TESTIMONY OF THE DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT TO THE NEW YORK CITY COUNCIL COMMITTEE ON HOUSING AND BUILDINGS ON INTRO. NUMBERS 152-A, 543 AND 1015 MONDAY, FEBRUARY 22, 2016 Intro 152-A Good Morning, Chair Williams and members of the City Council. I am Vito Mustaciuolo, Deputy Commissioner for the Office of Enforcement and Neighborhood Services and I will provide the Agency’s testimony on Int. 152-A and 543, and my colleague, Anne-Marie Hendrickson, Deputy Commissioner for the Office of Asset and Property Management will provide our testimony on Int. 1015. First let me address Int. 152-A, which would impose a citywide requirement that owners seeking certain building permits first obtain a Certification of No Harassment from HPD. Tenant harassment can come in many forms. Landlords attempt to force out tenants by not only making life difficult for them but also by making living conditions unbearable. From cuts in necessary building services, locks changed without notice, unrequested prolonged and disruptive rehabilitation projects, and aggressive buyout offers, to baseless eviction actions in housing court, tenants experience a range of pressure tactics by unscrupulous landlords. Through its enforcement and preventative and proactive measures, this Administration takes harassment seriously and uses a wide variety of tools we have to combat it and punish actors aggressively. While these actions are prevalent in our city, we know that these activities represent a small segment of all landlords who are responsible and attentive owners. 1 We are well aware that some landlords engage in harassment tactics and activities, and we wholeheartedly agree that we should take proactive measures to prevent such behavior. Indeed we have spent the past several years developing effective tools to combat harassment. Working with you, we secured new laws precluding owners and their agents from pressuring tenants to accept buy-out offers and allowing tenants to initiate housing court actions against a landlord who engages in harassment. Almost one year ago, HPD helped to launch a multi-agency effort, to focus all available enforcement tools on landlords engaging in patterns of harassment. This Task Force is a partnership between HPD, DOB, the Attorney General’s Office and the State Division of Housing and Community Renewal. The Taskforce identifies a portfolio of buildings where harassment may be occurring on a widespread basis, and each agency uses its enforcement and other powers to issue violations and gather information. Following the inspections and information gathering, the Task Force determines the best course of action to address any conditions found during the inspections and investigations. The Task Force has inspected buildings across the City and hopes to curtail widespread harassment through its joint efforts. Beyond those efforts, we also work with local elected officials and community groups on specific neighborhood concerns. An example of this work includes HPD’s participation in the North Brooklyn Housing Taskforce. This taskforce brings together HPD, DOB, and DHCR with community-based tenant advocates and legal services providers to target some of the most distressed buildings in the Williamsburg and Bushwick areas as identified by the taskforce’s communitybased partners. This effort has allowed us to concentrate the city’s resources and tools to assist tenants that may need our help. 2 The administration also employs an array of programs to support tenants experiencing harassment from their landlords. HRA administers a free legal services program to income-eligible tenants, with $76 million in funding devoted to that program – more than ten times the amount budgeted in prior administrations. In partnership with Council members and community groups, HPD hosts Tenant Resource Fairs in communities that provide an opportunity for residents to obtain information about their rights, to consult with legal service providers and HPD code enforcement officials about problems they are facing, to report issues with particular buildings and landlords and to submit applications for affordable housing. City Hall and HRA have created a Tenant Support Unit that engages directly with tenants to help them report housing quality issues, refers them to legal services organizations to get help against harassment, and provides information on their rights and affordable housing opportunities. HPD is experimenting with a mobile van to make it easier for people to report housing conditions and get help if they fear they are being harassed, evicted, or threatened with service disruptions. In addition, HRA provides a range of assistance to people who might be rendered homeless through an eviction, utility cut-off, or other housing problem. While HPD believes that the current Certification of No Harassment requirements have been useful tools in the City’s effort to curtail displacement and deter harassment of tenants in some circumstances, HPD is concerned that requiring the Certification of No Harassment as proposed in this bill would be an overly broad, poorly targeted, after-the-fact approach to preventing harassment that will impose considerable costs upon all development. It will therefore slow the production and rehabilitation of housing just when we have a pressing need for more housing to 3 address