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May 31, 2007
Council OK's 'Full-Court Press' Against Slumlords
To date, the city has had limited powers to force negligent landlords to bring their buildings up to code. That changed yesterday when the City Council passed the Safe Housing Act which empowers (requires, actually) the Department of Housing Preservation and Development to identify 200 problem buildings a year and go after their owners to make repairs. Under the bill, if an owner does not comply, the city may do the improvements itself and send the owner the bill. If he refuses to pay, the city may place a lien against the house and ultimately seize the property. “This bill is a full-out, governmental full-court press against slumlords in the city of New York,” said Christine C. Quinn, the City Council speaker. The scope of the bill, which was sponsored by Letitia James, includes not only smaller, short-term problems like a faulty radiator but entire system upgrades. Mayor Bloomberg is expected to sign the bill within the next 30 days and become law within the next six months.
Council Passes Bill Enabling City to Fix Worst Buildings [NY Times]
City To Get Tough On Negligent Landlords [Brownstoner]
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Comments
Damn! Now that's how you get s--- done. I like it.
Posted by: Anonymous at May 31, 2007 9:20 AM
Good idea, now who is going to police the biggest slumlord of all - the City of New York
Posted by: David at May 31, 2007 10:08 AM
The City has long had all these powers, Mayors choice not to exercise them. The new law mandates HPD enforce.
Posted by: Anonymous at May 31, 2007 10:22 AM
The Mayor chooses not to enforce them because strict enforcement of the code will result in landlord abandonment and loss of housing.
Buildings are poorly maintained not because landlords are evil, but because rent stabilization makes it unprofitable to renovate buildings.
You can't force landlords to accept low rent payments AND give these people a palace.
If the landlord can't make money, he'll just walk away from the building. This is a huge problem right now. Most rent stabilized tenants live in buildings that were constructed very well in another era, but their good construction only lasts so long. 60+ years of deferred maintenance will be having a huge effect in the coming years, and in most cases its cheaper for landlords to simply demolish their buildings than keep renting to deadbeats.
Posted by: Eryximachus at May 31, 2007 11:04 AM
If hpd force the issue and bills the landlord, wouldn't the cost be just passed to the tenants in the the form of MCI?
How does that help affortable housing?
Posted by: NYCer at May 31, 2007 11:31 AM
Eryximachus, you really dont know what you are talking about. Low rents and deferred maintenance is about the only recipe to make profits with rent stbilized buildings. Building prices are based upon the rent roll and given the current market multiple/cap rate, unless the building has below market rate rent you are better off in a Bank CD. However since the Rent Stabilization laws have built in MCI increases for much of maintenance (new roofs, pointing, boilers, elevators, etc...) if you can find a building with low rents and deferred maintenance you can update the building and get a good return on the investment b/c you can pass on most of the cost to the tenants and/or get J51's.
Anyone who owns a RS building who doesnt put in these improvements is incompetent or an idiot.
Posted by: David at May 31, 2007 11:38 AM
Does anyone want to buy all of my rent stabilized buildings before the city ends up taking them over? Honestly, that's what's going to happen as a result of this. The city is just going to end up taking over all the buildings it puts liens on.
Posted by: Meryckawick at May 31, 2007 11:56 AM
David -
What you say is not totally true. MCI's can be contested by tenants. The MCI increases are also not that much. I have run the numbers on RS/RC buildings. The best you can do is if you can free up an apartment and renovate it but just MCI's alone are in some situations (where the rents are very below market) not going to help you that much. Plus an elderly or disabled tenant is still protected from the MCI increases. Landlords are not stupid, if they aren't doing the MCI its b/c it simply isn't profitable.
This law will do nothing to help the slumlord problem, b/c when the building is foreclosed by the city and they go to auction it off only another slumlord will buy it b/c no one else could make any money from these buildings. In the interim taxpayers will be financing the renovation of these buildings.
Posted by: Anonymous at May 31, 2007 11:58 AM
It's really unfair to blame rent regulation laws for poor building maintenance. Many landlords spent years neglecting their buildings into their current condition rather than having them just sort of decay. They watched as the conditions got worse and worse and were never repaired and now tenants are supposed to have sympathy for these people because their inaction caused exactly the problems that any tenant or building professional would have warned them about? No way.
