Testimony of the Real Estate Board of New York before the New York City Council Committee on Housing and Buildings on Anti-Displacement Legislation

Introduction

The Real Estate Board of New York, Inc. (REBNY) is a broadly-based trade association representing owners, developers, brokers, managers and real estate professionals active throughout New York City. Thank you for the opportunity to participate in today’s hearing and to provide support and constructive comments on the bills being considered this morning.

Allow us to emphatically state at the outset that the Real Estate Board of New York stands with public officials, advocates and other stakeholders in finding sensible policy measures to root out bad landlords and to protect tenants from deceitful actions. We have an affordability crisis in New York City, and illegal measures taken by unscrupulous landlords should be met with full punishment allowed by the law, along with supportive enforcement efforts to do so.

We also want to applaud the Council for considering a wide array of legislation. As written, many of the bills being considered seek to target fraudulent information submitted as part of permit and certificate of correction applications, add additional requirements for tenant protection plans, and add new requirements to increase transparency for tenants occupying buildings undergoing construction. Today, we would like to provide support for many of the bills, as well additional feedback, including ways that legislative language could be strengthened or clarified.

Bills such as Intros. 551 and Intro. 1242 make attempts to increase transparency both for public consumption and to help make data-driven policy decisions, which REBNY absolutely supports. We fully support Intro. 1242 to expand the available data in the online property owner registry, but do want to caution that while we support the intent of Intro. 551, which is to help get better data on the universe of buyout agreements, the types of information being asked for would likely lead to a false or an incomplete dataset illustrating the nuances of a buyout agreement.

Legislation such as Intro. 1258 sponsored by Chair Cornegy, would ensure that an audit process take place by the NYC Department of Consumer Affairs (DCA) to ensure that tenants are properly served with eviction notices of a court proceeding. Sewer service is especially unacceptable when it comes to evicting someone from their home, and we support the Council’s efforts to take additional steps to root out dishonest servers.

Notwithstanding a number of recommended changes, we also support some of the Council’s efforts to generally conduct audits of submissions and corrections given to City agencies, such as in Intros 1171 and 1279. Intro. 1171 would among many important provisions, require that DOB conduct inspections of building portfolios or the HPD Speculation watch list and make referrals where false statements are made. We do recommend that for any legislation requiring audits can realistically be met with agency resources, some level of discretion is included to take into account instances where it is clear that a trivial error was made, and to withhold audits of the Speculation Watch List as it is early in its inception with further refinements needed to the methodology. This will ensure that the limited resources used by agencies and enforcement officials are used for appropriate cases.

We also support the Council’s efforts to target buildings where there are an excessive number of violations, such as in Intro. 975 where building permits would be denied. We appreciate that the Council is thinking ahead to include exceptions where the permit needs to be issued to perform necessary work to correct dangerous conditions. We would recommend that the Council consider other extenuating circumstances where a building permit should be issued, such as rehab projects.

While we fully support the goals of many of the bills in this package, we do have concerns regarding the practical realities, operational difficulties, one-size fits all approach, or level of punitive measures being taken in some.

We think there are practical challenges to requiring additional layers of compliance from an owner or contractor. Increasing regulatory burdens make it exceedingly difficult to perform necessary renovations and improve building quality. For Intros. 1277 and 1280, we do have concerns regarding the delays that may be issued to projects for being caught up in an across-the-board audit process or the level of fines for what may be genuine mistake. We do look forward to working with the Council to find other alternatives to meet the policy goals of these bills and exploring ways to improve these bills to target truly bad actors.

In Intro. 1278, which would ensure that DOB does additional TPP review for air and fire compliance, we are concerned that this may make it harder for applicants to complete the TPP and risk the potential for compliance issues. We would enjoy the opportunity to work with the Council to ensure that City government helps applicants better comply with TPPs through standardized reviews.  

Lastly, in an environment of mistrust toward landlords and government alike, increasing pre-emptive inspections, notices, and requests for information from tenants may push a law-abiding landlord into a tightrope walk between compliance and harassment and privacy concerns. As an example, it is overly burdensome to grant DOB unfettered access as a condition of retaining a permit, especially in cases where a tenant refuses access, as proposed in Int. No. 1257. We recommend including a noticing requirement in Int. 1279 to tenants and landlords that their unit/building may be selected for an audit and that a visual inspection may be required. This is also an opportunity for city agencies to provide help lines and general information on building quality standards. 

Additionally, beyond the legislative discussion today, the city needs to allocate appropriate resources and ensure agency coordination on the city and state level if we are to see improvements in enforcement. Generally, the issues related to tenant harassment can be addressed with more targeted enforcement and proper government coordination. According to research recently published by the Regional Plan Association (RPA), a handful of landlords are responsible for a disproportionate amount of the city’s poor housing and eviction cases. RPA estimated that “of the 763,276 buildings with residential units in NYC, less than 2 percent are managed by bad landlords.”[1] It is our hope that as we move forward through the legislative process, efficient and accurate mechanisms can be put in place that enable government to truly target and eradicate bad actors.  

