New York Values #22 - Airbnb

Airbnb is a polarizing service. I myself fall on both sides of the aisle depending on when you ask. At its core, I love the idea of being able to rent a room in someone’s home here rather than pay $80+ for a shady hostel bed or $200+ for a motel near LaGuardia airport. Or rent a whole apartment for friends rather than two double beds, again at exorbitant prices. And there’s the added benefit of getting more of the culture/architecture/feel for a place than if you stayed in a chain hotel. I’ve also used the site to long-term sublet my apartment when I traveled (with my landlord’s permission), and to rent the second bedroom when I was between roommates. 

However, I hate their interface, especially for hosting. I hate their customer service (or lack thereof). And it sucks if you accidentally rent to someone who doesn’t understand how it works and rates you 4 stars instead of 5 because “this is clearly someone’s home.” Yes, yes it is. It’s in my description. That’s how Airbnb works. Or how it initially worked, before people started taking advantage of the system. 

The New York value here is that it is still easy to find an apartment or room in NYC to rent on Airbnb for a relatively cheap price. Regardless of the legality of the tenant’s or owner’s listing, as a consumer you can access this city for less than a quarter of prior costs. When I came to NY as a high school or college student I slept on floors, under desks, or not at all, depending on people’s availability. My friends and I could not afford a hotel room, and many hotels won’t rent to 18 year olds. Now? You have options, guys. It makes the gap between apartments easier, too! If you have a lease ending and a few days before the next one starts, you can just Airbnb a cheap spot while you put your furniture (if applicable) in storage somewhere. Good job, Airbnb. You may not be perfect, but you get some things right. 

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I was supposed to write about sellers in a soft market this week, but I want to write more about Airbnb instead. Dear sellers, I promise to get back to you next week. Lo siento. Don’t list in the interim. 

New York’s city council recently voted unanimously to require room-renting sites like Airbnb to supply exact addresses and personal information about their hosts (full names, whether they rent or own). The justification for this is that people are gaming the system, worsening our existing dearth of affordable housing. There are legitimate concerns surrounding “ghost apartments” and apartments being used solely for Airbnb rentals, so at face value you can make this argument. However, the hotel lobby has a lot of power in NYC, and has donated extensively to city councilman-and-womans’ campaigns. This makes it hard to separate how much of the recent measure is to protect “the people” and how much is aimed at protecting corporate interests. 

Because my relationship with my landlord is not the best (read: he’s letting the building fall apart around me), I’ve been careful to stay within the legal confines of my lease. However, most Airbnb hosts do not. Most new leases in the city involve riders that prohibit any and all Airbnb activity. There are some reasons for this that make sense. While I was careful to make sure anyone who would share my space was respectful, not everyone is so discerning. And if you live in a building where your neighbors are constantly Airbnb-ing to loud, obnoxious guests, I totally understand how that would be frustrating. Getting onto multiple leases solely for the purpose of making them into Airbnb’s and earring a profit isn’t really fair, as you aren’t taking on any of the responsibility that your landlord does, and you don’t pay for maintenance. It’s definitely unfair to make a profit off an income-restricted or rent-stabilized/controlled apartment, as you should be bound by the same limitations in price as the landlord. I was careful never to earn more than my actual rent when I was subletting. 

However, renting out the other room in your apartment — for a portion of the rent rather than a massive profit — if you are between roommates should not, in my mind, be prohibited. People move out and leave the city unexpectedly all the time, and you can’t always find another roommate with short notice, especially one with whom you feel safe. It's incredibly stressful to share your space with someone who terrifies you, and it's also stressful to suddenly pay double because someone up and bailed on you. It's usually not even possible, causing you to fall behind on payments. 

My moral qualms aren't the only reasons that people are unhappy with this proposed law.  Multiple lawsuits have already been filed challenging the decision. Airbnb is obviously angry about it, but the second is a private citizen who rents out a portion of his two-family home using Airbnb. That is completely legal, as he is not bound by . However, after he testified about his opposition to the bill, since he sees it as an invasion of privacy (and I'm inclined to agree), he claims that city officials with Special Enforcement have been actively intimidating and harassing him. This ties back into the theory that our city council is in the hotel lobby's pocket. I can't say 100% either way, but I hate lobbies, so I'll let you guess where my bias falls. 

I don't know what will end up happening, whether the challenges will result in a change or, if not, how the enacted law will affect short-term rentals in the city even more than the "Airbnb lease riders" already have. My hope is that, even if this does go through, people who rent out a portion of their space responsibly are able to continue to do so, for the good of both hosts and travelers.

Thanks for reading,

xoxo

Anna

New York Values #21 - Buyers' Market

Today’s New York Value is inspired, as usual, by a combination of real life events and an article I read, and it’s all about buyers!

