Tag Archives: rent stabilization

New Map of Preferential Rents Shows the Displacement Risk for Rezoning Neighborhoods and Low Income Communities City-wide

Last week, ProPublica launched a new tool mapping the number of rent stabilized apartments with preferential rents by zip code, throughout New York City. The results are eye-opening. Almost a third of all rent stabilized apartments in New York currently have preferential rents: over 250,000 units citywide. That’s over 250,000 households that do not truly enjoy the protections of rent stabilization. That’s over 250,000 households that are at risk of displacement, especially in low-income communities.

The use of preferential rents directly undercuts the protection and stability rent stabilization is intended to provide, leaving tenants vulnerable to large rent increases at every lease renewal, regardless of the rates permitted by the Rent Guidelines Board.  Especially troublesome is the prevalence of preferential rents in some of the city’s poorest neighborhoods. Six of the ten New York City zip codes with the most preferential rents are in the Bronx, with poverty rates in those areas ranging from 30 to 43 percent – a population that cannot afford a big rent increase.

Of equal concern is the fact that many of these neighborhoods with high numbers of preferential rents are in areas where the de Blasio administration has proposed large-scale rezonings, further exacerbating the risk of displacement. This is a risk the City does not adequately address. The city is mandated to consider how a rezoning could impact current residents, including potential displacement. And yet, when considering displacement risks, the City excludes rent stabilized tenants from their analysis, under the erroneous assumption that their tenancy is secure. The prevalence of apartments with preferential rents shows just how wrong this is.

Take East Harlem as an example, which is currently going through ULURP for a neighborhood rezoning. In its Draft Environmental Impact Statement, the City found no adverse impacts due to secondary displacement. But again, the City did not consider rent stabilized tenants in their analysis. According to ProPublica there are close to 5,000 apartments with preferential rents in the two zip codes that include East Harlem. This means almost 5,000 families are not subject to the limits on a rent increase that rent stabilized tenants depend on. How can these 5,000 families be considered secure in their apartment then, or free from displacement risk? As land values and rents increase following the rezoning, there’s nothing to stop a landlord from raising the rent to a level that might force a tenant out.

The same concern exists around the proposed Jerome Avenue rezoning in the South Bronx, where there are close to 9,000 apartments with preferential rents in the two zip codes spanning the area – two zip codes with poverty rates over 40%. The same concern exists in Inwood, or Bushwick, and the list goes on. These are by far not the only households at risk of displacement, both in these rezoning neighborhoods and throughout the city. But these are households we know are at risk just from preferential rents alone.

The goal of the de Blasio administration’s Housing New York plan is to both construct and preserve affordable housing. Rent stabilized housing makes up the largest portion of our city’s existing affordable housing stock. The new data on preferential rents illuminates once again the vulnerability of rent stabilized tenants, and the need to place protections for existing residents and preservation of existing affordable housing at the center of any affordable housing plan intended to actually address the affordability crisis facing our city.

Gowanus Community Comes Together for Rezoning Campaign with the Launch of the Gowanus Neighborhood Coalition for Justice

Yesterday afternoon members of the Gowanus community came together in force for the public launch of the Gowanus Neighborhood Coalition for Justice (GNCJ) and the release of their Priorities Platform. Formed in response to the City’s proposed rezoning of the neighborhood, the GNCJ is a coalition of local residents, workers, businesses, and community organizations united in their effort to ensure the voices of under-represented local stakeholders are meaningfully heard. Holding signs stating their demands, including, “Protecting tenants from displacement” and “Inclusion of NYCHA communities in the Gowanus rezoning,” the Coalition made a forceful and eloquent case for why any rezoning in Gowanus must move forward under the framework of advancing racial, social, and economic justice.

Speakers stressed the point that the City must avoid the mistakes of previous rezonings – including those along nearby 4th Avenue in 2003 and 2007 – that have led to the displacement of rent stabilized tenants, local businesses, and other community members to this day. To avoid this fate, the City must include the people most deeply impacted by these changes in the actual decision-making process. As Dave Powell of the Fifth Avenue Committee stated, “No rezoning that does not incorporate the voice of longtime residents is authentic.”

To this end, the GNCJ released their Priorities Platform outlining the five intersecting principles under which any rezoning should occur:

1. Advance Racial and Economic Justice
2. Create Real Affordable Housing and Protect Tenants from Displacement
3. Promote Environmental Justice
4. Uplift the Culture and Community of Longtime Residents
5. Protect Local Businesses Where We Shop and Work

Coalition members, including NYCHA residents and rent stabilized tenants, elaborated on these points and shared personal stories, calling for strong anti-displacement measures, the production of deeply affordable new housing, and substantial investments in NYCHA. Industrial business owners and the organizations that support them spoke about the urgent need to preserve industrial spaces and the good paying jobs they provide. Speakers called for the protection of small businesses that serve low- and moderate-income residents, as well as a commitment to deal with the pollution and environmental inequality that have been a part of Gowanus for decades. All of these demands pointed to a broader call to address the existing racial and economic segregation in the community.

The Coalition also released a neighborhood profile of Gowanus and its residents, highlighting the area’s history as an industrial hub as well as a diverse, mixed-income residential community – both of which are currently at risk. The report notes the massive rise in real estate value and speculation over the last 15 years in Gowanus and with it the growing inequality gap between the highest and lowest income households as the neighborhood has become both wealthier and whiter. And yet, despite these challenges, Gowanus is still home to a large population of NYCHA and rent-stabilized residents – a vital part of the community whose needs must not be ignored.

