City Council’s ‘Distressed’ Housing Scheme Would Aggravate New York’s Affordability Crisis

“Decline is a choice,” Charles Krauthammer famously said of the policies of the Obama Administration. A version of the phrase applies to the New York City Council’s latest, misguided housing policy: distress is a choice.The Council is blessing what is not a self-evident idea: that non-profit organizations will do a better job than private owners in rescuing the city’s thousands of “distressed” rental apartment buildings. By giving such groups a right of first refusal to buy, the Community Opportunity To Purchase Act would, per its sponsors, “stabilize an increasingly distressed affordable housing sector.” In contrast to Mayor Eric Adams, who refused to sign a similar bill, Mayor Mamdani has indicated he will do so. Rather than signing the bill into law, here’s a better idea: address the reasons why older rental buildings are falling into disrepair in the first place, rather than handing them over to groups which, according to NYU’s Furman Housing Center, lack the financial capacity to fix them up. “A lack of resources and a lack of capacity within the qualified not-for-profit sector,” the Furman center says, “make it unlikely that this sector can meet the demand from tenants involved in the more than 6,000 annual sales of residential buildings with three or more units in New York City. This will make the experience frustrating for tenants who may be interested in exercising the new right.”Ironically, the language of the bill’s justification for taking property out of the hands of the private sector reveals the true underlying housing problems: a combination of “inflating costs and stagnating revenues.”It’s tough to control inflating costs at a time of rising fuel bills, for instance — but stagnating revenues have everything to do with city policies, none more obvious than Mr. Mamdani’s rent freeze, coupled with rising property tax bills. Per Furman: “Property tax bills for older, predominantly rent-stabilized buildings (where 90 percent or more of units are regulated) have risen faster than inflation even as their net operating incomes have declined in real terms.” The city has applied a tourniquet to rental revenues — and having caused distress, blames it on “predatory landlords,” as a sponsor of the Opportunity to Purchase Act, Councilwoman Sandy Nurse, puts it. The numbers are stark. Even before the rent freeze a Furman Center study of the financial pressures faced by these older, rent-stabilized buildings found that net operating income — in other words, profit — declined, after inflation, between 2019 and 2025 to the point that “tightening operating margins that may limit the ability of owners to invest in building upkeep.” Furman’s Mark Willis told the city’s Rent Guidelines Board that thousands of prewar buildings in the Bronx are operating under water as rent increases failed to cover increased operating costs “ by roughly 1 percent per year in pre-1974 rent-stabilized buildings in the Bronx. “ That’s the recipe for distressed housing.As the most recent Census Bureau Survey of NY Housing makes clear, there’s a direct link between price regulation — “rent stabilization” — and poor building conditions, or distress. Per the survey: a third of rent-regulated units have “rodents” — almost twice the rate of unregulated apartments, as well as twice the number of leaks and three times the number of heat breakdowns.Not only do the City Council and the mayor have to ignore their own role in causing housing distress, they have to believe that taking the profit motive out of housing management will lead to better days. That was the theory that inspired public housing in the 1930s. Its original advocates were avowed, confident socialists, like Lewis Mumford, who viewed government as the best provider of good housing. “Where is the impetus for such housing to come from?” he asked, asserting that “it cannot be found in capitalistic methods of production.” In practice, NYCHA operates the most distressed housing in Gotham. Under the Opportunity to Purchase Act, it’s likely the city will have to invest millions to renovate units for the new non-profit owners. Notably, nonprofit management did not prevent the 19 buildings owned by Harlem Congregations for Community Improvement from accumulating, per the Chronicle of Philanthropy, “hundreds of citations for trash accumulation, inadequate heat, mold in apartments and sewage in hallways.”Private owners have skin in the game; nothing is worse for them than distressed units that they can’t rent and stay vacant. If the value of their property falls, they still can face unforgiving mortgage payments. No rational owner chooses to starve a building of maintenance — except for that “declining revenue” problem. Non-profit operators may, to be sure, have altruistic motives to help stabilize neighborhoods and improve buildings. Yet they will not be immune from a shortage of investment capital. Their management teams tend to be salaried bureaucrats — with no ownership stake.Here’s a better idea for the council and mayor: unfreeze rents, freeze rental building property taxes — and phase out rent stabilization. Watch housing “distress” fade away.

City Council’s ‘Distressed’ Housing Scheme Would Aggravate New York’s Affordability Crisis

City Council’s ‘Distressed’ Housing Scheme Would Aggravate New York’s Affordability Crisis

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