Roundtable Discussion on Challenges Facing New Affordable Housing in New York

1 ROUNDTABLE DISCUSSION HELD BY

THE NEW YORK STATE SENATE 2 STANDING COMMITTEE ON HOUSING

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ROUNDTABLE DISCUSSION ON 4

CHALLENGES FACING NEW AFFORDABLE HOUSING IN NEW YORK 5

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250 Broadway - 19th Floor 8 New York, New York 10007 9 January 25, 2012

Afternoon Session 10 11 12 PRESIDING: 13 Senator Catharine M. Young

Chair 14 15 ALSO IN ATTENDANCE: 16 Lorrie Pizzola

Senate Finance 17

Teresa Rosie 18 Housing Counsel

Office of Senator Young 19 20 21 22 23 24 25 1 ROUNDTABLE PARTICIPANTS: 2 Joe Rosenberg

Senior Counsel, Intergovernmental Affairs 3 NYC Dept. of Housing Preservation and Development 4 Ed Josephson

Housing Coordinator 5 Legal Services in New York City 6 RuthAnne Visnauskas

Deputy Commissioner for Development 7 Housing Preservation and Development (HPD) 8 Chris Athineos

Small Property Owner in Brooklyn, NY; 9 VP, The Small Property Owners of New York (SPONY) 10 Aaron Sirulnick

Property Owner in Brooklyn, Queens, and Manhattan; 11 VP of the Rent Stabilization; and, Chairman of CHIP 12 Raphael Sistero [ph.]

