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Affordable housing being 'squeezed out.' (real estate taxes, environmental mandates and increases in water charges undermine owners of affordable housing units)

"The recent 'State of the State' and 'State of the City' addresses by the Governor, Mayor and Comptroller, prompted me to consider the 'State of the Affordable Housing Industry,' and it became apparent owners are being squeezed on many fronts," Ruben Klein, president of the Bronx Realty Advisory Board, reported.

Unfortunately, state and local governments appear willing to help all in need except those who deliver one of the city's most important services affordable rental housing, Klein said.

"This privately-owned city 'resource' is not being renewed in sufficient quantities, yet owners as a group are being buffeted by some of the most egregious developments," he pointed out, and cited the following eight problem-areas for owners:

* "Real estate taxes, which have risen 50 percent in the past few years, and are now 23 percent of total expenses compared to 10%-15% just a few decades ago

* "Environmental mandates, which are important in creating healthy quality-of-life conditions for city residents, but the city must realize that some of these mandates are beyond the ability of an average apartment building owner to handle without some type of subsidy

* "New water metering regulations, under which water charges are several times what they were five years ago. Some owners are paying an equivalent of $700 to $900 a unit annually for water, and these costs have the potential of bankrupting them

* "High levels of lead in children because of lead paint, which must be dealt with and controlled by intelligent public policies, but the government should realize that compliance with all lead pollution regulations may cause many owners of affordable apartment buildings to go out of business, and they are not the cause of the high lead-levels. Moreover, some insurance companies are refusing to provide liability insurance coverage on lead poisoning, and without it, owners can't operate their properties

"The decline in mortgage interest rates, which generally is a good thing for the affordable housing industry, but does it really matter when banks are reluctant to do real estate lending here?

* Real estate assessments, which after rising during the last 15 years, have on average begun to come down, but generally not in the Bronx, and not as much as market values have declined

* The Housing Court, which seem to have adopted the banner of a social welfare agency and has made it difficult for owners to obtain warrants of eviction. Unless owners are permitted to replace indigent tenants with rent-paying-tenants, there will be a shortfall in income and insufficient funds for building maintenance, so all tenants in the buildings will suffer

* "The recycling laws, which are good for the city, for the environment, and all city residents, but unfairly put the responsibility for compliance with these regulations on owners, unfairly because the landlord gets fined if tenants don't properly separate their garbage -- and he has no control over what the tenants do.

Continuing, Klein said, "It would make much more sense for government officials to create a climate conducive to the maintenance and construction of affordable rental housing, instead of creating seemingly insurmountable obstacles toward these goals.

"The city cannot exist without affordable housing, yet under the conditions that prevail in New York City, affordable rental housing has to be one of the most difficult businesses for an investor to operate profitably," the BRAB officer asserted.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Real Estate Weekly
Date:Feb 10, 1993
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