Why rent control laws need to change

I am feeling left out and having nothing to add other than this update from Central Ohio: Nobody is eating the cats or the dogs.

@300 I think the argument is still "taking" but needs to be more specific. I think some people are still trying.

I just don't understand what the proponents think the future would look like with indefinite rent control. These buildings will eventually get too old and fall down. Landlords don't collect enough rent to maintain them. I think we are going to have some very unsafe buildings in NYC that will eventually tragically fall down.

Kind of like here (fire accelerated the process, but any building in disrepair might face rimilar opposition from RS/RC tenants):
https://www.thecity.nyc/2023/12/08/sunset-park-fire-condo-tenants-auction/

Krolik, I am sure there will be another program for general repairs of the building (not apartment specific) where govt offers Landlords tax concessions.

The easiest way to improve the system is to have increases decided by a reasonable economic formula with inflation and operating costs rather than the current process of political Rent Guideline Board deciding. But I don't see that happening due to rent-stabilized renter votes.

300_mercer re 'another government program' You're probably right but it seems insane - it's becoming a game of fiscal jenga.

I can't believe some of you are willing to reduce your posts to writing.

"The easiest way to improve the system is to have increases decided by a reasonable economic formula with inflation and operating costs rather than the current process of political Rent Guideline Board deciding. But I don't see that happening due to rent-stabilized renter votes"

https://rentguidelinesboard.cityofnewyork.us/about/board-staff/
The RGB consists of nine members, all of whom are appointed by the Mayor. Two members are appointed to represent tenant interests. One of these serves a two-year term, and the other a three-year term. Two members are appointed to represent owner interests. Like the tenant members, one serves a two-year term, and the other a three-year term. Five members (including the chairperson) are appointed to represent the general public. One of these serves a two-year term, another a three-year term and two serve four-year terms. The chairperson serves at the pleasure of the Mayor. Thereafter, all members shall continue in office until their successors have been appointed and qualified.

I can't believe some of you are willing to reduce your posts to writing.

"The easiest way to improve the system is to have increases decided by a reasonable economic formula with inflation and operating costs rather than the current process of political Rent Guideline Board deciding. But I don't see that happening due to rent-stabilized renter votes"

https://rentguidelinesboard.cityofnewyork.us/about/board-staff/
The RGB consists of nine members, all of whom are appointed by the Mayor. Two members are appointed to represent tenant interests. One of these serves a two-year term, and the other a three-year term. Two members are appointed to represent owner interests. Like the tenant members, one serves a two-year term, and the other a three-year term. Five members (including the chairperson) are appointed to represent the general public. One of these serves a two-year term, another a three-year term and two serve four-year terms. The chairperson serves at the pleasure of the Mayor. Thereafter, all members shall continue in office until their successors have been appointed and qualified.

"I just don't understand what the proponents think the future would look like with indefinite rent control"
Probably like the current

". These buildings will eventually get too old and fall down."
How many times has that happened? "Eventually" the big crunch will end the universe too

"Landlords don't collect enough rent to maintain them"
BS they absolutely do. As I previously stated the can afford to hold units vacant on purpose to the time of several billion $. It's always the mortgage which is the problem. Every single case of a Rent Stabilized building foreclosed on since 2019 had done a cash out refi and the mortgage was higher than the entire purchase price.

https://www.thecity.nyc/2023/12/08/sunset-park-fire-condo-tenants-auction/
Using this to prove

I can't believe some of you are willing to reduce your posts to writing.

"The easiest way to improve the system is to have increases decided by a reasonable economic formula with inflation and operating costs rather than the current process of political Rent Guideline Board deciding. But I don't see that happening due to rent-stabilized renter votes"

https://rentguidelinesboard.cityofnewyork.us/about/board-staff/
The RGB consists of nine members, all of whom are appointed by the Mayor. Two members are appointed to represent tenant interests. One of these serves a two-year term, and the other a three-year term. Two members are appointed to represent owner interests. Like the tenant members, one serves a two-year term, and the other a three-year term. Five members (including the chairperson) are appointed to represent the general public. One of these serves a two-year term, another a three-year term and two serve four-year terms. The chairperson serves at the pleasure of the Mayor. Thereafter, all members shall continue in office until their successors have been appointed and qualified.

"I just don't understand what the proponents think the future would look like with indefinite rent control"
Probably like the current

". These buildings will eventually get too old and fall down."
How many times has that happened? "Eventually" the big crunch will end the universe too

"Landlords don't collect enough rent to maintain them"
BS they absolutely do. As I previously stated the can afford to hold units vacant on purpose to the time of several billion $. It's always the mortgage which is the problem. Every single case of a Rent Stabilized building foreclosed on since 2019 had done a cash out refi and the mortgage was higher than the entire purchase price.

https://www.thecity.nyc/2023/12/08/sunset-park-fire-condo-tenants-auction/
Using this to try to prove thatRS buildings can't afford to maintain the building https://youtu.be/7kRKmJyZXJE?feature=shared

@30yrs - That was unkind. However, I do love that movie. How about you, @Rinette and I just start a side conversation that might be more interesting. I'lll start: Do you want "Last Week Tonight?" It is my happy place. I particularly enjoyed last night's episode to educate me on the whole Mayor of NYC's being indicted kerfuffle. I have admitted before that I don't follow NYC politics. I have also admitted before that I don't favor direct democracy because I rely on people smarter than myself to tell me what to think. To date, I have found John Oliver an excellent proxy and was particularly pleased to see his breakdown of the indictment last night.

*Do you watch

>>> " These buildings will eventually get too old and fall down."
How many times has that happened? "Eventually" the big crunch will end the universe too

Not falling down yet, but will probably happen in the not so distant future as these buildings get older while not being properly maintained. 50 years ago these buildings were old, but 50 years younger than today. But RS/RC tenants will resist moving out putting themselves and others in danger.

A building built in 1940 is more likely to be standing 30 years from now than one built in 1985

Tell me about the 1850 Italianate brownstones which have fallen down. That's 174 years and still zero.

Did anyone watch last night's debate and hear both sides' equally absurd proposals for addressing the affordability of housing? Does anyone think building scrillions of dollars of housing on federal lands out west is going to have any effect on the affordability of housing in NYC?

