Local Law 152 is a Total Sh*tShow

2020 is the year when gas piping inspections mandated by Local Law 152 of 2016 started being required.  

The law technically became effective in 2017, but it took the Department of Buildings two years to establish the rules by which Licensed Master Plumbers would be certified to conduct the inspections, the inspection protocols themselves, and, presumably, the inspection reports themselves.

This law feels like the culmination of the City Council's attempt to "fix" the issues that lead to catastrophic natural gas explosions in 2014 (Harlem) and 2015 (East Village).  

We've seen many changes at the Dept of Buildings levels, like that time in 2016 when DOB unilaterally started rejecting plumbing permit applications if the boiler of the subject building didn't have a permitted boiler with an exact serial number on file. No notice.

Then came the rule that no one is allow to shut off a gas meter to a building except a licensed plumber and that ConEd had to be notified immediately (or called to do the shut down themselves). That's a law. 

Next came the law that ConEd can't do any turn-ons until the Department of Buildings receives a valid permit and witnesses a gas pipe integrity inspection. So, suddenly your little turn off of the meter just to address one little thing has turned into a multi-month process, *if* you have the correct previous permits for your boiler (see above) and the gas piping itself. (that's two different permits, FYI, because the boiler may have been replaced on the same piping).

If you don't have either, then you have to re-file all the gas piping in your building.  Enter an engineer for several thousand dollars.  You get the work done (more thousands), then you get your inspection hopefully. You rarely pass the first time. Or, if you do pass, you get to apply for your blue card, and you might have to re-file the application wording so that it's just so.  

In a recent application that required zero work, just a gas integrity test to restore service after a prior tenant terminated their account, my plumber was forced to re-file the permit 3 times to reference various prior permits, and to get the language just right. Each time it cost $35. I got lucky because the piping was modern and was already up to code.  

For older buildings, luck has run out, and it gets tougher the older the building is, because in some cases still-functional gas piping could be approaching 100 years old, and law prohibits repair of gas piping - only full replacement from meter to appliance. 

If you notice above, to replace gas piping you must shut off the meter. That can only be done by ConEd, and turn-on can only occur after Dept of Buildings has witnessed an integrity test.

The complexity of the process all but guarantees that people will resist upgrading their gas infrastructure for as long as possible.

So, I guess, into the breach comes Local Law 152. The law, at the time I heard it, sounded like the inspection was intended to proactively find leaks and dangerous conditions where a pipe was about to corrode away. Licensed plumbers would do this by inspecting with a sniffer, "...public spaces, hallways, corridors, and mechanical and boiler rooms with a portable combustible gas detector to determine if there is any gas leak..." 

Made sense to me.  Proactively require owners to inspect for imminently dangerous conditions every 5 years.  

But the law didn't stop there: in addition to immediately hazardous conditions such as leaks or badly corroded pipes, or illegal installations (think garden hose connections, like the one that caused the East Village explosion in 2015), the plumber is required to also report "...any observed non-code compliant installations..."  

There is the beef!  New York City is FULL of non-code compliant installations... because over the decades there have been many updates to the building code!  And these installations are considered grandfathered, so long as they are safe. But the law seems to say (and inspections are being conducted as if) it is the modern day code that these inspections must occur under.

But the law appears to disallow what were formerly stable, grandfather gas installations of yesteryear: The law requires "non-code compliant installations" to be fixed immediately, and it only gives a 120 day window (plus 180 days if a plumber certifies that it is necessary) to get it done. That's 10 months. 

That's not enough time - by a long shot - to replace gas piping in an occupied building. More on that later.

Every building over a 2-family dwelling in NYC has to be inspected - 3 or 4 community boards at a time  (This year it's all buildings that fall into CB 1, 3 or 10), in each of the 5 boroughs, each YEAR. 

That's thousands of buildings, each year, that will be reported to have non-compliant installations. And to fix those issues, it will require engineering plans, permits, and a building shutdown, to be in compliant with the rest of the building codes. The process takes more than 6-10 months. Sorry, City Council, but it does. Even with the move to digital permit filing at the DOB, it takes a really long time. What to hear a potential real-life scenario? Keep reading.

Let's not forget we are having a COVID-19 pandemic. That means we don't know what's happening yet.  Everything that was supposed to start in January got pushed 6-9 months.  Many plumbers, concerned by the amount of responsibility conferred on them by the law, were ambivalent about offering the inspections. And then, when they decided to do it, they had to send their inspectors through a certification class. Hence, many inspectors just came on line in late summer and early fall. And they are just starting to file their preliminary reports. No news back from DOB about shutdowns on code compliance.

The leak is just turning into a trickle.

Many building owners just aren't thinking about it. The deadline to file the first inspection report is December 31. Plumbers are just starting to get those calls. They don't have much time get to things fixed before the the inspection reports are due.

Personal experience so far: One building dating back into the mid-1800s - is mandated to do the Local Law 152 inspections this year. We have done it and have no leaks or serious corrosion. But there are code issues (on the 80+ year old pipes with no corrosion). The pipes have some steel fittings.  Steel is no longer code to use in gas piping. It would seem we are mandated to replace these... in 10 months. We could keep the gas on while the plans and permits were being prepared, but then... shut down.  

Here's where my other real life experience kicks in for extrapolation of likely outcome: If lucky, the work would take a month to do (we'd be somewhere around January/February by then... great time to turn off the heat), then we get our first inspection. Then our second (there's always a second inspection). They decide a boiler inspection is necessary, even though no work was done on a boiler. Then maybe a third. We pass, finally. It's probably nearly May. We apply for gas authorization. We are asked to revise the permit language. Maybe to reference a permit that doesn't exist in the records.  A few more weeks (this has happened to me. Not just making it up, friends). Finally we get gas authorization.  ConEd comes to the building to check the conditions. If we're lucky, it's good to go. The turn-on happens in 48-72 hours. 

But maybe ConEd feel like the meter bars need replacing. Or maybe, they decide the building is "underserviced" (meaning the gas pipe coming into the building is too small for the gas load).  They say it's not dangerous. Changes need to be made.  They won't turn the gas on. Or they will turn on the heating meter but not the cooking gas stoves. Until ANOTHER permit is filed, ANOTHER shutdown is done, so that they can upgrade something that the utility is responsible for.