the affordability crisis our families face and to prevent the rent increases that lead to displacement. For decades, HPD has been accepting, processing, and issuing determinations on applications for Certifications of No Harassment. Since the early 1980s, the law has required owners to secure a Certification of No Harassment before the Department of Buildings can issue a permit to alter or demolish a Single Room Occupancy Multiple Dwelling. The requirement for a Certification of No Harassment for SROs was enacted after widespread incidents of extreme harassment in this building type. A similar requirement was included in the Zoning text, establishing some Special Districts in the City. The Special Clinton District provisions have included a “no harassment” provision since that Special District was created in the early 1970s. When the Special West Chelsea District, the Greenpoint-Williamsburg Anti-Harassment area, the Special Hudson Yards District and a portion of the Special Garment Center District were established, the Zoning text for those districts also included provisions requiring Certifications of No Harassment. Each of those actions was enacted in response to concerns about harassment in communities with a large number of rent-regulated apartments. Intro 152-A extends the requirement to obtain a Certification of No Harassment before any alteration or demolition permit can be issued by the Department of Buildings to virtually every residential building with three or more units in the City of New York. This bill would apply to all residential areas in the City affecting neighborhoods with housing stock as different as South Jamaica, Bay Ridge, Forest Hills, East New York, Eltingville, and Riverdale. Areas with high numbers of rent stabilized apartments require different approaches than areas with predominantly three family homes. At the same time, areas with large numbers of coops and 4 condo buildings require different strategies than areas where buildings are primarily rentals. HPD believes that the bill would cause a variety of administrative and other delays affecting the construction of all types of housing across the City. The current targeted nature of the Certification of No Harassment requirement is based on specific concerns related to areas with a high number of buildings with rent regulated housing. The impact of requiring such a Certification for all buildings would be enormous for both owners and residents of the affected buildings and would require significant agency resources. Some areas of the city contain few units that are rent stabilized; if a unit is an unregulated unit, a landlord does not need to harass a tenant to move out of the unit. The landlord can simply raise the rent at the end of the existing lease. The landlord’s decision to raise the rent beyond the reach of the current tenant at the end of the existing lease is not harassment and is not illegal. Some areas have a housing stock that is already subject to strong governmental oversight by a government agency like HPD, HUD, or NYCHA. Tenants in apartments that are regulated by affordability programs are already protected against harassment. The requirement for a Certification of No Harassment before any alterations will be permitted in any Class “A” building would mean that an owner of a small multiple dwelling, a large apartment house, or even a co-op building who wants to add a kitchen or bathroom to the unit, wants to combine dwelling units, or wants to make any other change in the configuration of the residential units or the public areas serving those units must ensure that such a Certification has been applied for and issued within three years of any alteration application. If after a thorough investigation HPD finds reasonable cause to believe 5 that harassment occurred in the building, a hearing must be held. These hearings are quite lengthy. This process may raise the cost and time associated with construction work in areas where there is little history of harassment. In sum, we agree that there are landlords that engage in deplorable harassment tactics-these landlords represent a small percent of all owners most of whom are good and responsible. To get at bad actors, we are deploying a larger variety of tools to prevent harassment than ever before, and are always looking for more effective tools to identify these actors and prevent them from denying a tenant his or her rights. We are happy to work with the Council to assess ideas for additional tools. Effective tools must be targeted to the needs of particular neighborhoods, market cycles, and building stock. The emphasis should be on preventing harassment and protecting the rights of current tenants, and the tools should not impose costly delays on the development and rehab of the housing we sorely need to reduce the pressures on rent that incentivize harassment and lead to displacement. 6 Intro. 