Buildings don't just decay randomly and for no reason. Stairs break because landlords don't repair them properly, roofs leak because the roof was installed improperly etc...
What really needs to happen is the inspection of buildings before their problems become too large for the owner. The city should consider providing loans and education to landlords who don't know how to take care of a building. The current regime is really like an emergency room when what we really need are more checkups.
Posted by: Dan at May 31, 2007 12:22 PM
blah blah blah, the city is always talking tough when it comes to landlords. But the really tough landlords don't give a rat's ass.
However, if you are a decent landlord trying to do the right thing, they will eat you up and spit you out in little pieces.
The city has designed all its tenant-landlord regs with only the absolute worst type of slumlord in mind, the result is, in a strange self-fulfilling manner, that only the worst kind of landlord stand the test of time in this town. You have to be a bribe-giving, limb-threatening, SOB thug to gain the respect, and fear, of the bureaucracy and the pols.
Posted by: Anonymous at May 31, 2007 12:29 PM
RC/RS = slums. The city needs to get its head around this equation. It is immutable no matter how many other laws are piled on top as band-aids.
Posted by: Anonymous at May 31, 2007 12:31 PM
Is this law or program designed to do anything about abandoned buildings, though? What about those? Like the one owned by the crazy lady on 7th Avenue and 2nd Street in Park Slope. If there are no tenants currently living in the building, it sounds like this Safe Housing Act doesn't apply to buildings nobody is currently living in. Which stinks. Abandoned, neglected, dangerous, eyesore buildings need to be addressed too.
Posted by: Anonymous at May 31, 2007 12:48 PM
My theory is that the rent regs were all written by lawyers and pols, the kind of guys who know absolutely nothing about how buildings are built or how they age. Their thought is that a building is inert and just lasts forever unless you do something bad to it.
Posted by: Anonymous at May 31, 2007 1:16 PM
Yes the tenants can contest but if the LL follows the guidelines on useful life and documentation of costs - the tenants will fail.
The increase is 1/84th/# of rooms. Which works out to be a 14% a year return (although you can only add 6% ea year so then you carry it over - so the effective return is slightly less) BUT this only reflects income return but there is also a huge return in terms of capital gains. Using RR multiplier -currently the RR multiplier is around 10x for many RS buildings in Brooklyn. So if by way of example, if I put a new $100,000 roof , within about 2+yrs I will have been able to pass the cost on by way of a $14,200 annual RR increase (which ignores that ordinary lease renewal % will be off this higher rent), so then if the multiple stays the same I will be able to sell the building (or refinance it) at 10x $14,200 which means $142,000 increase which = a 42% return on my money in about 2yrs, and if you dont sell you still are getting a 14% return on the $ invested on a new roof (forever).
BTW the RR multiplier is just a rough tool, in practice given current cap rate valuation methods the return would be even higher.
The reason why 'good' LL dont want to buy distressed properties from true slumlords has nothing to do with the economics of getting rent increases for MCI's and everything to do with the fact that slumlords generally have the worst possible tenants in their buildings. Therefore even if you improve the building, your going to lose a fortune in lost rents, legal fees and aggravation b/c the housing courts will generally side with the tenants (especially when the deadbeat tenants know how to work the system - which they often do).
BTW all this is no secret, which is why you now see institutional money being put into portfolios of RS properties. (i.e see Blackrocks recent purchase of 300M portfolio of RS buildings in the Bronx for one of many examples)
Posted by: David at May 31, 2007 1:23 PM
I'm not a housing lawyer but I don't see the MCI risk, If teh City goes in and fixes a ceiling, or an electrical circuit, or some plumbing, so that it is restored to its proper, non-violative condition, that is not an improvement. If the City, or the landlord, replaces water damaged oaf floorborads with new mathcing oak floorboards, is that an improvement in the legal sense? Seems to me MCI means an upgrade, not a repair. Housing lawyers, am i right?
Posted by: Anonymous at May 31, 2007 1:30 PM
An upgrade?
like putting in a Jacuzzi?
I think the regs mean capital improvements, ie: new windows, parapet reconstrcution, new roof.
NOT re-painting fire escapes, repairing windows, patching flooring.
You pass along 1 fortieth of the cost to the tenants every month. that's what I recall when I was on the board of a coop with rent regulated tenants who did not want to buy their units at a steep discount because it would have fundamentally wrecked their identities as victims.