Again, I'm not throwing out any possibility that I haven't personally witnessed happening in a building, in sequence! All of these things have happened in my buildings. And not all have old piping!

Doesn't DOB know this is how it goes? 

Did the City Council think about this when they wrote the law this way? I'm sure the Plumbers Association told them. Did they assume everyone who owns a building in New York is rich (even after they take 50-60% of the income in yearly property taxes?)

Feels like a feel-good law that had momentum in the wake of two tragedies.  But it defies reality.

Next question:

What is the DOB going to do when they see thousands of reports of non-compliant piping in buildings that aren't about to blow up? 

Nothing dangerous, just old pipes that you don't have to replace just this minute. Steel pipes. Pipes that have plugs or joints that aren't legal now, but were then? These little things can't just be replaced - the whole pipe has to be replaced from stem to stern.

Another predictable scenario: the owners paid for the inspection, but they just can't afford or manage the wholesale replacement of their building's gas pipes in 10 months.

A job of this type requires planning. It requires informing tenants and getting their buy-in. It might require relocating fragile tenants. If you try to keep tenants in place, you have $15,000-$20,000/month in portable heating to budget in. On top of up to $10,000 for engineering drawings and permits, and whatever the work costs.

What if the building can't afford to do the shutdown work because 30% of the tenants haven't paid rent due to the pandemic? what if it's full of seniors in rent stabilized apartments?  Or children? What if it's a self-managed co-op with middle-income owner-occupants?

Do they all get shut down? Fined? 

The plumber says about 80% of the building's he's inspected so far (hundreds) have issues that would require a shut down to fix. 

Do we have wholesale punitive shutdowns in CB 1, 3 and 10 in each borough this year?  As a sort of example to the other CBs?  Get a fire lit (no pun intended) to get those gas pipes modernized?  

I don't know.  No one knows, because the law, and subsequent DOB guidelines, say nothing about it.

My opinion is that an amendment should be passed immediately that stipulates that buildings with non-code compliant, but stable, piping, should be allowed to stay that way until the next 5-year inspection, or permitted construction, whichever comes first.

The way the law is written, thousands are wondering if their gas is going to be shut off this winter.

And no one knows who to ask.

Washing Machines - When do they become Standard Issue?

There's been a bit of coverage about in-apartment amenities as a result of COVID-19.  There was this Washington Post article that talked about one New Yorker who couldn't stand not having a washer/dryer in her apartment anymore.  Another broker linked to this Slate article - the top pullout quote is "A Washer Dryer Is a Social Distancing Dream Machine."

And so they are. Also a major adulting tool.  (I am doxing myself as someone who, faced with going downstairs to my apartment's laundry room, will simply order more underwear online to delay the process another week). 

The WaPo touches the heart of it by quoting the New Yorker saying "“It’s just insulting to come at us and be like, ‘We’re going to charge you an extra thousand dollars a month for this standard appliance that’s been in American households since the 1970s.’ ”

But, it's not so simple.

WARNING: I'm about to get detailed here.

Most apartment buildings in New York City were built before 1945, and most have been continuously occupied since then.  What does that have to do with in-apartment washing machines?  Well, it makes the whole thing a lot more complicated.

That's because apartments share both supply (what comes out of your faucet) and waste (drain) plumbing.  The waste stacks, as they are called, run behind the walls of the apartments from the top floor apartment to the bottom, and down below to where they join the main sewer waste.  When your upstairs neighbor takes a shower or a ... you know... that's how it leaves the building.

Ok, so, now the landlord/co-op owner wants to add an in-apartment laundry.  They need:

• permission to install laundry in unit (co-ops/condos)
• the space inside the apartment
• proximity to the drainage pipes
• the right size waste pipes

And that last item is the sticky wicket. Simply put, adding washing machines from top to bottom will generally overwhelm the existing drain plumbing that was installed 50-80 years ago. The amount of water discharged by washing machines can lead to drains backing up into the sinks and tubs of the unit below. Current building codes provide a complicated cross-table of number of fixtures drained to drainage to pipe-diameter value. 

Since wall space for burying pipes is generally limited, in most cases, the only answer would be to expose the existing kitchen waste pipe from top floor to bottom and replace it with a properly sized pipe (with appropriate vents for soap bubbles). This requires permits, engineering planning, and probably ancillary construction (ie, if you go through a kitchen wall you probably must rip out the cabinets to get to the pipe; if you go through a bathroom wall, the whole wall must be re-tiled).

Plus, all apartments top to bottom need to be worked on at the same time. Why? Old pipes may be too corroded to take a clean cut, meaning connections to newer pipe would rot out and cause leaks inside the walls. In addition, if the pipes need to be sized up, building code mandates that pipes only get bigger as you go down (so that there is never a bottleneck or clog).  So, you can't put a larger pipe above a smaller pipe. 

So, retrofitting for in-apartment laundry is very costly. If a washer is a deal-breaker for you, stick to newer construction buildings that were constructed to have laundry in every apartment.  Unfortunately, that is where the rents are highest.

Saving small businesses in New York: what are the solutions? - Curbed NY

This thoughtful article doesn't have all the answers to the mall-ification of NYC, but I think it has some good ideas and does a really great job pointing out the issues, and discussing some ideas that have been proposed to help small retail businesses thrive.



As manager of a couple properties with small retail businesses in their store fronts, I am pretty familiar with the struggles.  The idea that banks won't finance new construction unless "credit tenants" (aka national retailers such as banks or drug stores or big brands) anchor the retail was news but not a surprise to me.  Now we see why every time a new condo goes up, Starbucks goes in on the ground floor (not that I'm complaining, mind you!).



As for some of the solutions, well, I feel they cause additional issues. Mandatory 10 year leases aren't likely to work - because people who start small businesses have high failure rates and won't make it to 10 years in business. So then banks considering mortgages will discount the values of those 10 year mortgages.