(Position not identified) 13 Community Preservation Corporation 14 15 16 17 18 19 20 21 22 23 24 25 1 SENATOR YOUNG: Thank you for taking the time 2 for being here today. 3 Joe, nice spiel this morning. 4 But, as you also know, I became Chair of the 5 Senate Housing Committee about a year ago, and since 6 that time, we've been very busy with a lot of policy 7 initiatives. 8 But, I thought it would be helpful to get 9 leaders in the industry together, to talk about 10 different issues that face us, because, not only do 11 I want to be reactive, and take care of concerns 12 as they arise, but also be proactive and creative 13 about how we're addressing housing needs, not just 14 in New York City, but across the entire state. 15 So, that's the whole thinking behind having 16 these roundtables. And, this is the third one 17 that we've had. 18 We had one about a month, month and a half 19 ago, here, and talked to some of the academics, 20 and people, kind of, in that mode. 21 And then, this morning, we talked about 22 people actually developing the housing, and now 23 we've got our segment this afternoon. 24 And we've talked about a lot of different 25 issues that arise. 1 So, the way we've done this, is that it's 2 been very interactive, free-flowing. I want people 3 to participate, jump in. 4 You know, I've been to so many hearings, as 5 an Assemblymember, and as a Senator, over the 6 years, and hearings can be very beneficial. But 7 that format, I think, sometimes it stifles ideas. 8 And, this is a way where you can actually 9 interact with each other, and respond to each other. 10 And, as a result of how we were able to 11 conduct the meeting earlier today, we got a lot of 12 really good ideas out of that. 13 So, I'm hoping that we can do the same this 14 afternoon. 15 So, I thought we'd go around the table 16 because, what I have found, is that, in the housing 17 community, usually, everybody knows each other. 18 But, why don't we go about the table and say who you 19 are, and where you're with, just in case somebody 20 doesn't know someone. 21 JOSEPH ROSENBERG: Okay, I'm Joe Rosenberg. 22 I'm the senior counsel for intergovernmental 23 affairs for the New York City Department of Housing 24 Preservation and Development. 25 Glad to have been invited here. 1 EDWARD JOSEPHSON: I'm Ed Josephson. 2 I'm the housing coordinator for 3 Legal Services in New York City, which has offices 4 in every borough of the city. 5 And, as you probably know, we represent those 6 tenants, but also owners in foreclosure 7 proceedings. And, we represent, also, tenants in 8 multi-family foreclosure proceedings. 9 SENATOR YOUNG: Very good. 10 RUTHANNE VISNAUSKAS: I'm 11 RuthAnne Visnauskas. 12 I'm the deputy commissioner for development 13 at HPD. 14 CHRISTOPHER ATHINEOS: I'm Chris Athineos. 15 I'm a small owner from Brooklyn. 16 And, I'm vice president of "SPONY"; the Small 17 Property Owners of New York. 18 AARON SIRULNICK: Aaron Sirulnick, property 19 owner of buildings in Brooklyn, Queens, and 20 Manhattan. 21 I'm the vice president of the 22 Rent Stabilization, and, chairman of CHIP. 23 SENATOR YOUNG: Very good. 24 And, I don't know if you know, but this is -- 25 two very important members from the Senate team. 1 This is Lorrie Pizzola, who is former deputy 2 commissioner at HCR. And, she joined Senate Finance 3 this past year, and is doing a tremendous job. 4 And, Teresa Rosie, who is the housing counsel 5 in my office. 6 And, she is really a great go-to person, and 7 has done a really fantastic job getting up to speed 8 and getting a lot of very important work done. 9 So -- and she actually, as you know, helped 10 coordinate today; so, I want to thank her for that. 11 So, here we are. 12 And, I have some questions. 13 I think you got some questions in the mail, 14 so, that, it's always better to know what you're 15 going to be hit with. But, I thought I'd start. 16 And, I didn't even have to ask that many 17 questions in the last session because people just, 18 kind of, naturally flowed from one to the next. 19 But, the first question is: What's the 20 current availability of financing for improvements 21 and maintenance to multi-family buildings, 22 including the green buildings and 23 energy-conservation enhancements? 24 So, who would like to start on that? 25 And, then, how does that work? 1 RUTHANNE VISNAUSKAS: I can kick off. 2 So, at HPD -- and I'm sure a lot of folks 3 know what we do, but, just to provide a little, sort 4 of, overview. 5 So, we run -- in my division specifically, we 6 provide low-interest loans to private owners, 7 non-profits, for-profits, for new construction 8 and preservation of existing housing. 9 So, we put out about $350 million a year in 10 loans. 11 So, for the preservation stock, we have 12 two -- I'm not so sure if it's, sort of, a broad 13 overview, but, sort of, more narrowly, we have two 14 loan programs that are -- we've had for a very long 15 time, that are specifically geared towards private 16 owners who want to go upgrades to their 17 buildings. 18 They don't have very interesting names, but 19 one is called "The 8(a) Program." 20 We do about 1,000 loans a year. The -- it's 21 about a $20 million program, and they're, sort of, 22 smallish loans, mostly for systems repairs or 23 roof, boilers, windows. Kind of falling into that 24 weatherization concept of, really, sort of, 25 tightening the envelope -- 1 SENATOR YOUNG: You said those are 2 no-interest, or low-interest, loans? 3 RUTHANNE VISNAUSKAS: They are 3 percent 4 loans. 5 SENATOR YOUNG: 3 percent. 6 RUTHANNE VISNAUSKAS: So, they're -- you 7 know, today, interest rates are so low, it might not 8 seem that low. 9 I mean, historically, they're, you know, sort 10 of, generically, low-interest loans. 11 SENATOR YOUNG: And that's always a set rate; 12 right? 13 RUTHANNE VISNAUSKAS: Uh-huh. 14 And, we provide up to 25,000 a unit, 15 depending on the needs of the building, for that. 16 So, we -- it's been a very successful 17 program. 18 It just, sort of -- we have continuous demand 19 for it. It's been really great. 20 We try to publicize it as much as we can, out 21 in our field offices, so that people can, sort of, 22 make themselves -- you know, not everyone wants to 23 work with government, but we feel it's, sort of, our 24 easiest program for folks to use. 25 We have a second program that's called 1 "The PLP Program," which is more around, sort of, 2 moderate rehab; and getting inside people's 3 apartments, and more, kind of, in the kitchen/bath 4 area, in addition to, sort of, building-envelope 5 stuff. 6 That's slightly smaller. We do about 7 400 units a year, and we have about $15 million for 8 that. 9 So, those are the two, sort of, main programs 10 that we use, that anyone can really walk off the 11 street and come in. 12 We -- you know, when you work with the City, 13 there's, obviously, sort of, other things that go 14 around -- along with it, in terms of getting through 15 our process. It takes a bit of time. 16 But, we have found it to be very successful. 17 It's, really, just to, sort of, maintaining 18 the city's housing stock. 19 The other thing I would -- that we were 20 fortunate enough to have in last couple of years, 21 was the -- through ERA, there was an additional 22 large chunk of weatherization funds that we got 23 two years ago. 24 And, so, we spent an additional, about 25 $7 million last year, weatherizing 1,100 units. 1 I'm not sure how many buildings that was. 2 But, that was a great, sort of, federal 3 one-shot, sort of, deal that we got. 4 And, we worked with a couple partners to 5 leverage it up, and make sure we were using it very 6 efficiently. And also targeted that, really, 7 towards, sort of, windows, efficient boilers. 8 Sort of, tightening the building envelope. 9 SENATOR YOUNG: Who carried out to work? 10 How did that work? 11 Did you -- 12 RUTHANNE VISNAUSKAS: So, a partnership of 13 two national non-profit organizations: One called 14 "Enterprise Foundation." And, the other one called 15 "LISC"; Local Initiatives Support Corporation. 16 [Unintelligible] vague national 17 organizations. 18 They were actually the grantee from the -- 19 gosh, I can't -- forget, if they got it from 20 state -- I don't know if it went from the feds to 21 the state, and the state to them; or if they got it 22 directly from the feds. I just, sort of, forget. 23 But, they were the grantee for the funds. 24 And then we had a -- the program required a 25 match; a small equity contribution by the owner. 1 And where the owner didn't have those funds, we 2 provided them. 3 So, we worked jointly with them to, both, 4 identify pipeline that would be eligible, and 5 provide some funding where it was needed. 6 And then they set up, basically, an internal 7 staff, focused just on this; where they had a -- 8 basically, a series of contractors that they would, 9 sort of, bid out all of this work to, because it 10 was, sort of, a short time frame where we had to 11 spend the money. There were deadlines on it. 12 So a -- third parties, or, you know, a 13 private entity, run by these two organizations, 14 undertook managing the process. And we provided, 15 sort of, the technical support. 16 And we have, obviously, a huge pipeline of 17 projects that we've done, you know, for the last 18 40 years. So, we tried to highlight things in our 19 pipeline that were old, that could really benefit 20 from an infusion of dollars like this. 21 SENATOR YOUNG: Is that something that you've 22 been -- 23 AARON SIRULNICK: I have a question. 24 SENATOR YOUNG: -- your members take 25 advantage of? 1 AARON SIRULNICK: As a fourth generation of 2 real estate, tell me why -- I participate in not one 3 of your programs, for no reason, other than, I 4 don't really know what the difference is, what the 5 benefits would be, if I wanted to. 6 RUTHANNE VISNAUSKAS: Uh-huh? 7 AARON SIRULNICK: And it's my own -- not you. 8 It's not for lack of effort on your end, for -- on 9 your programs out there. 10 But, if I wanted to participate in an 11 8(a) program, on buildings that are generally kept 12 up. 13 RUTHANNE VISNAUSKAS: Uh-huh? 14 AARON SIRULNICK: These are not in areas that 15 are -- or, buildings that have been let go, or 16 dilapidated. 17 RUTHANNE VISNAUSKAS: Uh-huh? 18 AARON SIRULNICK: What would be the benefit 19 of me participating in an 8(a) loan program; as 20 opposed to going to my current bank, and telling 21 them that I need to refinance my mortgage, or take 22 out more money, to put into the properties? 23 RUTHANNE VISNAUSKAS: Yep. 24 AARON SIRULNICK: Is there -- 25 RUTHANNE VISNAUSKAS: So, it's really 1 targeted toward -- to folks who -- for whom that 2 is not an option. 3 Right? 4 We would prefer, obviously, if people can use 5 the regular banking industry, and that's more 6 efficient. 7 I mean, going to your bank, where you have a 8 relationship, and getting a loan, to do some capital 9 repairs in your building, is, for sure, a much 10 quicker process than to come through City government 11 to get a loan. 12 So, I think a lot of folks prefer -- I know 13 the intent is, not necessarily to compete with the 14 banks on that. It's really, I think, for the 15 market of folks for whom that is -- either, 16 financially, doesn't work, because they don't want a 17 7 percent construction loan because the building 18 can't carry it. 19 AARON SIRULNICK: Is there a tax incentive, 20 though -- 21 JOSEPH ROSENBERG: It's -- 22 RUTHANNE VISNAUSKAS: On -- 23 AARON SIRULNICK: -- to go through HPD? 24 RUTHANNE VISNAUSKAS: For -- not for 8 -- for 25 8(a). 1 JOSEPH ROSENBERG: Not for 8(a). 2 RUTHANNE VISNAUSKAS: No, it's strictly just 3 a loan -- a low-cost loan. 4 CHRISTOPHER ATHINEOS: But it's -- 5 JOSEPH ROSENBERG: [Unintelligible] on the 6 building? 7 RUTHANNE VISNAUSKAS: It's a mortgage. 8 JOSEPH ROSENBERG: A mortgage. 