The City of New York is getting behind the tiny-house movement big time.
In an effort to create more affordable housing, a few lucky borough homeowners will be granted hundreds of thousands of dollars to construct accessory dwelling units, or ADUs, on their properties.
Last Tuesday, the New York City Department of Housing Preservation & Development announced the launch of its Plus One ADU pilot program, which will fund the creation of additional living space for growing and multigenerational families.
The program will provide up to $395,000 in financing to a maximum of 15 single-family landlords so they can build ADUs “such as backyard cottages, garage studios, attached in-law suites, basement apartments, and attic space conversions” on their land, according to a press release.
By helping existing residents expand their square footage, the city hopes to help seniors “spend their retirement years in their chosen neighborhood,” enable in-laws to move in with young families, make space for children returning from college and otherwise help ease the current real estate crisis without “significantly changing existing neighborhoods.”
Other program targets include “seniors who need space for a caregiver, a multigenerational household who want separate living spaces, or young parents with a little one on the way,” Mayor Eric Adams added in the release.
The money for the program comes from a $2.6 million state grant for “crafting community-centered solutions to encourage low- and middle-income homeowners to create or upgrade good quality, safe accessory dwelling units.” The city plans to put in almost as much of its own money, the state’s Homes and Community Renewal Commissioner RuthAnne Visnauskas explained.
“ADUs financed through the program will become safe, habitable and potentially rent-restricted units that will help homeowners generate additional income and support long-term homeowner and neighborhood stability,” the press release noted.
A sketch showing an accessory dwelling unit in NYCCourtesy New York City Department of City Planning Looking to apply?
Eligible homeowners must be the occupants of the property, must be current on any mortgages and must not have outstanding municipal arrears or be in an active payment plan. There are also income limits; a two-person household can earn a max of $186,450 annually.
The property, too, must meet various requirements, including ceiling height minimums. The full list is available on the HPD’s website.
The Federal Housing Finance Agency will exempt workforce housing loans in 2024 from the lending limits it imposes on the government-sponsored entities. Fannie and Freddie will be capped at $70B each of multifamily lending next year for all other properties, a combined $10B below 2023 levels.
A "national housing affordability crisis" led the FHFA to exempt workforce housing from lending limits, a spokesperson said.
“Exempting this narrowly tailored category of loans encourages the Enterprises and the marketplace to build up this new product as a response to the national housing affordability crisis,” an FHFA spokesperson said in a statement emailed to Bisnow.
The agency, which has acted as conservator for Fannie Mae and Freddie Mac since 2008, defines workforce housing as developments that adhere to state or local housing affordability initiatives for at least 10 years or the term of the loan.
In regions that aren’t considered cost-burdened, the threshold for affordability is 80% of the area median income or below. Housing in cost-burdened markets can qualify with rents at 100% of AMI, while very cost-burdened rental markets have a limit of 120% of AMI.
“FHFA is trying to incentivize the creation of restricted affordable housing along with the use of GSE financing,” Donald King, executive vice president at Walker & Dunlop, wrote in an email to Bisnow.
The exemption is a shift from the FHFA's prior policy. It first created the workforce housing category last year but subjected loans for the segment to the annual lending caps put on the GSEs. This year, those loans are exempted, but the FHFA doesn’t expect to see a significant shift in the amount of workforce housing being financed by the lenders.
“While FHFA would like to see greater take-up of Workforce loans, FHFA does not anticipate the exemption will have an outsized effect on overall Enterprise multifamily purchase volumes in 2024,” the FHFA spokesperson wrote.
For nonexempt financing, the FHFA requires that at least 50% of loans qualify as mission-driven. Mission-driven affordable loans cover properties that are subsidized by the Low-Income Housing Tax Credit program, developments that restrict rents based on a state or local affordable housing program, Section 8 housing that is restricted to no more than 80% of AMI, and rent-restricted developments built by a public housing authority.
FHFA will also consider classifying developments that don’t fit those criteria as affordable housing on a case-by-case basis, according to the agency’s 2024 multifamily housing definitions.
In 2022, 18.6% of the multifamily units financed by Fannie Mae were for projects with rents priced at between 80% of AMI and 120% of AMI, according to its Annual Housing Activities Report. Of the 693,000 multifamily units Freddie Mac financed in 2022, 21.9% were for apartments restricted to those income levels, according to a press release. The regional differences in AMI requirements mean that not all of those units necessarily fell under the workforce housing definition.