The Gowanus Neighborhood Coalition for Justice understands that a rezoning and the investments that it will bring could either help address long-standing challenges and problems in the neighborhood or significantly increase the displacement of long-term residents and businesses and deepen existing inequality. There is a chance for the City to get things right in Gowanus, but it must take the demands of the Coalition seriously and work with them to ensure the rezoning is in the best interest of the entire community.

Understanding REBNY’s New 421-a Tax Exemption Proposal

What does it do? What does it cost?

In January 2017, a revised 421-a Tax Exemption, rebranded and given the title “The Affordable New York Housing Program,” was introduced and inserted into the proposed FY18 New York State budget. This version of the 421-a Tax Exemption is essentially an expanded and amended version of the expired June 2015 exemption that passed the legislature but with modifications intended to resolve the conflict created from a trade union wage provision that was inserted at the last minute, which subsequently led to legal complications and suspension of the exemption.

What is REBNY’s Proposal?   

REBNY’s proposed 421-a program does not improve or change any of the affordable housing requirements passed by the legislature in June 2015.

The June 2015 version was citywide and would have been used by almost all new residential development projects over 6 units, allowing developers affordability Options A, B, C, and D. (See image below for an explanation of the Options) The new REBNY proposal adds Options E, F, and G and requires developers to pay higher construction wage levels. The new Options E, F, and G also extend the length of the tax exemption to an unprecedented 35-year, 100% exemption. This is a major increase in the lifetime value of the exemption to the developer and a major increase in the cost to the New York City taxpayer.

The proposed new REBNY program is citywide, and would be widely used across most neighborhoods. Development of new buildings with 300+ rental units will be required to participate in the program in some areas, and eligible to participate in all other areas of the City. The new program is exceptionally generous to the developer, and most will take advantage of this financially generous opportunity.

What is the Cost of the REBNY Proposal?

The NYC Independent Budget Office recently reported that the current “421-a remains the city’s largest tax expenditure at $1.4 billion this fiscal year.”

New York City’s Department of Housing Preservation and Development (HPD) has stated that the REBNY’s proposed changes will increase the overall cost of the program by yet another 22% on top of the billion-plus dollars we are already spending on the program every year.

And the increase in cost won’t just come after year two of the extended tax exemption; it will come immediately. Developers will find the enhanced benefit irresistible since it allows them to not pay taxes for an additional ten years. We will see a rush of developers applying for REBNY’s 421-a program and see developments from the last 1.5 years retroactively being granted 421-a, costing tax payers an estimated additional $820 million in the first ten years, according to HPD.

Is 421-a an Affordable Housing Program?

Although the current 421-a Tax Exemption includes some requirements for affordable housing, it cannot be accurately described as an affordable housing program. It was designed in the 1970s to incentivize the creation of private, market-rate, and luxury housing at a time when the City economy was stagnant. The affordability benefits were a minor, late add-on the program. In fact, a 2014 analysis of the annual cost by ANHD shows that the exemption cost the City over $1.1 billion in lost tax revenue and covered 152,402 residential units, but only 12,700 of those units were affordable. That’s $11 of affordable housing benefit taken for every $100 given away to subsidize luxury development. That’s not an affordable housing program.

Who Will Benefit from the REBNY Proposal?

No additional affordable units, or deeper level of affordability will be generated by the REBNY proposal, and the increase in the length of affordability is minor. The primary beneficiaries will be market-rate and luxury real estate developers, who will have their already substantial public subsidy increased by an estimated 22.5% in each new building. A fraction of the increased value that is given to the developer will be passed along in the form of higher wages for the short-term construction labor, but this will be a minor amount.

Additional beneficiaries of the REBNY proposal will be landlords and politicians who oppose rent stabilization laws. The New York State Assembly, which tends to support rent stabilization laws, has often used the threat of not renewing 421-a as leverage to prevent the weakening of rent stabilization laws by the New York State Senate, which tends to support the 421-a Exemption. Since this version of 421-a included a higher construction wage for the first time, the Assembly – which tends to also be pro-organized labor –will find it far more difficult to use the threat of not renewing 421-a as leverage.

How Do the New “Options” Work?

• Option E is allowed within any of the Enhanced Affordability Areas, and requires 10% of the apartments be affordable at 40% of Area Median Income (AMI), 10% at 60% of AMI, and 5% at 120% AMI. The average hourly construction wage must be $60. Additional public subsidy is not allowed.

• Option F is allowed within any of the Enhanced Affordability Areas, and requires 10% of the apartments be available at 60% of AMI, and 20% at 130% AMI. The average hourly construction wage must be $60 an hour. Additional public subsidy is allowed.

• Option G is allowed only within the Brooklyn and Queens Enhanced Affordability Areas, and requires that 30% of the new housing is affordable at 130% of AMI. The average hourly construction wage must be $45 an hour. Additional public subsidy is not allowed.

• Any building with 300+ rental units outside of the Enhanced Affordability Areas can opt-into Option G, which, given the extraordinary value of the 35-year 100% abatement to the developer, is the most likely outcome.