9 But, it's good to look in the context of 10 this. 11 The 8(a) Program was originally designed back 12 at a time when there was no investment in the 13 rehabilitation of multi-family buildings in New York 14 City. 15 So, it was, really, a sense of, if you can't 16 get the private financing, the 8(a) was essential. 17 RUTHANNE VISNAUSKAS: Uh-huh. 18 JOSEPH ROSENBERG: So, that's one of things 19 about HPD: we have dozens of programs. 20 Some of them are -- all remain in effect, but 21 some are more effective, depending on what the 22 economy of the city is, and what the mood is in 23 terms of investment. 24 8(a) was an absolutely essential program back 25 in the days when a lot of private banks were not 1 willing to make the investments in New York City. 2 So -- 3 AARON SIRULNICK: I sit around -- when I sit 4 at our CHIP board meeting, and I listen to other 5 members, whether they be small property owners, 6 or owners of property in the Bronx, or up in 7 Manhattan, or in certain areas of Brooklyn and 8 Queens, I hear them talking about their HPD 8(a) 9 programs, and their issues with HPD. 10 And -- and I'm -- I know these gentlemen and 11 these ladies who are owners of property, and I'm 12 thinking: 13 Do they have first mortgages on their 14 properties? 15 Is yours subordinate to the first mortgage? 16 Why are they going to government, as opposed 17 to going to the private sector, for financing? 18 And, typically, I hear more about, it's the 19 ability for them to rehab property for considerably 20 low cost of funds. 21 JOSEPH ROSENBERG: Uh-huh? 22 AARON SIRULNICK: But there -- is there an 23 incentive otherwise? 24 Or is it, just, that the cost of funds are 25 lower, and the programs are available? 1 Or, because it's just that simple? 2 RUTHANNE VISNAUSKAS: I think so. 3 JOSEPH ROSENBERG: Yes. 4 And it's been a longstanding program. 5 I think the 8(a) has been around, probably, 6 since early '80s or so. 7 AARON SIRULNICK: You know we have plenty of 8 members -- well, Chris and I are on the RSA board 9 together. We have plenty of members who are 10 participants of your program. 11 I'm sure you're well aware of their names. 12 And, I don't hear too many complaints about 13 it, so, I don't know why more people may not be 14 taking advantage of it. 15 RUTHANNE VISNAUSKAS: Well, not everybody 16 wants to engage with government to get their 17 capital. 18 Right? 19 It takes longer. 20 CHRISTOPHER ATHINEOS: Do you find that the 21 first -- the banks will allow a mortgage -- a 22 second mortgage to be placed on the building? 23 RUTHANNE VISNAUSKAS: You know, each deal is 24 a little different. 25 But, right, I mean, you have to, sort of, 1 negotiate, depending on the building, and the amount 2 of the loan, and what the first is. 3 But, you know, it's a very successful 4 program. 5 JOSEPH ROSENBERG: And we're always looking 6 for ways to improve this program. 7 The thing about the program is, as RuthAnne 8 mentioned, both, adding NP and LP, they were both 9 created by the Private Housing Finance Law, 10 Article 8(a) and Article 15. 11 So, any time that we feel that it needs to be 12 modified, to some extent, we would certainly come to 13 Albany, and to the Senator, to discuss options in 14 which this -- these programs can be improved. 15 SENATOR YOUNG: Has it been difficult for 16 owners to get financing through the banks? 17 You know, the market tightened up -- 18 CHRISTOPHER ATHINEOS: I mean, as a small 19 owner, you know, SPONY represents the mom-and-pop 20 families that have a six-family or a ten-family 21 building, and, they live in the building. 22 And, it is difficult to get financing, even 23 from the banks. 24 And, you know, typically, these buildings 25 have been in people's families for many years. 1 But, you know, they just really put, 2 especially the small owners, through the ringer to 3 get a loan. And, a lot of times, they just don't 4 want to give it. 5 But -- and when you mentioned HP -- you know, 6 if you mention to these small owners, like, HPD, 7 they just start to get the shakes. It's like the 8 third rail of -- 9 RUTHANNE VISNAUSKAS: For sure. 10 CHRISTOPHER ATHINEOS: -- so, no offense 11 to -- 12 RUTHANNE VISNAUSKAS: And -- no. 13 Well, that's -- 14 CHRISTOPHER ATHINEOS: That's great that 15 there are programs out there like this. 16 RUTHANNE VISNAUSKAS: Right. 17 CHRISTOPHER ATHINEOS: And, you know, 18 certainly, if, you know, it's doable, we would 19 promote it to our members, because it's a win-win 20 situation. 21 RUTHANNE VISNAUSKAS: Right. 22 CHRISTOPHER ATHINEOS: I mean, that's the 23 problem with the small owner, at least. You know, 24 someone puts a mortgage on, for -- even some -- some 25 small owners put a 15-year mortgage, or a 1 self-liquidating mortgage, on their building, and 2 they may be locked in. 3 And then, all of a sudden, they find out an 4 apartment becomes vacant, and they have to do 5 lead-paint abatement, for thirty or forty thousand 6 dollars, or more, for, you know, an apartment. 7 And, they just can't -- they don't know where 8 to get the money. You know, to re- -- get a 9 mortgage, you may have to -- they may have to pay a 10 broker a point, and inspection fees, and appraisal 11 fees, environmental studies on the building. 12 So, you know, just the costs of getting that 13 financing are just prohibitive. 14 So -- and something like this, sometimes 15 they'll try to go -- before, a small owner, you 16 know, I guess, maybe, ten years ago, you'd go to 17 the bank. And, if you have a decent amount of money 18 in the bank, you can get a credit line. 19 Chase Bank would have a one -- one side of 20 one piece of paper, and they'll do a credit check on 21 you, and they give you a little checkbook, and you'd 22 have a credit line. 23 But, now, they want, you know, several 24 years of tax returns. And, has to be a lien on 25 the building. 1 And, it's just not an option for the small 2 amount of -- 3 RUTHANNE VISNAUSKAS: Uh-huh. 4 CHRISTOPHER ATHINEOS: -- 50,000 -- under 5 $100,000 loans. 6 So -- 7 SENATOR YOUNG: How do you communicate that 8 this program is available? 9 Or, is it just kind of known in the housing 10 community? 11 Or, how do you -- 12 RUTHANNE VISNAUSKAS: I think it's a couple 13 of ways. 14 One: We -- obviously, they're on our 15 website. So, anyone who's, sort of, noodling 16 around, looking for government -- low-cost 17 government loans in New York City, would find it. 18 We have -- it's, sort of -- we have field 19 offices. Our field offices have, historically, 20 been in areas where we've done a lot of work, so 21 they are the more, sort of, distressed neighborhoods 22 in the city. 23 So, I think to your point, where there's 24 probably folks who are homeowners in very stable 25 neighborhoods, that have been longtime stable 1 neighborhoods, where there isn't really a city 2 presence, or a -- and, certainly, HPD presence, 3 folks probably don't know who we are. 4 JOSEPH ROSENBERG: But we also head out to 5 the neighborhoods. I mean, quite often, we have 6 meetings that are sponsored by local elected 7 officials in certain areas, and schools, that 8 are well publicized, where people get a sense of 9 what the options are. 10 If you're a small -- if you're a -- if you're 11 an owner of multiple-dwelling, if you're a tenant, 12 if you're an owner of one- or two-family -- 13 RUTHANNE VISNAUSKAS: Yep, they're called -- 14 JOSEPH ROSENBERG: -- what can you do? 15 RUTHANNE VISNAUSKAS: And they're called 16 "Owners's Night." 17 JOSEPH ROSENBERG: Yep. 18 RUTHANNE VISNAUSKAS: So, we do these 19 specific things, where we have -- invite owners to 20 come, and talk about all of the services that HPD 21 can provide. 22 So -- 23 CHRISTOPHER ATHINEOS: I remember them -- 24 several years ago, they had them in Brooklyn, some 25 "Owner's Nights." 1 RUTHANNE VISNAUSKAS: Yep. Yeah. 2 CHRISTOPHER ATHINEOS: I mean, I remember 3 years ago, HPD used to have a small-building 4 owners's unit. 5 Does that still exist? Or -- 6 RUTHANNE VISNAUSKAS: I think it might have 7 gotten subsumed in a couple other places. 8 CHRISTOPHER ATHINEOS: [Unintelligible]; 9 right? 10 RUTHANNE VISNAUSKAS: No, we're still, you 11 know, actively, out in the -- in our field 12 offices, with outreach. 13 Subsumed, yeah. It's so small, it got eaten 14 up by another division, I think. 15 [Pause in proceeding.] 16 [The proceeding resumed, as follows:] 17 AARON SIRULNICK: Hi. 18 RAPHAEL SISTERO (ph.): How are you? 19 Hi, Raphael Sistero [ph.]. 20 AARON SIRULNICK: It's a pleasure. 21 RAPHAEL SISTERO (ph.): How are you? 22 How you doing? 23 [Greetings from Mr. Sistero continued.] 24 [The proceeding resumed, as follows:] 25 SENATOR YOUNG: Thank you for coming. 1 RAPHAEL SISTERO (ph.): It's my pleasure. 2 I'm sorry I'm late. 3 SENATOR YOUNG: That's okay. 4 That's okay. We're just so happy that you 5 made it. 6 RUTHANNE VISNAUSKAS: Raphael knows 7 everything I know. I can just leave. 8 RAPHAEL SISTERO (ph.): That's not true. 9 SENATOR YOUNG: We started the roundtable 10 discussion. 11 And, as I outlined, it's just kind of this 12 free-flowing thing, to generate ideas, and, people 13 can jump in anytime they want. 14 RAPHAEL SISTERO (ph.): Okay. 15 SENATOR YOUNG: Okay? 16 RAPHAEL SISTERO (ph.): Great. 17 SENATOR YOUNG: So, we were just talking 18 about, some of HPD's programs offered financing to 19 owners so that they can upgrade their apartments. 20 And, it's a great program because they have low 21 interest rates. 22 RAPHAEL SISTERO (ph.): Right. 23 SENATOR YOUNG: And, that sort of thing. 24 So, we're having a good exchange here between 25 some of the owners and the City. 1 RAPHAEL SISTERO (ph.): Great. 2 RUTHANNE VISNAUSKAS: Which would be a good 3 dovetail to other people that have financing for 4 green -- for retrofitting multi-family buildings, 5 we could segue to you. 6 JOSEPH ROSENBERG: Not that we would put you 7 on the spot, but -- 8 RAPHAEL SISTERO (ph.): We do. 9 We do -- at least I think we do, in the 10 six days that I've been at CPC. 11 So -- I mean, CPC has been around for 12 37 years, and has done, you know -- has -- primary 13 mission has been to work with small owners to do 14 renovation, retrofitting, refinancing of existing 15 properties. 16 Have a great initiative that they've been 17 trying to get off the ground for a little bit, to do 18 retrofitting -- specifically, to do retrofitting to 19 meet the new requirements that the City put in 20 place. 21 So -- so, there is -- you know, there is -- 22 there is the availability of that. You know, sort 23 of a private financing leverage on top of the public 24 dollars. 25 And that's actually true across the state. 1 CPC operates statewide, so, it's not just 2 New York City. 3 And, you know, obviously, I have a variety of 4 other, both permanent and permanent financing, as 5 well as construction/renovation financing 6 programs, as well, for owners of existing -- 7 existing properties. 8 SENATOR YOUNG: I know you're brave to come 9 so early in your tenure, you know, to be here. 10 So, we really appreciate it. 11 Congratulations. 12 [Laughter.] 13 RUTHANNE VISNAUSKAS: And CPC is actually a 14 good complement, I think, to the extent, we were 15 talking a little bit about, how the majority of 16 multi-family owners, small owners, in the city 17 don't necessarily know who HPD is or what we do. 18 And, CPC is probably a little -- well, we 19 have sort of a big presence in really distressed 20 areas. 21 I think CPC, sort of, complements that by 22 actually being more, sort of, borough-wide, and not 23 just in -- probably more, not in distressed 24 areas -- 25 EDWARD JOSEPHSON: We were talking about the 1 frustration of, how do you get the word out to the 2 constituency that really needs this. 3 This is what we were, kind of, addressing. 