Mayor Sets Ambitious 10-Year Plan for Housing

On May 5, Mayor Bill de Blasio unveiled a 10-year, $41.4 billion affordable housing plan for New York City. The plan outlines how the administration intends to create and preserve 200,000 units of affordable housing over the next 10 years. Of those, 80,000 will be new units and 120,000 will be preserved, and they will target a range of incomes, from extremely low to middle-class. Specifically, the plan seeks to increase the number of units available for families making less than $40,000 a year by 200 percent, and boost the number available for moderate-income families making between $67,121 and $100,680 a year by 50 percent from previous levels.

According to the plan, New York City will commit $8.2 billion in public funds to a 10-year housing plan. The plan also calls for $2.9 billion in state and federal money and more than $30 billion the city expects to attract in private funds.

The mayor’s announcement was the culmination of a campaign promise to make the city more livable for poor and middle-class New Yorkers. Mayor de Blasio’s plan of creating or maintaining 200,000 affordable units over the next 10 years, if realized, would surpass the considerable investment in affordable housing over Mayor Bloomberg’s three terms. Bloomberg invested more than $5.3 billion of city money in such housing, and leveraged more than three times that much from other sources, to preserve or build 165,000 units over 12 years.

The plan also details new planning initiatives and zoning changes that will help make these affordable units a reality. By requiring and not simply encouraging developers to include affordable units in residential projects in newly rezoned areas around the city, the mayor intends to foster a denser New York. It would be the first time, officials say, that such a mandate would be applied across the board, though many of the details of the requirement haven’t been decided.

A significant portion of the plan is dedicated to preserving existing units. As such, the plan’s housing initiatives include programs that keep apartments under rent regulation. The following identifies the initiatives that may affect current owners under the plan.

Ensuring Safety and Habitability of Current Units

The city believes that efforts to build new units must go hand-in-hand with efforts to protect and maintain housing quality so that New Yorkers can live in safe and healthy environments.

Perform a comprehensive review of the HMC. The Housing Maintenance Code (HMC) ensures minimum standards of health, safety, fire protection, light, ventilation, cleanliness, repair, maintenance, and occupancy in residential buildings. While specific updates to the HMC have been implemented over time, the city hasn’t undertaken a comprehensive review in recent years.

The city believes that requirements of the HMC should be better coordinated with other relevant codes and rules so as to streamline the design and review process, benefitting both building owners and tenants. Additionally, the HMC doesn’t incorporate some industry best practices, such as issuing electronic notices to owners and promoting green building technologies.

The city plans to conduct a comprehensive review, working with tenant advocates, organizers, building owners, and property managers to identify problems with the existing code. Based upon that review, the city will propose an update of the HMC to ensure that it reflects current technologies and best practices and is consistent with other codes relating to housing quality and safety.

Increase tenant awareness of how to report housing violations. Well-informed tenants can help to ensure that violations, unsafe conditions, and other HMC compliance issues in their buildings are reported so that they can be addressed in a timely fashion. Using posted notices and an extensive outreach campaign, the city intends to inform tenants about how to identify and report unsafe conditions.

Strengthen HMC enforcement through city procurement and compliance reviews. Before entering into contracts with or providing financing to property owners, or awarding developers site control of city-owned property, the city will examine the violation status of their New York City real estate portfolios and conduct additional reviews of those violations where appropriate. The city will insist that property owners and developers must cure violations if they want to do business together.

Facilitate rehabs by adopting new building code for existing buildings. Since 2008 there have been significant revisions to the New York City construction codes, but the current scheme remains complex and time consuming. Furthermore, rehabilitation of existing buildings is subject to a complex regulatory structure that includes state law, the applicable provisions of the Building Code, and interpretive regulations and guidelines.

In addition, according to the city, although several statutory amendments related to building resiliency have been made post-Sandy, the provisions governing alterations to maintain or increase resiliency, such as those related to flood- and wind-resistance, need to be studied further.