543 I will now speak on Int. 543. All New Yorkers have the right to live in a home environment that is a safe and otherwise in compliance with minimum housing quality standards, where essential services are provided and the environment is free of hazards. We assume that this bill seeks to ensure that property owners address the root cause of a housing code violation instead of repairing conditions in a superficial way. However, it is not clear the types of conditions that this bill is intended to address. Mold, leaks and pests are the most common types of recurring conditions brought to the Agency’s attention. As drafted, however, this bill is not clearly limited to those conditions. If it is meant to cover other recurring conditions, we need to hear more about what underlying conditions, may be at issue. If mold, leaks, and pests are the Council’s concerns, we believe that HPD’s current inspection procedure and our Underlying Conditions program address these concerns. I will first describe our programs and then discuss the effect this bill would have on our work. In response to complaints, Inspectors write violations for all of the conditions they observe. For example, if an observable roof leak or a ceiling leak is causing a mold condition, violations will be issued for both the leak and the mold. Each violation has its own correction and certification period based on the severity of the condition, and each condition has its own civil penalty. HPD also has a comprehensive program to address underlying conditions, which requires more resources than complaint inspections and therefore involves a more targeted approach for buildings that warrant this attention. Administrative Code section 27-2091(c), enacted in 2013, authorizes HPD to issue underlying condition orders and provides the flexibility to define what conditions can trigger 7 this type of an order. Our rules define an underlying condition as “a physical defect or failure of a building system that is causing or has caused a violation… including, but not limited to, a structural failure or failure of a heating, plumbing or other system”. These rules are intended to identify buildings with widespread water–related issues. The program focuses on these conditions because leaks are often related to other types of poor conditions, including mold, pests, broken plaster and peeling paint. Buildings are selected based the number of recent open mold and leak violations and the percentage of units which exhibit this type of condition. Once buildings are identified, HPD conducts full roof-to-cellar inspections to accurately document current leak and mold violations on which the Order can be based. Since 2013, HPD has issued 128 Orders, of which, 86 buildings have complied with the Order by providing documentation from architects or engineers hired by the owners. The architects or engineers are required to submit an affidavit indicating that they inspected the property and either determined that the building had no underlying systemic issue or that the property did have such an issue and that work has been completed properly to remediate that condition. If there are no systemic issues, the owner must still correct all existing leaks/other water conditions and mold conditions as a pre-condition for discharge. The owner is given four months, with a possible two-month extension, in order to comply with the Order. HPD has initiated 12 litigation cases in situations where the owner has failed to comply. We believe that this program effectively focuses our resources on buildings where a systemic condition exists and creates a clear and separate penalty for failing to address systemic conditions. Our concerns with Int. 543 are as follows: Because HPD already cites causal conditions when they are apparent, this bill seems to suggest that the inspector 8 should conduct a more thorough building inspection to determine the cause. It may be that even if the inspector conducts a full building inspection, he/she would not be able to identify the root cause of a condition. The bill would require HPD to expend additional resources on every inspection it conducts investigating the source of every condition (regardless of severity) even if one is not evident and document whether there is or is not such a condition. Looking for a source of water causing mold may mean roof inspection, inspections of additional apartments and exterior inspections that may or may not reveal a source but will lengthen the inspection time required for every mold condition. We believe that such extensive investigation is the responsibility of the owner. Adding an “underlying condition” to every violation adds confusion to the straightforward process, we use, of issuing separate violations for the underlying cause and for the outward manifestation of that problem. Providing separate timeframes for the correction of the underlying condition separate from the violation correction timeframes and changing penalties based on this identifier would also add confusion to the system. Underlying conditions may also be conditions for which the tenant is partly responsible. In the case of pest conditions, tenants with situations that require assistance from medical professionals or tenants who do not understand the role that they play in proper pest management may complicate eradication of pest conditions. Inspectors are neither building engineers nor pest management professionals; it is the role of the owner or agent to determine the cause of a violation and fix it. Recognizing that it is not always possible for the Inspector to determine the underlying cause of a violation, HPD chose to address this in its Underlying Conditions Program by requiring a professional, qualified to make such systemic determinations to certify that the violations do not result from 9 underlying systemic problems. Water sources can include building facade penetration, internal plumbing leaks, roof leaks, or flooding in other units (not systemic). Other recent legislation, including the “Three Strikes” law passed by the Council in 2015 (Local Law 65) creates an incentive for owners to correct violations at the source rather than have them re-occur. That legislation imposes inspection fees on property owners who receive multiple violations in the same apartment where those violations are uncertified or are falsely certified three or more times within a year. Intro. 