REBNY has the following specific comments to offer on each of the proposed bills:

INTRO NO:       30

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to the recovery of relocation expenses incurred by the department of housing preservation and development pursuant to a vacate order.

SPONSORS:    Chin, Cornegy, Brannan, Levine, Rivera

The bill allows the NYC Department of Housing Preservation & Development (HPD) to recover relocation expenses from building owners for up to 10% of the rent roll pursuant to a vacate order. While REBNY agrees with the overall intent of the legislation to prevent the wrongful displacement of tenants and immediate funds available to rectify these circumstances, the bill will erroneously apply to an entire universe of ownership. Vacate orders can be issued for a number of reasons—to ensure tenants remain safe—unrelated to tenant harassment, such as damage from major storms or accidental fires for example. We recommend the bill clarify the specific conditions of a vacate order that will trigger the recovery of relocation expenses. Additionally, forcing a property owner to put aside ten percent of the rent roll is untenable for the majority of owners and significantly impacts the ability for ongoing capital investment or ensuring there is enough cash-flow to support a building’s operation. Mandating this type of an across the board escrow account will force many property owners to increase rent for market rate units, further contributing to the City’s affordability crisis.

 

INTRO NO:       59

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to required disclosures by persons making buyout offers

SPONSORS:    Cornegy

REBNY understand that the purpose of this bill is give tenants more information about a potential buyout offer to make an informed decision. However, every building is different – there are different amenities, different levels of furnishings, different services offered to tenants, etc. These numerous variables all contribute to what rent a tenant may pay. Furnishing the median market rate rent gives wrongful impressions to the tenant about what goes into their rent for the specific building and unit they may live in. It is also important to note that today’s requirement is to notify the tenant that the owner or representative will contact them to discuss a buyout offer or relocation or other arrangement. Under 27-2004 f-2, this bill changes the meaning and purpose of the notice requirement that exists today. The addition of subparagraph (7) requires that the notice include the actual offer. Thus, it requires the owner to make an offer before he or she even knows whether the tenant is interested in having any discussion.

 

 

INTRO NO:       551

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to the disclosure of information regarding buyout agreements

SPONSORS:    Levine

REBNY fully supports the Council’s efforts to gather information about these instances to better inform policy-making. However, data-driven policies are only as good as the quality of the data received. The info required would only allow the city to be able to determine buyout amount per apartment by neighborhood. No information by apartment size, or arrears in rent or other circumstances and variables that impact offers are included in the legislation. This would lead to a false data set or picture of the buyout market, but we look forward to working with the Council to refine this legislation to ensure accurate information with real context is collected

REBNY recommends that the definition of buyout agreement be redefined. It currently leaves open the question of whether waiver of rent constitutes "money or other consideration." Often, non-payment proceedings are settled by waiver of rent in exchange for possession. Such stipulations are usually filed with the court. This seems to require that even in such situations the filed stipulation (or court order) must be filed with HPD or the owner is subject to penalty.

 

INTRO NO:       1107

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to requiring contractors to prepare and submit tenant protection plans, and to repeal section 28-104.8.4 of the administrative code of the city of New York, relating to requiring architects or engineers to prepare such plans.

SPONSORS:    Rosenthal, Ayala

INTRO NO:       1278

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to requiring heightened review of tenant protection plans and increased enforcement of building code standards

SPONSORS:    Rivera, Levine, Ampry-Samuel

We share the Council’s concerns in ensuring that the most appropriate person is preparing and submitting tenant protection plans. We would like to better understand the perspectives of architects, engineers, and contractors to ensure there are no unintended consequences with this legislation.

In order to achieve the aims of this bill, which include ensuring tenants are aware of their rights and protections, the Council should ensure HPD/DOB have the appropriate staffing to review and inspect submitted TPPs. The bills should also clarify which agencies are responsible for each of the requirements of the TPP to allow for better coordination. To assist further with compliance, the Council should require a template tenant protection plan to be published to assist contractors and owners in meeting all of the requirements laid out by the City and to expedite the approval of permit applications.

We believe that Int. No. 1278 may add an unnecessary layer of redundancy since its our understanding that City agencies are already required to review TPPs prior to approval. We are concerned that codifying this process will increase review times for permit applications. Additionally, Int. No. 1278 adds new provisions requiring DOB to inspect and reinspect sites until work is completed. We do want to highlight that from a tenant’s perspective, having repeated visits by a City agency are at times considered to be a nuisance and potentially infringe upon their right to privacy as was discussed in Seattle where a similar law was approved.[2] Lastly, the Council should consider combining both of these bills into specific provisions (§28-105.13) as Int. No. 1107 repeals §28-104.8.4.

