NYC landlords need $1B to avoid default under Mamdani

The city’s affordable housing landlords are in need of a colossal $1 billion in spending from the next mayor to dodge default, according to an affordable housing nonprofit. 

Razor-thin margins are often considered part and parcel of operating affordable housing units in New York City, but a growing number of these operators are failing to make ends meet.

A recent analysis by the New York Housing Conference, first reported by Bloomberg, reported worrying signs of distress among some of the city’s most affordable housing stock.

A looming rent freeze under the forthcoming Mamdani administration could make physical conditions worse for rent-stabilized tenants, the analysis found, as well as make costs higher for market-rate tenants.

Tens of thousands of the city’s roughly 213,000 publicly subsidized affordable housing units are in distress, according to the brief. A snowball effect of dramatic insurance hikes, rising operational costs, minuscule rent increases and pandemic-era nonpayments have prevented owners from keeping up with costs. 

This swath of the city’s rent-stabilized stock comes with city or state management, income restrictions and property tax exemptions. 

The units are financed in part by the New York City Housing Development Corporation, and their income relies on rent strictly governed by income levels and the Rent Guidelines Board.

Expenses for tens of thousands of these units are outpacing rents, according to the analysis. A multi-year rent freeze could result in widespread defaults.

“I’ve been working in affordable housing for 20 years and I’ve never seen this level of distress,” Rachel Fee, the executive director for the Housing Conference, told Bloomberg. 

According to Fee, a $1 billion financing program is needed in order to save these landlords from financial freefall.

The Housing Conference reported that losses from pandemic-era nonpayments are still causing pain for many rent-stabilized landlords, and operational costs have made matters worse.

Insurance costs jumped painfully over the past four years, the Housing Conference found, by an annual average of 25%. Water and sewer rates have increased by more than 21% over that same period. 

Rent increases have been smaller than expected in the meantime — below 2% in most recent years. 

For affordable housing advocates, Mamdani’s campaign promise to freeze rents presents a dilemma. While it would provide much-needed relief for tenants — something that drove many locals to the polls for the recent election — it could make the financial crisis within these affordable buildings far worse. 

Further distress could lead to landlords cutting maintenance and deferring needed repairs to save money. Landlords who also own market-rate units could potentially pass on costs to those tenants, leading to greater unaffordability. 

Dora Pekec, a spokeswoman for Mamdani, told Bloomberg Mamdani is keeping distressed affordable housing landlords in mind. 

“He knows we need to keep the more than 2 million rent-stabilized New York tenants in this city while helping landlords manage rising insurance costs, water bills, Con Edison rate hike and a broken property tax system,” Pekec told the outlet.

In addition to $1 billion to help buildings refinance landlord’s debt, the Housing Conference proposed a litany of policy reforms.

The nonprofit advocated for allowing vacant units to reset rents to current income limits could help revive building incomes, as well as expanded rental assistance programs and eased access to emergency reserve funds. 

Other solutions like freezing water rates, expanding tax breaks and backing an insurance company owned by affordable housing providers would also help to bring down mounting building costs.