UHAB’s Policy Platform

UHAB’s Policy Initiatives to Support Affordable Housing

NYC Land Bank
Landlord Licensing
Emergency Repair Liens
Receiver Reform
Tenant Sponsored Underlying Condition Claims
Reform for Limited Equity HDFCs

NYC Land Bank

–          Objectives:

  • Create a land bank to buy and hold properties for an interim period during which long term preservation deals are being worked out

–          Background:

  • In July 2011, NY State passed legislation creating up to 10 locally developed Land Banks in New York State, subject to the approval of Empire State Development Corp
  • The Attorney General has already pledged $20 million in funds to support New York land banks
  • Land banks are flexible and can address diverse housing issues, from Sandy affected housing to single and multifamily foreclosure
  • There is existing legislation in the New York City Council (Lander) that establishes a NYC land bank. This legislation will have to be significantly re-worked to tap the full potential of a New York City land bank

–          How it works:

  • Financial advantages:
    • The land bank ability to leverage its own financing through issuing and selling bonds.
    • Not subject to back taxes
  • Land bank can sell property and establish a priority for disposition (i.e., public space, affordable housing, etc.)
  • How the land bank could acquire property:
    • Purchase mortgages on single and multifamily buildings in foreclosure and then use their power as lender to set the property into a preservation pipeline. (Either preserving the home for the homeowner or establishing a long-term affordable housing proposal for multifamily.)
    • Purchase underwater Sandy affected housing
    • Purchase other, at risk affordable or subsidized housing. E.g.] In the case of subsidized affordable housing that is at risk due to mismanagement and/or foreclosure (see section on HDFCs below), the land bank could be a vehicle that can purchase debts and/or deeds and restructure the debt without sacrificing any existing affordable housing programs.

–          How to implement:

  • Pass local legislation outlining a local land bank program and naming who will sit on the board (and how they will be appointed moving forward.)

Landlord Licensing

–          Objectives:

  • Stop the circle of re-overleveraging that leads to more distressed housing and tenant harassment

–          Background:

  • Other cities, from Philadelphia to Cedar Rapids, have a landlord license program implemented by permit: landlords who don’t have a permit can’t collect rent.
  • Could go beyond regulations and fines to prevent bad actors from owning buildings
  • Rather than retroactively going after landlords who break the housing code, the city could proactively and progressively prevent housing from getting distressed in the first place.
  • Much of the City’s affordable housing stock is aging and cannot physically withstand another cycle of distress. It will be less costly to the City to prevent this housing stock from deteriorating to begin with.

–          How it works:

  • HPD or other agency has ability to determine whether a landlord can get a license based  on set of qualifications (e.g.: number of violations in other buildings, liens owed to the city, other buildings in foreclosure)
  • Landlords need a license per acquisition per LLC per property
  • If you own distressed buildings, you cannot be granted another permit, ergo you can’t purchase more buildings
  • If you’re a new actor, and you want to buy a distressed building, you have a window of time to become compliant in order to keep your permit
  • Require that a scope of work be submitted to HPD if you are buying a distressed building
  • Limit the universe of buildings that require license: buildings that meet  certain standards of physical and/or financial distress
  • Allow the City to vet underwriting on large deals for rent regulated housing; underwriting must be consistent with reasonable turnover rates and not include (implied or other) mass deregulation/subversion of rent regulation laws.

–          How to implement:

  • New City Council legislation that establishes a licensing program

Emergency Repair Liens

–          Objectives:

  • Revise ERP lien policy so the city can use liens as leverage for preservation outcomes

–          Background:

  • In 2012 the City Council passed legislation that allowed ERP liens to be treated similarly to tax and water liens, i.e. if they amount to the city statute, the city could have the power to foreclose
  • HPD generally sells unpaid liens annually, in bulk, to an authorized purchaser. Currently there are two banks that bid for the debt portfolio thru an RFQ.
  • Many distressed buildings carry a substantial amount of liens due to the city having to step in and make repairs. This is especially true in AEP buildings, as the program levies heavy fines against non-compliant landlords. HPD could use these liens as leverage to fight for affordable housing preservation and realize the full potential of the 2012 local legislation to push for affordable housing preservation

–          How it works:

  • Rather than include very distressed buildings in the lien sale, HPD should hold them to use as leverage to negotiate with buyers. The liens could be then used as leverage in one of two ways:
    • Liens automatically forgiven for HPD approved developers pursuing a preservation outcome, allowing non-profits/the CDC community more leverage against speculators/reduces additional subsidy the City would have to provide to make preservation deals financially competitive
    • Liens forgiven for non-approved developers who purchase distressed housing (absent a preservation deal) in exchange for an agreement that protects affordability/ caps rent increases (i.e., MCIs) for existing tenants.