543 would also permit tenants to apply to Housing Court for an order to correct an underlying condition, and authorizes the Court to reduce or extend time for compliance by the owner. Tenants already have the ability to seek relief when violations exist, and the Court already has the power to order a property owner to correct a violation and the condition causing that violation. We believe that our current Underlying Conditions program addresses many of the goals in this bill, and that this bill is unnecessary. We are happy to talk with the Council about how we can continue to improve the quality of New York City’s housing stock. 10 Intro 1015 For the record, I am Anne-Marie Hendrickson, Deputy Commissioner for the Office of Asset and Property Management. Int. 1015 would require HPD to create a centralized listing and application system for available affordable units in New York City, including units that HPD has no involvement with. The search for affordable housing in New York City can be difficult. To assist families seeking affordable apartments, the Agency launched the NYC Housing Connect online application system in 2013. The system dramatically eases the process of applying for affordable housing financed or assisted by an HPD program. Prior to Housing Connect, prospective applicants had to search newspapers for advertisements of open housing lotteries, request paper applications from each development in which they were interested, fill out the same income and household information repeatedly to apply to multiple developments, and mail each of those forms to the project sponsors. It was a tedious and sometimes confusing process. Housing Connect offers a one-stop application process to navigate all of those steps. Applicants create an online profile, then, with the click of a button, can apply to any newly constructed and recently rehabilitated units as they become available, and for waitlists for certain existing apartments. InformationWeek, a respected national publication, recently recognized HPD as one of the year’s “Elite 100” technology divisions, based on innovations like Housing Connect. The system currently boasts over 700,000 registered users. HPD is proud of the system and will continue to invest in upgrades and expansions of Housing Connect. In fact, plans already in progress for Housing Connect, as well as other complementary technology systems, include centralized access to a broader portfolio of available affordable units and closer oversight of the lease-up process. 11 For example, we have already planned to integrate units that have become vacant and are being re-rented into Housing Connect. Currently, applicants for those apartments must apply to individual developers and projects to be placed on waiting lists for vacancies. Just last December, we added the first set of re-rentals by incorporating MitchellLama developments into Housing Connect. That adds another valuable affordable housing resource into the system. HPD’s Mitchell-Lama portfolio consists of nearly 50,000 affordable units. As those developments refresh their waitlists, lotteries are now administered through Housing Connect. With the changes we have made or are underway, applicants will have the ability to apply not only to newly constructed or completely rehabilitated apartments, but to units that become vacant as apartments change tenancies over time, which will vastly increase the number of units made available through Housing Connect. Upon turnover of apartments, developers will enter unit information into the system. Housing Connect will randomly select applicants whose eligibility criteria and preferences match the unit specifications. The developer or its marketing agent will then screen applicants for the vacant unit. To help us hone the vision for incorporating vacant re-rental units in Housing Connect, HPD engaged the Cornerstone Partnership, a reputable consultant with extensive nationwide experience and expertise on housing policy, electronic data and process management, and best practices in stewardship of affordable housing assets. We are confident that we’ve developed an approach that rents up the affordable units quickly, while ensuring a fair and open marketing process. Moreover, our planned changes will enable HPD to monitor tenant selection for rerental units in the same way that lotteries for new units are monitored today. 