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.

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:

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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.

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.

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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.

Good that Salt Lake City legalized fourplexes but…

It's a case study on how NOT to do it:

✅No additional development capacity
✅1 stall/unit parking mandate
✅Half of units must be below-market-rate

I hope they'll be happy with McMansions instead.https://t.co/UdTcZa8Lx8

— Dan Bertolet (@danbertolet) December 9, 2023

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.

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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.

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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.

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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.

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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 [e-mail].)