4 ADAM SIRULNICK: I think that most people 5 know what HPD, and who HPD, is, but don't associate 6 HPD with being a source of financing. 7 RAPHAEL SISTERO (ph.): Right, the code 8 enforcements. 9 JOSEPH ROSENBERG: The code enforcements. 10 That's right. 11 RAPHAEL SISTERO (ph.): That's right. 12 And, you know, I mean, that's -- that's one 13 of the biggest challenges, I think, with the 14 agency getting its resources out to the right 15 people. 16 CPC can play, you know, a big role in that; 17 and has, historically, played a role in, sort of 18 finding small owners that need the financing, 19 underwriting whatever, sort of, permanent 20 market-rate debt that the properties can support. 21 And, then, you know, introducing them, and 22 connecting them, to HPD for subsidy that fills the 23 gap. 24 That's -- you know, that's sort of the 25 historic model that CPC grew up around, and I think 1 is -- you know, is -- continues to be the model 2 that drives what CPC does. And, you know, along 3 with, you know, a few -- some other things. 4 So, one of the things that -- that you know, 5 I want to do, now that I'm at CPC, is, really, sort 6 of, reenergize that part of CPC's business. 7 I think it's fair to say that CPC drifted 8 away from that during the boom years. 9 And, you know, now we need to, sort of, 10 refocus on that core-mission business that CPC has 11 done for so long; and, that really revolves around 12 providing debt financing to existing owners of 13 affordable housing, connecting them where necessary, 14 with HPD, to sort of leverage up what the -- what 15 subsidies can do. 16 So, you know, that's the -- that's the future 17 plan for -- you know, for CPC, is to -- is to really 18 reenergize and reinvigorate that part of -- the -- 19 or, of the company's business. 20 And I think, you know, at a time now, 21 where -- you know, there used to be lots of banks 22 out there that were -- that would provide, you know, 23 debt financing for small owners. 24 You know, the numbers of banks that are 25 willing to do anything these days is dwindling. 1 So, I think, you know, the -- sort of the 2 reason for CPC to be a big player in that market, is 3 more now, than it -- maybe it was during the boom 4 years, when money was easier to come by, and 5 easier to get financing. 6 SENATOR YOUNG: We had kind of a -- well, we 7 did have an interesting conversation earlier, about 8 energy efficiency, and ways to help incorporate 9 that into the design of a new build. 10 But, also, you know, do -- like, for example: 11 Do owners find it difficult to -- because, 12 obviously, there would be some cost savings there 13 if you're able to make your unit more energy 14 efficient. 15 Are there things that the State or the City 16 could do to help with that? 17 Or, do you have any ideas on that? 18 CHRISTOPHER ATHINEOS: And I know, like, 19 New York City, I guess the law that the City Council 20 and the Mayor passed, their green initiative, to get 21 rid of Number 6 fuel. 22 But, unfortunately, like, we have members 23 that have buildings in certain parts of the city, 24 in the Bronx, or Manhattan. 25 One of our members has a building right here 1 in the village, and, his grandfather built the 2 building. And, he was all ready to switch, from his 3 Number 6 oil to gas, and he found out that there's 4 no gas. They can't supply the amount of gas that he 5 needs. 6 SENATOR YOUNG: I've heard that, that that's 7 a problem. 8 CHRISTOPHER ATHINEOS: And, you know, he 9 called us, and complained. 10 You know, he said: How could they pass -- 11 how could the City pass a law like this, without, 12 you know, making sure the infrastructure was in 13 place? 14 So, I mean, he'll have to switch to, I guess, 15 a Number 2 fuel. But, you know, he was all excited 16 about gas, and being more green, and -- 17 So, from that perspective, I think it's 18 frustrating for a lot of owners. 19 AARON SIRULNICK: Another issue that came up 20 in our discussions at RSA, and at CHIP, is: Well, 21 for owners, like myself, who are going to embark 22 on a change of, 30, 40 of our boilers in the next 23 3 years, that's a tremendous, not only monetary 24 undertaking, time undertaking, but, to be told, or 25 hear -- and this is not on the City level, it's on 1 the State level -- that owners may not be eligible 2 for certain -- you know, rent incentives, or to do 3 so, because of the fact that the law is in place, 4 despite the fact the machinery and the equipment 5 that's being replaced may not have exceeded, or has 6 exceeded, its useful life. 7 So, where we want to be more energy 8 efficient, where owners want to participate in 9 local, city, state, programs, and federal 10 programs, sometimes the benefits don't outweigh 11 the effort. 12 And, we want to be green. We want to be 13 environmentally friendly. 14 We also have to be financially sound. 15 We can't make decisions just because those 16 who want to be green say you should do something. 17 We want to make decisions that are good for 18 our properties, good for our residents, but they 19 have to be good for our bottom line as well. 20 Someone -- some -- I don't believe Chris or 21 myself, or the people who we are in business with, 22 and we know who are -- who are real-estate people, 23 are not for profit. 24 I think that we all are here to make 25 reasonable expectations and returns on our 1 investment. 2 And, green is a wonderful investment. I 3 mean, we do it in our buildings, where we can, and 4 where there is some incentive, other than just 5 change a light bulb. And changing light bulbs are 6 very easy. 7 I mean, you have a large building, changing 8 light bulbs is also very costly. 9 And, they don't really -- the tenants don't 10 really benefit directly from the hallway light bulb 11 being changed. They, go, "Oh, wow, that's a new 12 fixture." 13 What tenants want, is to have some 14 incentive to do something inside their apartment. 15 What they don't want, is to pay for it. 16 And, we're stick in the middle, where we want 17 to be compliant, but we don't know where the cost 18 benefits are to participate. 19 And that's not -- I'm not trying to sound 20 insensitive to being green. I'm trying to be 21 realistic, too, which is important. 22 RAPHAEL SISTERO (ph.): Yeah, even -- I think 23 the -- you know, all of that makes sense. 24 And I think the biggest -- you know, the 25 biggest thing that the energy-efficiency discussion 1 has to focus on, is, doing things that drive down 2 operating costs, right, because that is what goes 3 directly to your bottom line; is, if, you know, 4 you're not -- if your cost to your fuel comes 5 down; if your building envelope is sealed so the 6 heat -- you know, you don't have to be, you know, 7 heating -- your boiler doesn't have to be running as 8 much. 9 Those kinds of things are things that I think 10 are the things that make the biggest impact on the 11 buildings. 12 And -- and may -- and they're also the ones 13 that are also happen to come with the added benefit 14 of being green. 15 But the reality is, that -- I've always felt, 16 like, if you do the energy-efficiency work properly, 17 you do it in a way, that, from my opinion -- not 18 that I want to be insensitive to the environment 19 either -- is the most important thing out of this, 20 which is, you do it in a way, that, over the long 21 run, allows us to, sort of, maintain the quality of 22 the housing infrastructure. 23 Right? 24 If you -- you know, if you're creating 25 programs and incentives for people to change 1 boilers, and to invest in building envelopes, to 2 keep the building envelopes tight so that you're 3 not losing heat through those things, you know, that 4 kind of stuff is also an investment in the -- in the 5 building itself, which, you know, is what we need to 6 do in order to be able to, sort of, maintain the 7 housing -- 8 JOSEPH ROSENBERG: That's a good point, 9 because I -- we have, in our programs, when an RFP 10 goes out for that new construction, right now, a 11 requirement that the building be as green as 12 possible. 13 And, it's like Raphael said, although there 14 might be more up-front costs when it's new 15 construction, that kind of sets the stage for 16 savings, ultimately; as opposed to waiting until 17 the use of the -- of the -- you know, building 18 system has deteriorated, and then having to replace 19 it. 20 EDWARD JOSEPHSON: If I could just chime in 21 for a second? 22 You know, this raises an important point; 23 which is, that, often, maybe too often, the source 24 of funding for building improvements tends to be, 25 get the tenants to pay for it, either through the 1 MCI Program, or, you know, [unintelligible], we're 2 going to discuss later. 3 And, you know, to some extent, that might be 4 appropriate, but -- but, when we're discussing 5 things like green initiatives, we have to also be 6 sensitive to not having a lot of green buildings 7 that are unaffordable to working families in the 8 city. 9 And, so, for example, you know, if you're 10 making an investment that reduces the landlord's 11 costs, and you're saving money that way, it's not 12 necessarily appropriate to then say: And, the 13 tenant should pay for it, so that they're getting 14 the cost savings at no investment to the landlord. 15 And, in MCIs, after the improvement's 16 completely paid off, the tenant is going to pay 17 forever, and it's just like a free lunch for the 18 owner. 19 And, you know, for the tenant's community, 20 that seems like the -- sort of, the balance is 21 struck too far away from the affordability. 22 CHRISTOPHER ATHINEOS: Well, I think yours -- 23 ADAM SIRULNICK: Well, probably for a 24 different roundtable, to discuss whether it's a free 25 ride. 1 But I -- 2 CHRISTOPHER ATHINEOS: I think, years ago, 3 I mean, for a lot of small owners, there was 4 always that option of: Do I go with the MCI and 5 pass it along to the tenants, or do I go with the 6 J-51 and get a tax abatement? 7 And, many years ago, sometimes, a lot of 8 owners would use the J-51 process. It wasn't, 9 maybe, necessarily passed along to the tenant. Or, 10 if there was a combination of the two, it would be a 11 little less of an offset onto the tenant. 12 But, now, the J-51 Program, if you -- I'm 13 just, you know, rattling off a number -- if you 14 spend $100,000, the J-51 schedule, they only, maybe, 15 will give you a $25,000 allowance, for a new boiler, 16 or a new roof. 17 So, owners say: Well, I'm going to spend 18 100,000, and, I'm only getting $25,000 benefit over 19 11 or 12 years? Not worth it. 20 It's not worth it. 21 So, you know, we'd always, like, look -- I 22 don't know who was in charge of changing the 23 schedule, but, you know, that certainly is, you 24 know, something that, you know, lightens the burden 25 on the tenants. 1 But, you know -- 2 RUTHANNE VISNAUSKAS: Yeah, I mean, it's 3 another thing that I think we were going to talk 4 about today, which is, sort of, efficiency of 5 government programs. 6 And, J-51 is certainly one of the ones that 7 we've been looking at. 8 It expired this past December; so, we're in 9 the process of looking at it through just that lens, 10 and, sort of, updating and correcting it, to make 11 sure we're -- we have, sort of, the most 12 efficient -- 13 JOSEPH ROSENBERG: And you're referring to 14 the certified reasonable cost schedule, which, 15 although -- 16 RUTHANNE VISNAUSKAS: Yes -- 17 JOSEPH ROSENBERG: -- which, although is not 18 statutory, is governed by the rules and regs, and 19 hasn't been changed since the 1990s. 20 So, that's what we're looking at very 21 closely, in sync with whatever decisions are made on 22 what the ultimate J-51 bill will look like. 23 SENATOR YOUNG: So, that possibly may be 24 included in the bill language -- 25 JOSEPH ROSENBERG: It -- 1 SENATOR YOUNG: -- even though it's 2 regulatory right now? 3 JOSEPH ROSENBERG: It probably wouldn't be in 4 the -- this is something we're looking at. We 5 don't -- it probably wouldn't be incorporated into 6 the statute, but it would be done hand in hand. 7 I mean, it's -- we're looking -- we're 8 acutely aware that it hasn't been changed since 9 19- -- the mid-'90s. We're wondering how 10 effective it is. 11 Are there certain items that should be in, 12 certain items not in. 13 So, we're doing a really in-depth analysis of 14 how the CRC can actually reflect what is needed in 15 the year 2012. 