RENT REGULATION IN NEW YORK CITY: A Briefing Book =============================================================== Appendix A THE HOUSING SUPPLY IN NEW YORK CITY This appendix will briefly describe the composition of New York City's housing stock, including an overview of rental housing. A more detailed discussion of the availability of rental housing, as expressed by vacancy rates is also included. OVERVIEW OF THE CITY'S HOUSING SUPPLY An examination of three characteristics of the housing stock- number of units, location, and tenure -- is useful in examining its distribution [Table A]. ----------------------------------------------------------------- Table A Location and Tenure Status of Occupied Housing Units New York City, 1991 -- Renter -- Total Cash No Cash Occupied Location Rent Rent Owner Units Bronx 327,509 4,130 78,596 410,235 (80%) (1%) (19%) (100%) Brooklyn 592,154 9,987 218,582 820,723 (72%) (1%) (27%) (100%) Manhattan 553,946 14,313 136,198 704,458 (79%) (2%) (19%) (100%) Queens 389,836 9,432 311,608 710,876 (55%) (1%) (63%) (100%) Staten Island 48,549 1,720 84,150 134,419 (36%) (1%) (63%) (100%) All Occupied Units 1,911,994 39,582 829,135 2,780,711 (69%) (1%) (30%) (100%) Source: 1991 NYC HVS, Census Bureau Special Tabulation, "All Occupied Housing Units by Borough and Tenure" ----------------------------------------------------------------- As indicated by the data, 70 percent of New York City's housing is renter-occupied, while 30 percent is owner-occupied. However, this distribution varies greatly by borough. The Bronx has the highest percentage (81) of rental housing. Staten Island has both the lowest number of total housing units (134,419) and the lowest percentage (37) of rental units. Notably, Manhattan has both a large number of housing units (704,458) and a high percentage (81) of rental units. Queens has an even greater number of housing units than Manhattan (710,876) but a much lower percentage (56) of rentals. In summary, the Bronx and Manhattan are overwhelmingly renter in tenure status, while Staten Island - and to a lesser extent Queens -- tend to be more owner-occupied. After examining the distribution of occupied housing, it is worth noting the distribution of vacancies [Table B]. ----------------------------------------------------------------- Table B Tenure Status and Location of Vacant Units New York City, 1991 All Staten Vacant Bronx Brooklyn Manhattan Queens Island Units For Rent 13,402 19,314 26,619 15,196 7,180 76,727 (47%) (39%) (41%) (37%) (31%) (40%) For Sale 4,599 8,504 4,655 9,204 2,196 28,973 (16%) (17%) (7%) (22%) (28%) (15%) Not Available 10,412 21,435 34,406 16,613 2,011 85,839 (37%) (44%) (52%) (41%) (41%) (45%) All Vacant Units 28,414 49,253 65,679 41,014 2,073 191,540 (100%) (100%) (100%) (100%) (100%) (100%) Source: 1991 NYC HVS, U.S. Census Bureau Special Tabulation, "All Vacant Housing by Borough by Vacancy Status" ----------------------------------------------------------------- Citywide, 40 percent of vacant units are for rent, 15 percent are for sale, and another 45 percent are not available for rent or sale. The median duration of vacancies varies significantly by tenure. Median rental vacancies last 1.8 months, while units for sale have a median duration of 5.4 months. In terms of the number of vacancies, each borough roughly mirrors the citywide distribution. However, the Bronx has a significantly higher percentage of rental vacancies (47 percent) due to the overwhelming rental nature of the borough's housing stock. Again, due to the composition of its housing stock, Staten Island has a significantly lower percentage of rental vacancies (31 percent). Manhattan has the highest percentage of unavailable vacant units (52 percent). As these unavailable units constitute a considerable percentage of the city-wide vacant housing stock -- some 45 percent, in fact -- it is worth examining the reasons why such units are not available. Data from the HVS list the reasons cited for the unavailability of vacant units [Table