Mandating one three-year extension at the outset of the initial lease might fly. But how does that do anything but pass the buck down the road, when retail rents have gone further up and the small business must somehow make an even bigger jump?


Mayor De Blasio made some noise last week about charging landlords who "keep their storefronts empty" waiting for tenants who will pay high rents. How does he decide on who is doing that?  Is there a mandatory time frame? A specific asking rent that would trigger the charge? A combination of the two?  Do they spend money every year indexing average asking rents in various neighborhoods?  Obviously asking a Soho rent in the Bronx is unrealistic, but what's an outrageous Soho rent?



The idea of giving FAR bonuses to landlords who are going to include retail has legs. There are a lot of neighborhoods - mine included - where retail storefronts are in need.  Whether it's a small or large business in that store front, we could use more stores!  So why not allow any building on a large (perhaps defined as 4-lane, two way streets?)  automatically have a commercial zoning for the ground floor, and allow the developer a bonus sq footage?  It's likely to benefit the neighborhood better than the "plaza" bonuses, many of which plazas remain shuttered to the public even after heavy coverage from a few years ago.



Another option mentioned was the implementation of restrictions of proximity for ubiquitous businesses such as banks in certain areas.  I grew up in a small town in Northern Virginia that had such an ordinance - against fast food restaurants.  They couldn't be less than 500 feet from each other.  So when Taco Bell wanted open up about 400 feet from the existing McDonalds - well, that was a fight (that resulted in a variance allowing Taco Bell to open, although the McDonalds eventually relocated further away and a carpet store took over its old space.). But overall I think it did do something for our little town. So, as then-Councilwoman Brewer said, "it's one tool in the toolbox."



I would like to see a bit more self-policing from landlords - especially long time landlords who have substantial equity in their properties and aren't faced with a refinance every few years.  Have 3 storefronts? Try to get or preserve a small business in one of them.  Lobby for tax breaks for long term tenancies of small (fewer than 3 locations) businesses.  I'll point out that since landlords with commercial spaces must submit Real Property Income & Expense statements annually to the city - disclosing rent rolls and income - their property taxes are already determined based on existing income, so lower rents *should* result in lower property taxes.  In other words, if your property isn't beholden to a mortgage bank, then you can afford a slightly lower retail rent.



Ultimately, it's going to take agreement among many stakeholders to achieve a new equilibrium that saves NYC from going suburban.



Saving small businesses in New York: what are the solutions? - Curbed NY:



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Landmarks Commission begins overhaul of application process | Crain's New York Business

I have to say this would be a very welcome development.  I recently had to help a business through a number of landmarks processes and all I can say is it took a LOT of time.  Thankfully this building did not require going through a public hearing, but I have to wonder how does it help the city?  It certainly doesn't keep the costs of maintaining the property down, and as a result Landmark Districts are among the most expensive to live in in the city.



I suspect this "overhaul" is going to consist of very low hanging fruit (such as the window review process mentioned in this article). But anything is better than nothing...



Landmarks Commission begins overhaul of application process | Crain's New York Business:



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Second Avenue subway pays dividends for Yorkville landlords, defying Manhattan rent declines | Crain's New York Business

Hard not to say "I told you so" about this.  Unfortunately by the time it gets to the press, the rents are already rising. However I still think that sales in the area are per square foot a bargain over other parts of Manhattan!





Second Avenue subway pays dividends for Yorkville landlords, defying Manhattan rent declines | Crain's New York Business:



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Announcing Solid State Properties LLC!

Effective immediately, I'm proud to announce that I have started my own company, Solid State Properties LLC, to continue the focus on small property management in Mid and Lower Manhattan, and parts of Brooklyn as well.

Solid State Properties LLC is a New York City based property management and brokerage firm specializing in Manhattan and Brooklyn properties under 6 stories. Whether it's a single condominium unit, a mixed use property, small co-op or small office building, we practice efficiency of scale and no-nonsense management, and rental brokerage all in one.

2016 Tax Rates by Class

‎In case anyone missed it:



NOTICE RECEIVED THROUGH REBNY (REAL ESTATE BOARD OF NEW YORK) 

The City Council adopted real property tax rates for fiscal year 2016, which begins July 1, 2015.  Here are the 2016 tax rates by class as well as last year's rates for comparison.   Tax Rates by Class Please note that the tax bills issued for the first half of fiscal year 2016 (July 2015 through December 2015) were based on the fiscal year 2015 tax rates. As a result, your second half tax bill will be based on the recently adopted fiscal year 2016 tax  rates and will include an adjustment for any overpayment or underpayment in  the first half of the year.

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My Own Non-Scientific Take on the City-Verizon Spat

I've been following Crain's NY Business' chronicle of the fight that the De Blasio administration is picking with Verizon over its failure to roll out FIOS citywide. In a nutshell, Verizon struck an agreement with the Bloomberg administration in 2008 to install fiber optic cable (trademark FiOS) internet access throughout the city, ostensibly so that areas served by only one cable provider (Time Warner, Cablevision, etc.) will have another choice.  This makes sense on the face of it. After all, cable companies are currently the only broadband providers in certain areas. Sure, you can go with another "provider" if you want - you might get mailings announcing "alternatives", but the fact is that in most areas, those companies have to rent capacity from the main cable company in the area, for the simple reason that those are the only cables in the ground.

My bugaboo with the whole scheme is that while attempting to lay all this fiber, Verizon has completely neglected the existing copper wire network that runs throughout New York. It is falling apart - and that fact is not being covered all that extensively.  One article in Ars Technica from 2014 mentions it briefly, as does the above Crain's article, again, briefly.

Let me paint a picture at how bad it has gotten by talking about two buildings that my firm manages. The first is on West 11th in Greenwich Village, a building with residential and business tenants.  At least every two months, and sometimes more often (depends on the weather conditions), I am forced to meet a Verizon repair tech at this building to let them through an apartment to the back, where they try to find a "good pair" in the phone box. This box is older than the hills, and it's full of rust. But when I have asked about replacing said box, I'm told that Verizon isn't replacing ANY copper phone equipment.

