Where Will New York's Working Poor Live?

As the New York City Rent Guidelines Board (RGB) begins to debate how much more the millions of tenants who are protected by rent stabilization laws will be paying when leases come due next year, they will be factoring some interesting and conflicting data (see this article from last week's Times). The RGB's staff puts out a few reports each year to help inform the debate on how much rents should go up, and the Income and Affordability Study released last month reveals that while the NYC economy is strong, incomes among rent stabilized tenants are stagnating (i.e., the rich are getting richer and the poor are... you know the rest). After first citing "increasing Gross City Product, falling unemployment rates and public assistance cases, and increasing employment levels," it then acknowledges "an increase in the number of food stamp recipients... falling real wages and escalating gross rent-to-income ratios."

Last week the RGB staff released the Income and Expense Study which analyzes income, rent and operating cost figures of rent stabilized buildings (where most of the working poor live). This year's study showed that, adjusted for inflation, New York City rent stabilized buildings are 12.3% less profitable in 2005 (most recent data) than they were in 1989. (By borough, buildings in Queens are up 18%, Brooklyn is up 2%, Manhattan is down 11% and Bronx properties are down 39% including a drop of 4.7% in past year alone.)

So why, if buildings are less profitable now, do they continue to sell for near-record prices, even in the Bronx? One reason is that many new owners of rental property in New York are working from the business model that counts on rents rising dramatically over the next decade. Backed by deep pockets (i.e., Real Estate Investment Trusts), these owners can afford to take short term losses while they try to push the rents up as much as possible. They can speed the process along by performing major capital improvements to apartments (sometimes questionable), getting low-rent tenants to move out (i.e., harassment), and lobbying the Rent Guidelines Board for higher rent increases each year. With the dramatic rise in operating costs (e.g., fuel, insurance, water) outpacing building incomes, they will have some ammunition on their side.

But the flip side is the data that shows that wages are not going up for working class New Yorkers. In the west and south Bronx neighborhoods, the last expanse of the City where the working poor can "afford" to live, residents typically pay half of their income on rent (the median percent of income spent on rent in some Bronx neighborhoods is close to 50%). Further rent increases without a corresponding rise in incomes will force many of these families to either double-up (not without consequences), leave the City, or go homeless (as families are doing in record numbers).

A recent report by University Neighborhood Housing Program, entitled Shrinking Affordability: Housing Prices, Quality and Preservation in the City's Last Expanse of Affordable Private Rental Housing, documents how rising rents and gentrification pressures in traditionally low and moderate income neighborhoods in Brooklyn, Queens and Upper Manhattan are forcing more and more of the working poor to the west Bronx, where rents are the lowest in the City. This increased demand for housing in the Bronx has allowed landlords to pursue more aggressive rent increases and eviction proceedings, forcing many tenants to make tough choices (e.g., pay the rent or buy Christmas presents for the kids, sublet a room to another family or move to New Jersey). And once the relatively affordable housing stock of west Bronx is gone, where will the working poor New Yorkers who make the City a real city go?

As always, there will be a battle between tenant and landlord interests as the Rent Guidelines Board makes its decision this year. As they analyze the various reports (including DMI's report on Saving Our Middle Class), we can only hope that the current Board thinks about the long term implications of affordability for the people that make New York the great city that it is.

This entry is also posted on the Drum Major Institute blog.