Proposal responds to unmet need and rising homelessness by focusing affordable housing development on the lowest income households
Would more than pay for itself by replacing regressive Mortgage Recording Tax with more progressive Real Property Transfer Tax that will reduce the cost of purchasing a home for middle-class families
(New York, NY) — Today, New York City Comptroller Scott M. Stringer unveiled a report that establishes the true scope of New York City’s affordable housing crisis, and reveals that the City’s current plan is not reaching those most at risk. NYC for All: The Housing We Need, finds that roughly 580,000 New York City households are in the greatest need of affordable housing. These households – almost 90% of whom make less than $47,000 per year for a family of three – are paying over half of their incomes to rent, bunking in overcrowded apartments or have been living in homeless shelters for more than a year – yet less than 25% of the City’s current affordable housing plan is being built for these New Yorkers. Comptroller Stringer’s proposal includes new strategies that will help build targeted, truly affordable housing for those most at risk. It also finally connects the City’s housing policy to its rising homelessness crisis by tripling the homeless set-aside to 15% for new construction and planning to meet that goal each year. To finance the proposal, the Comptroller is calling for the elimination of favorable tax treatment currently enjoyed by all-cash homebuyers and reducing unfair, outdated taxes on middle class New Yorkers who borrow to purchase a home.
“We are in the middle of a serious housing affordability crisis in this city and we cannot let a $2 million condo become the cost of entry. This crisis is having the greatest effect on the people who are the backbone of New York City – like home health aides, childcare workers, taxi drivers, and so many others – and we’re failing them. We have to face this crisis head on and build units for people with the greatest need. This isn’t our first housing crisis, and in the past, the City put effective plans in place to meet those challenges – today we need real solutions to face the real need,” said Comptroller Stringer. “Our proposal not only provides new units for some of the lowest income households and sets aside more housing for homeless families, it funds it through a new and progressive tax overhaul that makes it easier for middle class families to purchase a home.”
Comptroller Stringer’s Report Provides Comprehensive Analysis of Households in Greatest Need of Affordable Housing
The report found that, while the City has enjoyed economic growth over the last decade, working New York families faced stagnant wages, insufficient new housing stock, and rising rents – leaving 580,000 households to face severe housing cost pressure. Of those households:
Two-thirds make less than $28,000 per year for a family of three;
Another 20% make less than $47,000 for a family of three.
To effectively address the growing housing crisis and rising rates of homelessness, resources must be refocused to New Yorkers in the greatest need.
The City Has Failed to Align Resources to Need When It Comes to Affordable HousingThe report estimates that of the 540,000 households paying more than half their incomes for rent, some 515,000 households – or 88% – are extremely low income (earning less than $28,170 per year) or very low income (earning less than $46,950 per year). However, only 25%, or 75,000 of the total units under the current affordable housing plan, “Housing New York”, are directed towards this end of the economic spectrum.Even more startling is that of the 400,000 extremely low income households in the greatest need, the current plan only aims to build 31,500 units – or less than 10% of the need.In fact, the current affordable housing plan is building nearly as many units for middle income families earning up to $155,000 per year as it is for extremely low income families earning less than $28,000 per year.The graphic below illustrates the vast difference between the current housing plan and the actual need.
Comptroller Stringer is proposing to increase the number of units for the lowest income households and deepen subsidies for long term affordability.Since developing housing for extremely low or very low-income households is more costly, Comptroller Stringer’s “NYC for All” proposal calls for increasing the capital budget for new construction by $375 million annually, and repurposing the remaining 85,000 new units under the “Housing New York” plan for the households in the greatest need.To ensure the long-term viability of deeply affordable units, “NYC for All” proposes a new operating subsidy, funded at up to $125 million, to ensure that buildings have sufficient revenue to meet basic maintenance needs, while keeping rents affordable for the lowest-income households.
Proposal calls for tripling the homeless set-aside to 15% for new construction and meeting that goal every year – drawing the link between the affordable housing crisis and homelessness.In order to appropriately address rising rates of homelessness, the City’s approach to affordable housing must take into account working families that are at the greatest risk of becoming homeless. The report notes that of the families with children living in long-term shelter, one third (nearly 4,500) are working – highlighting the fact that many working families struggle to find affordable housing.Currently, “Housing New York” sets aside 5% of all units preserved and constructed for homeless New Yorkers – but just 1% of those units have gone to homeless families as of November 2017.“NYC for All” proposes tripling the number of newly-constructed units set aside for homeless families to 15% and meeting that target each and every year of the plan.