12 Complementing the upgrade and expansion of Housing Connect, two other technology platforms currently in development are transforming HPD’s monitoring capacity to ensure the ongoing affordability and physical and financial health of the housing developments we finance. Last year, HPD released an e-Rent Roll system to enable developers to submit rent roll information through an online system. The system greatly enhances HPD’s oversight and information on turnover in affordable units. Currently, the system accepts compliance information for the Federal HOME and Low Income Housing Tax Credit programs. We will be expanding the system to cover the rest of HPD’s portfolio, which will allow us to better monitor affordable re-rental units and homeless set-aside units across all our programs. Developers will submit rent rolls on a regular basis, enabling HPD to ensure that building owners charge tenants appropriate rents, check DHCR for the status of rent stabilized units, comply with affordability and set aside restrictions of their projects’ regulatory agreements, and market available re-rental units through the NYC Housing Connect system. At the same time, we are improving our comprehensive asset management of affordable housing projects by procuring a system to more efficiently monitor various risk factors associated with the financial and physical health of housing, in order to have real time performance assessments of our portfolio. This will help HPD better ensure that the buildings we’ve financed remain in good physical and financial condition, and protect the long-term affordability and availability of the units. In sum, HPD has already begun to build the technology tools and operational capacity to enable online access to a broader portfolio of affordable housing. We have an aggressive but realistic plan already in place to complete this work, rolling 13 out pieces of these systems later this year and continuing development and phased releases through December 2018. Because we have made, and continue to make, significant progress in our affordable housing technologies, we view Int. 1015 as unnecessary; and therefore we do not support it. In order to comply with Int. 1015, we would have to go back to the drawing board to fulfill the parameters of this bill. Restructuring our technology initiatives in this area would result in significant delay in our timeline for planned improvements and would be prohibitively expensive. We also have significant concerns about how the bill would affect small building owners, homeowners, and community-based affordable housing non-profits. Most affordable housing is not in big buildings or owned by the City’s largest developers. There are all sorts of housing types, but much of New York City’s affordable housing is in small buildings, often developed and managed by nonprofits or small, MWBE firms, with limited staff and cash flow. For those buildings, any significant new cost will have to come at the expense of the maintenance of the building or tenant services. This bill would impose significant new obligations upon those owners. For example, owners who do not reply in a timely manner indicating receipt of an application may be sued or fined with substantial penalties. As we have seen, the demand for housing in New York City is great -- even small housing developments receive thousands of applications. Small individual owners would need to respond to as many as a thousand individual applications for one unit and spend considerably more funds and manpower to manage their leasing process, which would take away funds from the maintenance and operation of their units, or require the City to provide additional subsidies. 14 Intro. 1015 also threatens the privacy of the residents of certain affordable housing developments by allowing the general public to deduce the income levels or health conditions of building residents. The bill would also impose new enforcement burdens on HPD by requiring that the Agency monitor all owners’ acknowledgements and acceptances of applications, enforce penalties flowing from private actions relating to the posting of information, and investigate all claims that owners are stalling on reviewing applications or proceeding with rent-up. We also have significant concerns about requiring the annual registration of rentregulated units in the city. The state already requires registration, and while there are certainly problems in the state’s administration of that system, those problems are better addressed by working with the state to improve its system rather than by requiring the city to duplicate that system. This requirement also raises legal concerns about whether it can be maintained or be enforced by the City in any meaningful way. Duplicating the state’s system is a waste of taxpayers’ resources. Again, we share the Council’s concern that New Yorkers should be able to quickly and easily apply for affordable homes across the city. We have constantly improved and expanded Housing Connect in the few years since we launched the system, and have a robust plan for additional improvements. But we have to balance the goal of making the process for applying for affordable housing as transparent and easy to use as possible against privacy concerns and concerns about burdening small and/or nonprofit owners. We are happy to talk with any Council Member or community group about their ideas for improving the system. We are also happy to brief the Council on progress periodically, as we have done in budget hearings, for 15 example. But legislating changes in the detail Int. 1015 seeks to impose is micromanagement, and will impede, rather than foster, a better system. Thank you, and we would be happy to answer any questions you may have on these bills. 16