PolicyPro: Housing chief details NYC landlord court crackdown

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Hey there, let’s get into today’s news at the intersection of policy and real estate:

• HPD’s chief lays out the city’s new approach to cracking down on landlords in court.
• A state bill targeting so-called zombie homes is on the cusp of passing in the Legislature, to the dismay of the banking industry.
• New Moody’s analysis argues a rent freeze would cause only limited damage to landlords.

In this edition we mention: Department of Housing Preservation and Development Commissioner Dina Levy, Assembly member Charles Lavine, state Sen. Zellnor Myrie, New York Apartment Association CEO Kenny Burgos and others.

We Heard

• Tightening the screws: The Mamdani administration plans to lean harder on the courts to crack down on negligent landlords. Questioned about the effort during a City Council hearing Tuesday, Department of Housing Preservation and Development Commissioner Dina Levy outlined a plan to fast-track some of the city’s most aggressive enforcement cases against multifamily owners. “The intention there is to really go after chronic landlord neglect,” said Levy. “One of the challenges is that even when we bring cases they sometimes languish in court.” To address that, HPD is in talks with the state Office of Court Administration about directing housing court judges to create expedited calendars for four categories of cases. The first involves the city’s 7A program, which allows HPD to seek the removal of negligent owners and property managers from day-to-day control of distressed buildings. The second targets properties under vacate orders where owners have failed to make repairs, leaving displaced tenants unable to return. The third covers comprehensive litigation, in which HPD seeks to compel the correction of all outstanding violations and collect penalties for unaddressed conditions. The fourth category targets Class C housing code violations that leave tenants living without basic services or in hazardous conditions, including a lack of heat or hot water, severe pest infestations, toxic mold and sewage backups. Levy said the aim is to “step up how we're going after landlords who would just allow tenants to live like that.” HPD plans to launch the initiative later this year and said it will begin by focusing on at least 10 housing portfolios with some of the city’s most egregious and persistent code violations.
  
• Lender-held wrecks: A long-stalled effort to crack down on New York City's zombie homes is finally nearing the finish line in Albany, despite opposition from the banking industry. Sponsored by state Sen. Zellnor Myrie and Assembly member Charles Lavine, the measure, which has been circulating since 2017, would force banks and other lienholders of abandoned multifamily properties to address hazardous conditions that threaten neighboring residents. The Senate passed the bill in April, and the measure is now on the floor calendar in the Assembly, where it can be called up for a vote either today or tomorrow. The bill aims to close a loophole that has allowed lenders to sidestep responsibility for blighted buildings. Under current law, local governments can seize abandoned properties, but lenders can block those efforts by agreeing to make repairs — with no obligation to actually follow through. The bill would give municipalities the power to sue for ownership of a property if those conditions are not corrected within 90 days. The sponsors estimate there are at least 2,000 zombie properties across New York City. For years, the New York Bankers Association has lobbied against the increased burden on the industry. Recent movement on the bill inspired fresh lobbying this spring from industry heavy-hitter JPMorgan Chase & Co. directed at Lavine, state disclosures show. The Assembly member previously told The Real Deal he’s “confident” the bill will move this session — though he’s running out of time, with Thursday the final day Albany is in session before the summer recess.

• Rent freeze impact: Landlords are warning that Mayor Mamdani’s push to freeze rents on stabilized apartments is a slippery slope that could hammer owners and drag on the city’s economy. Moody’s, however, sees a more limited hit. The credit rating agency found that a hypothetical five-year rent freeze could push about 6 percent of a pool of 481 multifamily loans it examined into default risk, according to a report released Wednesday. While industry players argue broad credit stress, the Moody’s report claims that “credit for only some multifamily loans will likely be vulnerable to such caps.” It did acknowledge freezing rents “would weaken cash flows, potentially spurring defaults and losses” for some borrowers, but argued that the vast majority of owners would still be able to make debt payments and refinance. The analysis looked at loans tied to buildings with roughly 42,000 units — a fraction of the city’s 2.4 million stabilized rentals. Most of the buildings in the sample are newer developments built with incentives like property tax abatements that temporarily lower operating costs. Landlord advocates say the report misses the bigger picture. Kenny Burgos, CEO of the New York Apartment Association, called it “a warning sign, not any reassurance.” He argued the data skews toward a well-capitalized slice of the market and leaves out older stock across the outer boroughs facing tighter margins. “To me this report shows that even the best capitalized housing stock within rent stabilization, even they have exposure,” said Burgos. Moody’s examined mortgages with detailed reporting available because the loans were sold to institutional investors who receive regular updates on loan performance in exchange for their capital.
  

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Bill Tracker

The Catch-Up

The antitrust division of the New York Attorney General’s Office is investigating Compass’ footprint in the New York market, reports TRD’s Sheridan Wall.

Mayor Zohran Mamdani’s executive budget trims funding and headcount at the city agency charged with policing housing discrimination, even as City Hall ramps up enforcement against chronically negligent landlords, reports City Limits.

The Charter Revision Commission launched by Mayor Mamdani — which is expected to weigh potential housing reforms — will hold its first three public hearings on consecutive days next week, reports City & State.

The Champlain Hudson Power Express project is officially pumping cleaner energy to the city’s electric grid, which is mostly powered by fossil fuels. The project eases some concerns about blackouts and brownouts this summer, when demand spikes, reports The City Reporter.

The Kicker

“It feels like the Bronx is burning again,” said Council member Pierina Sanchez, who chairs the Council’s housing committee, on the rise in major fires in the borough.

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