The problem is sometimes within the line between the building and the hub, which is an apartment building on the next block south. The tech must then go back and forth between this building and that, trying to find a connection that will hold. Once, I was told it was not the box, but the line between the hub and the box, which - in contradiction to Verizon's claims in the articles - runs above ground. You can see the phone wire strung all along the back yards of the block! When the line "goes bad" - meaning that it gets exposed and nicked/broken somehow - the tech has to "splice" it, meaning cutting the damaged part of the line out and basically taping the two ends together.  The tech who told me about the line said "that line has so many splices in it I don't know how it still works."  When I asked about getting a new copper line run - yes, you guessed it!  "They're not replacing anything."

 So, the tenants in this building constantly lose the phone service they pay so much for. And it's not just that building! My firm manages an adjacent building that has also had similar phone problems.

I looked into FiOS as an option to get away from the crumbling infrastructure and found to my amazement (though not so much now that I've been reading articles telling of similar experiences all around the city) that FiOS is NOT available on that block. This blew my mind. I understand that Verizon may not wish to wire every small building right off the bat (though seven years in one would hope they'd made some headway), but this building is right between two major thoroughfares - Fifth and Sixth Avenues - that surely must have fiber available? They don't have to bring it that far, and they have a building manager - ME - who is willing to get them access - all so they don't have to waste thousands of dollars visiting this building's back yard every six to eight weeks. Recently I head that another building towards Fifth Ave had successfully managed to get FiOS installed. How did they do that?

Which leads me to the other building, also on Fifth Avenue in the Flatiron. This building is not a large office building but it happens to have line running through it that serves some adjacent buildings as well. Within the past two months I have had at least five technicians needing access to that basement to repair copper phone and data connections! Again, I am completely shocked. The copper here in Silicon Alley is no better maintained (though it is apparently underground)! And I listen to the techs speaking with their home office, trying again to find "good lines". There isn't enough capacity to service all the commercial and residential tenants in that block!  The tech suggested I try to get some of them to sign up for "fiber", which would alleviate the crowded copper box.

Today I had a conversation with a very nice lady from the Verizon business office, and she informed me that she knew "no more FiOS installations were being scheduled for the rest of the year".  !!!!!!  In the meantime Verizon is spending millions of dollars running fiber "past" buildings but telling potential customers that it's not available to them. What kind of shell game is that? It reminds me of the recent scandal about the military contractors who built all kinds of equipment that only got destroyed once it was shipped to the Middle East. And all the money spent on advertising a service that no one can get? There's just no answer to that.

Following which, I might as well air my frustration at the fact that I am seeing many many of those little internet antennae popping up all over the place in Manhattan subway stations... but I am not getting any service!  I travel all over the city (forget the fact that not a single underground station in Brookyn has service), and I have seen these tell-tale signs of service in Washington Heights, East Harlem, and the Lower East Side - some for eight months or longer - but zero bars in any of these stations (I'm looking at YOU Second Avenue!).

I've said before that Transit Wireless' strategy seems completely haphazard. Their blog states that they have begun installing equipment in Upper Manhattan and the Bronx, but their Lower East Side stations? Nary a word - oh wait, I see that Delancy is part of the Phase 3 rollout - but no announcement as to when that will happen?

Oh, and the website www.NYCSubwayWireless.com seems to have been hijacked, or given up. It takes you to a website about call forwarding. It does not, as suggested on the Transit Wireless website, show you which stations have service.

How Much Higher Can Rents Go if Manhattan Wages Keep Falling?

According to the US Labor Department, employment in Manhattan increased, but wages have fallen because fewer jobs were added back in the finance industry. Overall private sector wages fell 3.3% in Manhattan.  

What does this mean for the crazy rents that we see throughout Manhattan? And the crazy home valuations? It could mean bad things. Sure, there are still tons of foreign buyers snapping up townhouses and condos in Manhattan; but that's still a small fraction of the people who live on the island. So... eventually... either we get a new extreme high wage-paying industry to employ lots of people.... or finance resurges in Manhattan.... or rents are going to have to come down.

It has been a strange year in Manhattan so far. Rents slipped quite a bit in November to a new 7 year high, which is par for the course, but Manhattan landlords were introducing incentives as late as February 2014.
According to Elliman's monthly report, May 2014 vacancy rates were just a tick lower than May 2013, and actually .13% higher than April 2014.  Some articles made mention that Brooklyn rents and Manhattan rents came close to equal during this time, suggesting that many Manhattanites are decamping to Brooklyn. But ultimately, it may simply be that rents are just too damn high, especially since the people who could afford the sky-high rents, and all the amenities, are less and less likely to be working in Manhattan.

I'm not saying that rents are going to fall off a cliff. New York is still the place to be and many people from all over the world locate here. And there is still a housing shortage, albeit an affordable housing shortage. The first developments to be squeezed will be the mid-range developments, those renting for $3500-$7000/month. The danger is that we might start to see more high end rentals than affordable developments, for the same reason that high end condo developments have proliferated in this city over middle class ownership housing: the middle class is getting squeezed, wages are falling, and the rich are the ones we can count on to have money.

But the 1% is only a single percent, so eventually rents will have to fall a little. Or even a lot. At least until New York finds its next big wage paying industry.

How Much Should You Borrow Based on What You Want to Pay Monthly

So you hear a lot about relative cost to rent versus cost to buy, but really, you're thinking... What can I afford?  Or, more likely, how much can I borrow but still pay the same amount in mortgage as in rent?  Today I want to show you a quick and dirty way to figure that out.

First, take your monthly amount of rent. Let's say $3000 for a round number.

Then, you need to subtract something to represent the maintenance (for a coop), or common charges + property taxes (for a condo) that you might be paying. This amount varies a great deal based on the size of the property that you are looking at. Common amounts are $500-$800 for a one bedroom or $800 - $1000 for a two bedroom, and go up from there. 

Let's say we're looking at a one-bedroom and want to be conservative, so we'll take $800 as the number. $3000-$800=$2200.  Notice we didn't include insurance. This is because homeowners policies are not a very big jump from renters insurance policies, so we'll assume that cost remains the same. (If you don't have a renter's insurance policy, you should seriously consider getting one up - your belongings are not covered by the landlord's insurance policy if they are stolen or destroyed).