Fannie Mae launched a financing program last month to support workforce housing preservation and development, making loans available to borrowers that restrict rents for at least 20% of the units at a property to between 80% and 120% of AMI.
For nonexempt loans, the FHFA said it will monitor the multifamily market and increase the $70B caps for Fannie Mae and Freddie Mac if necessary, but it said it wouldn’t reduce the limits if the market is smaller than projected.
In 2022, when the cap was $78B for each of the lenders, Fannie Mae did $69B in volume, while Freddie Mac purchased $73B in multifamily loans.
The workforce exemption in 2024 does open the door to the lenders going beyond the $75B lending cap for each of the lenders.
“The possibility does exist that they could lend more than the caps if both the market is there and there is widespread adoption of voluntary rent restrictions along with GSE debt,” King said.
Nearly 200 formerly homeless New Yorkers were hit with eviction notices over the past two years after the city-funded nonprofit tasked with leasing them apartments failed to pay their rent on time, court records show.
Tenants and their advocates say the yearslong saga exposes systemic problems in New York City’s vast network of scattered-site supportive housing — a model where nonprofits rent apartments from private landlords, sublease them to formerly homeless New Yorkers with special needs, like mental illness or HIV, and make home visits to check in and offer services..
The scattered-site model serves as a key tool in the city’s effort to reduce homelessness, with roughly 16,000 units leased by nonprofits across the five boroughs.
But a Gothamist review of court filings against the Brooklyn-based organization St. Nick’s Alliance shows that tenants can still face the threat of eviction when private landlords have little patience for nonprofits late to pay the rent, and city agencies are left unaware of the mounting cases against clients whom they pay to house.
None of the St. Nick’s Alliance tenants have been removed from their homes, and the organization said it has caught up on rent payments for nearly all of the apartments. But the episode is leading to finger-pointing among city officials, the nonprofit group, legal services providers and landlords over who is accountable for the steady stream of eviction cases that force tenants to navigate a complex process and deal with the stress of losing their homes.
“I'm just scared to death I'm going to be in the streets. And I don't want to be in the streets,” said Bridget Smith, a tenant in Flatbush. “I don't want to lose my apartment because the program’s messing up and the city’s not paying attention.”
Last December, Smith received one of the 187 eviction notices filed against St. Nick’s Alliance scattered-site program over the past two years. She contacted a lawyer to defend her and to help find out why she faced the threat of removal when the organization was supposed to be paying the rent.
Landlords filed to evict the organization from nearly half of its 357 scattered-site units since March 2022, including multiple cases for the same units, court records show. The organization says it has since resolved almost all of the cases and is set to take over the contract for another additional 140 apartments at the start of next year.
Smith, 62, said she has lived in her two-bedroom unit since 2002 and was stunned to find an eviction notice tacked to her front door. Over the past two decades, the apartment has served as a sort-of homebase for her extended family. A jumbled rainbow of children’s names fills a hallway growth chart, group photos line the walls and a large portrait of her daughter in her school safety agent uniform hangs in the living room.
“Everybody that's any age in my family comes to this house, have been here sleeping, eating, coming here crying, helping me,” she said.
Not everyone has the wherewithal to contact a lawyer or respond to the eviction notices on their own. All of the eviction notices name St. Nick’s Alliance, but few name the actual people living in the units — instead, they refer to “John” or “Jane Doe” residents.
If the nonprofit does not respond in court either, a judge can rule against a resident by default and issue a warrant to a marshal to remove them.
That happened in at least eight of the cases against St. Nick’s Alliance after no one showed up to respond to the notice, court records show. Gothamist matched the addresses of those apartments to city eviction records and found that marshals have not reported removing tenants from the units.
Smith’s attorney Erin Evers, from Brooklyn Legal Services, said that should never happen to tenants following the rules in their government-funded apartments.
“Somebody is not fulfilling their end of the bargain, and that is leaving tenants vulnerable to eviction,” Evers said. “They're ending up in housing court for nothing — for literally something that is completely outside of their control and that they have nothing to do with.”
Pointing fingers
St. Nick’s Alliance develops affordable housing and runs a variety of services, including elder care and career training. They also use their scattered-site contracts to rent units from a handful of large New York City landlords, including Joseph Popack and the Pinnacle Group, which owns Smith’s building through a limited liability corporation and did not respond to phone calls.