Yesterday I submitted a board package for my FIRST sales deal (all 350 pages of it), which is equal parts exciting and terrifying. Co-op boards are like the Wizard of Oz: no transparency, no peeking behind the curtain, simply an announcement of whether your client is granted an interview. If not, they don’t tell you why, and you’re left to dejectedly speculate. But I’m sure this will go well. My client is a gem. Positive thoughts, yo! The Secret! Tony Robbins! High Frequency! 

Then today we had our agent sales meeting, where frustrated listing agents talked about their strategies for price drops in a market where seemingly nothing is moving. The even more frustrating part is that buyers are not acting on this opportunity, but are still waiting for the floor to fall out, worried that mortgage rates are going up while the market may still drop lower. As one agent put it, the market is going through turbulence and buyers are strapping in, preparing for a crash. The turbulence isn’t actually a sign of a crash, however, but a market correction that was inevitable after the past years of rapid price increases. 

Where I keep all of my money

The value here is how much data is available in NY real estate, although not in real time (yet, but don’t worry, Compass is on it). You can run comps for any apartment or building, no matter how bizarre and unique. You can read endlessly about the new development being proposed or built, to predict how neighborhoods will look years down the road. Quarterly reports, The Real Deal, Brick Underground, broker spam (my spam is the best spam, though), no other market has quite as many resources or as much activity, or as much data about said activity, as this city. 

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The actual real estate value is related to this article in The Real Deal. Brokers have been telling buyers that it’s a buyers’ market for months. And it is. Just ask any seller or listing agent; they will rant about it. But because there is a lag between when new development is planned/priced and when it hits market (years), a lag between when someone thinking about listing their place and when it goes into contract (months), and even a lag between when something goes into contract and when it’s actually listed as sold (months/weeks), many of these homes priced too high, that aren’t moving, were priced based on the data available when the market was still artificially inflated. 

Also due to the lag time in information, buyers have remained skeptical of acting, concerned that the market will continue to drop and that they should wait it out. But today, FINALLY, The Real Deal published an article backing us (the experts, if you will) up. The New York Times is writing about the power buyers currently have. Now that the news has caught up with our reality, buyers will start jumping into the pool, the market will readjust, and prices will stop falling. It’s 2009 all over again!

This is true at all price points; I was able to negotiate a price 10% below listing for my co-op buyer, at the sub-1 million point, which is usually the most competitive. The more expensive the property, the smaller the buyer pool, and the more leverage you generally have in negotiation. 

Me, advising my clients on how money works

So, if you are in the market to buy, start looking. We’re reaching the bottom, and if you don’t act now you’ll end up with higher interest rates, less inventory, higher prices, and less power. I’m honestly just upset I am not currently in a financial position to purchase an apartment…or the plane tickets I’m constantly looking at (travel bug forever). 

If you’re aiming to sell, check back in next week. Because my team just had a closing yesterday on an apartment that should have been hard to sell, but wasn’t. If you price your place right, it will sell, and sell quickly (unless it’s above $5 million, but that’s always a tricky market). If you insist on listing it way above its value, it will sit stagnant, which will lead to a whole host of problems I will get into next week on New York Values! 

xo

Anna

New York Values #16 - Rent Stabilization

Today’s NY Value is inspired by my apartment and a conversation I had last night with my new roommate’s mother. Pulling inspiration from real life 24/SEVVVV (still tired)!

I discussed tenant protections a little bit in an earlier post, but this one is specifically about rent stabilized apartments versus rent controlled apartments versus free market apartments versus housing projects versus section 8. With me so far?

Rent stabilized apartments fall on the spectrum between rent control and free-market. I’ve laid out the exact differences in the “real estate” section, but essentially rent stabilized leases guarantee the possibility to renew (landlord can’t just sell the building and kick you out), and keep your rent from going up more than a limited percentage.

There are, however, a ton of misconceptions about these units. They are not necessarily much cheaper than market rate; in fact, a lot of rent stabilized units offer tenants a preferential rate that is lower than the legal rent, because legal is actually ABOVE market in those neighborhoods. They cannot be deregulated while a tenant is in place unless that tenant has made $200,000/yr for the previous two years AND the market rent is above the stabilization threshold (currently $2700). However, they are not only meant for low-income tenants; they are meant to protect the middle class. There are types of housing that are limited by income, but NOT rent stabilized units. There are also nearly a million of them in the city. ONE MILLION! 

At least one of these buildings might be rent stabilized.

There is definitely still a lack of affordable apartments for rent in the city, largely because new construction is pretty much all luxury unless it’s Mitchell Llama (income-restricted and offered by lottery). I get it; developers want to make as much as possible and building costs are steep. But I wish there were more incentives to build middle-ground apartments. Since there is a big delay between when a project is conceived and when it’s actually available to buy or rent, hopefully in a few years we will see a change based on the over-saturation of the luxury market.