So we have a principal and interest payment of $2200. Now, we look at the current interest rates. Your bank's website can provide those to you. Keep in mind two things: 1) interest rates change daily and 2) when the economy is good, interest rates tend to move up.  So if you are doing this exercise for a future purchase six months from now, you might want to add .25%-.5% just to be safe. (of course you can always buy the interest rate back down if you have the cash and the desire).

At the moment I am writing this, I just clicked over to the Bankrate.com website. Bankrate is an independent web site that publishes information about mortgage rates across many banks and regions of the US. Keep in mind that New York rates may be different from the national average. Coop loan rates are usually higher, as are condo loans, though somewhat less so.  Indeed, Bankrate gives me a range of 3.97%-4.89%, while the national average is listed as 4.29%.

Let's again be conservative and use 4.75% as our rate. Now, we flip over to http://www.realestate-calc.com/Mortgage_Calculators/Mortgage_Amortization.asp, where we find a nicely laid out table of the cost per $1000 borrowed. Scroll down to 4.75 in the first column, then slide your finger over to the 30-year column (all the way to the right). The number is $5.22. That means for every $1000 you borrow at 4.75% interest rate, your monthly payment is $5.22 for a 30 year self-amortizing loan (meaning when you hit the last payment of the 30 year loan, you have paid off the loan).

Ok, so now we take your monthly rent payment less allowance for monthly maintenance fees (remember that? $3000-$800=$2200), and we divide $2200 by $5.22. So in other words, we are seeing how many thousands of dollars we can service with the $2200 we already pay.  The answer? 421.456. Just multiply that by $1000 (or  move the decimal over 3 places) and you'll get $421,456, which is the amount of mortgage you can carry, plus maintenance charges and (if condo) property taxes.  

Now let's take that one step further. You generally need a 20% down payment to get a mortgage. Most coops require that at least 20% be put down. Condos might only require 10% (some coops do as well, but banks have become more stringent since 2008 and it's harder to get a 90% mortgage on a coop than it once was).

The amount of mortgage that we figured, $421,456, represents 80% of the total cost of the property that you can purchase. This is the maximum loan to value ratio (or LTV) that most loans allow. Dividing that number by four tells us what 20% of the total price must be. Answer: $105,364.

To get 100% of potential purchase price, we multiply that number by five. (because 5 x 20% = 100%). So $105,364 x 5 = $526,820.

So, the total purchase price that you can likely afford while still keeping  a similar housing payment to what you pay in rent is $526,820. This assumes a down payment of $105,364 (the 20% number we calculated earlier).

In the hottest parts of Manhattan, this will get you a studio or a small one bedroom. In northern Manhattan, this will get you even a two bedroom. Even in Brooklyn, you can score a very nicely sized one bedroom or even two bedroom depending on area (though probably not in Williamsburg, alas).  So if you feel you can't afford to buy, think again. You can afford to buy if you can afford to rent at Manhattan's prices.

What's a Non-Conforming Coop?

You're searching the Internet for your new home to buy.  You find a property - a coop unit - that looks really, really good. You read through the description and you are loving the way it sounds. The photos look great too. Then you see at the bottom of the listing "Non-conforming building - cash offers only (or preferred)." Huh. What does that mean?

You Google the term "nonconforming building". The returns define it to be a building that doesn't conform to existing zoning laws. But in New York City, it's more likely to mean that the building's financials and/or owner occupancy do not conform to guidelines set by Fannie Mae (FNMA) and her compatriot, Freddie Mac (FHLMC), the two entities that purchase loans on the secondary market from the banks that originate them.

So you Google "nonconforming loans".  This search just gives you a lot of information about jumbo loans, which are a type of nonconforming loan, because the amount of the loan is higher than Fannie Mae conforming limits.

But this property is asking less than the published conforming loan limits. Are there other issues that can put a property into nonconforming territory?

Answer: yes there are. One of the big ones is owner occupancy. This refers to the number of units in the coop that have been sold by the sponsor to individual owners and are occupied by those owners and their families. Units that are owned by individuals but sublet to renters do not count, but individually-owned vacant units do. Sponsor-owned units also are not considered owner-occupied (a sponsor unit is one that continues to be owned by the original landlord of the building who created the coop, or their successor).

FNMA/FHLMC requires 51% of cooperative units to be "owner occupied". Not 50%, but 51%. This was a big issue back in the 1980s and 1990s when sponsors owned more than 50% of units in many coops that had just been converted. The sponsor ownership is less of a problem these days, but smaller coops (under 40 units) can still slip into this nonconforming status if they have a significant percentage of sponsor ownership (ie, 25-40%) and if the coop allows too many owners to sublet in addition. When that happens, the coop falls into non-conforming status.

In the olden days, it was possible to get something called a "waiver" on nonconforming buildings. This literally meant that the owner occupancy issue could be waived, and a bank could get you a conforming loan. Since 2008, however, that is practically impossible, according to mortgage lenders that I have considered. Whereas waivers were practically a given before the mortgage crisis (for a small fee), now each application for a waiver is scrutinized and takes weeks to process. Few are granted.

So that leaves us back to this beautiful coop in your price range. You don't have cash, but you see it's a bargain. What can be done?

First, realize that while many mortgage programs are not going to be available for that particular unit, some loans might be. These loans are called portfolio loans, and they may be given by banks or mortgage lenders.  A portfolio loan is a loan that a bank cannot sell to FNMA/FHLMC. The bank has limited choices - either the loan must be held and collected by the bank until the end of the term, or the loan can be sold to an investor who will deal in nonconforming loans.

Unfortunately, that translates to a slightly higher interest rate for the borrower.
But such a property may present an opportunity. Remember, every coop is different. Some may be primarily investor-owned, while others may simply be one unit from conforming.  Ask your agent what the situation is.  If the situation is just one unit, then you might have an opportunity to get a little pop in value when that one unit does finally turn the owner occupancy ratio over 51%. You have the option of refinancing into a conforming loan once the building is conforming as well.