@krolik - I am still trying to figure out why you care so much about this issue. I am not sure I believe you that "It is about NYC being too expensive for so many younger people, and about lottery being a bad, insufficiently targeted way to distribute subsidies, in my opinion."

Either way, however, I have said it before and I'll say it again: It would be awesome if you (and various others in this thread) devoted your considerable brain power to public service. I was a much bigger critic of all things government until I rolled up my sleeves and got in the trenches to see if I could make things better as part of the public public making-and-administering team. It involved a HUGE pay cut (my public sector salary was literally 25% of my private sector salary), but I would not trade that experience for anything. Governing is hard; the policy makers get white papers from all sides and the results are always suboptimal.

One of my favorite moments in government is when I got a principal to support in one of the agencies I worked for after an administration turnover. Household name. First thing he did was call and "all hands on deck" meeting to tackle an issue that was near and dear to his heart. Twenty people in the room when he started talking; after five minutes, only five; at the end, just me. He asked what had happened, and I had to explain to him how insulting it was to all the career folks who live and breathe the policy issue on which he was focusing for him to come in with an idea that was as old as the hills as if nobody had ever thought of it before. I told him he would have a lot more luck with "the deep state" if he did his homework and reviewed legislative history, internal files, etc. to see what bright ideas had already been vetted from every angle before calling another meeting on any issue within his portfolio.

"Do you [watch] "Last Week Tonight?" It is my happy place."

Does it make you feel smart to watch a sarcastic guy speaking fast with a British accent? Like since you can keep up, you must be smart too and ought to have a similar accent?

>Tell me about the 1850 Italianate brownstones which have fallen down. That's 174 years and still zero.

Lol, this is a survivor bias fallacy: All the 1850 Italianate brownstones I know of are currently standing, and the ones that aren't standing I don't even know anything about them because they aren't even around anymore to know of.

"It would be awesome if you (and various others in this thread) devoted your considerable brain power to public service."

Horrible idea. Don't you know anything about how increasing the public sector crowds out the private sector? More brains into government means less brains in the private sector working to create free market, competitive solutions.

Re: "Does it make you feel smart to watch a sarcastic guy speaking fast with a British accent? Like since you can keep up, you must be smart too and ought to have a similar accent?"

No.

"Lol, this is a survivor bias fallacy: All the 1850 Italianate brownstones I know of are currently standing, and the ones that aren't standing I don't even know anything about them because they aren't even around anymore to know of."

Actually, I know more than a few that are no longer standing, and none of them collapsed.

Not local but old row houses fall down on a regular basis in Philly. Plus there was that one in Cobble Hill from a few years ago.

Some of them have not been standing for close to 100 years, yet adjacent nearly identical ones are still there with no signs of going anywhere.

stache,
I wonder why this article left out Rent Stabilization as the major cause of those?
https://www.inquirer.com/real-estate/inq2/philadelphia-rowhomes-construction-destruction-takeaways-20240129.html

Here's one with a statutory tenant paying $1,225 when market is close to $7,000
https://streeteasy.com/sale/1736552

Anyone care to predict the collapse date?

My prediction:
Never.

The reasons some are going strong is they are getting maintained.

I have seen some pretty dilapidated ones in Harlem when they were not maintained.

What I am saying, RC rents might not be enough to maintain many properties. Keep lights on while the structure deteriorates, yes. Make engineering/structural upgrades, no. It will be like the Florida condo that fell down

@30, at the townhouse posted for sale, who is paying $1,250?

The 4th floor tenant is

So you checked and those dilapidated structures in Harlem are Rent Stabilized?

Let me ask you a question:
Let's say an owner of a Rent Stabilized building takes out a mortgage and after doing so finds the can't pay all the building expenses. Is it Rent Stabilization which causes the expenses to go unpaid or is it over leverage of the building?

Just a note regarding Surfside, there were multiple reasons that contributed to the collapse of that building. It started with faulty construction and design.

Condos down here decided to kick the can down the road year after year, rather than maintain their buildings and have appropriate HOA charges that could fund current maintenance as well as future maintenance. Also, the buildings near the ocean, take a real beating from the salt air and wind. So you need continuous maintenance taking place.

It seems particularly ludicrous to argue that RS landlords can afford to forego BILLIONS of dollars in rent leaving units vacant on purpose but at the same time can't afford to do basic maintenance on the buildings to prevent them from falling down

30yrs, what do you think should happen to the rent stabilization program long-term (as in 30 or 50 or 100 years from now)?

- gradually end it
- keep it in perpetuity with the existing housing stock
- keep it in perpetuity with an expanding housing stock
- keep it in perpetuity with coverage expanding to all renting of housing

Not a loaded question, just wondering what you think is the right policy path for the program.

Rent Stabilization is the only real Affordable Housing plan in NYC. When the housing shortage issue goes away, NYC can consider ending RS. We continue to hear the fiction Rent Stabilization prevents building of new housing. This is total BS because RS only affects buildings built before 1974. As I've stated previously, I think the solution is bifurcated zoning:
First, roll back every upzoning from the last 30 years. Then, if a builder wants to build free market, then they can avail themselves of the current zoning. But if they built 100% real affordable housing they get a HUGE FAR bonus

>>But if they built 100% real affordable housing they get a HUGE FAR bonus

How would you define real affordable housing?

>>We continue to hear the fiction Rent Stabilization prevents building of new housing.

But doesn't it prevent a landlord from demolishing an old crappy building to build a larger one?
There is not a lot of vacant land in NYC...

"But doesn't it prevent a landlord from demolishing an old crappy building to build a larger one?"
The usual ignorance doesn't require an answer.

"How would you define real affordable housing?"
Rent Stabilization

Got it, thanks 30. So the first N floors of FAR may be built at market but the additional floors must be affordable. Of course, I imagine it’d be the other way around in practice, with the lower floors as affordable.

And under your idea, the market FAR and the affordable FAR are each separately tradeable?

