There is no easy fix for New York City's affordable housing crisis (and by extension, the homeless epidemic), which has transformed a karate expert's sloganeering into an actual rallying cry. At this point, as Steven Wishnia argued so nimbly last week, the best the city can do is try to stop the bleeding by preserving the cheap housing we already have (and encouraging developers to make more of it). But as he noted, there are still glaring loopholes in the system that allow the affluent to exploit rent rules for their own benefit. And a new report today sheds some light on just how glaring it's getting.
DNAInfo has a long piece today all about affluent New Yorkers who are hoarding rent-stabilized apartments at the expense of more deserving parties. They analyzed the census data from 2010 and found that 22,642 rent-stabilized households (out of a total 970,000 rent-stabilized apartments in the city) had incomes of more than $199,000. Approximately 2,300 rent-stabilized households had incomes of more than $500,000. That motley crew includes polo-playing multimillionaire with family estates, former Philip Morris executives, magazine editors, hedge fund principals, oral surgeons, and "the culture editor of a major fashion magazine."
Some have been holding onto the property through their families for decades, some inherited it from spouses when they moved in together years ago. Either way, this is a problem. There actually is a procedure in place that theoretically should prevent this from happening: landlords can ask the city to 'luxury decontrol' rent-stabilized apartments, "to deregulate apartments so they can rent units at a much higher market value." The problem with that seems to be a matter of bureaucracy: landlords have filed 8,185 luxury decontrol petitions between Jan. 1, 2011, and Dec. 31, 2013, but only 291 have been approved in that time.
Here's the other major problem: landlords trying to use procedures like this in bad faith to increase rents and do away with rent-stabilized apartments in general. As it stands now, landlords can only deregulate these apartments if they can raise the rent high enough, to $2,500 (and even then, they still have to prove the occupants have made more than $200K over the last two years).
This was something Wishnia touched upon in a previous piece about why the push to abolish rent regulation is bad:
The most intellectually honest argument against regulating rents is the naked libertarian one—that government has no business interfering with the market, and people have no right to a product they can't afford. This reasoning is far too ruthless to fly politically, so rent-regulation foes have to find friendlier ways to package it.
One is to portray rent-stabilized tenants as affluent, aging "dowagers," who pay $225 for a seven-room apartment on West End Avenue. This is like the Reagan-era legends of "strapping young bucks" buying T-bone steaks with food stamps. [NPR Planet Money co-founder Adam Davidson] seems to buy into this myth, as did former city Rent Guidelines Board chair Edward Hochman.
Here's the reality: In the pre-deregulation year of 1996, when there were still more than 200,000 rent-stabilized apartments that cost less than $400, 80 percent were occupied by people making less than $25,000 a year, and half by people making less than $10,000. About 200—less than 0.1 percent—were occupied by people making more than $100,000.
Those numbers have increased as housing prices in general have increased over the last decade—only approximately 3% of occupants of rent-stabilized apartments fall into this loophole, but that's still tens of thousands of units being unfairly used when tens of thousands of people are desperate for low-income housing.
And just as Wishnia said, the DNAInfo piece is chockfull of quotes from interested parties (mainly landlord associations) who want to do away with regulation, and are latching onto statistics like this for justification. "What this points to is this inherent failure of the system to not be income-based, to just give out subsidies willy-nilly," Jack Freund, the executive vice president of the Rent Stabilization Association of New York said. "The system can be gamed if you know how to do it. It can keep you in place for a long time."
More checks and balances are clearly needed; more oversight and timely responses from the city are needed. But throwing out the baby with the bathwater isn't the solution to fixing the housing crisis.