16 ADAM SIRULNICK: We'd be very happy to help 17 participate in that. 18 RAPHAEL SISTERO (ph.): Look -- 19 RUTHANNE VISNAUSKAS: Yeah, we've met with -- 20 RAPHAEL SISTERO (ph.): It's -- 21 JOSEPH ROSENBERG: Duly note, yes. 22 RUTHANNE VISNAUSKAS: -- we're in -- 23 RAPHAEL SISTERO (ph.): It's -- to be a 24 little bit more direct, okay, it's impossible to 25 look at that schedule and think that it actually is 1 kept up with the cost of doing the things that the 2 J-51 Program was intended to do. 3 So, you know, it just -- it just is -- 4 AARON SIRULNICK: Well, there's just 5 disincentive. 6 There's just no incentive, or very little 7 incentive -- 8 RAPHAEL SISTERO (ph.): To do it; right? 9 AARON SIRULNICK: -- for any of us -- small 10 property owner, large property owner -- to 11 participate. 12 RAPHAEL SISTERO (ph.): Right. 13 And -- and -- then, that's part of the reason 14 why applications have been down, and, you know, 15 people are not -- it's not the only reason, but it's 16 part of the reason, why it hasn't been done. 17 And I think, look, I agree with your point 18 about J-51. I think, that, you know, fortunately, 19 or unfortunately, depending on how you think about 20 it, we -- you know, programs get put in place 21 decades ago. And, sometimes, as an industry, we 22 lose sight of why the program was originally set up. 23 The J-51 Program was originally set up at a 24 time in which the City was losing population 25 dramatically, the neighborhoods were 1 deteriorating. And, it was set up to create an 2 incentive, and an assistance, for owners to invest 3 in their buildings, and to not walk away from 4 their buildings. 5 And, that's the reason the J-51 Program was 6 put into place. 7 And, it's gotten caught up in a whole bunch 8 of, you know, other stuff. 9 And I think that -- you know, that may be 10 fine for today's J-51 Program, but, I think we can't 11 lose sight of the fact that, you know, the housing 12 infrastructure that the city has is just as critical 13 as the roads and the bridges, because, if we don't 14 have good housing stock, people aren't going to want 15 to live here. 16 And, we need to -- we need of be sensitive to 17 that fact, as a city. And, I think we need to -- to 18 recognize that, you know, owners are -- are -- you 19 know, are trying to -- you know, the vast majority 20 of owners are trying to do the right thing. 21 And, the numbers don't always add up, 22 especially for small owners. 23 And, the J-51 Program is a great way to be 24 able to incentivize owners, and to provide 25 assistance to owners, to do things that are 1 necessary to -- invest in the underlying housing 2 infrastructure. 3 And, you know, I get the point about MCIs, 4 and all of that, and I'm sensitive it to. 5 I think it has to be talked about, and dealt 6 with, but, it benefits nobody, for our buildings 7 to deteriorate and our housing stock to deteriorate, 8 and for our neighborhoods to, sort of, really 9 flounder the way they did in the '70s and '80s. 10 That's -- that's nobody's -- to nobody's 11 benefit. Whether you're an owner or a tenant, a 12 financier, or a City agency, elected official, 13 nobody wants to see that. 14 And, so, I think that's -- to me, that's the 15 common ground to build on. 16 And I think -- you know, personally, think 17 J-51 has been one of the most successful programs 18 that we've had in the city over the years. It's, 19 now, needs to be rethought about, and updated. 20 And my hope, you know, now being outside of 21 government, is -- is that we can get together around 22 the table and talk about the reason why it was put 23 in place, and use that as the common agenda to, sort 24 of, create the new -- the new J-51, because, you 25 know, we need it. 1 And we -- and we're not going to get it -- in 2 this day and age, and in this economy, we're not 3 going get some great new, you know, government 4 program to dump boat loads of direct capital money 5 into investing in the housing infrastructure. 6 So, we've got to find another -- another way 7 to incentivize private-sector investment, which then 8 leverages up the investment that government 9 makes -- 10 JOSEPH ROSENBERG: And just on that for a 11 second, yeah, the J-51 program started in 1955. 12 I mean, how much has the world, let alone the 13 city of New York, changed since 1955? 14 You know, we've talked about how the 15 8(a) Program, perhaps, was used for a specific 16 purpose several years ago, more than it is now, 17 but, it's subtle. 18 But, J-51, this is -- we need a program for, 19 you know, the year 2012, not 1955. 20 There have been modifications, but they're 21 not -- they have not been substantive. 22 EDWARD JOSEPHSON: You know, and to pick up 23 on that point, you know, my understanding is, that 24 the J-51 program is a $257 million program. 25 And, the irony of -- of, you know, these 1 tax-abatement programs is, is if the Senate were 2 appropriating $257 million for housing, you can bet 3 that you would be, you know, scrutinizing how to 4 target it in the most efficient possible way. 5 But when it's a tax program, you know, it's 6 tended to just kind of roll over, year by year, 7 without any thought about, you know, where should 8 this money really be going. 9 And so, while, you know, I agree with 10 Raphael's comments about, you know, how 11 improvements are possible, the question is, you 12 know: Have we really thought about, where is this 13 money going? 14 Should it be targeted to distressed 15 neighborhoods? 16 Should it be targeted to small owners, as 17 opposed to big owners? 18 Should it go to, you know, certain parts of 19 the city? 20 Should it go to preservation programs? 21 I'm told that the 257 million is greater than 22 HPD's code-enforcement budget. 23 So, I mean, it's a big-scale thing. 24 And, so, you know, what I would say here, is, 25 not to advocate any particular use of this money, 1 but, that I know that people sitting at this table 2 could probably think of better ways of spending it 3 than what's being spent right now. 4 And that's the discussion that needs to 5 happen, and it's not happened in a long, long time. 6 ADAM SIRULNICK: To your point before, about, 7 whether this should -- owners should look at the 8 only reason to put money into the building, should 9 not be to -- or, on the back of the tenant; and I 10 agree with that. 11 I think that the bigger issue, and as Chris 12 pointed out, is that, laws, whether they be local 13 or statewide, are oftentimes passed with less than 14 all the information available. 15 And, hearings are great, but they don't 16 always accomplish, as you know, everything. 17 And, then, putting a law into effect, to 18 require property owners to change to a different 19 grade of fuel over a certain period of time, and in 20 a very short period of time, without accounting for 21 the infrastructure, without accounting for the 22 absolute economic hardship that small property 23 owners, or any property owner, would have, putting 24 the tenant side apart; putting that MCI component 25 separate -- to me, was putting a lot of effort to be 1 very green, but little effort into thinking: How are 2 we going to, you know, put this through, and make it 3 work? 4 So, where I'm going to put ahead a 5 significant amount of money, and I'm not borrowing 6 the money, I'm not going to HPD for the money -- 7 Although, at 3 percent, I may. 8 -- and, I'm not going to CPC -- 9 Although I may, now that I see Raphael, and 10 he seems like a nice guy, and he wants to lend 11 money. 12 -- but the -- I'm going into my cash flow. 13 To go into cash flow is a significant 14 decision that we make in our business, over a policy 15 that I think was not well thought out. And, it was 16 done very quickly, at the Mayor's behest, to be very 17 green; to be very energy- and environmentally 18 friendly. 19 But the reality is, is that it wasn't well 20 thought out. It forced a lot of people who may 21 have, in the past five years, replaced their 22 heating-plan systems. 23 So, now, the five years, those boilers and 24 machinery are not -- have not exceeded their useful 25 life, but they have to change it again, for what 1 reason, whatsoever, other than, the law says you 2 have to do it. 3 It's, to me, backwards; but, we have to 4 comply with the law. 5 If I were a small property owner, I'd be 6 really upset. 7 If I was this guy's friend in 8 Greenwich Village, who's really eager to go do this, 9 and he may save a significant amount of money on his 10 operating side -- forget the tenant side, we have 11 the operation and revenue side -- he can't even do 12 it. It's not available to him. 13 Yet, the law's going to require him to do 14 something, maybe not what he wants to do. 15 But, that's what we have to work on; we have 16 to work on creating laws that really work. Not 17 just that sound great, and look good on the front 18 page of "The Times." 19 EDWARD JOSEPHSON: And your point about the 20 costs of J-51 is interesting. 21 I mean, as much as the program needs to be 22 changed, and, of course, it is an expensive one, I 23 think people shouldn't lose sight of the fact that 24 J-51, to a great extent, is the basis by which a lot 25 of owners are able to provide new boilers and 1 heating systems, to ensure that the building is not 2 deteriorating, and that the tenants are able to get 3 heat and hot water over the winter. 4 So, it's got -- it's got a very important 5 rehab aspect, and it's been very important in 6 ensuring that neighborhoods don't deteriorate 7 [unintelligible] -- 8 AARON SIRULNICK: We participated in a 9 J-51 program. Up until the recent 10 "Roberts" decision, we were tremendous 11 participants in the J-51 Program for every 12 capital-improvement project that we did in our 13 buildings, where we were qualified. 14 Where we were qualified, we participated in 15 it. 16 It wasn't -- and I agree, we need to relook 17 at this cost that we were recouping, and the time 18 frame in which we were recouping it. But, we fully 19 agreed that this program works, and we participated 20 in it. 21 And, we'd like to continue to participate in 22 it, once, you know, it takes change. 23 JOSEPH ROSENBERG: And there's a benefit for 24 tenants in J-51. It's not substantial, but, a 25 certain percentage of the MCIs -- 1 AARON SIRULNICK: Offset. 2 JOSEPH ROSENBERG: -- as you know, is offset, 3 by J-51. 4 AARON SIRULNICK: But I'm not even looking at 5 the income side. I'm just looking at the incentive 6 to improve on the properties. 7 As Raphael said, if you look at the 8 late '70s, and the beginning of the '80s, how many 9 properties went rem in the city of New York, and 10 property owners would just -- couldn't afford, no 11 matter they would want to do, had to walk away from 12 their properties? 13 That is not the same anymore. I think the 14 numbers, obviously, speak for themselves. You 15 would find that the rem properties, or the 16 properties the City is taking over, are minuscule, 17 compared to what they were in the late '70s. And, 18 that is because of programs like J-51, and 19 programs like your 8(a) Program, where you are 20 incentivizing the people to borrow and improve. 21 And I'm not looking at the income side. 22 EDWARD JOSEPHSON: Right, and all I'm say is, 23 you know, if you had a limitless source of money, 24 you'd want all the buildings to improve and use 25 J-51. 