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Housing Policy


NEW YORK'S BROKEN HOUSING COURT LETS TENANT STAY FOR YEARS WITHOUT PAYING RENT


PLUS: AUSTIN AND SALT LAKE CITY PASS VERY DIFFERENT "MIDDLE HOUSING" REFORMS,
DEMOCRATS IN CONGRESS WANT TO BAN HEDGE FUND–OWNED RENTAL HOUSING, AND A LOOK AT
GOP PRESIDENTIAL CANDIDATE'S HOUSING POLICY POSITIONS.

Christian Britschgi | 12.12.2023 7:00 AM

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There's a lot going on in this second edition of Rent Free. This week's stories
include:

 * Austin, Texas, and Salt Lake City both passed "middle housing" reforms that
   will allow more housing in existing neighborhoods. One city's reforms will
   likely get much more housing built.
 * Democrats in Congress are trying to ban investor-owned rental homes, a policy
   that's likely to fuel gentrification.
 * A look at the 2024 Republican presidential candidates' housing policies

But first, our lead story about housing court dysfunction in New York:

--------------------------------------------------------------------------------


NYC HOUSING COURT FAIL

In April 2020, Vanie Mangal's tenant, who lives on the bottom floor of the
two-family home they share in Queens, stopped paying rent. Instead, she started
harassing Mangal.

"This was the height of COVID. I had a lot of stress at work," says Mangal, an
emergency room physician's assistant. "All of my patients were dying. I'd come
home, and we share a hallway, and she would scream things to me in the hallway."

Other episodes of harassment followed. Mangal's tenant would play music at all
hours. At one point, she exposed herself to Mangal. Her tenant claimed a COVID
hardship to avoid eviction while also ordering new furniture and buying a new
car.

Want more on urban issues like regulation, development, and zoning? Sign up for
Rent Free from Reason and Christian Britschgi.

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In 2021, Mangal's nightmare situation was written up in The New York Times as an
example of pandemic-era eviction restrictions' toll on small landlords.

Fast forward to today, those eviction restrictions are gone, but Mangal's
nonpaying tenant is still there. Mangal is the one who moved out instead.

Helping to keep her tenant there is New York's overwhelmed housing court system,
where it can take over a year to process a simple nonpayment case.

Under a new plan proposed by New York's landlords, and modeled off much-praised
eviction diversion programs elsewhere in the country, more cases could
potentially be shifted out of housing court. But groups that get taxpayer money
to represent tenants in housing court are dead-set against the idea.

Housing Court Dysfunction

In 2019, New York landlords were filing around 14,000 residential eviction cases
a month. Pandemic-era eviction restrictions dropped filings down to basically
zero for a time.

In 2021, those suppressed cases started flooding back into an understaffed court
system. In New York City specifically, landlords also say an expansion of the
city's right-to-counsel program—which provides tenants facing eviction with free
legal representation—has also slowed things down.

"You add all those [COVID-era cases] on top of a court system that is not fully
staffed, and you have attorneys on the other side who are intentionally delaying
[cases] as long as possible," says Jay Martin, executive director of Community
Housing Improvement Program (CHIP), a property owners trade association.

Right-to-counsel advocates say explicitly that their goal is "slowing down
eviction cases."

Today, there are nearly 200,00 active eviction cases in state court, up from
around 33,000 before the pandemic.

The result is people like Mangal have had to wait nearly four years to vindicate
their property rights.

Even in cases where no one would be removed from the unit, the wheels of justice
grind slowly. CHIP shared with Reason the case of one building owner whose
tenant was killed by a bus, but retaking legal possession of the unit still took
two years.



A Possible Fix

To cut down on the housing court backlog, CHIP has proposed creating a voluntary
eviction diversion program. Tenants and landlords would meet with a financial
planner before an eviction is filed. The planner could help tenants craft a
payment plan and connect them with government assistance.

Tenant advocates praise Philadelphia's similar eviction diversion program. It
requires landlords and tenants to undergo 30 days of either mediated discussions
or direct negotiations before the landlord can file for eviction.

Local public radio station WHYY reported in August that some 5,000 people have
used the mediation program, and 70 percent managed to reach an agreement that
kept the case out of housing court.

Resolving landlord-tenant disputes before a landlord files for eviction can be a
benefit to both parties, says Carl Gershenson, a director at Princeton
University's Eviction Lab.

"The landlord has already paid filing fees. In a lot of cases, they've paid
legal fees. A tenant has an eviction filing on their record, which is also not
ideal when they go to look for rental housing in the future," Gershenson tells
Reason.