To fund the effort, Comptroller Stringer is proposing a progressive tax model that eliminates advantages for all-cash buyers and makes financing a new home more affordable for middle class New Yorkers.
Eliminate the Mortgage Recording Tax and Enact a More Progressive Real Property Transfer TaxWhen homes are purchased in New York City and New York State, the Real Property Transfer Tax (RPTT) is imposed on all purchases based on the price paid for the home. However, only those who borrow to purchase or refinance a home pay the Mortgage Recording Tax (MRT), based upon the amount financed. In other words, middle class New Yorkers who scrimp and save to finance their homes are taxed twice, and often end up paying as much as double in taxes what wealthy, all-cash buyers would pay for the same property.This is hardly a rare event:
In 2016, all-cash purchases accounted for more than 80% of Manhattan condo purchases over $5 million, and over 90% of Manhattan townhouse purchases over $5 million.
These all-cash buyers avoid the MRT entirely, but the typical New York City worker buying their first home cannot. In effect, the MRT penalizes borrowers, who constitute the vast majority of first-time home buyers and those of modest means.
Consider an example: A NYC home purchased for $500,000 in cash would pay an RPTT of $10,038. Meanwhile, a buyer who got a mortgage to finance 80% of the house would pay the same $10,038, PLUS an additional MRT of $9,750. Under the current plan, middle class New Yorkers are penalized for financing their home.
Comptroller Stringer’s “NYC for All” proposal eliminates the Mortgage Recording Tax entirely. Instead, it treats all transactions equally, regardless of how a home is purchased, implementing a single progressive Real Property Transfer Tax that rises as the price of the property rises.
The tax proposed in “NYC for All” will save the average middle class New Yorker over $5,700 on a purchase or refinancing. It would also raise up to $400 million annually, providing the resources to finance more deeply affordable housing and reduce homelessness.
The City Should Create a Land Bank to Use City Owned Properties for Permanently Affordable Housing.
As a starting point, Comptroller Stringer renews his call for the creation of a dedicated New York City Land Bank/Land Trust – an idea he first proposed in a February 2016 report, Building An Affordable Future – to help jumpstart the development of affordable housing on hundreds of vacant lots owned by the City. There are already some 25 land banks across the state working to proactively take control and develop abandoned properties.
The Comptroller’s Office estimates that the City could build at least 20,000 new, deeply affordable units on vacant lots owned by the City, but first the City Council must act to pass existing legislation to create a New York City Land Bank. The legislation, first proposed in 2015, would create a land bank for New York City “tasked with acquiring, warehousing and transferring real property to develop, rehabilitate and preserve affordable housing.”
“The Community Service Society’s 2018 Unheard Third survey reveals the wide extent of housing hardships among low-income New Yorkers, which force families to make difficult trade-offs and are often precursors of homelessness,” said David R. Jones, Community Service Society President and CEO. “However, the bulk of new units built under the City’s housing plan is out of reach for those New Yorkers under the most pressure. As the first serious proposal recognizing the need for operating subsidies in affordable housing, Comptroller Scott Stringer’s plan would go a long way toward filling a much-needed funding gap to help target housing to families that need it most.”
“New York’s affordable housing crisis grows more dire by the minute and New Yorkers need bold action from the City immediately to stay in their homes,” said Judith Goldiner, Attorney-In-Charge of the Civil Law Reform Unit at The Legal Aid Society. “Today’s report released by Comptroller Stringer details concrete steps that City Hall could implement tomorrow to effectively address this issue. Eradicating homelessness and improving affordable housing options for our clients is paramount. We look forward to putting these proposals into practice.”
“Our housing crisis is forcing hundreds of thousands of New Yorkers to make impossible sacrifices just to keep a roof over their heads. The City’s current housing plan has failed low-income New Yorkers and is nothing more than a gentrification plan,” said Jonathan Westin, Executive Director of New York Communities for Change. “Comptroller Stringer has a real proposal to address our city’s affordable housing crisis. We need immediate action to provide housing for those who need it most – New Yorkers have waited long enough.”
“New York City is growing more and more unaffordable every day, pushing out the people who built the communities that are now en vogue. Comptroller Stringer’s report provides data that makes the dire nature of the affordable housing crisis abundantly clear,” said Afua Atta-Mensah, Executive Director of Community Voices Heard. “We look forward to working with Comptroller Stringer to address this important matter and are glad for the leadership that this report provides.”
To read the full “NYC for All” proposal, click here.