Poor tenants and landlords constantly living in debt do not affect the real estate market. The current situation in the rental market depends on the federal and local governments. But these forces are interested in socialism, not capitalism, in the Bronx housing market.

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Poor tenants and landlords constantly living in debt do not affect the real estate market. The current situation in the rental market depends on the federal and local governments. But these forces are interested in socialism, not capitalism, in the Bronx housing market. To continue this social experiment radical solutions are required. But it has to be a fair deal between the authorities and the people of the Bronx. One option for such an agreement could be the massive construction of public rental housing and infrastructure. This is called integrated development of the territory. But will this happen soon?

A threat that grows stronger every year

The average age of Bronx residents is 33.6 years, (1) but the average lifespan of homes in the borough is 87 years*. (2) Our estate is almost three times older than us. And the age difference will increase. Because the construction of new housing is very slow. From 2010 to 2020, 31,125 multifamily housing units were built in the Bronx. (3) This represents only 6% of the total housing stock in the area. The construction of housing of a different format is carried out in such small volumes that this does not affect the situation in the foreseeable future. If this pace of housing construction continues, it will be necessary 150 years to completely renovate housing in the Bronx!

Real estate won't give us that much time. Already in the Bronx, about 700 multifamily homes are in "physical and financial distress". (4) This is almost 10% of the total number of such houses in the area. (2) It's no surprise that there are a lot of complaints about residential real estate in the Bronx. (5) And real estate collapses like the house at 2755 Dewey Ave did. (6)

The situation is unlikely to improve. And that's why.

Secrets and vices of the rental housing market

The problem of deteriorated housing has not been noticed by the authorities and society. Because the problem of housing affordability comes first. But the reality is that housing unaffordability in New York this is only a consequence of the dilapidation of residential real estate, most of which was built too long ago to be competitive in the 21st century!

The most affordable real estate in New York is co-ops. This type of housing accounts for more than 90% of sales priced under $400,000. (24) So this property characterized by the most affordable rental rates! If, of course, the conditions are equivalent.

But there are very few such properties in the Bronx! The area's housing market is dominated by 2-4 family homes and single family homes. And this property is very expensive! (25) The Bronx was filled with 2-4 family homes and single family homes at a time when the type of housing was not as important. But now everything is different. This property is not for poor people in expensive New York. 26% of Bronx residents live below the poverty line. (3) The dominance of the most expensive types of real estate in such an area is nonsense from an economic point of view. Even if this property is in very poor condition.

But even time cannot free us from this home! Falling walls will not affect those people who can really improve the situation. Because only 19% of housing in the Bronx is occupied by homeowners. 81% of residential real estate is occupied by tenants. (1) This means that in most cases, residents do not have the opportunity to improve the condition of the property.

Tenants are trying to improve their living conditions by contacting landlords. But that doesn't make sense. Because landlords are not the real owners of the housing they rent out! Landlords are only nominal owners! After all, the real owners of rental housing are banks, which influence homeowners with their lending policies. After all, almost all rental housing is purchased on credit, most of which are not paid in full, but are refinanced to conclude new transactions. In the buildings with stabilized units segment, the number of refinanced loans is approximately three-quarters of the number of new loans. (7)

It is more profitable for landlords to remortgage property to buy new houses than to make a profit from renting out apartments and paying off the loan in full. (8) This happens because landlords can earn more from changes in lending rates and the cost of selling real estate than from rent payments and changes in the cost of renting real estate. From 2006 to 2021, Real median gross rent increased by only 19.6% in the Bronx. But even such a slight growth is a miracle! Since over the same period, median household income in the Bronx increased by only 13.2%. (3) Bronx residents' incomes lag behind rental costs. Therefore, thanks to the efforts of the city authorities, making money on rent payments is becoming a taboo for landlords.

This may seem like a bold statement, but rent has lost its importance as a source of income for landlords. Although the profitability of rental apartments is landlords' best kept secret, some open sources of information suggest that in the Bronx, rental apartments with 3 or more bedrooms is not a profitable business. Income can come from renting out 1 and 2 bedroom apartments. However, even this property can give its owner 4-6% income per year (11) after paying the minimum interest on the loan in the amount of 6% per annum. (12) Payment of taxes, non-payment of tenants and repair costs real estate will reduce this value. What that reduction will be depends on the characteristics of the homeowner's business.