No.
One or the other.
A short market building or a tall 100% affordable.
With numbers such that it's a real windfall to go affordable. At least that's my going in position

I had been looking at the economics of affordable housing and zoomed in on the first taller one I ran across, Archer Green at 23 floors. Built in Queens on a brownfield site. It is touted as a “$151M initiative” and produced 387 apartments averaging ~700 sq ft, done under HPD & HDC programs. Something like $21K/yr average rent and $400K development cost per apartment.

You do the math on that, and it becomes a 5.25% gross yield from rent. Which puts cap rate at what, 3%? Not really attractive economics in a 2.x% 10yr risk-free world when it was conceived, to say nothing of our current 4.x% world. Presumably that’s why it needed HPD & HDC incentives. I also imagine the cost of developing in Manhattan is more expensive than Queens, so shove the cap rate down a bunch for that. And the cost of land in brownfield Queens is much lower than Manhattan, because of what it takes to pay the existing owner to forgoe existing structure and/or free market air rights (even with lower FAR).

I guess this all is a long way of saying, I’m not sure how your proposed program helps. Tall buildings are expensive to build, and if you force them to be all-affordable, I’m not sure the economics will pencil out. Meanwhile, the incentive to develop free market buildings has been reduced, because you can no longer replace old 5-story structures with as many shiny 50-story structures. Which pushes back into affordability down the pipeline.

Perhaps I’m missing something, as this is not a subject I am familiar with. But I don’t really see how the economics of your FAR incentives program would work without pairing of the building of affordable housing to free market housing.

Value, Because of stuffy/difficult coops boards and most coops apartments needing renovation. Then there is 20% new building premium due to updated infrastructure, bigger windows, and layout etc. New development condo market on UES has slowed down as well.

Sorry wrong thread.

inonada,
It's simple. In NYC land costs are always a very significant portion of development costs. Under my scheme land would trade at the price to build small free market buildings. So if someone elected to build affordable per unit land costs would decrease by, say, 80%. You'd be amazed what deals can pencil with an 80% reduction in land costs.

@30 how is that land used right now?

I imagine a part of the reason land is expensive is that there is almost no vacant land, and any plots you can find come with serious issues such as old buildings (that you might want to demolish) that have rent controlled tenants. How can these old buildings be vacated to make way for new construction?

Krolic Logic:

Assume prewar buildings aren't actually worth MORE. "BECAUSE THEY SRE OLD.'

Oops, I forgot. All of the rent stabilized buildings are in parallel of imminent collapse
But hey Then you will get all that vacant land It's a win win situation

@30 it seems that some of your plan is already being implemented, but we are still in the crisis we are in. NYC would change zoning laws if some units built are affordable, otherwise can build a smaller building with any kinds of units:
https://www.nytimes.com/2024/10/16/nyregion/brooklyn-botanic-garden-shadows.html?

But NIMBYs want to protect the garden and in this instance I might be in agreement with them.

By the way, few months ago a taller building went up that blocked the view of the Empire State building from my apartment. Oh well.

@Krolik - I'm sorry to hear that. Hopefully you still have some views, light.

Maybe somehow eliminating rent controlled apartments in some way while allowing rent stabilization to continue.

Tax incentives could work too as long as you defined what 'affordable' is.

@Krolik - I live in Brooklyn and have been a frequent BBG visitor / some years also a member..
And from what I've seen I think the scale & duration of the shadows are being overblown.

Even the rendering in the article looks like the kind of maximal early morning low-in-the-sky sun shadows you get for maybe 1-2 hours per day.. and largely don't even encroach into the garden.

Everyone wants development, just not too close to them.

@steve I didn't look into this in detail, you are probably right. I do love BBG, but they should build, build, build. On the plus side there will be many new people deriving utility from living next to the garden.
I am okay with loosing the view of Empire State building, just a little sad. More worried about living next to one of those brand new Turkish buildings LOL

@MTH my problem is, I don't want the word "affordable" to be interchangeable with "regulated/rent controlled/rent stabilized". Everyone should have housing that is affordable to them (that doesn't mean on UES or on Fifth avenue), and equal protections. If you build enough housing, use it efficiently, and make it cheaper to operate buildings, prices will come down for everyone.

Right now rent subsidies and protections are given out either randomly based on lottery, or inherited based on where you or your parents / grandparents lived in the 60s 70s or 80s (and largely exclude new arrivals to NYC since then). Plus, the old buildings in the program are not economical to fix or replace, so they are continuing to fall apart (tenants require landlord to pay them millions to move out, which businesses cannot make work).

The city acts as if market rate tenants are all millionaires and billionaires. Last time I checked, most certainly aren't, and many are very rent-burdened. Their rent is subsidizing the tenants in "affordable" units that might or might not be in a greater need.

Regarding the number of millionaires and billionaires in NYC, I just did a google search on these numbers, they are way much smaller than what I initially thought

-----------
One in every 24 residents of The Big Apple are millionaires, according to a new ranking from Henley and Partners. New York City is also home to 744 centi-millionaires, worth at least $100 million; and 60 billionaires.

https://www.cbsnews.com/news/city-with-most-millionaires-new-york-number-1/

@woodside - effective residents or legally registered primary tax residents?

Given the number of $10-20M apartments, I think we know the true number of $100M+ NW people who own real estate here is >800.

>Their rent is subsidizing the tenants in "affordable" units that might or might not be in a greater need.

I don't think the market renters are subsidizing the "affordable" units. The rent stabilized tenants receive zero dollar from the government or from other renters.

Yes, rent stabilized tenants in Manhattan are paying much lower rent than market renters, and so the rent stabilized building's landlord receives a much lower rent. The landlord is an investor. When he bought the rent stabilized building at much a lower price, he knows exactly what situation he went into.

The too high rent of the market rent is due to the extreme low supply, which has some thing to do with too few non-luxury new units get built. No empty land, very restrictive zoning law to build high rise and it's just very expensive to get things done in NYC.

> effective residents or legally registered primary tax residents?

My guess is the effective residents (individual persons), not a household. Maybe further digging can get more information out.

> Given the number of $10-20M apartments, I think we know the true number of $100M+ NW people who own real estate here is >800.

Just a random speculation, some people may have owned apartments that were priced >$10M, but they may have bought it long time ago and they are currently cash poor, relatively.