Flatbush resident Bridget Smith says she's lived in the apartment for over 20 years.
Photo by David Brand
Over the past year, Popack filed nearly all of the eviction cases against St. Nick’s Alliance, with the nonprofit owing a median rent of $4,164 — typically the equivalent of about two months of missed payments. In several instances in September, unpaid rent began to mount, sometimes reaching $8,500 or more, court records show.
Frank Lang, St. Nick's Alliance's deputy housing director, said the agency has settled up with Popack and the other landlords who filed the eviction cases, except in a handful of situations where they are trying to compel the owners to complete repairs by withholding rent and suing in housing court. HRA and Popack’s attorney Scott Gross confirmed that nearly all the rent money has been paid.
Lang also said the lengthy housing court process and other safeguards ensure residents are unlikely to actually get evicted, even if they received a notice for nonpayment proceedings.
“The program that is operated has a lot of protections to make sure that the residents themselves are not going to become homeless and are not going to lose their location,” Lang said.
But the city’s Human Resources Administration is disputing the claim that they made their contract payments late. Spokesperson Neha Sharma said they are issuing corrective actions to ensure St. Nick’s Alliance pays its bills on time, though she did not describe what those were.
“The agency also has robust accountability and oversight mechanisms in place to prevent the recurrence of any prevalent issues and we remain committed to taking broader action when warranted,” she said.
HRA officials said they were not aware of the mass of eviction filings until Gothamist notified them.
That’s not uncommon. No city or state agency keeps track of exactly where nonprofits are renting units in their scattered-site programs. That means regulators have no idea when problems arise or when tenants’ homes are threatened, said Evers, the attorney from Brooklyn Legal Services.
“The real problem is there is no safety net in place for the most vulnerable tenants in New York City,” Evers said.
She said the missing rent raises red flags because of past financial scandals involving at least two organizations with scattered-site supportive housing contracts. In one case, an executive was charged with stealing cash from contracts meant to house formerly homeless tenants with HIV. In another, an agency stopped paying rent, exposed hundreds of tenants to the risk of eviction and left the city scrambling to find a new provider to take over the housing contracts.
Lang said St. Nick’s Alliance is in a “very healthy place” and would never divert money from its scattered-site contracts, even to cover other budget holes.
The spike in filings against St. Nick’s Alliance comes as the number of evictions continues to rise across New York City. City marshals have completed nearly 15,000 residential evictions since a freeze on most legal lockouts ended last January, according to city data tracked by Gothamist.
But the scattered-site system depends on landlords known for mass evictions, harassment and unsafe conditions because they often have the only affordable units. The Right to Counsel Coalition, a group of housing advocacy and legal assistance groups, listed Popack as one of the city’s “worst evictors” in 2021.
Popack did not respond to phone calls or an email. Popack’s attorney said he was frustrated with St. Nick’s Alliance for not paying and not responding to demands for rent.
“He wanted to get their attention,” Gross said. “We decided to try and wake them up, which we did.”
Lang said he was caught off guard by the surge of eviction filings and said St. Nick’s Alliance works closely with landlords to inform them if rent payments will be late.
A crucial tool plagued by problems
The scattered-site model keeps people housed in the community with stable apartments and access to services, but the crucial tool for addressing homelessness remains plagued by funding shortfalls, negligent landlords and a lack of oversight, according to providers, attorneys, tenants and activists.
The Supportive Housing Network of New York, or SHNNY, an industry group that represents nonprofit providers, has long sounded the alarm on funding gaps that discourage many providers from even applying for scattered-site contracts in the first place. In many cases, contracts from the city and state fail to keep up with market rents, leaving few options for providers trying to lease quality apartments.
“The nonprofits that provide supportive housing are working with razor-thin margins,” said Pascale Leone, SHNNY's executive director.
Leone said any funding delays put “tenants, many of whom have experienced significant barriers to receiving stable housing” at greater risk of eviction or other problems.
The same issues also helped drive residents to form the first citywide supportive housing tenants association. The organization Supportive Housing Organized and United Tenants, known as SHOUT, informs residents about their rights when facing eviction.
SHOUT member Abby Hinds lives in a scattered-site supportive housing unit in the Bronx and said no tenant should be left out to dry because of the failures of providers, landlords or city agencies.