1 But, as it is, you know, if you have building 2 on Park Avenue, you know, is that really -- you 3 know, they prob- -- they might -- they'd probably 4 improve themselves anyway without the J-51 5 incentives. 6 So, you're really giving the incentives to 7 the people that need the most incentive in a city 8 where you also have east New York and south Jamaica 9 and all these distressed neighborhoods. 10 And, you know, maybe, maybe not, but that's 11 the discussion that needs to happen. 12 RAPHAEL SISTERO (ph.): It's a completely 13 fair point. That's right. 14 CHRISTOPHER ATHINEOS: I think, also, in the 15 J-51 Program, when they have the schedule, like, it 16 might say, a new boiler, but, a lot of times, the 17 costs -- the associated costs are not included. 18 I just went to put a new roof on. It was a 19 $100,000 roof. 20 And, when you talk about going green, we 21 wanted to rip off the existing many layers of 22 roofs and go right to the deck; rip that up and 23 put insulation in there, on a six-story building in 24 Brooklyn. 25 And when I found out that this wasn't a 1 new-roof project now, it was an asbestos-abatement 2 project, because, the tar, although it's not 3 airborne, it's not pipe insulation, but they 4 consider it an asbestos-abatement project, the cost 5 of that was more than the roof, because you have to 6 use union abatement companies. 7 And so we said: You know what? Just forget 8 it. I'm just going to put another roof on top of 9 the old one, and, you know, maybe I'll let my son 10 worry about it in 30 years from now. 11 But, it's unfortunate, because, you know, 12 there is, maybe, savings. There's, you know, 13 improving the building. 14 And, then, I know we talked about associated 15 costs. 16 A lot of times, when the boilers -- now, 17 this guy in Greenwich Village wanted to change his 18 boiler from Number 6 to gas. He found out, not only 19 is there not any gas available in that neighborhood, 20 but, he has a 21-story building. 21 He said, that, now, under the new building 22 code, we have to reline the chimney. And they 23 cost -- it costs $10,000 a floor, because the gas 24 burns at a different temperature than oil. 25 So he said, "I would have to reline the 1 chimney too, at $10,000 a floor." 2 He said, "Forget it." 3 You know, it's not -- so, all these, you 4 know, associated costs sometimes are not factored 5 into, maybe an MCI, or a J-51. And they really 6 should be. 7 The -- I mean, as a small -- as a small 8 owner, if I go to take a loan for the $100,000 roof, 9 you know, even if I don't avail myself of the 10 J-51 Program, just use the MCI program, the cost of 11 borrowing the money is not included in the MCI. 12 So there are a lot of -- 13 AARON SIRULNICK: We met with the 14 Mayor's Office, and their -- the DEP and the DOB, 15 for months before the enaction -- creation of 16 the -- enactment of the law. 17 Nobody wants to listen to reason. They 18 want you to follow the Mayor's lead, and be green. 19 And that was the law, and that's how it was 20 created, and it went through, and everyone was 21 happy, except the people who have to spend the money 22 to do it. 23 JOSEPH ROSENBERG: RuthAnne, just, we have to 24 jump in and defend the Mayor, I believe; right? 25 RUTHANNE VISNAUSKAS: That's your -- 1 ADAM SIRULNICK: No, the Mayor's initiative 2 was a good initiative. 3 RUTHANNE VISNAUSKAS: Yes, it was. 4 AARON SIRULNICK: How the law became the 5 current form was not thought out. 6 The initiative is great. We support the 7 Mayor's initiative. 8 We don't support the current form of 9 requirements. It's just -- there's no incentive 10 to do it. And the time frame to do it is 11 unrealistic, considering the fact I just said 12 before, many property owners, including small 13 property owners, may have recently done work on 14 their heating-plant system, and now they're forced 15 to do it again. 16 CHRISTOPHER ATHINEOS: I think the 17 unfortunate thing is, when they -- when the City 18 passes laws, and we can, you know, blame the 19 City Council, maybe not so much the Mayor, but, they 20 don't take into consideration the people in the 21 trenches, like us, the people at the agencies, the 22 lenders, the owners. 23 And, although there are many good 24 intentions, like the "lead paint" law, the green 25 initiative, the people that sit in the City Council 1 chamber, you know, just love to pass the laws. 2 I mean, everyone would like to drive a car as 3 a safe as President Obama drives, but, the cost of 4 it is just not, you know, reasonable. 5 So, I think, at these City hearings, you 6 know, I wish, as a small owner, and someone who 7 attend a lot of the hearings, you know, I wish the 8 City Council members would be better informed on how 9 to pay for this. 10 Or, they should require, you know, people 11 from the City agencies, or small businesses, to come 12 and figure out: How are we going to pay for this? 13 I mean, it's not fair, maybe to -- for the 14 tenants. It's not fair for the owners. 15 And maybe we need to target, you know, 16 certain areas. 17 I mean, especially the "lead paint" law, 18 although, maybe it's not as discussed as much now as 19 it was in the past, that was terrible for the small 20 owner who has no ability to pay for these, you know, 21 huge costs. 22 And, it's irrelevant. It doesn't matter 23 how -- if the apartment could be as good shape as 24 this room is. You know, the walls could be perfect, 25 but, you have to abate, you know, paint on friction 1 services, and impact surfaces. 2 So, you have to go and change the door 3 frames, even though, if that's -- if that's lead 4 paint, I mean, it just doesn't make sense. 5 It just doesn't make sense. 6 AARON SIRULNICK: I think -- in defense of 7 HPD, I think that [unintelligible], when he was 8 there, one of the great things that he did, when -- 9 is, the language was rewritten -- 10 RAPHAEL SISTERO (ph.): He passed the J-51 11 law in 1952, too, by the way. 12 ADAM SIRULNICK: -- but, I think that -- 13 JOSEPH ROSENBERG: Well, he'd would love 14 that; right? 15 RAPHAEL SISTERO (ph.): I told him that the 16 other day. 17 JOSEPH ROSENBERG: He's not dead yet. 18 AARON SIRULNICK: -- [unintelligible] more 19 appropriate language changes in the "lead" law, was 20 just decreasing the age by one year. 21 JOSEPH ROSENBERG: Yes. Yes. 22 AARON SIRULNICK: And, what -- what did that 23 show? 24 It showed that the law was correct. 25 But, it also showed that there is -- there 1 are eyes on that side of the table as well, who 2 were very well aware that the decreasing cases -- 3 the decrease in lead-paint-poisoning cases was so 4 overwhelming, that the age that they had initially 5 set the law at was prohibitive; and it was cost 6 prohibitive. 7 And just by lowering the age helped small 8 property owners tremendously. 9 So, you know, I think that these things are 10 goals that we should set, to continue with the -- 11 you know, your agencies. 12 RAPHAEL SISTERO (ph.): Yeah, but I -- you 13 know, I think, just as a -- as a, sort of a broad 14 issue, and I think -- you know, I know the agency 15 finds this in its -- in its various enforcement 16 programs, owners of small property -- 17 And, I'm not even talking about small owners. 18 Right? 19 I'm not even just talking about, owners that 20 only own one or two properties. 21 You can own a lot of small property. 22 -- the small properties, in particular, in 23 the outer-borough neighborhoods, by far, is the 24 toughest business in real estate, in the city. It's 25 the hardest business to, sort of, figure out how you 1 make economic -- it's -- it's one of the reasons 2 why it's the vast majority of buildings that fall 3 into, you know, the alternative-enforcement program, 4 and other programs, because it's so hard to figure 5 out how to do it. 6 And -- and, you know, I think, to -- there 7 are, clearly, laws that get passed, that don't 8 really -- that don't take that -- that into account; 9 that the vast majority of the housing stock in the 10 city is outside of -- is outside of Manhattan. 11 And the property types are different, and 12 the building needs are different, and the owners 13 are different. 14 And I -- you know, that's, clearly, one of 15 the most complicated issues for the New York City 16 housing business, is: How do you pass laws for 17 the five boroughs of New York, where the housing 18 stock is so vastly different across the city? 19 And I think -- I -- you know, I happen to 20 think it's a completely fair point, without blaming 21 anybody, that we just -- we -- and I say "we," even 22 though I'm not in government anymore -- probably 23 haven't gotten that as right as we wish we could 24 have over the last 30 years. I mean, it's been 25 that way for a while. 1 And, you know, I don't really have any 2 answers to it, but, it is -- it's, clearly, from all 3 my years, one of the most, if not the most, 4 difficult problem, to, sort of, think about, how 5 to -- how to deal with -- 6 SENATOR YOUNG: But, yeah, and I think that's 7 why discussions, such as today, are very important, 8 because we can have these face-to-face 9 conversations about, programs, proposed 10 legislation, what the real impact is, what are the 11 practical applications, what are the barriers, 12 what are the solutions. 13 And, so, that's really what this is about. 14 We have something in Albany called "the law 15 of unintended consequences"; where, maybe you strive 16 to fix a problem over here, but you create ten more 17 over here. 18 And, unfortunately, that is an outcome that 19 we see sometimes in government. 20 So, the key is, getting information, 21 listening, and coming up with a product that 22 works. 23 And, so, that's why today is good, too, 24 because we want to have these discussions. 25 You know, we're going to work to renew the 1 J-51 Program this year, and -- on the State level. 2 And, so, it's good to hear people give input 3 about, what they think works, and what doesn't work, 4 and, how we can make the program even better. 5 Because we want to have those -- those 6 types of opportunities for input. 7 So, on the J-51, I mean, we might as well 8 segue. 9 We've talked about MCI a little bit, but, you 10 know, does anyone want to expand on that? 11 EDWARD JOSEPHSON: Well, let me address, sort 12 of, the MCI individual apartment. 13 I don't know, is that where we are on the 14 agenda? 15 SENATOR YOUNG: Talk about some of the 16 programs, and how they work. 17 EDWARD JOSEPHSON: Yeah, because, you know -- 18 with respect to Upstate and the Downstate, you know, 19 like, the City rent regulations are, you know, 20 described as "a forest in the thick of things." 21 They're complex. 22 And -- and I'm not sure everyone 23 appreciates the vast difference between the 24 MCI Program and the Individual Apartment Program. 25 And -- and, it's really vast, because the MCI 1 program, and -- 2 You know, I know I'll get disagreement from 3 the other side of the table in a minute. 4 -- but, is targeted at structural 5 improvements, like roofs and boilers, and things 6 that really, arguably, benefit the housing stock. 7 And, they're also very heavily regulated and 8 supervised by DHCR. 9 Every application has to be approved. It's 10 scrutinized. 11 And it's at a -- you know, often, a burden to 12 tenants, but a relatively controlled rent 13 increase. 14 In total contrast, the Individual Apartment 15 Program is, generally, cosmetic improvements to 16 individual apartments. So, instead of boilers and 17 roofs, you're talking about, new kitchen 18 cabinets, and bathroom tiles. 19 And, so, what you're getting is, very 20 superficial improvements of dubious necessity, and 21 huge, enormous rent increases; typically, 22 hundreds of dollars a month on an apartment. 