To purchase >$10M apartment, you think only a person with $100M can be qualified to buy? How about a couple with each having $50M?

My naive thinking is that a household with $50M should be able to buy $20M with no problem. It's too far beyond what I know.

Taller Towers, Fewer Homes https://www.nytimes.com/2022/09/23/realestate/nyc-apartments-housing-shortage.html?smid=nytcore-android-share

Theory:
If we get rid of Rent Stabilization, small inefficient buildings with crappy units paying low rents which are clogging the system will be torn down and replaced with much larger buildings containing reasonably priced rentals.

Practice:
When developers manage to vacate a Rent Stabilized building they build large, expensive units which are largely not lived in and simply used as a store of wealth.
Taller Towers, Fewer Homes https://www.nytimes.com/2022/09/23/realestate/nyc-apartments-housing-shortage.html?smid=nytcore-android-share

On the storage of wealth front, I feel like the most extraordinary apartments I have been in in the city are owned by tech titans. The few silicon valley scrillionaires I know personally have apartments in Manhattan that they don't live in, but maintain as if they did. The joke is that all those apartments are "2/2/20's," which translates to "two weeks for two people for $20 million."

One of my favorite NY experiences that illustrates the disconnect between Mr. and Mrs. MCR on New York came in the form of our reactions to a dinner invitation at 15 CPW. Mr. MCR (who could not care less about Manhattan real estate) was annoyed when the invitation came in from old friends who now live in London, but maintain an apartment at 15 CPW for the few days they come to the city each year. Mr. MCR's initiation reaction when the invitation came in: "I get that they will be jet lagged and don't want to come all the way across town, but how about we propose meeting somewhere in the middle?" My reaction: "We are going across town!"

With respect to the upzoning, one of the townhomes on Beekman Place added a story in the past two years, thereby paving the way for all the others to do the same. Those who live on the 8th and 9th floors of 30 Beekman lost their river views. It never occurred to me that our river view would ever be blocked, but now I am pretty sure its days are numbered. The apartment will lose considerable value if/when that happens, but again, we are on the Titanic, so I am pretty sure the apartment will have lost most of its value by the time that happens anyway because the view is what Mr. MCR values about the apartment. The apartment that we left because it depressed Mr. MCR was one that I loved - a quiet small apartment in the least desirable line in the building that never had a view to begin with. That would still have been a solid choice from a financial management perspective, whereas the current apartment (Mr. MCR's choice) is a financial crime from my perspective.

All of the above is to say that my limited experience/anecdotal data with NY real estate is in line with @30yrs conclusion. I feel like having an obscene apartment in NY is part of the portfolio of every uber rich person on the planet. Accordingly, fundamentals are never going to drive the prices. Fundamentals for developers will drive the development, and that just leads to more units that are simply "wealth storage units" for crazy rich people who have diversified asset portfolios . The bulk of the shiny condo buildings in midtown are dark - nobody actually lives in these places. River House is similarly largely dark. I have always thought that a REAL "pied-a-terre" tax is what would actually move the needle towards a better housing mix in NY, but I also know that there are likely scores of people much smarter than myself and more dedicated to the issue that have already explored that idea from every angle and deemed it either inefficient from some perspective, which just translates into impossible from a political perspective.

@MCR
> I feel like having an obscene apartment in NY is part of the portfolio of every uber rich person on the planet.
> I have always thought that a REAL "pied-a-terre" tax is what would actually move the needle towards a better housing mix in NY,

Completely agreed on both points. The system as it stands right now leads to probably every billionaire and centi-millionaire on the planet having an apartment in Manhattan, and 0 to rounding error paying any city or likely even state tax. Even many of your favorite famous actors that maybe aren't quite worth $100M fall into this category. Also there's often more than 1 apartment due to all the nepobaby offspring.

Less demand for $10M+ units might lead to appropriate sized/priced units being developed more.

There is plenty of pent up demand for development of $1-3M apartment units which is still unmet, some of it due to zoning. It all ends up happening on the waterfront in Brooklyn & Queens seemingly due to zoning.

Many would argue even those are "luxury units", but the counter argument is that a new apartment is always going to be nicer than existing stock. Selling those units to the relatively well off means they aren't bidding up lesser apartments to ridiculous levels (to live in or renovate before move-in). So there is a degree of trickle-down affordability.

Kind of like cars.. yes they are expensive, but buying a new car has never been the right answer for the bottom 50%. Used cars have longer warranties, last longer, etc than 20 years ago.

I don't know -- I work with some people "in entertainment" and some of their nepo babies. While the parents may have "uncountable" amounts of money, they are often LA-based and are often perfectly content to rent here. Mo' homes, mo' problems, and someone who is already juggling a shooting schedule doesn't really want to be dealing with property management hassles. (Really old-time SE chat people will remember that there was an actor on these boards about ten years ago, not my client, who was constantly complaining about how tough it was to manage his investment rentals from away.)

Also, the people I know with uncountable money help their kids in many ways that you and I wouldn't even think of, but they aren't buying them $10MM apartments. Helping with the purchase of a $2mm- $5mm apartment maybe, but even that's rarer than you'd think.

ali r.
{upstairs realty}

Maybe offer developers tax incentives for buildings using a population density index (breaks only available for buildings that meet a given metric of density) since mega rich people require tons of space, middle class families are happy to get by on less. There would have to be a disincentive to buying multiple apartments and combining them.

@Krolik understandable - diplomats Turkish or otherwise have immunity. I hope they don't turn out to be inconsiderate neighbors.

Often forgotten in these discussions, the cost of development in NYC even if the land cost is say $100 per sq ft as the existing land is being used to something.

1. Build the bathrooms bigger as per new code even though the bedroom is tiny (ADA complaince).
2. Put sprinklers in the building all-in $50 per sq ft cost (there were no sprinklers before 2004 I believe).
3. Fire-proof construction of building all-in $100 per sq ft cost over sprinklers.
4. DOB strict regulations which building adding to development time and compliance cost - $100 per sq ft.
5. Energy code addtional requirement - actual cost of windows insulations and supervision
6. Elevator min size (strecther requirement) and testing requiremnts $50 per sq ft
6. After the building is build, Local Law 11 cost etc. Special garbage removal requirements.