 

INTRO NO:       1247

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to providing residents with copies of notices of violations

SPONSORS:    Cabrera, Brannan

REBNY supports the Council’s overall efforts to improve transparency for residents. However, notifying residents of every notice of violation would require the property owner to provide residents with copies of even the most mundane violations, including minor or administrative violations. This would be counterproductive for City agencies to attempt to enforce and for property owners to administratively follow through on. We would like to work with the Council to refine the types of violations where a resident should be notified of a notice of violation.

 

INTRO NO:       1257

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to granting access to the department of buildings as a condition of obtaining a permit

SPONSORS:    Cornegy

While this bill is intended to ensure City agencies can perform audits and inspections to root out illegal activity and fraud, we are very concerned about any City agency having unfettered access to a building or a tenant’s home. We understand that one of the legislative goals is to ensure that DOB does not have to pursue a warrant after an investigation may be closed if they make visits at times where an owner, contractor, or tenant may not be available. We would first like to better understand the universe of instances where this occurs, how prevalent a problem this is, and identify other solutions to address a laudable legislative goal.

 

INTRO NO:       1274

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to requiring landlords to obtain and provide tenants with the previous four years of rental history

SPONSORS:    Levine, Lander, Ampry-Samuel

REBNY is supportive of the City’s efforts to discover illegal rent increases and agrees that the City should penalize bad actors. We are concerned that the bill will alarm tenants to increases in their rent unless they are given the necessary context to understand whether the increase was issued legally (through abatements or rent guidelines board approvals) or illegally. Rather than adding a new and significant administrative burden for owners, the City could easily achieve the objective of this bill by requiring DHCR to coordinate with the DOB and/or HPD to provide tenants with this information. Lastly, the bill should clarify the types of leases this will be applicable to as this kind of information may not be as relevant for existing tenants that have continuous lease agreements.

 

INTRO NO:       1275

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to denying permits for occupied buildings

SPONSORS:    Powers, Brannan

We support the Council’s efforts to find non-monetary ways to punish landlords who truly falsify their records to make it appear a unit is vacant when it may not be. A one year denial of any permits could serve as a detriment not just for the property owner but for tenants in a building where non-emergency work is being done for their benefit. We ask that the Council reconsider its approach, especially to clarify what qualifies as a fraudulent statement and whether an honest mistake wrongly noting the number of occupied units, for example, would trigger this level of response from the City. Perhaps instituting a strong notice of violation with a period to correct the violation would be a more appropriate measure that would allow for continued progress on building projects.

 

INTRO NO:       1277

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to preliminary inspections

SPONSORS:    James

We appreciate the legislative goals of ensuring buildings and units are actually vacant when this information is presented in an application. However, the success of this bill is fully dependent on the agency’s ability to inspect such a significant number of units without delaying the permitting process (which can already be lengthy in its current form). If improperly resourced, the bill will only add an unnecessary layer of compliance that will make it significantly more difficult to construct, which increases the costs for producing units that are ready for a tenant.

We believe that we should first explore additional and unexplored ways using the resources and data housed by multiple agencies to better target where preliminary inspections would be most useful, instead of an across the board 15% requirement.

 

INTRO NO:       1280

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to the tenant protection plan and penalties for false statements relating to tenant occupancy on certain construction documents

SPONSORS:    Rosenthal, Levine, Ampry-Samuel

We support the Council’s efforts to reduce instances of fraud, especially when it comes to ensuring that a property owner accurately informs the agency of unit occupation during building alteration. However, the assigned penalties for an unintended omission or a needed correction within the Tenant Protection Plan is far too punitive.

 

INTRO NO:       975

SUBJECT:        A Local Law to amend the administrative code of the city of New York, in relation to denying building permits where a residential building has an excessive number of violations

SPONSORS:    James, Brannan, Holder, Koslowitz, Yeger

REBNY is fully supportive of this bill and applauds the Council’s efforts to enforce against owners with an excessive number of building and maintenance code violations. REBNY agrees with the Council that there should be an exception to this rule that allows for permits to be issued to perform necessary work to correct dangerous conditions. We would also request that the Council ensure that any type of special circumstances, for example a change in ownership where a new owner inherits excessive number of building and maintenance code violations with the ultimate goal of rehabilitating these units for the benefit of the tenants and building operations as a whole, be considered when granting an exception.