Backlash

But legal aid groups in New York hate CHIP's idea. They say it will funnel
renters into mediated discussions where they have fewer legal protections.

"Eviction cases are hardly ever only about money and a certified financial
planner cannot safeguard tenants against bad acting landlords failing to hold up
their end of the bargain," Ami Shah, deputy director of housing at Legal
Services NYC, told The Real Deal in a statement.

(In 2022, 80 percent of residential eviction cases were for nonpayment of rent,
according to the state court system's eviction dashboard.)

Instead, legal aid groups have asked for more funding for housing court lawyers.
New York City's right-to-counsel program got a $20 million bump this fiscal
year, on top of the $186 million they were already receiving.



Martin attributes this opposition to cynical motives: Any alternative to housing
court would lower the demand for these groups' services. Legal aid attorneys
would also have less ability to use a prolonged housing court process as
leverage for landlords dropping eviction cases.

(Legal Services NYC did not respond to Reason's request for comment.)

A mediation program would do little to help Mangal, who says she tried to work
things out with her tenant outside of court already. A smoother-moving court
system would allow her to vindicate her property rights a little faster.

CHIP says they hope to introduce statewide legislation creating a New York
eviction diversion program in the new year.

--------------------------------------------------------------------------------


TWO CITIES SHOW HOW TO PASS, AND HOW NOT TO PASS, 'MIDDLE HOUSING' REFORMS

Austin, Texas, and Salt Lake City have both passed zoning reforms that will
allow multiunit (or "middle housing") developments in once-single-family-only
districts. Both cities are attempting to give builders more flexibility to add
more housing in existing neighborhoods.

But the devil is always in the details. The particulars of Austin's reforms make
it more likely that city will see more housing actually get built.

Austin

This past Thursday, the Austin City Council passed Phase One of its Home Options
for Middle-income Employment (HOME) Initiative that allows three-unit homes to
be built on all residential lots citywide. Previously, homeowners had only been
allowed to build a single-family home and an accessory dwelling unit (ADU)
(a.k.a. granny flats or in-law suites) in the city's lowest-density zones.

Other cities' triplex legalizations have produced few units because the new
multiunit developments had to be roughly the same size as the single-family
homes they were replacing.

Austin's reforms tweaked and simplified the city's code so that newly legal two-
and three-unit homes can take up more land on each lot and be built with smaller
setbacks from the street. If builders maintain the existing single-family home
on the property, they'll get "preservation" and "sustainability" bonuses which
allow them to cover even more of the property.



Chris Gannon, an Austin architect at Shams Gannon, says the HOME Initiative
legalizes smaller, more affordable homes that Austinites want to buy.

Market data shows that when a new large home and ADU were built on the same
property, "that ADU would sell immediately, while that primary [home] would sit
on the market for weeks. The smaller, more affordable homes are in high, high
demand."

Salt Lake City

Last Tuesday, the Salt Lake City Council passed reforms legalizing four-unit
homes in all residential zones and allowing larger apartment buildings in
existing multifamily areas.

On paper, that allows more housing than Austin's triplex legalization. But Salt
Lake City's reforms come with some punishingly high affordability requirements
in single-family zones. Builders of four-unit projects must offer half their new
units (or a quarter of them if they preserve the existing home) at below-market
rates.

Zoning wonks argue those affordability requirements are a huge tax on
development.





Turner Bitton, of the group SLC Neighbors for More Neighbors, says that the
affordability requirements will keep new fourplexes out of many single-family
neighborhoods. But the multifamily reforms, which allow builders to add more
floors and spread the costs of affordability mandates across more units, should
be more productive, he tells Reason.

--------------------------------------------------------------------------------


CONGRESSIONAL DEMOCRATS INTRODUCE LEGISLATION CRACKING DOWN ON HEDGE FUND HOME
OWNERSHIP

Democrats in the U.S. Senate and House introduced twin bills that would ban
institutional investors from owning large numbers of single-family homes.
The New York Times describes the details of the legislation:

> The bill would require hedge funds, defined as corporations, partnerships or
> real estate investment trusts that manage funds pooled from investors, to sell
> off all the single-family homes they own over a 10-year period, and eventually
> prohibit such companies from owning any single-family homes at all. During the
> decade-long phaseout period, the bill would impose stiff tax penalties, with
> the proceeds reserved for down-payment assistance for individuals looking to
> buy homes from corporate owners.