So all these things add at least $300 per sq ft to the building cost without considering cost due to high density in NYC. But public is oblivious to these costs and politicians keep adding regulations.

That is why there is not much development in NYC areas with low land cost as the building code and related comliance requirement is the same.

>>>Kind of like cars.. yes they are expensive, but buying a new car has never been the right answer for the bottom 50%. Used cars have longer warranties, last longer, etc than 20 years ago.

If we needed a car, we'd definitely be used car buyers. Everyone, please go look at shiny new construction, and leave me the crappy coop units :-)

>>>I don't think the market renters are subsidizing the "affordable" units. The rent stabilized tenants receive zero dollar from the government or from other renters.

I think they are subsidized indirectly.

1) buildings often have a mix of "affordable" and market rate units. When investors are making various decisions, they are setting prices based on what they get from the building in total, and jack up the market apartment rents accordingly to compensate for inflexible low yield from "affordable" units. My guess is some of those unit rents actually don't cover operating cost and those prices are only possible because the operating costs are subsidized by market rate rents.
2) "affordable" tenants use space inefficiently because to them the extra space comes at a price that is way too low. Hence the elderly couple described in this article, middle class based on solid occupations described in the NYT article, living in a 4br the length of a building, paying 3k in rent. They would never downsize and vacate the unit to benefit a larger family, because a 1br market rental would actually be more expensive. They have had sub-tenants in spare bedrooms over the years, supposedly for free, but I am sure at the very least it was some kind of barter. They could easily list on Airbnb (it is legal to rent out extra rooms with the host living there). There is no way to prevent them. Inefficient use of space --> less space available --> higher market rents
3) I am pretty sure affordable crappy buildings pay less taxes which means rest of us pay more taxes to plug the whole.

It's like inonada claiming that my 3% mortgage is subsidized by the taxpayer, via govt policies and guarantees, even though mortgage investors and the original lender are all for-profit companies. And I agree. Even thought you can't put your finger on which penny of subsidy comes from where, but yes, I am absolutely more subsidized than a person with no mortgage, with a side effect of the locked in effect, inflated property prices, and the fed having to raise rates for everyone higher than they would need otherwise, because consumers with fixed rate mortgages don't feel the bite. Even more subsidized was the seller that got to sell the unit to me at a price inflated due to cheap mortgage affordability.

Just because I personally benefitted from some policy, doesn't mean I have to think all existing policies are good.

>>>To purchase >$10M apartment, you think only a person with $100M can be qualified to buy? How about a couple with each having $50M?

I purchased for $1M, but I did not even have $1M, so I took out a mortgage. I guess it does not work that way for rich people...

>>>The system as it stands right now leads to probably every billionaire and centi-millionaire on the planet having an apartment in Manhattan, and 0 to rounding error paying any city or likely even state tax.

As offensive as they are on the surface level, I think those expensive empty units are actually a net positive for NYC as they do pay suuuuper high property taxes and subsidize everyone else while not being a strain on the city's budget and utilizing minimal resources. While it is a bit wasteful to have an empty unit, each such unit can cover subsidies for many needy families.

And NYC does go very aggressively after part time residents. A colleague had a studio in Manhattan as he was commuting weekly from the mid-west to spend 2-3 days in office, and he ended up paying city and state tax, even though his kids were going to school in another state and he had a large home there. So technically his studio was a part time residence, empty 5 nights per week, but the city got a lot of taxes from him.

@ MTH

>>>diplomats Turkish or otherwise have immunity. I hope they don't turn out to be inconsiderate neighbors.

I was thinking about it more in the context of Adams controversy that he allowed Turkey to cut corners on fire safety in their buildings. So the new building next door is a fire hazard?
I am by the UN, so there are plenty of inconsiderate diplomats around from every country :-)

It’s interesting to hear viewpoints from all involved, so thank you everyone for sharing.

>> I have always thought that a REAL "pied-a-terre" tax is what would actually move the needle

I’m not sure that would move the needle much. Suppose you started charging the tax at 2% of value, which kinda doubles or triples the current property tax. The rich person buying the $20M apt for use 2 weeks a year isn’t gonna care. They’re already OK lighting money on fire, so what’s another $200K? Some people have a deep capacity to waste resources without compunction. So you really gotta make it hurt, by tying statutory residency (i.e., NYS am NYC income tax) to owning unrented property.

I don’t know if NYC should be discouraging pied a terres, but I think that would be the most effective way of discouraging it. And I wouldn’t do it at some threshold. If you think about it, the $500K-3M pied a terre much more directly affects the housing available to residents.

Case in point, there are 50x more people in the $10M+ net worth bucket than the $100M+ bucket. And if r/fatfire is any indicator, a large number of the $10M+ people who hang out on that subreddit think burning $1-2M on a pad you visit sporadically (in NYC or elsewhere) is FAT but beyond that is excessive. I’m guessing tacking a 14% tax on their gross income would change their tune right quick.

Nada, How do you think about Pier-a-terre using less services that a full time resident - schools, police, roads, and city subsidies? And creating employment for construction and doormen etc.

And due to factor I mentioned above, cost of new constrution with soft costs alone without land cost is $700 per sellable sqft. For a 2 bed room small 900 sq ft apartment ($630k without land), at multifamily 6 cap capital cost alone is $38k per year plus RE taxes $9k plus $9k maintenance = $56k per year. So many families with children can't afford these anyway. So might as well get someone to pay real estate taxes without spending as much on services.