So, all in all, don't leave those gems in the dust. Nonconforming coops can present an opportunity to the person looking for a below market opportunity for a long term primary residence.

2 Digital Maps to Help You Know New York City and How to Use Them

The IS department of the City of New York has some beautiful map tools available for use by the general public. If you're searching for a home, you might be interested in a couple of them:

1) The NYC Crime map shows how many and what types of crimes occurred throughout the city. You can look by precinct, by graduated point map (which shows how many crimes occurred in a specific spot that you can drill down by zooming in), and by heat map (where changing colors indicate a larger number of crimes). You can even specify which kinds of crimes you would like to see information for. 

One thing you won't see too much of is murder. Thankfully, as former Mayor Bloomberg pointed out, NYC has had very few violent crimes given how large the city is over the past few years. This tool is great for people moving to the city who want to understand what happens in different neighborhoods, and residents who what to keep track of what is happening in their particular area.

2) The NYC Business Atlas shows a variety of demographic information about population and business density. It shows businesses by heat maps and also the number of different types of businesses in a specific area, as well as what types of businesses have started up recently. Prospective residents might find this information useful as they evaluate various neighborhoods.  http://maps.nyc.gov/businessatlas/

Enjoy!

Happy New Year!

Wow, what a year it's been! New York saw a huge break out of activity at the ultra top end of the real estate market, but lagged behind the rest of the country in lowering unemployment. The stock market had it's best year in about a decade, but Wall Street did not regain employment as companies sought to diversify to other lower cost states.

Today, we are seeing the end of the Michael Bloomberg era (which I personally enjoyed and I thought overall enhanced the quality of life for New Yorkers).  The incoming mayor, Bill DeBlasio, was a come from behind candidate who has pledged to be progressive and, many people hope will also bring more focus to the outer boroughs, some areas of which are still truly suffering from the havoc of Hurricane Sandy. Though I do not know him personally, Mr. DeBlasio was in fact my city councilman for nearly 8 years. I wish him luck and good progress.


I wish a very prosperous new year to my family, friends, colleagues, and to everyone I have yet to meet!

Brooklyn Rents Rise While Manhattan Gets Cheaper, Report Shows - Upper East Side - DNAinfo.com New York

If it seems like Topsy Turvy to have Manhattan rents sink while Brooklyn rents rise, it's not all that hard to understand : quite simply, when two things are considered equal, prices reach a similar level. Given that many people now work in Dumbo and Williamsburg, ‎or just across the river in Lower Manhattan, it's not too hard to equate the lively Brownstone neighborhoods in Brooklyn to the charming Landmarked areas in the Village, Soho and Tribeca. So rents in the two areas are meeting each other.

The article somewhat contradicts itself by saying that tight credit markets (making purchasing homes harder) hold renters in place, but that Manhattan rents may have gone down because many purchased. I say that the more likely answer is that people now see Manhattan and parts of Brooklyn as interchangeable and live where they find the most personal value in doing so.

Brooklyn Rents Rise While Manhattan Gets Cheaper

The Flickering Light Bulb In Your Furnace

Every winter, at least one of the properties I manage experiences issues with the heat. Usually the first sign of trouble is when it fails to turn on in that shoulder season in October. You know, when it dips into the 50s and below at night. Tenants call me to say their radiators are cold, and I call the plumber. Then suddenly, the heat comes on! I cancel the plumber. All is well... until we get a 10 degree temperature drop.  Inexplicably, the heat goes out again. Sometimes it kicks on again before I can get the plumber over there, so we leave it again. But the writing is on the wall: I know that it's only a matter of time before the problem is back, and usually in a matter of days.

Signal Relay - this little guy might be to blame if your boiler
doesn't come on when it should, but then comes on by itself later on.

This week I finally put a name to the most likely culprit: signal relay. A signal relay is a switch that turns on the circulating pump (which draws hot water up through the radiator and back to the furnace to be re-heated). They are electrical circuits, and they fail. It's hard to say how often they fail - and there might be more than one if the furnace has zoned heat.  But, if your heat fails to go on when it should (and may or may not come on later without a plumber's help), or goes off at an inappropriate time (either to come back on or not), you can put money on a signal relay failing or having failed.

If you're wondering why shouldn't we have the plumber in even when the heat starts working by itself, the answer unfortunately is because you can't tell a signal relay is broken unless it's actually not working. Think of a light bulb in a chandelier. Sometimes, the filament in one bulb disconnects from one of the two contact wires and the bulb goes out. You think to yourself "I need to replace the light bulb", but before you can, the filament reattaches and the bulb starts working again.  Now, you can't remember which bulb it was (unless you're really good like that), and you don't want to change out the good light bulbs because that would be a waste... so you have to wait until it goes out again before you can identify it.

Same thing with a boiler. If the signal relay is causing the problem but it's still working intermittently, then the heat is on while it's working, and if tested the relay will not seem broken. So, unfortunately usually the heat has to be off for the plumber to find the problem.

The good news is it's usually an easy fix if your plumber has a compatible part with him. Make sure you can tell him the make and model of your furnace when you call. Otherwise he may not have a compatible part and may have to come back the next day - meaning more hourly charges and possibly a very cold overnight.

Plastic Bag Law Not So Bad - Says My Dad

Last month I went down to visit my father and stepmother who live in the District of Columbia. My first morning there, I headed around the corner to get my morning tea at the Starbucks and a quick stop at the convenience store to pick up a few things I'd forgotten to bring with me (and some donuts for Dad).

At the 7-Eleven, I stared blankly at the screen as the cashier rang up my purchases. Then my eyes focused on one thing: a bag charge of ten cents. I hadn't even thought twice when she'd asked me if I wanted a bag. "Huh," I commented (did I mention I am NOT a morning person - even a late morning person?). "How long has this bag charge been around?"

"About three years," said the cashier.

I headed over to Starbucks and got my coffee, a breakfast sandwich and the pound of ground coffee beans my stepmother asked for. The barista asked if I wanted a bag. "No thanks," I said, and tucked it all into the bag I'd gotten from the 7-Eleven. One bag saved.