–          How to implement:

  • City Council Legislation or amend HPD rules regarding how to treat liens

Receiver Reform

–          Objectives:

  • Improve the receiver appointment process to ensure that buildings do not continue to deteriorate during the foreclosure process.

–          Background:

  • Buildings that enter foreclosure are often extremely distressed, as owners in dire financial straits often direct their scant resources towards avoiding foreclosure rather than maintaining safe living conditions.
  • The foreclosure crisis continues to plague multifamily housing, and the number of units of affordable housing being managed by a receiver at any given time in New York City is significant.
  • The Office of Court administration already vets receivers to ensure they are qualified, but their qualifications are only based on financial attributes. (i.e., interest/relation to the defendant in the foreclosure case.)
  • Currently, the receiver process is notoriously politically corrupt, with judges’ friends often enjoying highly lucrative appointments.

–          How it works:

  • HPD could compile a list of qualifications to be a receiver and release an RFQ to be on the receiver list.
    • In other programs, HPD does similar functions like the 7A program where  HPD vets property managers so 7As are capable of managing distressed housing
    • Potential criteria include a minimal level of arrears/evictions in properties they currently manage, along with a demonstrated ability to significantly reduce B & C violations.
  • Receivers that already meet these qualifications could automatically make the list

–          How to implement:

  • HPD develops a set of criteria/releases a RFQ; the Office of Court Administration amends their rules regarding receivers that they must meet HPD’s standards.

Tenant sponsored underlying condition claim

–          Objectives:

  • Improve recent “underlying conditions” legislation to allow tenants to directly bring these claims against a landlord

–          Background:

  • Landlords often thwart the Housing Maintenance Code by responding to HPD violations by superficially fixing the problem but not the issue that is actually causing the violation e.g.- patching a leaking ceiling, but not fixing the pipe leak that caused the issue
  • This causes great frustration to tenants who see the same reoccurring problems in their apartments
  • In March 2013, the City Council passed legislation that granted HPD the ability to issue an order forcing a landlord to correct underlying conditions
  • Tenant advocates wanted the option for tenants to be able to make a similar claim in court, but it was not included in the legislation
  • Tenant initiated actions have always been an integral part of the HMC enforcement- currently we have a violation system based on tenant complaints as well as tenant-initiated HP actions in housing court, it is unfair tenants cannot make the same claim about underlying conditions

–          How it works:

  • Tenants, who have the most knowledge of, and experience dealing with condition problems in their apartments, would be able to make a specific claim in housing court if they are dealing with a reoccurring issue caused by an underlying condition.
  • This is likely to actually decrease the burden on the City’s ERP program; if tenants can get underlying conditions fixed, then inspectors won’t be returning to buildings for the same violations numerous times.
  • It could also decrease the (huge) burden on the housing court of dealing with recurring complaints.

–          How to implement:

  • Expand the current legislation to allow tenants to bring underlying condition claims in Housing Court

Reforms for limited equity HDFCs

–          Objectives:

  • Ensure stewardship of affordable housing through limited equity cooperatives by -reducing non-compliance with existing monitoring agreements.

–          Background:

  • HDFC cooperatives are required by law to provide homeownership opportunities for persons of low income. However, a number of HDFCs are now selling shares at prices that far exceed the modest purchase power of low-income families.
  • Due to a lack of oversight, many HDFCs are poorly managed and governed, which leads to loss of affordable homeownership options for low to moderate income New Yorkers. Affordable housing is lost both thru too-high resale price, but also general mismanagement: i.e., tax arrears, water and sewer liens, mortgage arrears, all of which put HDFCs at risk of foreclosure and dissolution.
  • HDFC cooperatives represent an invaluable piece of affordable housing stock, about 30,000 units, in New York City: they are some of the only affordable housing left in hyper-gentrified areas such as the Lower East Side and Williamsburg, and must be preserved for the long-term.

–          How it works:

  • Establish a price cap on shares for HDFC apartments/stricter regulation around share re-sale and income restrictions, ensuring permanent affordability for HDFC cooperatives that sign onto a new Regulatory Agreement
  • In exchange for the stricter monitoring program, establish 100% property tax abatement for 40 years for HDFCs that voluntarily enter in. Tax savings would offset rising operating costs, helping preserve struggling HDFCs.
  • HDFCs that do not sign the new Regulatory Agreement face no equity/re-sale restrictions but continue to have income restrictions; units already sold above the cap will be “carved out” and treated similarly with no restrictions on sales, but the income restrictions continue to apply. These unit(s) will not receive a tax abatement, although the rest of the building will. Since these buildings have full property tax responsibility, the city will be able to increase revenue from these buildings.
  • The HDFC task force expects this to be a revenue-neutral program.

–          How to implement:

  • City Council Legislation
  • Draft a new Regulatory Agreement and expand 3rd party monitoring program.
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