"And due to factor I mentioned above, cost of new constrution with soft costs alone without land cost is $700 per sellable sqft. "
An aquaintance at a very large construction firm says that for non-luxury finish this can be $400

“As offensive as they are on the surface level, I think those expensive empty units are actually a net positive for NYC as they do pay suuuuper high property taxes “

BWAHAHAHAHA.
https://nypost.com/2015/03/09/new-yorks-super-wealthy-pay-less-on-property-taxes/
https://ny.curbed.com/2015/7/15/9940480/one57s-tax-breaks-led-to-a-paltry-number-of-affordable-units
https://www.wnyc.org/story/years-95-property-tax-break-paid-you-enjoyed-billionaires/

Who is going to pay soft costs including financing? Contraction firms may be oblivious to soft cost.
"An aquaintance at a very large construction firm says that for non-luxury finish this can be $400"

And then 20% deduction for non-sellable. Sure can the hard cost for gross square footage be $400 for a mid rise. Possible. There is 10-13% blended cost of capital for 3 years. Professional, DOB fees, development fees, DOB fines, transaction costs, selling cost - all a constrution firm doesn't think of.

>> Nada, How do you think about Pier-a-terre using less services that a full time resident - schools, police, roads, and city subsidies?

The same way I think of high-income residents using less of those services: it sucks to be rich. 0.04% of NYers pay 21.3% of income taxes.

https://comptroller.nyc.gov/reports/raising-revenues/

And here is how that money is being spent:

https://www.cssny.org/news/entry/our-analysis-of-nycs-fiscal-year-2025-adopted-budget

Are the top income earners in NYC using 500x more services than average? Probably not. Is it “fair” that they pay so much relative to the services used? I don’t think tax policy is about fairness compared to services used, despite the usage of the term, “fair share” by politicians. The metric by which fairness is determined is something else, not “services used”.

I don’t have a strong opinion on the matter of pied-a-terre taxation, just that this would be an effective way of addressing the issue. On the balance, I’d rather see less of pied-a-terres because I find it wasteful and therefore distasteful. I feel the same way about people who throw away food because they consistently buy and order too much. To my personal ethos, it speaks to a lack of control over “can” vs. “should”. Some life forms suffered and died so you may live, at least have the goddamn discipline to not make them have suffered for no reason just because you can.

So I look at the situation of apartment-wasters, and I view them the same as food-wasters: humans being humans. And when the food-wasters complain about the apartment-wasters, I kinda roll my eyes. As if they’d behave any differently if they had the means.

>> And creating employment for construction and doormen etc.

There are 27k doormen in NYC paid a total of about $2B/yr. The total GDP of NYC is $1200B/yr. I’m pretty sure the economy would be flexible enough to handle 2700 doormen having been in another line of work, it’d be a 0.017% shift.

Keith, can you please tell us your story about bucket production in the Soviet block again? Not quite the situation here, but whenever someone touts employment serving a wasteful purpose, I am reminded of what such touting looks like at the extreme of serving a useless purpose.

@nada: What you describe ("tacking a 14% tax on their gross income would change their tune right quick") would be a REAL pied-a-terre tax. You cannot redefine residency for tax purposes without broader repercussions, but setting a pied-a-terre tax per se in the terms you propose could do the trick, with the caveat I noted above that I have no doubt every possible idea in this realm has already been vetted by minds better than mine and dismissed due to some undesirable ineffeciency, which just translates to a non-starter from a political perspective.

Nada, Good points on comparison of service usage by rich residents and pied-a-terre owners and waste. I agree.

So that leaves additional construction/related industry jobs and service jobs. I think that combined effect is bigger than you think but I don't have the numbers to back it up.

BTW, there is indeed higher real-estate tax (15% or so for high-end) for properties held in LLC or non-residents. Coop-condo
https://www.nyc.gov/site/finance/property/landlords-coop-condo.page

@inonada Part of the reason peids a terre are wasteful is that coops prohibit or discourage renting. If they could, many pied a terre owners would rent.

Unless there’s some mechanism I’m not aware of, pied-a-terre owners pay full property taxes on their homes. They don’t pay NYS or NYC income taxes of course, except Krolik’s friend, who seems to have made a mistake. The friend should carefully acquiant himself with the facts of the cases of Julian Robertson, nominally of Locust Valley, NY, and Nelson Obus, of New Jersey and Northville, NY. But I digress...

The only money NYC is going to get out of the pieds will be via property taxes. But creating a whole new method of tracking ‘is this a pied-a-terre or not?’ is a non-starter in NYC, given the current level of governmental ineptitude.

How about we simply:
a) raise residential RE taxes significantly for *everybody* (strawman amount: +100%), which might come a bit closer to representing the actual cost of providing the full set of benefits and subsidies to all the people who regularly put their head on a pillow in NYC - a little transparency for all property owners would be valuable.
b) Because we seem to be out to blatantly screw the pieds, make some percentage of that RE tax paid (strawman amount: say 40%) deductible against NYC taxes due on the resident’s NYS return, which only true residents file. Non-residents, being non-filers, will have no means of recouping/offsetting the property tax. LLCs, which already don't get the abatement, would continue to not get a rebate.

(For the landlords: They would get the deduction on the return filed by the entity that owns the building. Entity doesn’t file NYC taxes? Too bad. No credit.)

I agree with 'nada that this probably won't move the needle much, and it certainly won't magically eliminate the mismatch between taxation and spending policies over the last twenty years.

"And then 20% deduction for non-sellable. Sure can the hard cost for gross square footage be $400 for a mid rise. There is 10-13% blended cost of capital for 3 years. Professional, DOB fees, development fees, DOB fines, transaction costs, selling cost - all a constrution firm doesn't think of."

Grasping at straws. And since we are talking about an affordable rental, almost all irrelevant.

It's a large firm and the person is very high up. I asked what the total cost would be. He gave it. You can come up with all the nonsense you want to claim he left stuff out. He has built 10s of thousands of units. If he said that's the cost I believe him over you 6 days a week and twice on Sunday.

It should be noted the 300 has a history of overstated construction costs because of self interest.

This statement from Nada is obviously wrong then. 700 sq ft at $400k (almost $600 per sq ft) with subsidized financiang etc completed 3 years back with building cost up 15-20% since for a building starting now. Of couse, who I am to stop you from believing in $400 per sq ft cost.

https://newyorkyimby.com/2021/12/archer-green-affordable-housing-complex-debuts-at-92-23-168th-street-in-jamaica-queens.html

Nada>>
I had been looking at the economics of affordable housing and zoomed in on the first taller one I ran across, Archer Green at 23 floors. Built in Queens on a brownfield site. It is touted as a “$151M initiative” and produced 387 apartments averaging ~700 sq ft, done under HPD & HDC programs. Something like $21K/yr average rent and $400K development cost per apartment.