Investors would have lost interest in the rental housing market if not for the actions of the federal government. The Federal Reserve plays with interest rates. The price of loans determines the cost of selling rental housing, supply volumes, demand and even construction volumes. Changes in lending rates provide landlords with an opportunity to make money by flipping and refinancing rental properties. But this same method of earning money makes the demolition of outdated real estate and the construction of new projects unprofitable. Competitive real estate is not being built. This limits the availability of real estate and worsens the overall technical condition of the rental housing market. Landlords are refinancing loans, speculating on old properties and making a quick profit. They do this instead would invest in long-term construction projects, earn on rent payments and pay off loans in full.

From 2006 to 2021, the Federal Funds Rate increased or decreased by 2,200%! The Federal Funds Rate has changed several times from 0.25% to 5.5% and vice versa. (9) Proper use of changing lending rates allows landlords to make big money. The same can be said about using fluctuations in home sales prices. The average sale price of condos and co-ops in certain areas of the Bronx can increase by 15% per year! (10) Taking advantage of these price fluctuations gives landlords greater profits. From 2021 to 2023, 609 multifamily homes were sold in the Bronx. These buildings contain 22,109 rental housing units. (13) This represents almost 8% of the total rental housing stock. (14)

Resale is a profitable business if such a large part of the market changes owners in 3 years! At this rate of sales, the total volume of transactions will be equal to the total market volume for 33 years. In order to recoup the housing at the expense of rental payments during the same time, it is necessary to have a net rental yield of 3%. But this is unlikely for most types of apartments. The investor's position will worsen if he engages in construction. After all, the average construction period for a house with 20 or more housing units is 25 months! (22)

Local authorities do not restrict the resale of rental housing and refinancing of loans. Local officials are focusing on rental rates, housing quality and other aspects of the traditional rental business. In the current situation, investments in rental housing can generate profit. But the solvency of tenants and the equity capital of landlords have lost decisive importance. The fate of the market is in the hands of the federal and local governments!

Incredible! But government actions are part of the reason for the poor state of the Bronx rental housing market. In fact, the federal government supports landlords to enable them to rent housing to poor tenants at unprofitable prices. This constrains the market, but helps local governments play socialism and buy the loyalty of voters in New York and elsewhere!

May you live in interesting times

Is the current situation good or bad? Tenants live in housing for which they have no money. But the housing is so uncomfortable and dilapidated that it creates negative emotions. Landlords constantly live in debt and do not become real owners of the housing they rent out. This kills the desire to repair and, especially, build housing. Banks make money on dilapidated and uncomfortable real estate. The technical condition of the property is constantly deteriorating and this property is no longer affordable for most tenants. This makes it possible to call such earnings dubious. The authorities retain the loyalty of voters. But this loyalty is becoming smaller every year due to the decreasing availability and quality of housing.

This situation cannot last forever. Because worn-out real estate will collapse. And this will be the end for everyone. To renovate real estate in a free market, the authorities will have to refuse to support the majority of tenants. Otherwise, private capital will not build. But refusal to support tenants will collapse the government's ratings. Since many residents of the Bronx will be forced to leave New York without money for rent. In order to keep these people in the city, it is necessary to build public housing, which would then be rented out at preferential rates to the poor population. This is the only real way to renew real estate and maintain housing affordability without social disruption.

Paradox. But the main obstacle to construction is public opinion. The authorities themselves ruined their reputation. Officials do not speak frankly about the reasons for the unaffordability of housing and often offer the population unfair deals in the construction market. This behavior already has political consequences. Support Bruckner rezoning and the construction of an affordable housing project to Throggs Neck were one of the reasons for Marjorie Vela'zquez's defeat in the elections in the New York City Council in the 13th district. (15) It was a bad experience.

