12 notice co-signed by one of the primary homeowners, informing them that Liu intended to exercise his legal right to take over the property for personal use.

On a "form versus substance" standpoint, such subterfuges shouldn't be legal because 1% ownership would normally not trigger control, and would qualify as a passive interest.

New York City special eviction protections.  In 2017, New York City passed a "Right to Counsel" law, which provides legal representation in eviction matters for people who are below the federal poverty line.  Currently, the program is limited to certain areas of the city with the highest need, because there isn't enough money and enough lawyers to fully fund and staff the program ("Year One of the NYC Tenant Right to Counsel Program," Next City).

New York State eviction protections.  With the recent progressive turn of the New York State Legislature, other protections were passed at the state level, which have had significant impact in NYC as well ("NYC evictions down almost 20% six months after state tenant protections enacted," New York Daily News). From the article:

In June, Gov. Cuomo signed off on a package of laws that made it more difficult for landlords to take apartments out of rent-regulated status and no longer allowed them to raise rents by as much as 20% when tenants move out of regulated units.

WRT rent control, in the 1950s NYC had over 2 million housing units covered by rent control, now it's less than 25,000 units.

Extending the "Right to Counsel" approach.  Just as issues raised by Moms 4 Housing are leading Bay Area jurisdictions to consider enacting tenant right to purchase laws, the "Right to Counsel" approach, providing additional assistance to impoverished households when facing eviction, in a system that is weighted to favor property owners, ought to be extended, as a way to reduce the overall human and social costs that result.

A new word to me: "renoviction" but it was coined in 2008

-- "“Renoviction” – A new word for an old scam," Renters at Risk Campaign

(I came across the word used in an article in Toronto's free weekly, Now Magazine.)

When people are evicted because a housing unit is going to be renovated.