Back at the ranch, I told my Dad about my discovery of the bag charge. "Oh yeah," he said, "that's been around a while now. I didn't realize you didn't know about it."

"How are you handling it?" I asked curiously. Dad is in great shape, but senior citizens aren't known for their desire for change or inconvenience, and being charged for bags that used to be free isn't something that seems convenient OR like the status quo.

"You know, I like it," Dad said.

"Really?"

"Yeah. We drive around (because despite the Metro, DC is very much a driving city) with a couple of these reusable bags that the grocery store gave us in the trunk of each car, and it's not a big deal. Plus, it's really cut down on plastic bag litter. And if I have to, I can always pay the ten cents. But I usually don't have to."

What struck me most was my father's comment about the lack of plastic bag litter. I think we've all seen plastic bags stuffed into planters, flying around in the wind and caught in trees. Bags that benignly end up preserved forever in our landfills or more worse: that end up in our waste water ( potentially clogging up rain sewers); can get into our rivers and wash up on the shores; or worst, get out into the ocean where larger sea life can eat or get stuck in them and die. Free-ranging plastic bags journey to join one of the several oceanic gyres of plastic waste that have congregated with the currents in many parts of the world.

In economic terms, litter is an externality. That is the term we use for something that affects many people as a result of actions created by a few. In this case, plastic bags which are given for free to shoppers end up affecting many more people as litter in our public places. It's sad but many people - for reasons of convenience, spite, or accident - fail to properly dispose of plastic bags. And everyone, polluter and non-polluter alike, pays the cost of cleanup (sanitation, parks & recreation staff, supplemental cleanup such as the Doe Fund, and countless hours of building superintendants, plus volunteer hours of generous citizens).


Moreover, for the moment, more than 99% of plastic bags used in New York City are going to landfills. Aside from being able to bring plastic bags to certain grocery stores and retail stores as mandated by state law, there is nowhere to recycle plastic bags. The city specifically says not to put them in the curbside recycling (though I do). And who wants to hoard them at home to shlep them to the grocery store anyway?

I speculate that flimsy plastic bags do not recycle well and therefore recycling companies do not see profit in accepting them. That means plastic bags are an end product that - even if reused once or twice - have no resurrection factor. The free market is a long way away from bringing them back into the resource chain.

Plastic bags - plastic grocery-type bags in particular - have no long term value. They have a maximum of two uses - to ferry a set of groceries from your local store to your house, and maybe to pick up some dog poop. Ironically, dog poop would return safely to the earth if we put it in a compost pile but because we put it in a non-biodegradable plastic bag and toss it into a landfill, it will probably not biodegrade for decades. Or - another irony - you could use the plastic bag to stuff full of paper (yes I have done this, when I've run out of Whole Foods paper grocery bags) to put in the curbside recycling!

Enter the idea of just not using plastic bags in New York City. If you use them, you have to pay towards the cost of cleaning them up. Easy as that.

Naturally there are people who will oppose this for monetary reasons. The most obvious group will be manufacturers of plastic bags for grocery and retail stores, who will see their revenues fall when shoppers opt not to take a plastic bag, leading stores to cut their orders of these bags. To them I say: sorry. Figure out how to make a widely available recycling program and we'll talk.

I expect regular people to object too. I expect their reason will be something along the lines of: "You're taking away another thing I used to get for free!" To them I say: the bags were never free. You pay for them twice: once when you bought something at a store and again when you pay taxes to have them cleaned up off the streets and out of parks. You pay for them in the time you spend volunteering to clean up your favorite parks and beaches. Plastic bags are convenient, but what price should we pay for that convenience? Should it be the oceans, and our public parks and streets? Our landfills which, once filled, cannot be used for decades? Should it be loss of the ingredients of those plastic bags - which could have made up something much more useful - like school desks or chairs? Just so we could carry something around for an hour?

I carry a lot on my back as I move about the city, but starting tomorrow I am putting another thing in my backpack - a reusable bag that packs down into a corner of itself. It was a promotional item from a seminar at Google. When it wears out I have another just like it ready to go. I won't always be able to avoid using plastic bags, but I'll try. And when (not if - I'm pretty sure this bag charge will pass) we have to pay for our plastic bags, I'll do it when I need to. And then - sorry, Department of Sanitation, consider it a civil protest - I'm putting it my curbside recycling.

New York's the Same, the World is Better, What's Going On?

I am no Wall Street guru, but I follow the market pretty closely these days, as well as economic indicators throughout the world. Here is what we've got going:   .

1) Interest rates made a rather large move (.25% not really a large move, but for bond traders it's a large move)

 2) Several large retailers - and today Cisco, which is like the GE of pure tech plays - have reported lower than expected 2nd quarter results (whose expectations? it's sort of an average taken across many investment firms' analysts' projections).

 3) Walmart also missed on revenues, though not earnings (earnings are the actual income reported after all expenses have been removed), and cut its own projections for the rest of the year.

 However, other things are not all bad! For instance:

 1) July unemployment nationwide FELL to 7.4%, the lowest since 2007 - that's a YEAR before the crap hit the fan in 2008. Remember that before the credit crunch caused by the failures of Bear Stearns, Lehman Brothers and Washington Mutual, among many others. Many people forget that the downturn began in late 2004, when the first of the subprime mortgage crisis started to be felt.

 2) Europe, which caused an echo credit crunch on these shores as analysts scrambled to discern which of our multinational banks held how many Greek, Spanish, Irish, Cypriot, etc. bonds, has suddenly peaked its head out of the recession pit, according to the official statistics office of the European Union. China, too, has seen a slight rebound that is pulling materials and mining stocks up ever so slightly.

All that, plus lighter volume (which exaggerates price swings in an individual stock) made for a 200-point drop in the market today.

I watch the stock market because it seems to have more correlation to the real estate market in Manhattan (and increasingly, Brooklyn) than the markets in the rest of the country (which is why NYC's prices kept going up until almost the moment Bear Stearns went down). But it's hard to say what's the new normal here: the Dow made new highs nearly every week until April, had a correction in May, resumed upwards in June, and now in August (traditionally not a great month for the market) it's heading down again, mostly lazily but today in a more precipitous fashion. What will happen in September? What indeed? It's a soap opera that doesn't end.