This happened because the authorities tried to manipulate people, and did not offer favorable terms of the deal. Among the reasons why area residents did not approve the housing project to Throggs Neck were fears of a worsening life. 339 new apartments would be built in an area where there is a shortage of school places, poor transport accessibility, insufficient sewerage capacity, floods, and so on. In such conditions, give people 90 affordable apartments and bringing another 250 new families into the area is not an attractive deal! Apparently this has happened before. After all, from 2014 to 2021, the volume of construction of affordable housing in this area was almost 20 times less than the city average. (20) This means that during all these 7 years the authorities have not made an interesting proposal to residents for construction in the area.

But New York has a successful history of mass housing construction. This construction took place under conditions similar to those found in the Bronx residential real estate market. Then the authorities carried out large-scale construction after receiving public approval. This is the "First Houses on the Lower East Side of Manhattan" project. Construction of public housing on the site of an old private Victorian slum in the East Village, Manhattan. The project was implemented in 1935 by the New York City Housing Authority (NYCHA). Construction was stimulated by the issuance of special bonds for slum clearance, as well as tax benefits. Construction materials from demolished houses were also used.

The successful implementation of the project even required the confiscation of private property with the payment of compensation. The owner of two multi-family houses tried to challenge this decision in court, citing the constitution. But The New York State Court of Appeals, the highest court in the state, upheld the confiscation. In a court decision it was said that the Housing Authority could seize private property: "Whenever there arises, in the state, a condition of affairs holding a substantial menace to the public health, safety or general welfare, it becomes the duty of the government to apply whatever power is necessary and appropriate to check it." (16) Great wording for modern homeowners of old Bronx homes, isn't it?

Subsequently, the construction of public housing continued. But other financing instruments have already been used for this. In the middle of the past century, for this in New York, grants for construction and operating subsidies from the federal government were used. Total from 1935 to the early '90s 175,000 units of public rental housing were built in New York City. Part of this real estate then became federal property. But all this property is still in use! (17)

Public housing has not been actively built in New York City for almost 35 years. However, now the renewal of this project could be very useful for the Bronx. However, the authorities and residents need to improve on the experience of the last century! We are talking about complex development and not infill development. Otherwise, everything will end up like in the case of Throggs Neck.

Complex development this is when all the properties in the entire area are demolished. Not only residential buildings are being liquidated, but also old schools, hospitals, roads, etc. Along with new housing, new schools, hospitals, shops, parking lots, and parks are being built. Roads and even metro lines are being built. New housing - new social infrastructure. A new area is being built from scratch. The number of residents is increasing, but the quality of life is also improving. Therefore, local residents approve of such projects.

But this requires such efforts from the authorities that officials have not yet known. It is necessary to resettle the residents of the demolished property during the construction of new housing. And these are tens of thousands of people. It is necessary to speed up the issuance of construction permits. Build new factories for the production of building materials. Since usually the available capacities are not enough for such a large construction. Find thousands of workers for construction and settle them. Raise tens of billions of dollars for financing, and so on. It's not as simple as building a couple of houses on Throggs Neck. Complex development is usually done with the support of the state budget. Since such projects are of national importance and are too expensive for the city budget to pay for it.

Construction like this has never been done in New York. But such construction is being done in many megacities of other countries. Marvelous. But in many foreign cities, infill development similar to the project to Throggs Neck is prohibited. That is the infill development of residential real estate is prohibited. Only complex development of territories is allowed. Developers are prohibited from building housing if schools, stadiums, hospitals, shops and other social infrastructure are not built for the residents of new houses. Since it is not profitable to build social infrastructure for a small number of residents, developers either do large residential construction projects or not building at all! This is true! Infill development is an attempt by a developer to make money from the residents of the area. And complex development is when everyone wins, both the developer and the local residents!

But infill development is not prohibited in New York. Things are even worse! Infill development has become the most popular dishonest deal offered by city authorities! But complex development is not known to New Yorkers. Therefore, targeted development injections have become the signature style of the local administration.

The Bronx is the place where bad practices can be disrupted most effectively. The area is ideal for complex development for the construction of public housing. 26% of Bronx residents live below the poverty line. (3) This means that these people are useless for landlords who want to make money! But many Bronx residents don't have the money to move to other boroughs of New York. Since in other areas of the city, rental housing is more expensive than in the Bronx. Only 1% of housing in other New York City boroughs is affordable to middle-income Bronx residents! (18) The Bronx has the highest rate of housing overcrowding. 5.7% of apartments are identified as overcrowded. This means that in such apartments there are 1.5 people per room. (19) The project of mass construction of public rental housing can be done by offering the residents of the Bronx a profitable deal with the complex development of the area!