Posted by: Anonymous at May 31, 2007 1:41 PM
You are correct, many upgrades or repairs (like painting or fixing a leak) cant be passed on as MCI's but Major improvements can be. Additionally if a tenant agrees (not likely) or moves you can get a MCI increase of 1/40th the cost per month (forever)for many renovations to the apartment, in addition to any vacancy increases.
Anyone who thinks that there is no money to be made in RS rental buildings b/c the rents are too low is missing a huge opportunity. There are many factors that can make such investments difficult (Courts, Horrible tenants, high purchase prices, etc...) but if you find a RS building with low rents, decent tenants and alot of old infrastructure - you might very well have a gold mine, if you have the $, expertise and commmitment to work the building.
Posted by: David at May 31, 2007 2:06 PM
Oh please- do any of you even have a clue as to "habitability" or "safety?" What a bunch of racist,ignorant, money grubbing moralistic prigs you people are. I guess everything is money- but when you live in an apartment where ceiling fall in on you and electrical wiring is sticking out of the built in light fixtures, or you fall down the stairs because the steps have been broken for 5 years and you die from a broken neck, you might see things a little differently. And not to put too fine a spin on it, but if being a landlord was a money-losing proposition how come so many of you want to be landlords? FYI- you can't be a landlord without tenants and maybe if they were treated a little better, they'd be better tenants. cause and effect.
Anon 1:30- you are right. According to RS laws, those are maintainence. Many of the posters on this board love to forget that the laws involve the building safety.
Anon 1:41- unless you are a professional psychologist please refrain from exercising your very poor analytical skills. Frankly admitting to having been a coop board member is hardly a recommendation for fairness, honesty or intelligence.
And the idiot who said RC'RS =slums- you so obviously have no idea about this- rc'rs apartments are all over the city including places like Brooklyn Heights, riverdale and the Upper East & West sides- and not just above 110th St. Lets not do the KKK thing and blame minorities for the problems of the City. You people are definitely part of the problem, not the solution.
Posted by: Anonymous at May 31, 2007 2:07 PM
David,
I also recall from my experience in the coop I mentioned previously that tenants hated improvements like new windows because they knew they would get socked with 1/40th of the cost (as it pertained to their unit of course) forever. It did add up. They would try to block the workmen and call the police claiming harassment. A comedy. Some of the more savvy ones -especially the folks with attorney children or grandchildren, would not pay without a court order let me tell you. I don't think I agree with you that RS buildings are "gold mines". Mines of acid reflux maybe.
Posted by: Anonymous at May 31, 2007 2:17 PM
tenants get socked for everything- like a new refrigerator because the old one finally died. A 3004 appliance that teants pay for forever because the raise is permanent. Give me a break. for a leaking roof? Why shouldn't that come under a warrant of habitability? tenants don't hate improvements- jeesh you coop people are so damn smug and arrogant- and you are not privy to people's finances so blanket statements as to hating improvemnts or wanting to be victims is simply you being an ass.
Posted by: Anonymous at May 31, 2007 2:24 PM
If you replace the building windows it is 1/84th. And you're right some tenants don't like it, and generally those same tenants complain it is too cold and drafty in their apartments. (i.e. they will always complain)
Tenants are a pain in the the a$$ - it is just like any business were you have the public as customers (only worse), but that is the business and if you know what you are doing you can make alot of money and give tenants a decent place to live too.
There is simply no long-term economic benefit to run a building into the ground. Years ago when people had doubts about the viability of the cities and tenants were hard to come by and banks wouldnt loan any $ - then maybe it made sense to put as little into the buildings as possible - because there was a real risk that the property would soon be worthless. But thankfully those days are long past. Landlords who let their buildings fall apart are either out for a real quick buck or incompetent - or a bit of both.
This plan is supported by the REBNY and other LL groups and really is no big deal. The only problem I see is that many of the tenants living in the squalid conditions described, live in buildings owned by NYC.
Posted by: David at May 31, 2007 2:29 PM
Dear 2:24,
Who is being an ass in this thread?
you!
