New York City Rent Guidelines Board Housing NYC: Rents, Markets & Trends 2018 Board Members Chair: Hon. Kathleen A. Roberts (Ret.) Public Members: Hilary Botein Rodrigo Camarena Cecilia Joza David Reiss Owner Members: Angela Pinsky Scott Walsh Tenant Members: Sheila Garcia Leah Goodridge Staff Members Executive Director: Andrew McLaughlin Research Director: Brian Hoberman Deputy Research Director: Danielle Burger Office Manager: Charmaine Superville Table of Contents Table of Contents Chair’s Acknowledgements ..............................7 Non-Performing Loans & Foreclosures ....44 Executive Director’s Acknowledgements........9 Characteristics of Rent Stabilized Buildings ................................44 Loan Expectations...................................45 INCOME AND EXPENSE Longitudinal Analysis Financing Availability and Terms ............46 Price Index of Operating Costs Underwriting Criteria and Introduction..................................................13 Loan Performance...................................46 Overview......................................................13 Sales Data Analysis Price Index Components...............................14 Building Sales Volume ............................47 PIOC by Building Type..................................17 Building Sales Prices...............................48 Rent Stabilized Hotels...................................18 Summary ......................................................49 Rent Stabilized Lofts .....................................18 The Core PIOC .............................................19 INCOME AND AFFORDABILITY PIOC Projections for 2019 ............................19 Commensurate Rent Adjustments..................20 Income and Affordability Study Methodology ................................................21 Introduction ....................................................53 Acknowledgements.......................................24 Overview ........................................................53 Economic Conditions Income and Expense Study Economic Output & Consumer Prices ......54 Introduction..................................................25 Unemployment Statistics ..........................54 Local Law 63 ................................................25 Employment Statistics ..............................55 RPIE Study Wage Data ..............................................56 Rents and Income...................................25 Bankruptcy Statistics ................................57 Comparing Rent Measurements ..............27 Poverty Statistics ......................................57 Operating Costs......................................28 2017 Housing & Vacancy Survey “Distressed” Buildings ............................29 Vacancy Rates ..........................................58 Net Operating Income............................30 Income ....................................................59 Operating Cost Ratios.............................30 Rent..........................................................59 Net Operating Income After Inflation......32 Affordability of Rental Housing ................60 Longitudinal Study Other Measures of Income & Affordability Rents and Income...................................34 American Community Survey ..................60 Operating Costs......................................35 Consumer Price Index ..............................62 RPIE Expenses and the PIOC...................36 New York City Tax Return Filings ..............63 Operating Cost Ratios.............................36 Section 8 Housing Availability ..................63 Net Operating Income............................36 Non-Government Sources Summary ......................................................37 of Affordability Data ................................64 Methodology ................................................37 Real Property Tax Credit ..........................64 Mortgage Survey Report Cash Assistance Programs ..............................65 Introduction..................................................41 Housing Policy................................................65 Overview......................................................41 Homelessness & Evictions Survey Respondents......................................41 Homelessness ..........................................66 Mortgage Survey Analysis Housing Court ..........................................67 Financing Availability and Terms ............42 Summary ........................................................68 Underwriting Criteria..............................43 Housing NYC: Rents, Markets and Trends 2018 • 3 Table of Contents HOUSING SUPPLY Appendices ........................................................97 Glossary............................................................140 Housing Supply Report Index..................................................................149 Introduction ....................................................73 Overview ........................................................73 NYC’s Housing Inventory ................................73 Changes in the Housing Inventory Housing Permits ......................................74 Housing Completions ..............................76 City-Sponsored Construction ....................77 Tax Incentive Programs ............................77 Conversions and Subdivisions ..................79 SRO Housing and Airbnb Rentals ............79 Co-op and Condo Activity ........................80 Rehabilitation ..........................................81 Tax-Delinquent Property In Rem Housing and Anti-Abandonment Strategies ..................................................82 Demolitions ....................................................83 Summary ........................................................83 Changes to the Rent Stabilized Housing Stock in New York City Overview ........................................................87 Additions to the Rent Regulated Housing Stock Section 421-a and J-51 Programs..............88 Mitchell-Lama Buyouts ............................88 Loft Units..................................................88 Changes in Regulatory Status....................88 Other Additions to the Stabilized Housing Stock ..........................................89 Subtractions from the Rent Regulated Housing Stock High-Rent High-Income Deregulation ......89 High-Rent Vacancy Deregulation..............90 Co-op and Condo Conversions ................91 Expiration of Section 421-a and J-51 Benefits ............................................91 Substantial Rehabilitation ........................92 Conversion to Commercial or Professional Status................................92 Other Losses to the Housing Stock............92 Summary ..............................................................93 Summary Table of Additions and Subtractions ............................................94 4 • Table of Contents List of Appendices List of Appendices Appendix A: Guidelines Adopted by the Board C.6 Distribution of Operating Costs in 2016, by Building Size and Age..................................108 A.1 Apartments & Lofts—Order #50.....................97 C.7 Number of “Distressed” Buildings A.2 Hotel Units—Order #48 ................................97 in 2016........................................................109 C.8 Operating Cost-to-Income Ratios by Decile Appendix B: Price Index of Operating Costs in 2016........................................................109 B.1 PIOC Sample, Number of Price Quotes C.9 Number of Buildings and Dwelling Units in per Item, 2017 vs. 2018.................................98 2016 by Building Size and Location .............110 B.2 Expenditure Weights, Price Relatives, C.10 Longitudinal Income and Expense Study, Percent Changes and Standard Errors, Estimated Average Rent, Income and Costs All Apartments, 2018 .....................................99 Changes (2015-2016) by Building Size B.3 Price Relative by Building Type, and Location................................................111 Apartments, 2018 ........................................100 C.11 Longitudinal Income and Expense Study, B.4 Price Relative by Hotel Type, 2018 ..............100 Estimated Median Rent, Income and Costs Changes (2015-2016) by Building Size B.5 Percentage Change in Real Estate Tax Sample and Location................................................112 by Borough and Source of Change, Apartments and Hotels, 2018 ......................101 C.12 Longitudinal Income and Expense Study, Average Net Operating Income Changes B.6 Tax Change by Borough and Community (2015-2016) by Building Size Board, Apartments, 2018 .............................101 and Location ................................................113 B.7 Expenditure Weights, Price Relatives, C.13 Longitudinal Income and Expense Study, Percent Changes and Standard Errors, Change in Rent and Net Operating Income All Hotels, 2018 ..........................................102 by Community District (2015-2016) ............114 B.8 Expenditure Weights and Price Relatives, C.14 Longitudinal Analysis, Number of Buildings Lofts, 2018...................................................103 and Dwelling Units in 2015 & 2016, by Building Size and Location ....................115 Appendix C: Income and Expense Study C.1 Average Operating & Maintenance Cost in Appendix D: Mortgage Survey Report 2016 per Apartment per Month by Building Size and Location, Structures Built D.1 Mortgage Interest Rates and Terms, 2018 ....116 Before 1947.................................................104