What are people saying?

But what do Bronx residents think of the borough's housing market? Social activist George Havrenek spoke about this. He previously opposed the Throggs Neck project (21) and ran for City Council as a Republican and Conservative Party in 2023 for the 13th District. (23) This is what he said in the interview.

Do Bronx residents need better living conditions ?

An overwhelming number of Bronx county residents need better living conditions. Lower socio-economic areas of Bronx County have higher rates of childhood illnesses including asthma, higher infant mortality rates, more homelessness & drug use, inadequate health and human services, over-crowded, inadequately funded schools, higher crime rates, negative resident perceptions re: public safety and overall quality of life standards.

Do you think the governments' actions in the rental housing market are effective?

Simply, let's ask, What has government at any level accomplished to help lower housing costs on rental and sales marketplaces? There has been plenty of lip service from state and city officials in this arena but little implemented action. Pandemic related hardships, budgetary and otherwise, were default excuses; however, time has elapsed. It's now put up or shut up time.

Do you think authorities will make radical decisions to improve the situation in the Bronx rental housing market?

No. Especially with City of Yes plans Politicians and affiliated agencies (CPC HPD) will remain on a steady course to increase population without proper housing. This dynamic allows the powerful developers and political power brokers to make money while too many remain under a wage threshold that fosters total independence from government subsidies.

Construction of tens of thousands of public rental apartments in Bronx. Under what conditions is this good? --bad?

Large numbers of rental construction does little to solve housing shortages when you permit the entry of thousands more. Community instability is a key effect of the current "never get ahead" dynamic of past and present administrations. The only way it can be deemed positive is if this mass construction lowers the number of people in need of proper housing without overwhelming infrastructure, essential services etc...or sacrificing quality of life standards.

How are residents of the area ready to help the authorities improve their living conditions?

Area residents are unaware of policies and the lanes in which they travel and therefore unprepared to aid, fight etc.. Community boards are under the auspice of their respective Borough Presidents. This dynamic creates an environment where opposition against political wishes are done with minimum code requirements. For example a no vote cast by cb10 against the City of Yes proposal #2 should be followed up with a unification effort among other community boards. The Borough president and mayor's support for this project are extreme roadblocks Outreach by community boards is sub-standard and often very in effective.

As we see it, dialogue with the residents of the Bronx is possible. George Havrenek, knows the area well. He believes that the government's actions are not effective, and residents are not able to defend their rights. To correct this, a lot of social and political work is needed. Mr Havrenek thinks building affordable public rental housing could be helpful. But this can only happen with proper construction.

But pollsters warn that only some groups of voters care about affordable housing. And "average voter" not interested in this. This is happening all over the country. This is what the chief pollster, The Trafalgar Group, Robert Cahaly, answered the question: Is the public interested in affordable public rental housing?

He said: "It depends on what segment of the public you mean. If you mean the average voter, likely not, they are more concerned with what affects them family and their lives immediately, especially in this election cycle."

That is, poor Bronx residents must rely only on themselves to fight for affordable housing. And this requires more effort than if all voters wanted to achieve what they wanted.

But are politicians ready to take an important step? Most likely, complex construction will require federal support. Therefore, the readiness of the new president to make a decision on the construction of affordable public rental housing is of fundamental importance. Here's what political consultants said when asked:

What is the likelihood that the new president will use the construction of affordable public rental housing to gain voter loyalty?

"Affordable housing is critically important to millions of Americans, and more pointedly, millions of voters. President Biden has already declared that our country needs to 'build, build, build'. I would expect him to continue to call for increased new housing starts over the coming months while campaigning on the economic progress our nation continues to make under his administration," said Democratic media and general consultant, Bud Jackson.

"It's more likely that a candidate will promise public-funded of housing to gain support from developers and activist groups," said The founder and president of TABcommunications inc., Tab Berg.

But Co-Founder, Managing Partner, i5 Enterprises llc, Mike Iverson thinks that the new president will not pay much attention to affordable housing.

