New York's rental housing is in rough shape.
In 2015, the city issued housing code violations at a rate of 231 per 1,000 apartments. Around 50 violations per 1,000 apartments were considered serious, meaning they pose a threat to health and safety, such as exposed lead paint and ceilings in danger of collapse. The problem is more pronounced in buildings owned by the worst landlords: the 584 buildings owned by the 100 landlords named on the Public Advocate's Office's annual watch list last year had more than 53,000 violations, or more than 90 per building. And that's just using the arbitrary cutoff of 100 landlords. A 2015 list of buildings with three or more serious violations or structural violations per unit, or for small buildings, two or more, included 6,081 buildings.
Tenants seeking relief from perilous conditions have a number of options. They can call 311 and file a complaint, which may prompt a visit from a housing inspector. Violations can result in fines that, if unpaid, hinder the owner's ability to get construction permits, or prompt a lawsuit by the city. Withholding rent can force the issue into court, where a judge can order the building owner to make repairs. But stakes are high for tenants who withhold: going to court puts them on the tenant blacklist, and they risk eviction. If they have the resources to hire a lawyer, or qualify for help from one of the city's legal services organizations, there’s also the option to sue.
In rare instances, the city will take over a troubled building and put a nonprofit manager temporarily in charge of collecting rents and overseeing maintenance (Getting a judge to agree to this is not easy: Tenants made homeless in 2015 when their landlord built an illegal building directly outside their windows and the city vacated their apartments are still in court trying to make this happen.) Rarer still, in a handful of cases over the past few decades, prosecutors have brought criminal charges against landlords for such egregious behavior as cutting giant holes in rent-stabilized tenants' floors to drive them out. Still, it's not unusual to see open violations that date back a decade, and some of the same names have appeared on worst offender lists for longer.
There's one thing that the city pointedly doesn't do to address this: prevent problem owners from continuing to rent apartments. The answer to tenants' woes lies here, some housing activists argue, in licensing landlords.
Building a massive, sun-blotting illegal building directly behind a legal rental property, forcing the latter to be vacated wasn't enough to convince the city to strip the owner of control. (Nathan Tempey/Gothamist)
In December, the city of Toronto passed a law requiring property owners to register with the city and pay a per-apartment fee that will go towards covering regular proactive inspections of every last apartment building in the city limits. The law will also require landlords to post restaurant-style letter grades in building lobbies, and create a system of charging fees for further audits that is supposed to ensure that recurring problems get stopped once and for all.
"If you’re a good landlord it costs you nothing," said Yale Fox, a transplanted New Yorker from Toronto and founder of the startup RentLogic, which complies public data to grade apartment buildings. Fox supported the legislation.
The bill stopped short of licensing landlords, which local activists had backed, but the inspection system it has created is more sweeping in scope than New York's, which is primarily complaint-based.
"This is not a license anymore, this is what we would call a tenant protection bylaw," said Councillor Josh Matlow, the Toronto legislator who spearheaded the bill. "I don’t care what it’s called so long as you achieve that goal" of protecting tenants and compelling landlords to fix up their buildings promptly.
He explained that city staffers convinced him that licensing would create an additional bureaucratic process that "would actually make things more complicated and slow things down." The beauty of the new program, he said, is that it will be largely self-funded, and the more owners fix up buildings, the fewer inspectors will be needed.
"I look forward to a day we have very few audits and have to hire very few people to do them," he said.
The law passed despite heavy lobbying by real estate interests, including flyers on apartment doors saying the registration fees would be passed on to tenants. Most rental housing in the Canadian province of Ontario is rent-stabilized, and though landlords can apply for above-guideline rent increases, the provincial authorities said that the board deciding rent increases would be unlikely to approve an application for an increase based on the new fees. The city is now petitioning the province to codify that as a policy, and is working out other details, such as how often buildings will be inspected and their grades updated. Matlow and his allies in the Federation of Metro Tenants’ Associations and the surviving Canadian ACORN are looking forward to what's to come.
"I don’t think it would be fully honest to say we’ve solved everyone’s problems," Matlow said. "There will always be landlords who want to ignore people’s reasonable demands to keep their buildings in repair. We have a huge city with tens of thousands of buildings with a wide geography, and we need all the support we can get. For many years it’s been like a game of Whac-A-Mole."
Toronto is not alone in looking at licensing landlords. Several small and medium-sized cities around the United States require some form of license to rent properties, as do Washington, D.C. and Philadelphia.
An illegal partition in an apartment that, until recently, the city was paying above-market rate to rent as part of the city's cluster site homeless shelter program. (Nathan Tempey/Gothamist)
We talked to housing officials in Minneapolis, which has had some form of landlord licensing in place since 1991. Like Toronto, Minneapolis uses per-unit fees from landlords to fund a proactive inspection regime. Unlike Toronto's housing administrators, those in the Midwestern city reserve the right to pull a building owner's license for five years at a time, not just at one property, but across his or her entire portfolio.
It takes a lot to get to that point, but Mike Rumppe, deputy director of Minneapolis Housing Inspection Services, estimated that the city revokes around 30-50 licenses a year.
"Revoking a rental license means you cannot do business in the city," Rumppe explained. "We cannot take a property, but we can revoke a license and say you can’t do business in the city. The common thing [for owners in this situation] is to sell the property."
In an extreme case, the city of Minneapolis is fighting to strip a real estate mogul of 62 licenses that administrators say he obtained while hiding the corporate interest of another real estate bigwig who had already been stripped of his licenses.