The city plans to establish an Existing Buildings Code Revision Committee to propose a comprehensive Existing Building Code based on the International Existing Building Code (IEBC), as has been done in the rest of New York State. Adopting a separate code for existing buildings will streamline permitting and simplify regulations governing building upgrades and resiliency improvements for the existing housing stock.

Offer training for building owners. Some owners, particularly small landlords, may benefit from training on best practices for maintaining their residential buildings in safe and habitable conditions and from information about resources that are available to improve building performance and reduce operating costs. The city will work with nonprofit partners to provide comprehensive training programs for owners of residential buildings and explore the feasibility and potential benefits of providing financial incentives (such as grants, loans, and in-kind assistance) to owners who successfully complete an education program and implement best practices.

Preserving Rent-Regulated Affordable Housing

Rent-stabilized apartments are a critical component of the city’s affordable housing stock. According to the city, approximately half of all rental units are currently subject to rent stabilization, which provides tenants with important rights and regulates rent increases for more than 2.3 million New Yorkers. However, decontrol provisions implemented in 1993, along with market pressures, have resulted in the loss or deregulation of 250,000 units from the rent-stabilized stock.

Lower the rate of units exiting rent stabilization. The majority of the units that have left the rent-stabilized housing stock were lost through high rent vacancy decontrol, which allows units to exit rent regulation when a unit is vacant and the legal rent for the incoming tenant exceeds $2,500 per month. A small proportion were lost through high-income/high-rent deregulation, which allows units to exit rent regulation when the occupant’s annual income exceeds $200,000 for two consecutive years and the legal rent exceeds $2,500 per month.

Legal rents can escalate quickly to that $2,500 trigger through annual rent increases, permissible increases upon vacancy, and/or rent increases due to major capital improvements (MCIs) and individual apartment improvements (IAIs).

The state law governing rent stabilization will come before the state legislature for renewal in 2015. The city will advocate strenuously for renewal, and for strengthening rent stabilization protections. Further, the city plans to work with state partners to seek to amend the New York State Local Emergency Housing Rent Control Act (LEHRCA) in order to effectively repeal the Urstadt Law and 2003 amendments, which limit the city’s role in the state rent regulation scheme.

Increase rent-stabilized tenant protections. In 2013, over 30,000 New York City families were displaced from their homes as a result of eviction proceedings filed in housing court. The city believes that there’s a lack of legal representation for low- and moderate-income tenants facing eviction. The city intends to streamline city programs that provide eviction prevention services to help ensure that tenants in rent-stabilized units stay in their units.

Specifically, the city will seek external funding to support eviction prevention programs and will ask private law firms to provide pro bono legal services to defend tenants facing eviction or other housing court actions. In addition, the city will work with community-based organizations and tenant organizations to increase tenant education.

Tenants of rent-stabilized apartments may apply to the New York State Division of Housing and Community Renewal (DHCR) for rent reductions due to substandard conditions or services. To help protect tenants’ rights and encourage owners to provide required repairs and services, HPD will work with the DHCR to determine how HPD’s code compliance efforts could assist the DHCR with its enforcement of the rent reduction provisions.

Creating Better Preservation Tools

While the city will work to expand on preservation efforts using existing tools, the administration acknowledges that more flexible tools are needed to reach a broader range of properties and meet the needs of different neighborhoods and building owners. The city intends to streamline and coordinate the existing tools to provide more standardized and efficient preservation programs.

Create new incentives for properties in danger of converting to condos or exiting rent regulation. Many buildings that don’t have capital needs or require rehabilitation and are in strong markets are likely to convert to condominiums or leave rent regulation.

Existing tax exemptions and abatements are too limited in scope to apply to such buildings (for example, J-51 requires rehabilitation, 420-c is available only for Low Income Housing Tax Credit program-financed projects controlled by charitable organizations, and Article XI requires the involvement of a Housing Development Fund Corporation). Therefore, the city will seek to create a new tax incentive program to provide rental building owners a partial or full tax exemption, subject to HPD approval, in exchange for entering into a regulatory agreement that ensures affordability for the life of the exemption.