Posted by: Anonymous at May 31, 2007 2:29 PM
"Tenants are a pain in the the a$$ - it is just like any business were you have the public as customers (only worse), but that is the business and if you know what you are doing you can make alot of money and give tenants a decent place to live too"
And you people wonder why tenants direspect you? FYI- I didn't realize a tenant was an afterthought but hey, what's the sense of having an apartment building with no tenants. who cares if they have decent living conditions or not so long as you can stuff your pockets.
Anon 2:29- then I'm in good company, no?
Posted by: Anonymous at May 31, 2007 2:42 PM
David - Maybe i have totally forgotten math but the numbers in your work up don't seem to make any sense. How does a 14% increase in rentroll guarantee you a 14% return on 100k. Plus i don't see how you got the 14% in the first place. Furthermore you seem to be assuming no one is over 65 or disabled. As someone who lived in a building that was all RS/RC tenants (including myself) i have to say about 80% of the building was over 65 and i don't think this was so unusual.
Plus not ALL rent stabilized buildings are losers, if they were there would be a lot more slums. Clearly some make sense. But the ones that are run into the ground generally do have the tenants with the lowest rent rolls.
Posted by: Anonymous at May 31, 2007 3:36 PM
If you invest 100K on a roof and pass on all of it, over 2+yrs you will be entitled to increase the RR by approx 14,200 a year (that is 1/84th of the cost*12 months). And $14,200 is 14.2% of 100K. This increase ignores normal RS escalations.
Being over 65 or disabled does not exempt you from these increases - having a valid SCRIE or DRIE (Sr Cit or disability exception) prevents these increases from bringing those tenants rent to higher than 1/3 total disposable income. So you are technically correct that you may not be able to pass on 100% of the cost, but it is unusual to have a building that is 80% over 65. And besides if you did then there would be plenty of $ to be made with such a building since vacancy increases would be huge given the lifespan of the average person.
As for Annon@2:42 apparently your reading comprehension is as bad as your attitude... I never said tenants were an afterthought and I also said that there is no legitimate excuse for not providing tenants with a decent place to live. In fact I am the person saying that this law is a good idea, will have zero effect on good LLs and that RS housing can be very profitable at the same time that you provide people with a nice place to live.
But tenants can be a pain in the a$$....so what...all businesses that deal with the 'public' are hard. I am not saying that you should disrespect the tenants (in fact just the opposite), but if you think getting a call at 2am b/c a pipe burst or having to deal with arguments between neighbors, or bed bugs etc.... isnt a pain in the a$$ then you are a glutten for punishment.
Posted by: David at May 31, 2007 4:04 PM
When I said RC/RS=slums, I don't mean that a given RC building is automatically a slum.
What I meant, although it should be obvious, is that a booming city with RC/RS laws creates slums, as a byproduct of those self-same laws.
Even if only 1 in 100 RC building is a slum, doesn't change the fact that they exist because of the laws.
The downside of trying to artificially hold down market prices is the creation of the odd random and dangerous slum now and again.
Let the market operate and find its own level, and there the term "slumlord" passes into history.
Posted by: Anonymous at May 31, 2007 4:46 PM
The correct spelling is glutton and anon. My reading comprehension may be bad but at least I can spell. On second thought, forget that. For all you say- and yes you are saying the law is a good idea- you still make it sound like providing a tenant with a decent place to live is secondary to you making gobs of money. That makes them an afterthought. You think a burst pipe isn't a pain to the tenant? How about having all your clothes ruined? Or losing 100 hard earned dollars worth of food because the refrigerator that's been making bad noises for a year finally gave out? Or falling on the stairs in the dark because the light wasn't fixed in the hallway and cracking your knee? Tenants give as good as they get. And no matter how much landlords twist and turn, without tenants, you ain't.
On another level- and this is not directed at you David- there's the fact that unsafe buildings are dangerous. Money, no money, if you're a landlord you went into it with your eyes open. It's your responsibility to provide a safe place for tenants to live- it doesn't have to be pretty, doesn't have to have the granite counter tops and vessel sinks. It has to be safe. And that includes doors and roofs properly maintained, lighting, stairs and floors, plumbing, electrical, bug and vermin infestations- when it involves human lives, it's the landlord's responsibility. If you don't feel you are making money and you can't or won't take care of your responsibility, get another line of work.