So the " a parking garage designed to accommodate 130 vehicles, a low-cost Aldi supermarket, and a 15,000-square-foot community center" came along for free with those units at zero construction cost. I didn't realize it worked that way.

https://thenyhc.org/projects/archer-green-2/
*Archer Green is a ground-up, mixed-use new construction project with 387 apartments, all of which are affordable. In addition to its residential component, which serves formerly homeless, low- and moderate-income families, the project also includes 70,000 square feet of commercial space, a 15,000 square foot community facility, and a parking garage for the NYPD. The street-level commercial space will be anchored by ALDI, a low-cost grocery store that will bring high-quality fresh food and produce to the neighborhood. Archer Green is a single building with two towers that are connected by a two-story podium. The building includes numerous amenities including a fitness room, outdoor terrace with grills, community lounge, children’s play room, media and coworking space, package lockers, and bike storage. Apartments include high-end finishes such as Caesarstone countertops, plank flooring, and tiled bathrooms. The project will achieve LEED Gold status and incorporates numerous green technologies that will improve building operations and increase resiliency, including a state-of-the-art battery energy storage system, solar panels, a CHP system, EV charging stations, and energy efficient appliances"

There is little doubt that a non-luxury building whose goal was to keep costs as low as possible could be built for substantially less.

Best pricing would be for a three floor no elevator building with no dishwasher and only through the wall AC.

@Aaron - re "But creating a whole new method of tracking ‘is this a pied-a-terre or not?’ is a non-starter in NYC, given the current level of governmental ineptitude." My response is this: NYS is rather skilled at monitoring this. We got audited after we gave up the fiction that we ever lived in NYC (after paying full taxes for the seven years we didn't live there but told them we did). They looked at everything down to where we boarded our dogs, cell phone bills, credit card statements, electric bills, EZ Pass statements. All showed that we are rarely in NY, but they did not give up until they had turned over every possible stone. It was insane.

@30yrs - Yes, I imagine developing those amenities at Archer Green explains the extra $200/ft cost that others are baking into construction of any modern apartment. Thx for the additional information.

@stache - You raise an interesting point. All new development does not have to have all the bells and whistles that everyone takes for granted. Back in the day, people lived with a lot less and seemed to survive and thrive.

@MCR - that is one of my concerns.. I've actually been sub-50% of time in NYC for 4 tax years now, but it's close enough that I'm not ready to go through the battle. I think a clean break where we sell our condo and leave fully would be the right time, and then we can sign a lease on a smaller unit for any NYC housing needs.

On the other side of this, I know LOTS of people who never registered as NYC resident for tax purposes and lived the fiction of residing with their parents in NJ/Westchester/LI/CT for close to a decade.

So I think the city/state are pretty good at catching people on the way out, but not at catching people who never registered their status properly to start with.

Re: amenities
It is odd to me that the basic expectations of even affordable housing are so high that we then are unable to build any due to the resulting unreasonable cost. My first apartments in the city had no AC, no dishwasher and not even a full sized fridge. My wife & I both lived at places that didn't even have in-building W/D so we used the laundromat. I didn't have in-unit W/D until I was 35. None of those buildings, obviously, had play rooms, gyms, roof decks, etc.

Each of these in isolation isn't a huge thing, but they add up if you are trying to create affordable housing.

I do find the grandfathering of regulations in housing to be kind of funny in a place like NYC where buildings can be 100+ years old. At least with cars, you know that the average safety of units improves as new regulations pass as the average car on the road is 12 years old. So eventually seat belts, air bags, rear airbags, backup cameras, emergency braking, etc make it to everyone.

NYC housing though, while a new apartment needs huge bathrooms & elevators for ADA, sprinklers, fire proof construction, etc.. the average apartment may.. never get there, or at least not in any of the posters here lifetimes.

For example there are 852 rentals listed in UWS.Only 585 (68%) have dishwashers. If I select dishwasher, play-room, gym, shared outdoors space - 163 (19%). Add in-unit w/d and it goes down to 98 (12%).

@Steve123 - re "it's close enough that I'm not ready to go through the battle," I would advise, YES, just sell to avoid the battle. As is the case with many things in life, I don't know how we would have navigated it as lay people (i.e. non-lawyers). The overreach was insane. Even after we proved by every conceivable metric that we were not NYS or NYC residents, they even tried to send us a spurious bill. We had to escalate it and were thoroughly prepared to go to court. A supervisor took one look at the file and just said "oops, so sorry to trouble you," but they took it that far.

And I totally agree on the amenities. I did not have a dishwasher in my own apartment until I was 35. Indeed, when I was in the Foreign Service, I lived in an obscene apartment by my standards in Taipei. It was viewed as substandard such that they were apologetic when they moved me in and asked me if it would be okay. My response: "This is the nicest apartment I have ever lived in. What is wrong with it?" Their answer: "We are so sorry; it does not have a dishwasher."

P.S. - I still don't have an in-unit W/D in NYC. That is next level luxury. :)

P.S. - For all you finance types, I am binge watching "Industry" at the moment. For those of you in finance who care to play, are there any characters you personally identify with?

>>Unless there’s some mechanism I’m not aware of, pied-a-terre owners pay full property taxes on their homes. They don’t pay NYS or NYC income taxes of course, except Krolik’s friend, who seems to have made a mistake.

The friend was renting, not even owning, a small place in the city in addition to his large house in Nowhere. Still, that counts as a "permanent place of abode". He had a job that was in NYC and had to be in office 3 days a well. But the day count might have been 4 days a week due to partial days counting as a full days for NYC residency purposes, which I think is the aggressive aspect of the policy. The friend is a Harvard Law School graduate... so doubt he made a mistake on legal stuff.

@30yrs
Yes, I have seen the articles claiming the super rich are "underpaying" property taxes on their apartments based on % of market value calculation.

