We have an immediate need for rental housing for families and individuals across a range of income bands. That need is heightened when one accounts for the City’s continued population growth.
The recent suspension of the 421-a program makes addressing the challenge for more rental housing even more daunting. Two-thirds of New York City’s housing inventory is comprised of rental housing. NYU’s Furman Center recently found more than one million households in New York City are rent-burdened, which means they are paying 30 percent or more of household income on rent, and nearly 600,000 of those households are severely rent-burdened, or paying more than 50 percent of their income on rent.
Meanwhile, our city continues to grow with our population expected to increase by another million by 2040.
Many of these families and individuals are expected to be renters rather than homeowners. As a result, it is critical that New York puts in place the ability to create rental housing throughout the five boroughs for a range of incomes to address the City’s needs for our population today and tomorrow.
It is simply not economically possible to create a substantial amount new rental housing in most areas of the City without government assistance.
Under today’s property tax system, multi-family rental housing generally is taxed at 30 percent of gross income.
Given the high cost of property taxes, land costs and construction costs, most owners will opt to do something else rather than build multi-family rental housing with a substantial below market component unless there is a tax benefit program like 421a in place.
For example, in the absence of a tax benefit program like 421-a, in many areas of the City, owners will build market rate condominiums where sales prices can offset the high cost of new development (e.g., property taxes, construction, land).
According to recent data published in the Mayor’s Management Report, the loss of the 421-a program will result in the loss of an estimated 18,000 below-market, or affordable, units citywide over a four-year period.
This is a serious loss for all New Yorkers, particularly those who would benefit from the new housing.
Going forward, we are committed to working with stakeholders to address the need for more rental housing as soon as possible.
A significant challenge to building more rental housing will be how to handle the issue of construction wages.
It is important to ensure construction workers are treated fairly and that all construction workers, regardless of skill or experience, are paid at least a living wage.
On the other hand, it is clear that imposing a construction prevailing wage requirement on the production of rental housing, particularly with a significant below market component, will either severely diminish the amount of new rental housing created or result in a dramatic expenditure of additional government funds.
The impact of dramatically higher construction costs was made clear in a November 2015 analysis by the NYU Furman Center which found that, to “the extent the pending [421-a] program is intended to make rental more competitive with condominium development, any increase in construction costs will temper the impact, if not make future rental development even less likely than under the current program.”
More recently, the City’s Independent Budget Office found that imposing a construction prevailing wage requirement on the creation of affordable housing would cost the City an additional $2.8 billion.
The need is great and the challenge is daunting. But we do believe that if stakeholders focus on the need to create much more below-market housing throughout the five boroughs of the City, to ensure that construction workers are treated fairly and that more job opportunities are created for City residents, a solution can be found.
REBNY is committed to working with other stakeholders to find that solution.
In other REBNY news:
February 9 is REBNY’s next Breakfast Club seminar. From 9:30 a.m. to 11 a.m., join your fellow REBNY members at this free seminar in our Mendik Education Room, where our top industry leaders will be imparting hints and tips to improve your business. For more information, contact Yesenia Dhanraj at YDhanraj@rebny.com, or check the Events section of www.rebny.com.
Submissions for REBNY’s Sales Brokers Deal of the Year Awards are due on February 10 by 5 p.m. To make a submission, contact Desiree Jones at DJones@rebny.com.
REBNY’s next Residential Rental Clinic seminar is on February 19 from 9:30 a.m. to 10:30 a.m. in the Mendik Education Center. Presented by Daniel Marrello of Town Fifth Avenue LLC and Gary Kyian of Perfect RE Solutions Inc., join fellow REBNY members in this exciting seminar that will teach you more about how to expand and improve your residential real estate business. For more information, contact Yesenia Dhanraj at YDhanraj@rebny.com.
Request for Housing for Veterans in Need: New York City is seeking housing for homeless veterans, with the greatest need being for studios and one-bedroom apartments.
The City has committed to ending veteran homelessness and has worked to ensure that all veterans have a rental subsidy. There are also landlord and broker incentives available for those who place veterans in housing.
earn more about the program, or if you have an apartment you’d like to make available, please visit http://www1.nyc.gov/site/dhs/outreach/veterans.page. For information on how to make a donation, visit www.rebny.com or contact Johann Hamilton at 212-616-5251.