But either way, at least we still have a cool milli of these on the market today. 

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Look at all the buildings which may be rent stabilized!

Your Real Estate value: breaking down the difference between rent controlled, rent stabilized, market rate, and section 8 housing. I know a lot about this stuff, but I still learned a thing or two in the process.

Housing Projects:

• 328 physical projects in NYC housing over 400,000 people

• public housing

• income restrictions

• you can apply for housing in one of these “projects” now, if you qualify

Section 8 Housing Vouchers:

• 235,000 households in private apts in NYC

• income restrictions

• used to pay rent in private buildings that are NOT specifically income restricted

• new applications for Section 8 housing have not been accepted since 2009, so this doesn’t help people who aren’t already in the program

Rent Controlled:

• roughly 27,000 exist in the city

• built before Feb 1947, continuously occupied since 1971

• not income restricted

• rents can go up based on the DHCR (Division of Housing and Community Renewal) rulings

• guaranteed renewal at the end of your lease

• if landlord sells, you get to remain a tenant on the same lease for same price

• you can't get one now unless you have a family member who has one and find a way to get on the lease

Rent Stabilized:

• roughly 1 million exist in the city

• built before 1974, unless they are a more modern building that received tax incentives for offering rent stabilization

• not based off income

• rents can only go up a set amount set by DHCR

• guaranteed renewal at the end of your lease

• if landlord sells, you get to remain a tenant on the same lease for same price

• you can rent a vacant, rent-stabilized place now!

Free-market:

• everything else

• no guaranteed renewal — your landlord can sell the building at the end of your lease and you gotta bounce

• rent can go up with the market, so no protection if the location becomes super popular

I want to write more in the future about the other types of rental units, but for now let’s call it a day, and I’ll see you back next week with another NEW YORK VALUEEEEEEE.

xo

Anna

New York Values #13 - Flights

Today is my BIRTHDAY and I woke up at 4am in Reykjavik, Iceland after a 24 hour layover to head to Berlin. Iceland was cool and I’m glad I had a day to check out Reykjavik, which is really beautiful, but I’m definitely going back with a crew and enough money/time to rent a car and drive the whole country. 

In light of my being abroad, today’s New York Value is about how living in NYC makes it so easy and cheap to travel compared to most of the United States. New York is home to two large airports, JFK and LaGuardia, and although Newark is in NJ it’s still very much a NYC airport. LaGuardia is a domestic Delta hub, while JFK and Newark are major international airports with cheap service around the country and world. I thought living in VA and having such easy access to Dulles was amazing, but pretty much any time I compare prices, flying from NY is substantially cheaper.

I met a girl yesterday who goes to school in LA, and she expressed how jealous she was at what I’d paid for my flight (very little), and how easy it is for her East Coast friends to visit Europe, Africa, and the Middle East (ok, she just said Europe, but it holds true for all). Although it’s easier for West-coasters to get to Hawaii and Southeast Asia, Eastern Europe is my favorite place ever, so I’m glad I’m on the better coast (KIDDING! I love CA/Oregon/Washington, but I have no interest in living there). 

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Real Estate Value? Also international themed.

NYC’s housing market has remained stable throughout time in a way that very few can. Part of this is the city’s role in the international economy. Part of it is also the barrier to entry of owning, especially in Manhattan, and most specifically related to the concentration of co-ops.

Having enough money to purchase a co-op is not enough; you also need to show you have two years of “post-closing liquidity” after the sale. In a co-op your monthly HOA fees are called “maintenance,” and you basically need to prove that you will have, in cash or easily liquidated stocks/investments, 2 years of this amount, as well as your mortgage payments, after you buy. For instance, many apartments on the lower end of the price range in Manhattan, at $500k, will then have maintenance at roughly $1000/month. So with 20% down, you’re looking at handing over $100k in cash, getting a $400k mortgage, paying your closing costs (which vary, but let’s say 4% of the purchase price for this example, so another $20 grand), and then need to show about $70-80k more in the bank. This is, of course, after you have an accepted offer, sign contracts, submit a board package that includes such documentation as your past 2-4 years of tax returns, recent bank statements, letters of recommendation, landlord recommendation, employment letters, have your credit and background checks, etc. Oh, AND then you have the interview with the co-op board if they think your application is up to snuff. 

I don’t mean for this to scare anyone off of buying! Honestly, in this city it’s shocking the amount of money and documentation needed simply to rent mean that if you’re in the habit of signing leases rather than just subletting and floating around, buying isn’t all that much crazier. And because co-ops are so strict, during recessions there is very little fluctuation in their values; your asset’s value is pretty protected. There’s a reason all these very wealthy foreign investors have historically and continue to park their cash in the NYC housing market. 

Hope you’re all having a great week, and are getting more sleep than I’ve had the past few days! It’s shocking that this is even remotely coherent.

xo

Anna