New York City's Ongoing "Affordable Housing" Follies

“Affordable housing.” Who could be against that? Surely an energetic, well-intentioned government ought to be able to come up with some programs or initiatives to make housing more affordable for low and moderate-income residents.

In practice, the State and City of New York have been pursuing the Holy Grail of “affordable housing” through government compulsion for close to a century. After all that, what we have is the most expensive housing market in the country. Somehow everything they try to generate more “affordable housing” proves only to make the situation worse.

The latest initiatives in this arena involve compelling developers who want to build new buildings for market-rate rentals to set aside some percentage of the building as “affordable.” The word “affordable” in practice means income-restricted and subsidized. Immensely complex eligibility criteria and formulas have been devised to generate apartments that can be rented to people whose income falls in some arbitrary narrow range with respect to “area median income,” with rents set at approximately one-third of the carefully-determined income of the new tenants. Finally, perfect justice and fairness have been achieved!

Whatever the complexity of the formula, and no matter how perfect the fine-tuning of rent with income, in the end it’s just another form of handout. The people getting the handouts are well aware that they have now been deemed qualified to live off handouts, and thus they are strongly incentivized to see how far they can push things. It all ends up right where you would expect.

A service called Bisnow New York has a piece yesterday with the title “Unpaid Rent Is Still Piling Up, Threatening The Future Of NYC’s Affordable Housing.” It seems that some very large percentage of the tenants of this “affordable housing” stopped paying rent during the Covid pandemic, and then there was an eviction moratorium, so they got away with it. Here in the post-Covid world, the property managers are now trying to re-establish the culture of rent payment, but without any serious level of enforcement against non-payers. From a representative of property management company that handles thousands of units:

“It's at quite a crisis situation,” said Susan Camerata, chief financial officer of Wavecrest Management, which manages roughly 30,000 units of affordable New York apartments.

How bad?

At the end of 2023, 34% of renters in New York state affordable housing units had at least two months of unpaid rent bills, according to a study by the New York Housing Conference. The study, which sampled more than 52,000 units, found that households owed almost $130M in total, averaging $7,260 per unit.

Among other things, New York set up a program called “Emergency Rental Assistance,” to help people who were struggling during the Covid emergency. Most people who applied got bailed out of their rent arrears, at enormous taxpayer expense:

New York's Emergency Rental Assistance Program, funded by both federal and state dollars, had almost 500K requests from renters before it stopped accepting applications in January last year, according to Office of Temporary and Disability Assistance data from July. As of April 29, almost 304K applications had been approved and payouts totaled nearly $3.5B. 

After the majority of people who stopped paying rent got bailed out by the state in the last round, lots more people are now stepping forward to bet that they will do it again.

[S]peaking at the affordable housing conference, BRP Cos. Managing Director Andrew Cohen said there is “a culture of nonpayment” among tenants who don’t want to pay.

Why should that surprise anyone? Meanwhile, the numbers of evictions are tiny relative to the number of people in serious arrears. When asked by Bisnow, managers express compassion for the tenants and a desire to minimize evictions and make them only a “last resort”:

Evictions were a last resort for every owner and operator who spoke to Bisnow for this piece, but they were still something that all of them had been compelled to pursue for some of their affordable units at some point since the pandemic.

Undoubtedly the owners and managers would prefer the easy route of another state/federal bailout, and have been betting that it will be forthcoming. Probably, it will be.

Overall, it’s a toxic situation. The tenants in “affordable housing” have been deemed “vulnerable” and have votes effectively for sale and ready to be bought. New York’s politicians are only too willing to make the deal.