Tax Arrears in Rent Stabilized Buildings, 1995
The number of rent stabilized buildings in arrears levelled off in 1994 after
five years of steady growth. However, while the number of buildings at least
three quarters in tax arrears remained virtually constant over the past year,
the average level of arrears per apartment grew by 19.3%. Most of this growth
came from buildings reaching three or more quarters of arrears for the first
time in 1994, indicating that a core of buildings continues to fall into
arrears despite improvement in the City's economy.
1994 was also the first year in which the size of buildings in tax arrears
declined. From 1989 to 1993, the average size of a building in arrears rose
from 13.4 units to 17.6 units. In 1994 this average dropped to 16.2 units for
buildings three or more quarters in arrears.
Overall, current tax arrears data indicates that falling interest rates,
decreasing unemployment and general improvement in New York's economy during
1994 allowed many larger, less distraught buildings to lift themselves out of
substantial arrearage. However, a substantial number of smaller, more
marginalized properties continue to fall deeper into debt to the City.
See Buildings with Arrears are Concentrated in Poor Neighborhoods
The following "bullets" briefly summarize the findings of this report:
Buildings in Arrears
- Approximately 500 buildings fell into arrears for the first time in 1994.
- The overall number of buildings three quarters or more in arrears remained constant, implying that the same number of buildings paid back arrears as fell into arrears.
- The average size of buildings in arrears declined from 17.6 to 16.2 units in 1994.
- The average size of buildings first reaching three quarters in arrears declined from 26 units in 1993 to 18 units in 1994.
Level of Arrears
- Buildings three or more quarters in arrears owe an average of $1821 per dwelling unit, up 19.3% from last year.
- In 1993, the average arrearage per apartment was $680 for buildings three or more quarters in arrears for the first time. In 1994, the average was $998, an increase of nearly 50%.
- The City vested fewer buildings in 1994 and has temporarily halted any further vesting actions.
- The redemption rate climbed to 52% in 1993 from 29% in 1992.
This study is primarily based on data from the tax arrears file maintained by
the Department of City Planning. This database includes information from
several sources, including the Department of Finance (e.g. tax arrears) and
the Department of General Services (e.g. vestings). The information cited in
this report reflects conditions as of January, 1995.
The City Planning arrears file was matched with the RGB's list of
rent-stabilized properties, to yield a database of stabilized buildings with
tax arrears in one or more years from 1988 to 1994. All of these buildings
were registered with the State Division of Housing and Community Renewal. In
this study, "arrears" refers to buildings three or more quarters in arrears,
since the amount owed by buildings less than three quarters in arrears is
Change in Arrears, 1988-94
Number of Buildings
In a reversal of recent trends, 1994 witnessed no significant growth in the
number of buildings burdened by arrears. Roughly 11% (4293) of the 38,000
rent stabilized buildings registered with DHCR were three or more quarters in
arrears during 1994, as opposed to 4291 properties in 1993. By contrast,
between 1988 and 1994, the number of stabilized buildings in arrears grew 53%.
Level of Arrears
While the number of buildings in arrears remained stable in 1994, the level
of arrearage continued to increase. The latest figures show that buildings
three or more quarters in arrears owe $1821 per dwelling on average, an
increase of 19.3% over last year. Such growth far outpaced the 8% rise
witnessed between 1992 and 1993. Since 1988, the average level of arrears per
apartment has increased 127%.
See In 1994, the Average Level of Arrears Continued to Rise...
The fact that the average level of arrearage accelerated in 1994 while the
number of buildings with arrears remained constant highlights a recurring
problem - small buildings continue to fall into substantial arrears despite
the city's revived economy. More than three-fourths of the buildings in
arrears in 1994 faced substantial arrears in both 1993 and 1994. Arrearage in
these properties averaged $2072 per apartment in 1994, somewhat higher than
the overall average($1821). However, the average level of arrears in these
buildings has risen only by 3% since last year.
At the same time, about 500 buildings fell three or more quarters into
arrears for the first time in 1994, with a mean arrearage of $998 per
apartment. In 1993, arrears averaged $680 among comparable buildings. Thus,
growth in average arrears seems to be driven by the influx of smaller
buildings that fell into arrears for the first time in 1994 in relatively
worse condition than their predecessors.
Number of Units
While the number of buildings at least three quarters in arrears was the same
in 1993 and 1994, the number of dwellings in such buildings dropped for the
first time since 1988, from 76,000 to 70,000. Between 1989 and 1993, the
average size of buildings at least three quarters in arrears gradually
increased from 13.4 units to 17.6 units. In 1994, this average dropped to
16.2 units. New additions to the arrears group in 1994 were also smaller than
their counterparts in 1993, averaging 18 apartments in size as opposed to 26
dwellings. Likewise, buildings that "dropped out" of substantial arrearage
between 1993 and 1994 averaged 21 dwellings in size. It seems that improved
economic conditions have allowed larger, less distraught buildings to lift
themselves out of arrears, leaving behind a "core" of smaller, more
marginalized buildings which are falling deeper into arrearage.
See The Number of Apartments in Arrears Dropped for the First Time Since 1989
Traditionally, New York City has seized (vested) buildings that failed to pay
taxes for a number of years. Property owners could prevent seizure by paying
back taxes to the city ("redemption"). Last year, the pace of vestings
declined even as tax delinquency among stabilized buildings worsened. Current
figures imply that vestings continued to remain low throughout 1994, while
the redemption rate appears to have rebounded from an all time low of 29% in
1992 to 52% in 1993, although this is still far less than the rates observed
in the late 1980's. The fate of delinquent buildings is uncertain since the
announcement of a temporary moratorium of vestings by the city's Department
of Housing Preservation and Development (HPD) early in 1995.