The city does not seem to have done an overarching review of how effective the licensing system has been in improving housing conditions. Data we obtained shows that as Minneapolis's rental housing stock grew from 2001 to 2016, the number of violations per building hovered around 1.6, then spiked from 2009 to 2011 during the economic crisis, peaking at 2.4 per building in 2011. Last year, the violations per building rate was down to 1.3, the lowest in the whole 16-year period.
Rumppe offered that the local real estate establishment is happy with the current setup, and indeed they are.
"We generally argue against any additional regulations placed on property owners as a general rule, [however] we feel that Minneapolis has the regulatory tools to ensure a rental market that meets the needs of both owners and tenants," wrote Marty McDonough, director of government affairs for the Minnesota Multi-Housing Association, in an email. He singled out for praise the recently implemented tiered system, in which owners of well-maintained buildings pay less and go through inspections less often: "Our members were active in the creation of the new system, and it seems to be working well."
"The people we’re going after, they’re not happy, obviously," Rumppe also noted.
So how would landlord licensing look in New York City? The city already requires owners of multifamily buildings to register them annually, at a rate of $13 per building (failure to register means a fine of $250-$500), plus, if there are rent-stabilized apartments, $10 per unit. The money goes into the city's general fund, as opposed to being earmarked for building inspections. At HPD, inspections are funded by federal block grants and city taxes, according to an agency spokeswoman.
Harvey Epstein, director of the Community Development Project at the Urban Justice Center, said that housing advocates have been pushing for landlord licensing in New York "for years," but that city officials have said that such a system would require state authorization. Not that there has been a serious campaign by elected officials to obtain such authorization.
The Mayor's Office deferred an inquiry to HPD, and the office of Council Speaker Melissa Mark-Viverito did not respond to comment requests. HPD declined to make someone available to discuss its inspection systems.
"We have worked with the city on creating proactive inspections and looking at sales data to earmark where future displacement might occur, but would love the licensing requirement to move forward," Epstein said.
The city has taken some limited steps towards broadening its enforcement from responding to 311 calls and other complaints. In 2011, HPD started a program to identify buildings in need of rehabilitation regardless of whether tenants had complained. In the middle of 2015, 1,000 buildings had been put on the list and nearly half had subsequently been taken off after improvements. And in 2008, the agency created an Alternative Enforcement Program, aiming to identify the 200-250 buildings in the city with the most violations and, if the landlord fails to make the necessary repairs, hire outside workers to do them and charge the owner. As of last year, 1,128 buildings containing 14,728 apartments had cycled through the program.
Frank Ricci, spokesman for the rent-regulated landlord lobbying group the Rent Stabilization Association, said that that members "support" the current system, although the housing maintenance code is "outdated" in some ways. He also criticized some inspections as politicized, saying that pressure from elected officials and activist groups can cause HPD to send inspectors to "go there and load it up with [lower-level] A and B violations, which paints a picture that the building owner is very bad."
Any further steps such as letter grades and rental licenses would not make sense, in part because, he claimed, tenants are to blame for a large portion of violations that landlords incur.
"So many violations are tenant-caused that I think that would be misleading and not paint a proper picture of the building," he said.
He did not provide evidence for this claim and RSA did not respond to a request for data backing it up.
On the whole, Ricci said, "I think the complaint-based system we have now is a much better use of resources." And, regarding the premise of landlord licensing, "I just don’t buy it. I don’t think it’s true. The reality is most tenants in the city are happy with the housing accommodations that they have, and if they’re not, they have multiple vehicles to do something about it."
One impediment to the current system changing landlord behavior is that fines of a few hundred or few thousand dollars have little impact on owners' pocketbooks relative to the profits to be made by getting regulated tenants out, argued Emily Goldstein, senior organizer at the Association for Neighborhood and Housing Development. It's common practice, when the city or tenants do take an owner to housing court, for the fines to be reduced, eliminated, or never collected, she said. And when they are collected, "None of that is enough of a counterweight against the market here."
She explained, "The reality is there are neglectful landlords, there are your run-of-the-mill incompetent landlords, but a lot of the worst cases that we see across the city are a part of an actual strategy to harass out tenants. Either a building was over-leveraged and irresponsible loans were taken out on the assumption that they were going to be able to raise the rent in spite of regulation, or they’re stuck without enough money to make the repairs, because the money is going to the mortgage, which is higher than it ought to have been."
She continued, "Rents are so high and there are so much profits to be made by getting a building out of regulation in more and more neighborhoods, tenant harassment is a widespread strategy. None of the sort of basic inspection or penalty systems that we have in place are sufficient to counteract that."
So could a more robust regulatory apparatus take the place of the one we have now? New York is home to some of the most expensive real estate in the world, and as a result, an extremely sophisticated and influential landlord lobby. Since the 1990s, real estate interests have poked a series of holes in the rent stabilization law, allowing apartments to be deregulated under a variety of conditions and creating incentives to find inventive ways to drive out longtime tenants.
Members of the Real Estate Board of New York donated $21.7 million to candidates in the 2014 election cycle, more than a tenth of all donations made, including huge amounts into obscure upstate legislative seats crucial to the preservation of lucrative real estate tax breaks; and shady real estate deals and contributions are at the center of criminal investigations and prosecutions of people connected to the de Blasio and Cuomo administrations, not to mention the last Assembly speaker and Senate leader.