Firstly, some of these articles refer to apartments that have abatements, which were by the way given to developer/buyer in exchange for including 2-3 "affordable" units in the development. I think those abatements are dumb (too expensive - speaking of ways in which the city and taxpayers are subsidizing those units big time) and we shouldn't try to incentivize "affordable" housing in this way, not good bang for buck. There probably shouldn't exist "affordable" units in those specific locations. So I agree with those complaints, but because new abatements are no longer being granted and existing ones are there for a limited time and will naturally expire at some point, there is no point complaining about them right now.

Secondly, some of the sensationalist arguments are that the rich are paying little compared to apartment's purchase price.

Those super pricey apartments trade at random prices like art and collectibles. The value is probably also partially based on designer interiors included in the price. Some billionaire row apartments recently traded 20-30% down, so we know it is hard for anyone, let alone the taxman or the journalist, to estimate those values. But also, we all know that NYC has a different way to estimate property tax for apartments. And if you look at inequities between NYC property taxes, it is clear the main disparity is between property classes (BK townhouses being the main beneficiary), so let's start there.

Should apartment taxes be based on market values in NYC? I think I am a proponent of property taxes being weighted towards land values more rather than less. This is to create the right incentives towards dense construction and discourage anyone from sitting on underused land.

Most taxes are progressive, but not all. Some taxes are based on services used, or behavior incentives (gas, tobacco). Not a fairness argument, and agree with you that wasteful jobs (doormen in an empty building) not being a worthwhile goal on its own, but I think from budget perspective, if air above 57 street brings in revenue without straining resources, it is a good trade for the city. My point is that a fancy expensive condo might be the best use of land in a few prime areas. NYC benefits via taxes and rich person's occasional NYC presence and associated spending, even if this is a pied-a-terre. And yes, it is wasteful to build and maintain a place that stands empty, but many things are wasteful, such as holiday decorations and cut flowers. What I am not in agreement with is that construction of luxury condos is somehow a detriment to affordable housing. Rich people trading up and buying a shiny new condo is a trend that depresses UES and Midtown coop prices making them affordable to upper middle class families like ours, which in turn frees up a middle class rental like the one I lived in previously, which in turn freed up a property in Staten Island that I sold... etc.

I also don't think the demand for luxury condos is unlimited, as recent luxury development struggles show.... once developers realize the market is saturated, they would focus on another niche.

>>>@Aaron - re "But creating a whole new method of tracking ‘is this a pied-a-terre or not?’ is a non-starter in NYC, given the current level of governmental ineptitude." My response is this: NYS is rather skilled at monitoring this.

@MCR, based on your story sounds less like skilled and more like very determined where they smell the money:-). This level of diligence probably does not scale to the entire city.

Krolik>> A colleague had a studio in Manhattan …, and he ended up paying city and state tax…. So technically his studio was … empty 5 nights per week, but the city got a lot of taxes from him.

Krolik>> He had a job that was in NYC and had to be in office 3 days a well. But the day count might have been 4 days a week due to partial days counting as a full days for NYC residency purposes.

I’m confused. Did he not know about NYS / NYC statutory residency laws? I don’t live in another state, I have not seriously considered leaving NYC yet, but I’ve probably known about statutory residency rules for most of my time here. Bizarre to me that an even modestly educated person would be so clueless.

Or did he know about the regulations but was sloppy about managing his 183 days, hoping no one would notice, and simply knowningly failing to file taxes? Uh, wait… maybe you shouldn’t answer that.

In any case, the apartment being empty 5 days a week is inconsistent with spending 4 partial days in NY, which would have you spending 3 nights in the apartment. Better approach would have been to fly into Newark once a month, slept in NJ, and cross into NY in the morning.

36 weeks * 4 days = 144 days
12 weeks * 3 days = 36 days
4 weeks * 0 days (vacation, holidays, sick, etc.)

180 days, keep receipts, GPS, etc. tracking every movement.

I am not sure about the detail of commute, but I think he spends 2-3 nights in NYC per week. so the apartment is empty 4-5 nights a week. He flies in Monday morning. Sometimes he is flying out at the end of day 3 at the office, and sometimes in the morning on day 4. Probably flying from LGA more than Newark.
He definitely paid NYC and NYS taxes while having a home and a family in Nowhere.
Sure the set up is expensive, but even after tax and flights it is prob still a lot more income than he could make in Nowhere.

@Krolik - sequencing matters a lot from the tax authority perspective I've seen..
Was he a NYS/NYC resident who then moved out and became a weekly commuter?
Or was he always a weekly commuter?

No, was Nowhere resident in for >10years prior and had a job there before his NYC job. Initially NYC job was all remote due to COVID, transitioning to few days per week in the office, which is when he rented an apartment and started paying NYC/NYC taxes.

My guess is he is enjoying spending time in the city and reliving his young professional experience a little bit, going to Harvard Club for dinner, etc. The experience could be worth the money spent on taxes to him. Flying into Newark and staying in New Jersey while away from family might be not worth the savings.

So I was wondering why tiny new construction apartments all have ridiculously huge bathrooms. This is driven by regulation? what about amenities, is that required?

@krolik - re "@MCR, based on your story sounds less like skilled and more like very determined where they smell the money:-). This level of diligence probably does not scale to the entire city."

I suspect you are right. Mr. MCR gets quite a bit of scrutiny from all taxing authorities. At this moment we are being audited by the IRS. What flagged our return was the amount of property taxes paid on multiple dwelling units in different cities and states with no corresponding rental income. We don't rent out any of the places Mr. MCR uses as his home-away-from-home in the cities where he regularly has to be for work. I have given up and just officially transferred my residency to Ohio since that is where I have been for 90% of the past year and am likely to remain for the foreseeable future given family considerations.

@MCR how would a pied-a-terre taxes (or higher property taxes) influence your behavior? Is there a level of tax that would cause you to think you were better off with a hotel? or a smaller place?

@krolik - We are well past that point for me. In terms of what would influence Mr. MCR's behavior, I truly do not know, but I have to think there is a level of materiality that would catch his attention. As matters stand, he actually lives significantly below his means, so the pied-a-terre tax would have to be more than the income tax he would pay in each locale as a fulltime resident. Again, he paid it for 7 years in NY just to keep stringing me along that we were actually ever going to live there. :)