23 And -- and, in contrast to the MCI program, 24 almost totally unsupervised by the agency, because 25 there's no application process, there's no approval 1 process. 2 The owners go and do it. And, the cost may 3 be inflated, the work may never have been done. 4 And, unless the tenant is particularly savvy, no one 5 ever finds out. 6 And, so, what we have found, you know, on the 7 tenant side, is that, you know, since deregulation 8 was put into the rent-stabilization law, 100,000 or 9 more apartments have leaked out of the system. 10 And, I would think, that, probably most of 11 them were pushed out through the abuse of the 12 Individual Apartment Improvement Program. 13 AARON SIRULNICK: The use, or abuse? 14 EDWARD JOSEPHSON: The -- well, the -- the -- 15 both. 16 Both. 17 AARON SIRULNICK: Oh! 18 EDWARD JOSEPHSON: Because I would say, even 19 when it's used properly -- I mean, there's two 20 different problems here. 21 One is, you know, perfectly honest owners 22 doing exactly what they're supposed to do; and, yet, 23 I would say a very dubious benefit to the housing 24 stock, having your kitchen cabinets have an extra 25 cost of $200 a month. 1 And then you have, added to that, the vast 2 widespread abuse of landlords who, either, don't do 3 the work and inflate the costs; use their cousin's 4 business to pad the bills; 5 And, you know, on the tenant side, we've seen 6 it all. You know, owners who use the same receipt 7 for ten different apartments in the building. 8 People who write a check to the contractor, and then 9 half the fee comes back, you know, gets deposited 10 in the owner's account. 11 And -- and DHCR is -- the procedures are not 12 set up to have them watching the store. 13 And, so, you know, probably the number one 14 thing on the tenant's agenda, is that, if we're not 15 going see another 100,000 apartments leak out of 16 the rent-stabilization stock, the State Legislature 17 needs to pay attention to this. 18 I mean, that's -- you know, and that's our 19 ask. That's why I'm here. 20 CHRISTOPHER ATHINEOS: Well, I have to say, I 21 think we should get rid of the MCIs, the 22 individual apartment improvements, and all of it. 23 When we cannot deregulate all of the 24 apartments, I think everyone should be paying a 25 fair rent. 1 You know, I mean, I think it's -- that's the 2 thing. I mean, that's the whole thing for us. I 3 mean, it's just unfair that there are people in 4 there paying a lot less than they can afford -- a 5 lot less than they should, that can afford a lot 6 more. 7 And -- I mean, a lot of the things you said, 8 I can understand, and sympathize. And, you know, I 9 don't condone any illegal things that may be 10 mentioned, but, first of all, the individual 11 apartment improvements, unless the tenant -- if 12 there's a tenant in occupancy, unless they consent 13 to what you call "cosmetic improvements," they 14 don't have to agree to it. 15 So, these -- these don't affect any tenants 16 in place. 17 EDWARD JOSEPHSON: That's correct. 18 CHRISTOPHER ATHINEOS: On a vacant 19 apartment -- on a -- in a -- in a vacant apartment 20 in a building that the owner owns -- this is his 21 building -- he's entitled to improve his building. 22 And I would argue that they're not cosmetic. 23 "Cosmetic" -- what DHCA defines as 24 "cosmetic," I think is, maybe a paint job, maybe 25 sanding the floors. Something like that. 1 But, when a plumber -- when we put in a new 2 kitchen, it's not just hanging cabinets on the 3 wall. It's putting new plumbing in the apartment, 4 connecting the risers, replacing galvanized 5 pipes that are, this big [indicating]. But, 6 because of the deterioration of the pipe, they're 7 like, this big [indicating]. 8 So -- I mean, I wouldn't consider that 9 cosmetic. A lot of times, it could be rewiring 10 the apartment. You know, if you do a new bathroom. 11 I mean, the bathroom alone, the plumber could 12 charge us up to $10,000 on a bathroom. 13 I mean, you know, a bathroom isn't just going 14 to Home Depot, and buying a new toilet and a tub for 15 a few hundred dollars. I mean, the price of 16 copper and precious metals have skyrocketed, as I'm 17 sure you can, you know, see. 18 So -- I mean, I think you have to be 19 sensitive to that. 20 I mean, no one likes to see on the news -- 21 certainly, I, as a responsible property owner, you 22 see -- every once in a while, you'll see on the 23 news, and HPD sees it, you know, someone's ceiling 24 is caving in, and there's water -- you know, it's 25 "raining" every time they want to -- the neighbor 1 upstair takes a shower. 2 Well, a lot of that is because these 3 buildings have been neglected. 4 So -- when we put in a new kitchen or a new 5 bathroom, it's not just the cabinets, or the 6 fixtures, the toilet, the tub. It's all the 7 plumbing, and everything that goes with it. 8 So, you know -- and these are on vacant 9 apartments, so it doesn't necessarily affect someone 10 that's in place. 11 And I would submit, that anyone that goes to 12 rent that apartment, would love to be in a nice, you 13 know, new bathroom, or new kitchen. And, there's no 14 obligation on their -- 15 EDWARD JOSEPHSON: If they could afford it. 16 CHRISTOPHER ATHINEOS: -- there's no 17 obligation on their part to rent it, that's true. 18 And, if they could afford it. 19 And, you know, the problem, I -- you know, we 20 would say, is that there are plenty of low-rent 21 apartments out there. The problem is, you have 22 upper-income people living in them. 23 And, so -- 24 AARON SIRULNICK: I think Raphael said it 25 well before, and I touched [unintelligible] on what 1 you just said: Firstly, I think that the vast 2 majority of owners are operating their properties 3 properly, and legally. 4 And I would venture to say, that if -- people 5 who you may be referring to, we would not support as 6 members of our organizations, and we would certainly 7 not condone any of their activities. 8 That being said, in order to entice people to 9 live in this city, and not move to Hoboken, you 10 know, Pennsylvania, Connecticut, and so forth, you 11 must be competitive with the product you're 12 offering. 13 And, if you want to rent apartments with 14 kitchens from 1947, ands bathrooms from the same 15 era, and you're willing to accept a rent that is 16 substantially below market, that is the owner's 17 decision to make. 18 This is -- you know, this is private 19 property, subject to lease. 20 If you would like to entice and encourage 21 people to move into the city, you must be 22 competitive with what you're offering, and you have 23 to offer new kitchens, new bathrooms, new 24 electric, new plumbing. 25 You can't offer a view. That's the only 1 thing none of us can solve here. But, we can 2 certainly offer a better apartment, and a better 3 quality of life within our apartment buildings. 4 And that's what incentive is. 5 And, I would disagree with you that the 6 Individual Apartment Improvement Program isn't 7 monitored. 8 It is monitored by the vast majority of 9 above-board owners who are responsible to operate 10 real property in the city. 11 And, the majority of us do exactly what we're 12 supposed to do. 13 RAPHAEL SISTERO (ph.): So -- I mean, I think 14 it's -- I think it's very hard to talk about 15 individual pieces of the rent-regulation system in 16 isolation, you know, because they -- because they -- 17 they work together. 18 You know, I think -- I, for one, you know, 19 would never have -- would -- if -- if it were -- if 20 it had been up to me, I never would have designed 21 the system that we have. 22 On the other hand, there are a million 23 units in it. 24 So I think the idea of just letting it go, or 25 turning it off instantly, I think is a pretty scary 1 one, to know what would actually happen to the 2 market if that were to happen. 3 And I understand all the argument on both 4 sides. I just -- you know, for one, I'm not sure -- 5 I'm not quite sure do how you do that. 6 I think, you can't, in -- you know, in 7 defense of the tenant perspective, I think you can't 8 look just at the Individual Apartment Improvement 9 Program, and, without recognizing, that, when an 10 apartment vacates, not only are you able to go in 11 freely, totally, completely, at the owner's 12 discretion, private property, to invest in their 13 property, and make that improvement, and get the 14 individual apartment increase. 15 But, you also get a 20 percent automatic 16 vacancy allowance, all of which is contingent upon 17 the market bearing any of those rents. 18 Right? 19 So -- you know, and this is one of the things 20 that nobody ever talks about when it comes to the 21 whole rent-regulation debate; which is, again, going 22 back to my point about the outer boroughs. You 23 know, most apartment units in most outer-borough 24 neighborhoods, the market rent on those units 25 doesn't anywhere approach the deregulation 1 threshold. 2 AARON SIRULNICK: That's right. 3 JOSEPH ROSENBERG: Yes, and contract versus 4 legal aid. 5 RAPHAEL SISTERO (ph.): So -- so, the 6 reason -- you know, the reason that owners are -- 7 you know, are -- where buildings are, you know, 8 with ceilings falling in, is partly because there 9 are -- like there is in any industry, there are bad 10 actors in the marketplace. 11 But part of it is the market rents. You 12 know, there are buildings out there, especially 13 smaller buildings, where you're doing the right 14 things, you're trying to keep up, you're trying to 15 do the right thing. The rent does not meet the cost 16 to operate a building. 17 And, so, the third thing I would say, is, I 18 think you have to recognize, that to keep an 19 apartment -- to keep the lights on in an apartment 20 building in this city costs, $500 a month, $600 a 21 month. Something like that. 22 Right? 23 That -- just, that, if you were to say no 24 owner can charge more than $600 a month, because 25 that's what it costs to keep the lights on, and, 1 we're going to take profit out the -- capitalism out 2 of the real-estate market, the vast majority of 3 low-income working families in the city can't even 4 afford that $600-a-month rent. 5 So -- you know, the rent-regulation system, 6 in and of itself, is never going to be a solution to 7 the affordable-housing problem in our city. 8 And I think the -- the -- you know, the 9 issues around affordable housing and rent 10 regulation, way too often, are confused. 11 Personally, my own view on this, is that, if 12 I were, you know, king for a day, I would flip the 13 two. 14 I would -- I would provide the quicker, 15 deeper incentive that the individual apartment 16 increase provides. I would provide that for major 17 capital systems, and, I would provide the longer 18 term, you know, for the individual apartment 19 increases; because, I fundamentally believe, as I 20 said before, that the investment that owners 21 really -- that we want owners to make is in the 22 infrastructure in the building. 23 AARON SIRULNICK: Say that again? 24 I think you contradicted yourself. 25 RAPHAEL SISTERO (ph.): I probably did. 1 Probably more than once. 2 AARON SIRULNICK: No, only at the last part. 3 You were right -- I was with you, right until 4 the part -- 5 RAPHAEL SISTERO (ph.): Give the individual 6 apartment incentive. 7 AARON SIRULNICK: On the flip part. 8 RAPHAEL SISTERO (ph.): Reverse them. 9 Reverse them, the incentives. 10 RUTHANNE VISNAUSKAS: In terms of the 11 amortization. 12 RAPHAEL SISTERO (ph.): In terms of the 13 amortization. 14 AARON SIRULNICK: So, the roof, the boiler, 15 the elevator, we'd get the 1/60th. 16 RAPHAEL SISTERO (ph.): The one -- right, 17 which used to -- I was going to say, the 1/40th; 18 now, is 1/60th. 19 AARON SIRULNICK: And the cabinets would have 20 a finite period of collection? 21 RAPHAEL SISTERO (ph.): That would be the 22 one, whatever the -- 23 JOSEPH ROSENBERG: 1/84th. 24 RUTHANNE VISNAUSKAS: 1/84th. 25 JOSEPH ROSENBERG: The 1/84th, yeah. 1 RAPHAEL SISTERO (ph.): Right. 