- REAL ESTATE EDUCATION
- GIVING BACK
Memo Regarding Intro Nos. 1210 and 1211
October 26, 2016
MEMORANDUM OF OPPOSITION
BILL: Intro No 1210, Intro No. 1211
SUBJECT: Requiring the HPD to create and publish a watch list of multiple dwelling owners who are alleged to engage in practices of predatory equity and establishing a rebuttable presumption regarding harassment that assumes a landlord intends to vacate lawful tenants of a multifamily unit (of more than 5 units) if a debt service coverage ratio falls below 1.05.
DATE: October 26, 2016
SPONSORS: Ritchie J. Torres, Daniel R. Garodnick, Jumaane D. Williams, Rosie Mendez, The Public Advocate (Ms. Letitia James)
The Real Estate Board of New York (“REBNY”), representing over 17,000 owners, developers, managers and brokers of real property in New York City commends the City Council’s efforts to protect tenants from harassment. However, while well-intentioned, these bills are overbroad, create a presumption of tenant harassment based upon arbitrary numerical markers, and publicize confidential information.
Intro No 1210 sets forth criteria and authorizes the Department Housing Preservation and Development (HPD), in consultation with the Department of Finance (DoF), to determine a multiple dwelling owner’s debt service coverage ratio and based upon such ratio, to identify “high risk” and “moderate” risk multiple dwelling owners who are presumed to engage in predatory practices to remove lawful tenants.
Intro No 1211 gives rise to a rebuttable presumption regarding tenant harassment where the debt service coverage ratio of a multiple dwelling owner of six more units is less than 1.05. The ratio is the quotient of the owner’s annual net operating income divided by the owner’s annual debt service.
It is unclear as to what databases or other information sources will be used determine the debt service coverage ratio. Data concerning the income of certain multiple dwelling owners could be obtained by DoF though the annual filings of Real Property Income and Expenses (RPIE) of certain, qualified multiple dwelling owners. However, these are confidential filings submitted to DoF for the limited purpose of estimating property market value. Sources of the owner’s annual debt service are even less clear. While debt might be revealed in mortgage recording filings, debt could also be derived from private equity sources that are unrecorded in any public domain. In order to accurately calculate every multiple dwelling owner’s debt service coverage ratio, as this bill requires, sources of information beyond the domain of DoF, specifically private sources that not have any obligation – outside of a subpoena - to reveal such information, will need to be consulted.
Even if every multiple dwelling owner’s debt service coverage could be determined, what is the justification to establish 1.05 as the ratio to give rise for the presumption of tenant harassment? It begs the question of whether a multiple dwelling owner just over the 1.05 threshold is really less prone to harassment. The monetary difference between a debt ratio of 1.06 and 1.04 can be as low as a few thousand dollars. Moreover, such an arbitrary marker might also discourage multiple dwelling owners to take on addition debt for property improvements or other property investments.
REBNY understands that tenant harassment has been, unfortunately, a rising trend but these bills are not effective means to address that problem. Rather, it will reveal private information, discourage investment and set unnecessary precedent in using arbitrary markers to indicate certain behaviors.
For the foregoing reasons, we voice our opposition to Introduction No 1210 and 1211.