“That’s everyone’s biggest fear,” Hinds said. “You should always feel secure if you signed a sublease and it’s taken care of. What a frightening situation.”
The price of hotel rooms in New York City is skyrocketing as thousands of rooms are diverted to shelter asylum seekers and the crackdown on Airbnb eliminates that option for some visitors.
For the four weeks ending Nov. 4, the average daily rate in New York City reached $362.70, up sharply from $291.22 for the same period in 2019, according to STR, the leading source of hotel financial data. The city saw a record 66 million tourists in 2019.
Rates are likely to continue to increase in 2024, with the average rate for the year exceeding $300 a night for the first time, says Sean Hennessey, a longtime watcher of the city’s hotel scene who is now an associate professor at NYU’s Jonathan M. Tisch School of Hospitality. “The city is benefitting from the post-COVID travel rebound, rooms lost to sheltering asylum seekers and the near-elimination of short-term rentals,” he said.
With the crucial holiday season approaching, all signs point to New York meeting or exceeding the 63.3 million visitors forecast by the local tourism bureau NYC Tourism & Conventions. That figure would represent a 12% increase from last year.
In Battery Park City, the Conrad New York Downtown’s leisure travel is back to 2019 levels, says general manager Chintan Dadhich. He notes that because occupancy has rebounded, the hotel is able to expand its offering of amenities, which makes guests more willing to pay high rates. For the first weekend in December, a couple staying Friday and Saturday night are being offered rooms ranging from $762 to $982 per night.
Meanwhile hotel industry experts estimate that some 10,000 hotel rooms are being used to house asylum seekers, which has boosted rates in two ways. One is simply statistical: By eliminating 10,000 lower-cost rooms, the average room rate is boosted. An even bigger factor is that the loss of lower-rate options allowed higher priced hotels to boost their rates, as a matter of supply and demand.
Airbnb says the new rules sharply limiting the ability of homeowners and renters to offer Airbnb rentals are clearly leading to higher rates. Even though the company is honoring reservations made before September, it notes that most Airbnb listings are made weeks not months in advance.
“Visitors to New York City have thousands of fewer rooms to stay right now, which is resulting in less choice and higher prices. The impact is likely to grow after December and especially during peak travel nights, such as on New Year’s Eve,” said Taylor Marr, housing Market economist at Airbnb.
The prospect for building new hotels to increase the number of rooms remains unclear. At the behest of the hotel workers union, Mayor Bill de Blasio pushed through a requirement that all new hotels must receive a special permit from the City Council. Experts say the Council is likely to approve hotels only if the developer agrees to recognize the union and since then only one new project has been proposed.
Rising hotel rates will help hotels, whose finances were battered during COVID, but long-term threatens to make New York City too expensive for some potential visitors. But the city’s attractions may be irresistible.
“Just think if we get a casino!” said Hennessey, only half facetiously. “With abundant marijuana shops around town, there’s hardly a whim we don’t cater to.”
On Sunday we noted that Beijing would be employing several schemes to try and put a floor under its spiraling property crisis - chief among them, providing at least 1 trillion yuan (US$137 billion) in low-cost financing to renovate urban villages and build new, affordable housing (which, according to Bloomberg's Ye Xie, George Lei and Henry Ren, might not be enough).
Beijing announced the two-pronged approach over the past few weeks, which have top-level political backing for financing equivalent to approximately 10% of annual new home sales in what Bloomberg described as the "Singapore" model.
Singapore, while a mecca of private-sector business and financial activity, is renowned for a residential market that’s dominated by public housing. If China’s new plan works, officials might be able to both end a nearly three-year slump in property construction and meet President Xi Jinping’s aims to promote “common prosperity.”
“The plan is more of a longer-term structural adjustment in the property sector toward a Singaporean model,” said Betty Wang, senior economist at Australia & New Zealand Banking Group in Hong Kong. “I don’t think it’s just a short-term effort to boost property investment — instead, it’s about China’s 2035 common prosperity goals.”
50 developers
Now, Bloomberg reports that Chinese regulators are quickly moving forward with the two projects - and have drafted a list of 50 developers eligible for a range of financing, according to people familiar with the matter. The list comprises both private and state-owned developers, who will vie for support from financial institutions loans, debt, and equity financing.