My personal experience tells me that buyers are less likely to buy in New York when the market goes down. This might be because the buyer is actually employed in the financial industry, or it may be sympathetic concern, as most people in New York are at least cognizant of the market's moves, even if they aren't invested.

Dearth of buyers can lead to price drops, but only if there is a glut of properties relative to the number of buyers on the market. A quick glance at the live listings infographic provided by Urbandigs.com shows that active inventory (ie, properties currently listed for sale) has dropped nearly 20% in the past 3 months. In addition, properties in contract, after a huge 43% pop four to six months ago, has declined by 6% in the past three months. Finally, properties that have gone off market have increased over 15% in the past three months.

So, to summarize, fewer properties are on the market, at a rate that exceeds the drop in contracts signed. This means the inventory seems to be right-sizing itself. So, for the moment, prices in New York should remain unchanged.

We'll see how that works out when interest rates really begin to rise.

Nice Place You Got Here....

Yesterday I had my first visit to the MiMA building on 42nd Street off Times Square. As someone whose areas of specialty are below 34th Street, it just hasn't been that high on my must-see list. But I have to say I was impressed. I had in my head that the building was all the way on the Hudson. This isn't true. It's actually at the corner of 42nd Street and Dyer Ave (which is basically 4-block long access road to the Lincoln Tunnel that intersects between Ninth and Tenth Avenues). So it's about 1.5 blocks from the nearest subway stop, and 2.5 blocks from the majority of subway lines that run through the city. That's not bad! Also, it's near the Playrights New Horizons Theater, and the new Pershing Square Signature Theater. Those are two buildings I wish I got to more. You're off Times Square, so no hordes of tourists, but you're nearby for those few times you feel the need to, you know, remind yourself why you love New York City so much. Also, there's two Starbucks about one block away. A very important consideration to me! MiMA was developed by the Related Companies, and they are known for doing upper to ultra-luxury apartment buildings (doorman, etc), but I liked the floorplans I'm seeing - particularly that for the studio - it actually has a separate sleeping area; in some buildings the studio layouts actually force you to put your bed right up under the breakfast bar (at least you don't need a night table that way). Also nice is that that there is laundry in EVERY apartment, even the studios. I really liked the common areas. There are several large rooms that you can book (My meeting was in club room M-1, which had a large conference table, comfortable looking couch and a raised bar/table). Also there is onsite pet care (Dog City they call it). The health club is impressive. The terrace is large and they have a separate area they call "the lawn" which also has a seating area and an outdoor movie screen! (There is also an indoor screening room, and a catering kitchen!) I loved the lobby, which was very large with several groupings of bright, comfortable seating. I appreciated that after I identified myself to the doorman as having business in the building, he didn't begrudge me lingering a few minutes to check email and pack a few things away before I left. When people are looking for very luxurious accommodations (and this building definitely is very high end - studios starting around $4500/month), often they don't want to be west of Ninth Avenue - either because they want to be closer to the action or because they don't want to be near traffic. I'd say this building really isn't affected by those things, and anyone with a budget of $4500 or higher should check it out.

Sellers Reappear, Buyers Can Take a Breath.

Nice article on DNAinfo.com says more condos are now on the market after a few months where lack of inventory was causing bidding wars. This is good, because, according to the article, Manhattan condo prices are already back to and surpassing their peak value in 2007.

This article illustrates what I consider to be Phase 3 of the housing market.  In Phase 1, lack of buyers caused prices to fall. Sellers who had to sell at that time did so for much less than they could have just a few months before. But the sellers who didn't have to held onto their properties.  Sure, there was inconvenience for more than a few. Some had outgrown their space, while others needed to relocate for jobs or personal reasons. The ones who could hold on in their spaces did, while others managed to find renters to cover their expenses while they moved on with their lives. The result: eventually the equilibrium between available buyers and available sellers returned, but at a lower price point (econ 101, as some of you may recognize).

Phase 2: The buyers return. In this case, an easing of lending criteria (not by much, but you no longer had to be Bruce Wayne in order to qualify for a mortgage), an overall sense of more security that people weren't going to lose their jobs, and the resumption of the march upward in Manhattan (and Brooklyn) rents made them interested in buying again. People started looking around.... and didn't find all that much on the market. In the course of about 3 months over fall 2012-winter 2013, the lingering properties were swooped off the market.  That lead to a shortage in apartments, which means prices go up!  So, yes, there were stories of bidding wars earlier this year.

Now we are hearing signs of Phase 3. Phase 3 is - you guessed it - when the sellers return to the market. Not just any sellers, but what I would call "optional" sellers. These are people who would like to get rid of their apartment but have a little flexibility in when to do it. The owner who's renting after relocating to another city, or someone with a pied a terre that they don't use as much but can afford to keep. Or even the growing family who's a bit cramped but making do. 

Suddenly, selling seems more convenient to them now, and they are starting to put their properties on the market. The result: buyers have more to choose from, and a little more time to look. Prices probably won't drop, though. The market isn't loose enough for that. The bargain hunter days are pretty much over. Sellers may not all get the delight of having multiple sellers willing to jump through hoops for their property, but you can only sell to one person anyway. So price well (ask your real estate agent for help with that), and you'll still feel the love.

Is there a Phase 4? Yes, but it's not pretty.  It's the crazy market that existed 2003-2005 and again briefly 2006-2007 before the weakness finally caught up to NYC. Bidding wars, lack of contingency clauses, and lots of heartbreak. It's painful to be a broker during those times, even if I'm the listing agent, because I meet a lot of nice people and a lot of them end up heartbroken because they lost out on a bid. So I'm hoping Phase 3 - where buyers meet sellers in a healthy market - is here to stay for a while.

New Listing!

Just a quick note:

M. Woods & Associates has a new listing for June 15 in the West Village - a 1 Bedroom for $3500. While it is a ground floor apartment, unfortunately there is not access to the garden. You can check out descriptions and photos here.