C]. ----------------------------------------------------------------- Table C Reason Unit is Not for Sale or Rent New York City, 1991 Reason Number Percentage Held for occasional, seasonal or recreational use 19,696 21.2% Held for other reasons (than those listed) 14,970 16.1% Awaiting renovation 11,172 12.1% Undergoing renovation 10,242 11.0% Dilapidated 8,512 9.2% Rented-not yet occupied 6,979 7.5% In legal dispute 4,616 5.0% Sold-not yet occupied 4,527 4.9% Owner unable to rent or sell* 3,909 4.2% Held pending sale of building 3,641 3.9% Awaiting conversion to coop or condo 3,017 3.3% Held for planned demolition 155 .2% Not Reported 1,607 1.7% TOTAL 94,351 100.0% * For reason other than market conditions, such as illness, etc. Source: 1991 NYC HVS Tabulation Package, Series IIB, Table 76 ----------------------------------------------------------------- CATEGORIES OF RENTAL HOUSING In examining the distribution of New York City's rental housing stock, the key unit of analysis is regulatory status-herein referred to as control status. The HVS data illustrate the distribution of rental housing by regulatory status [Table D]. ----------------------------------------------------------------- Table D Distribution of Occupied Rental Housing by Control Status New York City, 1991 Control Status Number Percentage Controlled 124,411 6.4% Stabilized 971,076 50.0% Mitchell Lama 83,183 4.3% Public Housing 174,254 8.9% Other* 598,652 30.7% TOTAL 1,951,576 100.0% Source: 1991 HVS Tabulation Package, Series IA * The unit of analysis "Other" refers to in-rem, HUD federally subsidized, Article 4, Loft Board regulated, and unregulated housing. ----------------------------------------------------------------- Exactly 50 percent of New York City's housing stock is rent stabilized while 6.4 percent is rent controlled. Explanations of rent control and rent stabilization follow [see Appendix B]. Before moving to a description of rent regulation, however, a discussion of the availability of rental housing is in order. IS THERE STILL A HOUSING SHORTAGE? Rent regulation is designed to respond to a housing shortage, so it is necessary to document the extent and nature of the housing shortage in New York City today. Despite a downturn in the economy and increased vacancies at the upper end of the rental market, a housing crisis for low-, moderate- and middle-income tenants persists. Definition of a Shortage. The main rationale for rent regulation, as mentioned earlier, is a shortage of housing. The net vacancy rate -- the percentage of the habitable housing stock that is vacant and available for rent -- is the threshold figure used by housing analysts and policy makers to measure a shortage. For policy and legal purposes, the generally accepted indicator of a shortage is a vacancy rate of 5 percent or less. Under both the rent control and rent stabilization laws, procedures to lift controls are triggered when the vacancy rate reaches or exceeds 5 percent. The 5 percent threshold has come to be accepted with little rationale. Some analysts have pointed out the rather arbitrary nature of the measure and have argued that factors beyond the vacancy rate should be considered when determining the function and structure of rent regulation in a given housing market. Though the vacancy rate alone perhaps should not drive rent regulation decisions (as it does currently), it does serve as a useful measure of the availability of rental housing. Vacancy Rates. In 1991, the net vacancy rate for all of New York City reached 3.78 percent -- a more than 1 percent increase from 1987, when the net vacancy rate was 2.46 percent. However, this vacancy rate varies across boroughs and by rent levels. In fact, despite an increase in the overall vacancy rate, there was a loss of apartments in the lower-priced rental categories. The net vacancy rate for rent stabilized apartments is also lower than the rate for other apartments and for the city as a whole. These rates are indicated by the HVS data on the percentage of housing that is vacant and available for rent [Table