Leverage liens for city repairs/services to press for affordability and responsible new ownership. When owners fail to perform necessary repairs or provide required services, the city can help to ensure that tenants are not subjected to dangerous conditions. Where the city acts to remedy these owner failures, it files a lien against the property to recoup the cost of those activities. Those liens, which are the direct result of an owner’s breach of its legal obligations, currently bear interest at a lower rate (7 percent) than an ordinary tax lien (generally 18 percent). The city will seek local legislation to ensure that liens for such work bear interest at the same rate as any other defaulted tax lien.

Enforcement of such liens can be an effective tool to get properties into new ownership. The city will explore ways to press for, and facilitate, such transfers and to encourage new owners to repair the buildings and devote part or all of the property to affordable housing.

Promoting Sustainability While Reducing Operating Costs

As part of the plan, the city also detailed initiatives to curtail rising operating costs from utilities and increasing flood insurance premiums.

Create an energy and water utility cost-reduction program. Utility costs in New York City increased more than 6 percent between 2012 and 2013, while fuel oil costs rose 20 percent in the same period and more than doubled since 2002. This has increased the rent burden for tenants and eroded bottom lines for property owners, which can lead to the deferral of maintenance and capital improvement needs. Undertaking retrofits to save energy and water can help building owners control operating expenses and maintain affordability, while also achieving broader sustainability and health goals.

Many buildings, however, haven’t undergone even low-cost, low-effort conservation measures because their owners lack technical understanding or have limited capital reserves or ability to borrow against small net operating incomes. Therefore, the city will create a pilot outreach and financial assistance program to provide grants or loans, as appropriate, to accelerate investments in energy and water efficiency projects. The program will target housing that serves low- to moderate-income residents.

In particular, the pilot program intends to target some of the oldest and most vulnerable housing stock, including smaller and mid-size tenement buildings. Some of these buildings may be able to reduce their energy and water consumption by up to 30 percent through moderate rehabilitation. This program will also seek to create job opportunities for community residents.

Help owners implement resiliency upgrades, reduce flood insurance premiums. In 2013, the Federal Emergency Management Agency (FEMA) updated its maps of high-risk flood zones (flood maps) in New York City, which are used to determine whether properties are required to purchase flood insurance and conform to resilient building standards. The updated maps increased the size of the city’s high-risk zones by more than 50 percent, adding 29,000 new residential properties and approximately 180,000 residents. As a result, many of these properties will face substantially increased premiums for flood insurance.

Property owners are able to reduce their flood insurance premiums by undertaking specific improvements to their buildings, such as elevating the ground floor and all building systems. The standards that govern these improvements, however, were largely conceived with free-standing single-family homes in mind, and they’re often physically impractical or financially infeasible in New York City’s multifamily buildings.

Federal standards also penalize affordable housing in particular because the expenditure threshold that dictates when an owner is required to undertake improvements—known as a “substantial improvement”—is linked to the assessed value of the property, which is typically lower than for market-rate housing. This can have the unintended consequence of deterring investments in the building.

The city will confront these challenges on multiple fronts. First and foremost, the city intends to continue to reinforce and expand the city’s coastal flood protection infrastructure—bulkheads, sand dunes, wetlands, and other physical structures—and work to ensure that FEMA recognizes the associated risk-reduction benefits in its flood maps.

The city will also advocate for the creation of flood protection standards that reflect the unique characteristics of New York City’s densely built environment. For example, the city will advocate for federal recognition of other forms of risk reduction other than elevating structures. This recognition would enable attached, semi-attached, and multifamily residential buildings to reduce their flood insurance premiums cost effectively. Larger affordable multifamily buildings will also need to be granted flexibility to make resiliency improvements without the risk of triggering costly additional requirements that could lead to financial failure and residential displacement.

The city also intends to assist property owners directly. It will explore the creation of a loan program to help low-, moderate-, and middle-income owners in newly designated flood zones perform resiliency upgrades. In some cases, these loans could be combined with other forms of incentives in exchange for an affordability agreement. The city will also launch outreach initiatives to provide information to property owners in the floodplain regarding their risks, their requirements to purchase flood insurance, and their options for reducing risk and flood insurance premiums.