"No, I absolutely do not think a new President would leverage the construction of affordable public rental housing for the poor, in NYC or the State of NY as a whole, to gain voter loyalty. The new president will instead be laser focused on the Economy (Getting inflation under control) the Border (Immigration Issue), Crime and Foreign Relations," said Mike Iverson.

However, excluding the president's interest in building affordable housing, Mr. Iverson described how Democrats and Republicans would do it if they were interested.

"Democratic leaders would likely look to federally subsidized (public sector taxpayer funds) to build new housing or commandeer and refurbish existing housing, whereas Republican leaders would more likely leave the building and/or commandeering and refurbishing of new or existing housing to private sector businesses," he said.

Mike Iverson also noted that the poor are unlikely to receive affordable housing even if it were built in New York. After all, there are people in the city who are in greater need of housing. These are immigrants and homeless people.

"New York is a predominantly Democrat run State and Manhattan is a predominantly Democrat run city, so you would think its likely the Governor of the state or the Mayor of NYC would construct government built housing to help the poor, but unfortunately for the poor in NY and NYC, they will likely take a backseat to the more pressing housing issues facing New York's Governor and Manhattans Mayor, created by massive homelessness and illegal immigrant influx that are currently stressing state and local housing more than the poor's need to have lower housing prices, does this make sense?" said Co-Founder, Managing Partner,i5 Enterprises llc, Mike Iverson.

These words suddenly reveal another reason for the poor state of the city's rental market. Poor New Yorkers who are not immigrants or homeless are not the driving force behind improving the rental market. Poor New Yorkers who work and pay taxes do not force the government to act. Although these people, having the right to participate in elections, can really change the situation.

"The poor is getting the short end of the stick because they do their jobs, do things right, and aren't loud about things, but in these unfortunate times, this doesn't get things done," said Mike Iverson.

He believes poor New Yorkers need to take action in this election to improve the rental market.

"The poor should be first in line for housing help, not third in line behind homeless and illegal immigrants who are here and NOT working," said Mr. Iverson.

He tell: "Unfortunately, too many politicians are only swayed when their existence is challenged, meaning votes, and the power of the organized group, which will represent a significant voting block says 'pay attention or we will vote you out of office'. So these groups need to identify their city representative and become a loud and proud menace to this persons life, from their office, their home, their church, their supermarket, anywhere the need to get this persons attention."

All this leads to the idea that people's opinions only matter when words are turned into action. In America the squeaky wheel gets the grease, meaning they have to pay attention to you if you are loud and organized enough. But will the presidential election mark the beginning of an improvement in the Bronx real estate market? We'll find out in November!

Bottom line

Let's be honest. The actions of the authorities and the inaction of voters are the reason for the poor state of the Bronx rental housing market. We are to blame for all our troubles. It doesn't matter who takes the first step to improve the situation. It is important that there is a positive result. But this can only be done through the joint efforts of the authorities and voters.

*Apartment buildings (more than 5 apartments)

Check List

1) .human.cornell.edu/profiles/Bronx.pdf

2) p.org/blog/how-will-bronx-buildings-survive-as-they-age

3) mancenter.org/neighborhoods/view/the-bronx

4) click here

5) .nyc.gov/assets/buildings/html/local-law-104-map.html

6) click here

7) click here

8) p.org/pdf/Gambling_with_Homes.pdf

9) .forbes.com/advisor/investing/fed-funds-rate-history/

10) click here

11) click here

12) .commercialloandirect.com/apartment-loans/new-york click here

13) elpa.com/report/report-MFYIR-2023

14) click here

15) click here

16) wikipedia.org/wiki/First_Houses

17) mancenter.org/coredata/directory/entry/public-housing

18) click here

19) click here

20) click here

21) click here

22) click here

23) lotpedia.org/George_Havranek

24) click here

25) p.org/pdf/BronxOwner_Guide_for_web-_final_5.1_.18_.pdf

Authors Bio:

I have been living as a journalist for 15 years. Nominee for the 2023 Pulzer Prize (category "Best Foreign Reporting." Red Hook Daily Catch) Regularly published in the United States, Australia and Canada.
I write on socio-political topics and agriculture. I defend the political rights of people with disabilities in the USA (I write articles about this for free).