 

INTRO NO:       1171

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to identifying unlawful statements in submissions to the department of buildings

SPONSORS:    Torres, Williams, Powers, Rivera, Kallos, Chin

REBNY is generally supportive of this legislation. We are especially supportive of notification [28-211.1.3] and reporting [28-211.1.4] requirements by government agencies. We are also encouraged by efforts to require coordination by city and state agencies [28-211.3] so that everyone is working off the same data set to identify errors. However, we are concerned by the requirement of a mandatory audit all buildings by an owner if there is an honest paperwork error with one application in one unit of many of a property owner’s portfolio. We would ask that the Council consider some level of discretion be included within the legislation to ensure the agency focuses on clearly egregious falsified statement.

In addition, one of the provisions of this legislation would require DOB to audit 25% of buildings on HPD’s Speculation Watch List. In the case of the Speculative Watch List, the Administrative Code gives HPD the power to remove a building from the watchlist if the department analysis has changed. Currently, the list captures buildings that are sold even when they are new construction and not fully leased up. This is both problematic for Affordable New York projects and for any MIH project where you have one team that builds and another that owns and manage. Given that the Speculation Watch List is in its very first iteration, we would ask that this provision be withheld until the methodology can be improved to ensure the right types of properties are truly captured, so that both agency and a good property owner’s resources aren’t wasted on an audit process that would result in zero issues.

 

INTRO NO:       1242

SUBJECT:        A Local Law to amend the administrative code of the city of New York, in relation to expanding available data in the online property owner registry

SPONSORS:    Ayala, Lander, Brannan, Ampry-Samuel

REBNY supports the Council’s efforts for greater transparency. Arming tenants with information about their housing conditions and findings of rent overcharges will allow them to make better decisions about their housing conditions and allow them to stay informed about potential illegal rent increases.

 

INTRO NO:       1279

SUBJECT:        A Local Law to amend the administrative code of the city of New York, in relation to requiring the department of buildings and the department of housing preservation and development to audit a certain percentage of certifications of correction

SPONSORS:    Rosenthal, Ampry-Samuel

REBNY supports the Councils efforts to reduce fraud by enforcing against falsely certified certificates of correction. REBNY would like to better understand how the agency’s resources would be deployed to meet the aggressive target of 25% audits of certificates of correction. REBNY generally supports this bill as long as other essential agency operations are not compromised and proper staffing is in place to accommodate these additional audits. To support the auditing process, the Council should also consider requiring the agency to notify the building owner and tenant prior to the audit to allow for the inspection to take place.

 

INTRO NO:       1258

SUBJECT:        A Local Law to amend the administrative code of the city of New York, in relation to mandating audits of the records of process servers.

SPONSORS:    Cornegy

REBNY is supportive of this bill. It is our understanding that despite City laws being adopted to require process servers to have GPS trackers to ensure property delivery, that there are instances where a tenant was never properly notified of an eviction proceeding, leading to a summary judgment.  Unfortunately, despite making good faith efforts, property owners are at times forced into a position of needing to engage in eviction proceedings where a tenant may be repeatedly engaged in illegal or disruptive behavior or have significant arrears in rent. To do so, a process server would need to formally serve court papers to the tenant. Sewer service of court papers, especially when it comes to housing evictions is simply unacceptable. If a tenant and landlord are in a position where they need to proceed to court to address issues, the tenant has every right to be notified properly. To the extent auditing the records of process servers can help ensure this happens, REBNY would like to lend its support to this legislation.

 

INTRO NO:       1241

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to expanding sanctions for submission of professionally-certified false or noncompliant building permit applications or plans.

SPONSORS:    Ampry-Samuel, Lander

INTRO NO:       977

SUBJECT:          A Local Law to amend the administrative code of the city of New York, in relation to mandatory sanctions for submitting incorrect professionally certified applications for construction document approval.

SPONSORS:    Reynoso, Holden

 

REBNY appreciates the Council’s specific focus on ensuring that professional who certify applications meet the highest of standards and that the applications are complete and accurate. We believe that this is worth additional discussions with stakeholders who would be most impacted by the legislation, including the American Institute of Architects (AIA) and the American council of Engineering Companies (ACEC) to ensure there are no unintended consequences.

 

*     *     *

Thank you for the opportunity to provide comments on these bills. REBNY hopes to continue to partner with the New York City Council on the proposed bills to advance changes that will reduce instances of tenant harassment and displacement effectively.

 

[1] Mandu Sen and Moses Gates. “The High Cost of Bad Landlords: Impacts of Irresponsible Building Ownership in New York City.” Regional Plan Association. Published Oct 2018. Accessed 12/13/18 <http://library.rpa.org/pdf/RPA_Cost_of_Bad_Landlords.pdf>

[2] Sisson, Patrick. “Seattle’s Mandatory Rental Inspection Law Challenged in Lawsuit.” Curbed. Accessed 12.12.18. < https://www.curbed.com/2018/12/6/18129672/seattle-apartment-lawsuit-rental-inspection>