How to Create Affordable Housing Now at No Cost

Mayor Bloomberg has proposed a far-reaching plan to create a total of 165,000 units of affordable housing by the year 2013 at a cost of 7 1/2 billion dollars. This plan has been described as "the largest municipal affordable housing plan in the nation's history ". As commendable as this goal may be, there is a far cheaper way of not only achieving this goal but of exceeding it.

It has been estimated that there are currently one million to 1.1 million units of rent regulated housing in New York City much of which is renting at a below market rents. As the most recent revelations concerning our governor and one of our congressmen have revealed many of these units are occupied by those who are not in need of affordable housing. The current system of rent regulations provides no form of "need test" to qualify those who receive these apartments. If just one in 5 of the existing rent regulated apartments are occupied by those who could otherwise afford market rate housing then if we were to require a " needs test" for those in rent regulated apartments, we could free up over 200,000 units of housing and make them available for those in need. The cost? Zero dollars. Obviously, this would be incredibly disruptive in the short term so if such a system were to be implemented, it should be phased in over a period of time.

Rent Regulations: The Cost of Good Intentions

When first enacted our system of Rent Regulations was intended to relieve the housing shortage created by World War II. Since then its purpose has expanded to include the creation and preservation of affordable housing. While this is indeed a laudable goal and necessary for the health of our city, an examination of the cost of rent regulations reveals that as well-intentioned as the system may be, rather than creating and preserving affordable housing the system instead has had just the opposite effect.

In previous blogs I've estimated that New York City's system of rent regulations is costing almost $2 billion per year to operate. According to city budget estimates, it costs the city $50,000 to create one unit of affordable housing. Assuming that this $2 billion a year of lost revenue could be leveraged to create an annual $10 billion pool of investment capital then the city would be able to construct 200,000 units of affordable housing every year if our system of rent regulations was eliminated. When you compare this to Mayor Bloomberg's ambitious plan for affordable housing which calls for the construction of a total of 165,000 units by the year 2013at a cost of $7.5 billion (and which has been described as "the largest municipal affordable housing plan in the nation's history ") it gives you some idea of the opportunity lost to the city every year as result of the operation of our system of rent regulations. Further, if the system were eliminated altogether tomorrow, the one million units of housing that are now regulated by the system could be completely replaced by newly constructed, better quality housing, within five years!

Rent Regulations and Affordable Housing

One of the most compelling arguments advanced by tenant advocates in support of rent regulations is the need to preserve affordable housing in New York. However, one question that never appears to be answered is "affordable for whom?" The regulations do not answer this question. This argument would be far stronger if there was some provision in the law that insures that rent regulated housing is preserved for those who can not afford market rate housing. This is not the system however. As the recent articles detailing the favorable rent deals that our governor and esteemed Congressman (for 4 apartments no less! ) receive many of those who benefit from rent regulated apartments do not require such favorable treatment. While the law may preserve affordable housing, it is not necessarily preserving it for those who need it. This is a one of the major flaws with this system that s needs to be corrected.

Disfunctional Court System Stifles Retail Development

New York City has one of the most dysfunctional landlord tenant court systems in the country. It is a system that easily permits tenants who fail to pay their rent to continue in possession of their stores for many months if not years after they stop paying rent. The simplest of uncontested court cases take a minimum of four months to resolve. It is no wonder then that landlords are reluctant to accept this risk and consequently either rent desirable store locations only to well-known chain and national tenants or require significant security deposits from mom-and-pop tenants. Perhaps if the court system could be reformed so as to ensure a measure of certainty and expediency to landlords this risk could be reduced and landlords would be more willing to rent desirable stores to a wider selection of tenants. Instead of every street corner then being occupied by a Starbucks, Duane Reade or bank branch perhaps we could then see more interesting stores operated by entrepreneurs and startups.