Ronald H. Cohen

(646) 424-5317

rcohen@besenassociates.com

 

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January 2016

New York City homelessness & real estate: Growing concern

While there is growing concern among real estate industry leaders about homelessness as well as crime, it has yet to stymie a market in overdrive. An ongoing crisis of seemingly epidemic proportions, homelessness is a sore subject for many New Yorkers these days. And it is of growing concern for the real estate community. In parts of the city it’s now virtually unavoidable to walk the streets without encountering it head-on. It has become a key quality-of-life issue for many, fueling derision and divisiveness. While many of us are quick to blame mayor de Blasio, the fact is that this has been a steadily mounting problem that until recently was out of sight and out of mind.

 


In recent years, homelessness in New York City has reached the highest levels since the Great Depression of the 1930s. According to the Coalition For the Homeless advocacy group, in July 2015 there were 58,270 homeless people, including 13,985 homeless families with 23,490 homeless children, sleeping each night in the New York City municipal shelter system. While the numbers show that the homeless crisis was not created by de Blasio, it certainly feels more prevalent and visible under his tenure.  The real estate bubble and its attached homeless problem began during the Bloomberg administration. When he came into office in 2002, we had about 25,000 people homeless. When he left in late 2013, these numbers had more than doubled to more than 53,000.

 


Although the city’s current housing stock of approximately 3.4 million units is the largest it has ever been, recent additions to the stock have not been sufficient to accommodate the growth in demand. The foreclosure crisis and Great Recession led to declines in housing construction, limiting the supply of new housing. Also, the number of units subject to the protections of rent regulation is decreasing. Data from the rent guidelines board reveals that since 1994, there has been a huge net loss of rent regulated units, to the tune of 150,000.

 


Much of de Blasio’s initiatives are incensing the real estate industry, which has enjoyed exponential growth and prosperity under the pro-development leadership of the prior Bloomberg administration. Programs like the Tenant Protection Unit (TPU), which eliminate the 4-year statute of limitations on rent overcharge look-back, significantly increase the liability for landlords.  And he recently signed a bill intended to address aggressive landlord tactics, limiting how a landlord can approach tenant buyouts and requiring full disclosure of tenant’s rights in the process.  Other measures such as the rent freeze (i.e. 0% increase on a 1-year rent-stabilized lease) and an increase to $2,700 to destabilize an apartment are squeezing profitability further.
Research shows that the primary cause of homelessness, particularly among families, is lack of affordable housing. Affordable housing is a critical part of the answer and the cornerstone of the present mayor’s agenda. He has a stated goal of adding and/or preserving 200,000 affordable units to New York’s housing stock by 2024. A recent means to that end is a proposal to use land-use regulations referred to mandatory inclusionary zoning, in which as neighborhoods or specific parcels are rezoned, developers who want to build there would have to set aside at least 25 to 30% of new apartments for people of low and moderate incomes. They could not opt out, and the affordability would be permanent. Time will tell how these issues will affect our industry as well as the homeless issue at large.

 

 

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