E]. ----------------------------------------------------------------- Table E Net Vacancy Rate by Borough New York City, 1987 and 1991 -- 1987 -- -- 1991 -- Available Vacancy Available Vacancy Percent Units Rate Units Rate Change Bronx 6,196 1.85% 13,402 3.88% +2.03% Brooklyn 13,476 2.29% 19,314 3.11% + .82% Manhattan 16,709 2.99% 26,619 4.48% +1.49% Queens 9,251 2.28% 15,196 3.67% +1.39% Staten Island 1,853 4.15% 2,196 4.20% + .05% NYC 47,486 2.46% 76,727 3.78% +1.32% Source: 1991 HVS Tabulation Package, Series IA, Table 14 and Series IIA, Table 14. ----------------------------------------------------------------- Vacancy rates increased in all boroughs, but both the amount of the increase and the net vacancy rate for each borough vary greatly. Manhattan, Staten Island, and the Bronx each have vacancy rates above the citywide average. Vacancy rates tend to vary much more greatly by price range than location. There are two ways to measure pricing: by apartment and by room. Apartment measures do not indicate how much space is being rented for the price. On the other hand, measuring by room results in some skewing, because small units comprise a substantial portion of New York City apartments and tend to be more costly per room. Whichever measure is used, there has been some loss of lower-priced apartments since 1987 [Table F]. The data indicate that there were only modest increases in the number of apartments renting for less than $500 per month and an actual loss of apartments renting for $300 to $399. An examination of rent per room indicates an even more significant loss of lower-priced apartments [Table G]. ----------------------------------------------------------------- Table F Net Vacancy Rate by Monthly Contract Rent Per Apartment New York City, 1987 and 1991 -- 1987 -- -- 1991 -- Monthly Available Vacancy Available Vacancy Percent Rent Units Rate Units Rate Change Less than $300 5,836 .96% 4,391 1.15% +.19% $300-$399 10,115 2.15% 4,858 1.74% -.41% $400-$499 7,843 2.44% 9,670 2.74% +.30% $500 or more 19,196 4.28% 48,085 5.26% +.98% TOTAL 47,486 2.46% 76,727 3.78% +1.32% Source: 1991 NYC HVS Tabulation Package, Series IA, Table 33 and Series IIA, Table 34. ----------------------------------------------------------------- ----------------------------------------------------------------- Table G Net Vacancy Rate by Monthly Contract Rent Per Room New York City, 1987 and 1991 -- 1987 -- -- 1991 -- Monthly Available Vacancy Available Vacancy Percent Rent Units Rate Units Rate Change Less than $75 3,850 .79% 1,871 .55% -.24% $75 to $99 6,213 1.77% 2,537 1.26% -.51% $100 to $149 14,645 2.75% 9,646 1.74% -1.01% $150 to $299 10,234 3.15% 32,434 5.48% +1.70% $300 or more 7,699 5.98% 19,949 8.35% +4.57% Source: 1991 NYC HVS Tabulation Package, Series IA, Table 33 and Series IIA, Table 34. ----------------------------------------------------------------- Unlike the net vacancy rates by rent levels for apartments, measures of contract rent per room illustrate a net loss for all categories of the lowest-priced apartments (those renting for $150 per room or less). The biggest loss (-1.01 percent) is in the range of apartments renting for $100-$149 per room per month. While loss in the lowest-priced category is expected due to the general upward pricing of the market, the loss of apartments renting in the $100-$149 per room range indicates a shortage above and beyond the pricing-up trend. The rent stabilized submarket exhibits trends similar to those in the overall rental market, in that the bulk of vacancies rests at the upper end. The overall vacancy rate of 3.60 percent for stabilized apartments is largely a product of vacancies in the most expensive apartments -- those renting for more than $300 per room a month. A Worsening Shortage. Not only are vacancy rates for lower-priced apartments substantially below the 5 percent benchmark, but there has been a significant loss of lower-priced apartments between 1987 and 1991. Thus, a housing shortage persists and has actually worsened for low-, moderate-, and middle-income renters.