The bill's supporters argue institutional investors are driving up home prices
and depriving ordinary Americans of homeownership opportunities. Yet, research
has found that banning investor-owned rental housing increases gentrification
and income segregation by excluding renters from single-family neighborhoods.

--------------------------------------------------------------------------------


HOW THE REPUBLICAN PRESIDENTIAL CANDIDATES COMPARE ON HOUSING POLICY

At last Wednesday's fourth GOP presidential primary debate, former South
Carolina Gov. Nikki Haley was the only candidate to answer the only question
asked about how to make housing more affordable.



"We have a high interest rate. You've got supply issues, ask any builder. The
supply issues have continued to be there….You've got insurance that's gone up,"
said Haley. "You have a lot of younger people who (1) can't afford a home, but
(2) the banks aren't lending them any money. They've made the regulations so
hard that they don't want to give loans on mortgages anymore."



This was a pretty good answer, all things considered. Haley is correct that
post–Great Recession mortgage regulation has prevented lots of people from
financing a new home, reducing supply and keeping more people in the rental
market (which drives up rents.) Mortgage regulation, unlike zoning regulations,
is also something more firmly under the control of the federal government—a
relevant factor given that Haley is running for federal office.

Still, there's no getting around the fact that zoning regulations make it
illegal to build new homes in many of the most in-demand areas and cities. On
that front, businessman Vivek Ramaswamy had the best things to say on housing
policy.

"Increase the supply of housing. Land use restrictions are constricting the
supply of housing. That's making housing more expensive for ordinary Americans
across this country," he said in the third GOP debate last month.

Gov. Ron DeSantis hasn't made housing policy a big part of his campaign. His
record as Florida governor is mixed on the issue of zoning reform. DeSantis
signed a major upzoning bill into law this year. He's also sued Gainesville,
Florida, for passing a very modest fourplex legalization ordinance.

Former President Donald Trump has not shown up to any debates thus far. Early on
in his tenure, his administration was very supportive of reforms that would
increase housing construction. In 2020, Trump gave that up and ran as the
country's NIMBY in chief.



--------------------------------------------------------------------------------


QUICK LINKS

 * Last week, Rent Free covered how ultraregulated San Francisco's can-kicking
   on zoning reform could see the state strip the city of its zoning powers. A
   few days later the city passed a "constraints reduction" ordinance that
   streamlines some development, likely forestalling drastic state intervention.
 * Speaking of San Francisco, after a decade of development battles, the city
   has finally selected a nonprofit builder to construct 350 units of affordable
   housing near a train station in the city's Mission District. A for-profit
   builder had proposed a largely market-rate project on the site back in 2013.
   Community opposition stopped that. The new affordable project will hopefully
   be finished by 2028 (provided financing is secured quickly), reports Mission
   Local.
 * Rep. Rashida Tlaib (D–Mich.) has introduced the Public Housing for the 21st
   Century Act which instructs the U.S. Department of Housing and Urban
   Development to study best practices for building publicly owned, mixed-income
   "social housing." (Hopefully, HUD will look at how even alleged social
   housing success stories are not as good as they seem.)
 * Pew has new research showing how zoning restrictions are driving up rents and
   home prices in Arizona.
 * Come January, the U.S. Supreme Court will hear the case of Sheetz v. County
   of El Dorado, where the builder of a single-family home is challenging a
   $25,000 traffic mitigation impact fee. "Impact fees have the potential to
   support housing construction and improve affordability relative to what would
   be possible without them. However, they can also deter new housing
   construction, limiting supply and exacerbating affordability problems," wrote
   Mercatus researchers Charles Gardner and Emily Hamilton in a recent amicus
   brief in support of the petitioner.

--------------------------------------------------------------------------------


REGULATION OF THE WEEK

The zoning code of Bloomington, Minnesota, declares bungee jumping "an
inherently dangerous and life-threatening practice" and bans it in all zoning
districts (even light-commercial!).

(Hat tip to Salim Furth for this week's regulation. If you have a submission for
a future regulation of the week, send it to rentfree@reason.com.)

Rent Free is a weekly newsletter from Christian Britschgi on urbanism and the
fight for less regulation, more housing, more property rights, and more freedom
in America's cities.

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NEXT: Is Florida Finally Fixing Its Broken Homeowners Insurance Market?

Christian Britschgi is a reporter at Reason.

Housing PolicyZoningProperty RightsNew YorkSan
FranciscoRegulationDeregulationTexasUtahSupreme CourtRepublican Presidential
NominationNikki HaleyVivek RamaswamyRon DeSantisDonald Trump
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