NYC emulates D.C. housing
NYC emulates D.C. housing
TOPA and COPA proposed rules aim to restrict when private sellers can transact their private properties and with whom
A few interesting pieces of legislation in NY state have sprung up recently. Some are half baked, some are interesting, and some haven’t even been proposed yet. I summarize them below so that you are up to date.
The less good
First rights to purchase for non-profits. This is known as COPA (Community Opportunity to Purchase Act). The rule would allow non-profits to get first ‘dibs’ at buying multifamily properties from private owners in NYC. It would apply to every single multifamily property in NYC. This is a law at the city level only. The way this would work is rife with administrative hurdles. Starting with letting HPD know of the sale in advance, private owners would have to also wait through two 60-day periods (with potential for extensions) patiently before being able to pitch their properties to for-profit buyers and engage freely in courting buyers. Additional information here.
First rights to purchase for tenants. This is known as TOPA (Tenants Opportunity to Purchase Act). Like the rule implemented in 1980 in Washington D.C., this resolution calls for any owner intending to sell a private piece of multifamily property to first offer the tenants of said property the opportunity to buy the property. The required waiting periods for TOPA would look very similar to those for COPA. Greysteel’s D.C. office is very well versed in TOPA, but here is a quick primer on how it works in D.C., where TOPA has long ago been baked into the fabric of housing. Both COPA and TOPA are part of a push by tenant associations in NYC to have apartments be viewed as “social housing,” a public good that is available to all.
Why the concern?
These rules would distort the free markets that govern real estate transactions. In January of 2022, the 10–year U.S. treasury bill was hovering around 1.8% yield. 120 days later in May of 2022, the yield hovered around 3.05%. On a 10 million property sale financed with 7 million dollars of interest-only debt, that means $213K in debt service in May, versus only $126K of debt service in January. The achievable sale price and the interested parties in this hypothetical property would be vastly different before and after the mandated waiting periods. Though interest rates will not always be growing – and growing at such rapid clips – this example illustrates just how impactful mandatory waiting periods and restrictions on property sales could be on private owners and their ability to do as they please with their property. There are more aspects to this (good and bad), but I think this illustrates an important concern with policies like this.
The better
First rents. A new bill proposed by both the senate and state assembly members would allow owners of vacant apartments in RS buildings to rent newly renovated units for market rent, and thereafter make those units rent regulated. The fine print: a tenant must have been living in the property for 10+ years before a thorough renovation and subsequent rent bump would be allowed. Specific documentation of the renovation would have to be submitted to DHCR as well. A link to the full bill is here.
Extending the 421 A deadline. This legislation doesn’t technically exist yet, but it should. Various housing developments and re-zonings last year would lose much of their “bite,” or their ability to deliver housing units, if the 421 A tax break expired for projects not finished in 2026. Michelle de la Uz, the executive director of Fifth Avenue Committee, which is building or currently controls over 1,900 affordable apartment units in NYC, wrote an article about this, with a focus on the Gowanus rezoning. Much of the touted 8,500 new apartments to be built depend fundamentally on the availability of the 421 A tax break. The deadline to extend the deadline for this year is June 8th, the last day of the legislative session for both houses of government in NY state.
In other news
The RGB vote will happen on June 21st . The highest possible rent increase for RS properties stands at 5% and 7% for 1- and 2-year leases respectively. Mayor Adams voiced some concerns about a 7% increase, and his view bears weight since he has made several of the current RGB board appointments (read: expect less than 7% rent increases).
NYC Department of City planning & the Mayor have launched a community driven plan for the Jamaica neighborhood in Queens. Details are sparse so far. The plan will focus on a 300-block radius and the intentions behind it are to create new jobs, grow the housing stock, and improve the streetscape.
Sources: NY State Assembly Bill, COPA Summary, Jamaica Neighborhood Plan, TOPA Primer