Posted by: anon 2:42 at May 31, 2007 5:06 PM
Anon 4:46- I totally disagree that RS/RC creates slums. They are all over the city in many different neighborhoods, including some of the highest end neighborhoods like Brooklyn Heights. So your theory does not hold water.
There's a lot of reasons for slums- are you going to blame the turn of the century slums on? RS'RC laws didn't come into being until long after that.
The City is a macrocommunity and as long as people think that market value is the single determinant of a good economy, it's because you fail to understand that the economy is made up of many parts that work in tandem. Upset the balance and it affects everything up and down the line. When you push poor or middle class people out of their neighborhoods, you force them further away from jobs, and you force out entire consumer markets.
Who's gonna serve you your expensive dinner when there are no waiters who can afford to live close enough to work in the restaurant. Who's going to clean your offices? Nursemaid your kids- you don't value these people, you don't care if they have amenities, or decent housing that's convenient to work, but you do want to make money off of them and you need their services. Quite the conflict. So one way of loooking at it would be to say that those who force out those who can't afford their killing rents are really hurting all the rest of us. Not the other way around.
Posted by: resident of at May 31, 2007 5:18 PM
You can tell the RS buildings in Brooklyn Heights a mile away. They are the ones with the broken sidewalks, the bare bulb fixture by the entry, the circa 1960 banged up garbage cans next to the door, the dead shrubbery, and in some cases the Garden State brickface over the early nineteenth century facade. They are micro-slums there is no doubt about it.
Posted by: Anonymous at May 31, 2007 7:33 PM
What a hoot -- so would you be referring to 80 Cranberry as a micro-slum then? That building has a concierge and several porters, yet most of the apartments there are stabilized. Many people on this thread don't seem to realize just how bad conditions are in a REAL slum -- and it's not just a question of a building looking a bit run-down or less-than-pristine. And I know plenty of rent stabilized buildings that are very nicely maintained as well. And, yes, landlords do love those MCI increases -- just about every landlord I know totally gut renovates stabilized apartments once they become vacant, thereby pushing the rent ever-closer to that magic $2000 figure -- and still they are a good deal. You can get a huge two room studio in an elevator building Oncean Ave on the stretch from Regent Place down to Ditmas for slightly over $1000 -- rent stabilized and these buildings are in good shape.
And studios in 80 Cranberry start at $1500, when available, so I think its owner is doing just fine, thank you.
Posted by: babs at May 31, 2007 9:01 PM
David,
You're not taking into account that "buildings" really aren't rent stabilized. Individual apartments may or may not be rent stabilized. In my buildings, for example, about half are and half aren't.
If I were to get a new roof, the MCI increase would only affect half my tenants (the rent stabilized ones) and the return you talk about would be reduced by half.
The main benefit of MCI increases is obviously to raise rent stabilized rents, but it's more of a psycological increase than a truly financially beneficial one. Folks paying $635.27/mo for a two bedroom in the Village hate it when their rent increases $15/mo even if the building was improved. It's human nature to want a good deal and what's better than having somebody else pay your way? What a joke!
I would have renovated my public hallways long ago, but I don't want to make my buildings any more attractive than they already are for the rent stabilized tenants. I'm sure many other landlords neglect their common areas for the same reasons.
Rent Stabilized tenants do not make landlords any money. Getting out rent stabilized tenants and increasing rents on market rate tenants is the way landlords make money.
You're obviously not a landlord. For the record, Bloomberg and his property tax increases are hurting landlords way more than anything else, rent stabilization included. My property taxes have gone up about ten fold in the last ten years. It's crazy.
The funny thing is that local politicians claim they want to promote affordable housing, yet they've jacked property taxes through the roof. 99% of the reason that I've jacked my rents lately for my market rate tenants is because if I don't, my income will drastically decrease due to rapidly rising property taxes.
Posted by: Jake the Snake at June 1, 2007 1:05 AM
Adding to Babs- all over Brooklyn Heights; and Schermerhorn St.- that group of 3 beautiful townhouses behind the Brd. of Ed are RS/RC,- beautifully kept and no broken sidewalks. people who say that RS/RC means slum buildings don't know what they are talking about.
Posted by: resident of at June 1, 2007 10:23 AM
Jake ignores, of course, that the fact that his market contained Rent Stabilized apartments lowered his initial purchase price in the first place.
Posted by: Mateo at June 1, 2007 3:54 PM
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