The yet-to-be-finalized list would expand on previous rosters created by banks that only focused on some “systemically important” state-backed firms. It underscores Beijing’s growing concerns about the sector following record defaults, a swathe of unfinished apartments and a deep contraction in real estate investment that threatens to derail growth in the world’s second-largest economy.
Some Chinese builders’ dollar bonds rallied after the report. Vanke’s 3.5% note due 2029 climbed 3.9 cents on the dollar, set for the biggest jump in two weeks, according to data compiled by Bloomberg. Longfor’s 3.85% note due 2032 rose 3.2 cents, while Seazen’s 4.8% bond due 2024 climbed 2.2 cents. -Bloomberg
According to a recent statement from Beijing, China's largest banks, brokerages and distressed asset managers were told during a Friday gathering to meet all "reasonable" funding needs from property developers, and to "treat private and state-owned developers the same" when it comes to lending. Regulators were also asked at the event to ensure that loan issuance to private builders doesn't outpace the industry average rate, given that China's outstanding property loans fell for the first time on an annual bases in Q3.
China has attempted several previous schemes to mitigate its housing crisis, which is putting a serious drag on the economy despite other indicators such as industrial production marking improvement in recent months. The real estate industry, on the other hand, contracted 2.7% in Q3, the largest drop this year.
"The results so far are disappointing, because these measures mainly focus on boosting demand but overlook the supply side, namely, the financing needs of developers," according to Macquarie Group Ltd. economists led by Larry Hu wrote in a Nov. 17 note. "A key thing to watch is whether and when policymakers would take bolder actions."
Access to credit line guaranteeing rents one sticking point
Bankruptcy is company’s latest attempt to fix balance sheet
Some owners of WeWork Inc.’s more than 700 properties are objecting to the company’s plans to shut down nearly half of its US and Canadian locations in bankruptcy.
Objections filed Tuesday, the deadline for such motions, pushed back on the company’s timeline for rejecting leases, and rules they say wrongly favor WeWork. For example, one landlord claims WeWork would retain the right to stay in a location, even after canceling a lease.
The filings provide a fresh look at the delicate balance WeWork must strike as it seeks to renegotiate or shed onerous leases, a key part of its bankruptcy plan. It’s in talks with landlords for hundreds of properties about rent cuts and other concessions, and must be careful not to push so aggressively that landlords choose to walk away and seek new occupants.
“WeWork is walking a fine line because it has to aggressively cut rent costs in order to reorganize successfully, but at the same time its future depends on maintaining healthy relationships with some of those same landlords if it hopes to strike new agreements with them after emerging from bankruptcy, ” said Evan DuFaux, a special situations analyst at the research firm CreditSights. “The case is likely to turn on the landlords’ strategy regarding renegotiation and rejection of leases.”
A representative for WeWork didn’t immediately respond to a request for comment. Representatives for Kirkland & Ellis and Hilco didn’t immediately comment.
WeWork filed for bankruptcy on Nov. 6, a move that gave it broad rights to reject or cancel contract agreements that are not financially feasible, including leases. It was earlier attempting to negotiate with landlords outside of court.
WeWork’s advisers from law firm Kirkland & Ellis and real estate specialist Hilco Global have been asking for rent cuts in a range of sizes, sometimes above 25%, according to a person with knowledge of the matter who asked not to be identified discussing private information.
Some landlords have also expressed concern over their ability to draw on collateral that guaranteed their rental income. A $1.5 billion letter of credit facility that backed rent promises at some of the properties is of issue in some of their objections.
WeWork “appears to be trying to play a game of ‘Gotcha’ with unsuspecting mom and pop landlords in order to force them into what are effectively new leases that WeWork would otherwise be unable to obtain in any legal or consensual manner,” lawyers for the owner of the company’s headquarters said in a court filing.
The company will be back in court next week to ask Judge John Sherwood to approve rules for canceling leases and paying any associated costs. Such rules are typically seen in big retail cases, where a company faces pressure to quickly analyze the profitability of hundreds of stores and then decide which to close and which to keep open.
Under Chapter 11 rules, companies have up to 210 days to decide whether to cancel a lease. Other contracts, like those signed with suppliers or customers, have no time limit.
The case is WeWork Inc., 23-19865, U.S. Bankruptcy Court for the District of New Jersey (Newark).