2 That's right. 3 That -- just -- just because, I think, if you 4 were to, you know, from a public perspective, as 5 much as I actually agree with what you said about 6 cabinets and kitchens and floors, I actually 7 don't think those are dubious improvements. 8 I've seen plenty of really crappy and 9 rotten -- excuse me for my language -- kitchen 10 cabinets, and kitchens and bathroom floors, that 11 people are living in, that they shouldn't have to 12 live in. 13 I still think the roof and the boiler and the 14 building envelope is a -- is an investment that we 15 would want to incentivize more than -- than the 16 interior. 17 So -- but, you know what? It's a tough, it's 18 a tough debate. 19 So -- 20 SENATOR YOUNG: Very interesting. 21 So, there's some other questions that we 22 wanted to talk about, and one has to do with -- I 23 want to get into this a little bit: The recent 24 federal cuts to New York's housing programs. 25 And, I think Joe could probably discuss 1 that -- 2 JOSEPH ROSENBERG: Yeah. 3 SENATOR YOUNG: -- and what ramifications 4 are, because I think it's pretty scary. 5 JOSEPH ROSENBERG: Yeah, we have a 58 percent 6 cut in our home funds over next 2 years, which is 7 a cut of $65 million. 8 That's an astounding and huge amount of 9 money. The kind of cut we haven't seen in -- in, 10 probably, decades. 11 So, it's a new day, and we have to learn how 12 to live with this. 13 This is -- we don't expect this to compromise 14 our new-housing marketplace plan. 15 How many units are we at, RuthAnne? 16 RUTHANNE VISNAUSKAS: Right about, a hundred 17 and -- well, almost 130 -- 127,000 units? 18 JOSEPH ROSENBERG: Out of 165,000. But, it's 19 going to be quite a challenge, and it puts us in a 20 situation we haven't been before. 21 So, the cuts are not only for the home 22 moneys, which, basically, is the low-income 23 component of the federal amount, but also the CDBG. 24 So, it's kind of a new world for us, in that 25 regard. 1 So, it's -- it's alarming. 2 You know, we have a lot of programs, but, 3 this is going to be something that we really have to 4 wrestle with. 5 RUTHANNE VISNAUSKAS: Yeah. And, then, we 6 predominantly use our home funds to produce new 7 construction, and, primarily, low-income rental 8 housing; as well as we do a lesser amount, but just, 9 sort of, a consistent amount of supportive housing 10 for formerly homeless and mentally ill. 11 So, it really hits those two areas 12 disproportionately: new construction, and supportive 13 housing. 14 So, like I just said, this $65 million is 15 a -- we generally do, for those types of yields, 16 loans that might be three to eight million 17 dollars, sort of, on average. 18 So, to cut 65 million -- that's the federal 19 fiscal '12 cuts -- so, to have a -- you know, in a 20 single year, a $65 million cut, that impacts a 21 large number of projects that can't go forward. 22 So, it's a -- it's a significant impact for 23 us. 24 JOSEPH ROSENBERG: And the bulk of the 25 units done thus far, under the housing plan, about 1 126,000, over 100,000 are for families whose 2 incomes are under 80 percent of the AMI. 3 So, this is going to be a tremendous 4 challenge that the City and the agency are going to 5 face. 6 SENATOR YOUNG: So, now you're coming up with 7 ideas on how to address it? 8 JOSEPH ROSENBERG: Yes. We're -- you know, 9 we've always been imaginative agency, in terms of 10 trying to, not just respond to the crises that 11 affect us, but trying to get ahead of it. 12 This is certainly going to be one of the most 13 severe challenges we've had in a very long time. 14 RUTHANNE VISNAUSKAS: And we took, you know, 15 a series of cuts over the years, you know, on the 16 city capital side, you know, when the, sort of, 17 economy crashed. 18 So, we, you know, spent the last couple of 19 years tightening up what we did, and really 20 getting at the -- you know, we -- what's for better. 21 You know, an unfortunate way to get there, but we 22 got to, sort of, a more efficient place, because we 23 had so many cuts already. 24 So, I think what we felt, sort of, that we 25 were out of area, kind of -- you know, efficient 1 place. 2 So, to take, sort of, another cut there, 3 isn't really a lot of fat to trim, so to speak. 4 So, we're -- it's going to be very hard to 5 implement a cut of this size. 6 RAPHAEL SISTERO (ph.): I think one of the 7 biggest challenges the agency faces, that there's -- 8 you know, the agency, has two -- has two sides of 9 the same coin. 10 One side, is the development side, that 11 RuthAnne -- through RuthAnne leads, that does all 12 the new-building development, runs the 8(a) loan 13 program, et cetera. 14 I mean, those are -- you know, those are 15 discretionary investments. 16 It also has a statutory side; right? 17 Statutorily mandated to provide enforcement 18 services, the vast majority of which is paid for 19 with CDBG money. 20 And, so, you know, the cuts, you know, 21 disproportionately impact the development side of 22 what HPD does -- which is, adding to the housing 23 stock, actually creating affordable units, 24 preserving existing affordable units -- because, 25 you know, there's only so much you can cut away a 1 discretionary program that you're mandated to run 2 and provide. 3 So, you know, that's -- I'm sure they're, you 4 know, grappling with that challenge, as the agency 5 has over the years, with various different cuts. 6 AARON SIRULNICK: We all need Purel. 7 SENATOR YOUNG: What's that? 8 AARON SIRULNICK: Purel. 9 SENATOR YOUNG: Oh, Purel. 10 You know, it's something -- no, I'm not 11 allergic to anybody in the room. Don't worry. 12 RAPHAEL SISTERO (ph.): What's the -- what 13 was the CDBG cut? 14 RUTHANNE VISNAUSKAS: It was $8 million for 15 this year, on top of last year's $13 million cut. 16 So, it was, almost, $21 million. 17 JOSEPH ROSENBERG: And that hurts the code 18 enforcement -- 19 RAPHAEL SISTERO (ph.): And that's -- right. 20 And that's to the -- right. 21 And that's to the whole City. The City gets 22 200-something million in CDBG money? 23 RUTHANNE VISNAUSKAS: Uh-huh. 24 RAPHAEL SISTERO (ph.): HPD gets 75 percent 25 of that. 1 JOSEPH ROSENBERG: Ballpark. 2 SENATOR YOUNG: So, they use that for code 3 enforcement -- 4 JOSEPH ROSENBERG: Code enforcement is 5 covered by CDBG, yes. 6 SENATOR YOUNG: Okay. 7 That's interesting. 8 JOSEPH ROSENBERG: And, that, you know, you 9 talk about mandates, I mean, code enforcement, 10 that's -- you know, that's a requirement, under the 11 housing-maintenance code. It's something that we 12 have to do. 13 Even if we didn't, we'd to do it anyway. 14 It's part of the life of how we keep the city going. 15 So, this is really onerous. 16 CHRISTOPHER ATHINEOS: And it's just like, 17 when an owner gets the 2 percent increase from the 18 Rent Guidelines Board, and they figure, "How am I 19 going to cover my costs on a 2 percent increase from 20 a $400 tenant?" 21 So, I can sympathize, and empathize -- 22 RAPHAEL SISTERO (ph.): Well, at least you 23 got a 2 percent increase. 24 This is a -- 25 JOSEPH ROSENBERG: Yeah, right. 1 We get a 1 percent decrease. 2 RAPHAEL SISTERO (ph.): What if you dropped 3 your -- what if the rent guidelines dropped your 4 rent by 15 percent? Then you'd really be in 5 trouble. 6 AARON SIRULNICK: That's a different 7 roundtable. 8 CHRISTOPHER ATHINEOS: You'd be running all 9 my buildings. 10 [Laughter.] 11 EDWARD JOSEPHSON: And, you know, it's worth 12 adding to that: In addition to the CDBG cuts, my 13 understanding is, that, so far, we've avoided actual 14 cuts in the Section 8 Program from the federal 15 government. 16 God knows what's going to happen this coming 17 year, but, there haven't been the increases in 18 vouchers that there have been, you know, in years 19 passed, even though, I think it's 1 in 10 eligible 20 families actually gets a Section 8 voucher. 21 And, then, we also saw the cut of this -- of 22 the Advantage Program, which was State funding that 23 was going to the City, and provide a Section 8, you 24 know, -like subsidy. 25 And all of those families, now, are -- well, 1 there's litigation, and may soon lose their 2 subsidies. 3 And, you know, ultimately, there's, you know, 4 a huge impact on the families. 5 But then, also, you have another impact on 6 the City, because they then have to do something 7 with these families who may enter the shelter 8 system; or, you may need, you know, increases in 9 the affordable housing. 10 And, I guess those also impacts on owners, 11 right, who, you know, were formerly getting 12 Advantage money. And then they get a letter from 13 the City, saying: Guess what? You know, the 14 contract that we used to have with you, well, we're 15 not honoring anymore. 16 And, so, you know -- and all that. 17 And, I can't resist saying, that, you know, 18 those of us who represent tenants and 19 homeowners, you know, we took a 13 percent cut 20 from the federal government, which is a big chunk of 21 our budget. And, we got zero down on the funding 22 from the State for our foreclosure representation. 23 And, again, you know, there's a whole chain 24 of impacts, because, you know, sometimes we drive 25 landlords crazy, but sometimes we get them the 1 money, you know, that they're owed on the rents. 2 Or, you know, we work out a deal so houses aren't 3 foreclosed. 4 And, so, it all has a rip -- and, then, 5 people are displaced, and then they come to HPD. 6 And, all has a ripple effect -- 7 SENATOR YOUNG: Right. It was very con- -- 8 surprised, and concerned, to see the foreclosure 9 piece of the budget. 10 So, we're working on that. 11 EDWARD JOSEPHSON: That's great. 12 RAPHAEL SISTERO (ph.): I don't think -- I 13 mean, the federal budget's not going to get any 14 better. 15 I mean, it's -- and, frankly, while I -- you 16 know, I get the concern around Section 8, every HUD 17 program will get cut to zero before they cut 18 Section 8. 19 I -- it's just the way the HUD budget 20 works. They're never going to cut Section 8 until 21 they got nothing left to cut. 22 But, with the 65 percent cut to the home 23 program, we're getting close. So -- to them not 24 having anything left to cut. 25 So -- 1 SENATOR YOUNG: So, we'll be working with the 2 City on possible solutions to that situation. 3 RAPHAEL SISTERO (ph.): The one -- the one 4 thing I just -- I -- the point I have to make, is 5 that I think, you know, part of the reason why 6 New York City has always provided more dollars out 7 of its budget to support housing production and 8 preservation, is that, you know, for last 9 three decades, you know, the cities -- you know, 10 mayors and city councils -- have viewed the 11 housing -- development-housing production as part of 12 an overall economic-development strategy. 13 And, that's not the way they view it at the 14 federal-government level. 15 And, honestly, that's not really the way they 16 view it at the State level, either. 17 But I think, you know, if -- you know, when 18 you talk about 165,000 units that -- the 19 investment in those units that the City's creating, 20 has created at least that many full-time-equivalent 21 jobs in the construction industry and the 22 building-management industry. 23 And it -- you know, it has been a real driver 24 of economic activity in outer-borough 25 neighborhoods. 1 And that's why, you know, the City has always 2 done this, because it has seen the sort of economic 3 impacts, and it's not just about, you know, the 4 social mission of affordable housing. It's a real 5 economic driver for the city. 6 And, you know, unfortunately, that's not the 7 way housing's seen at other levels. 8 And, I think that's -- that -- that shows you 9 the difference in the investment that gets made 10 in -- in housing programs, you know, at the 11 federal level, at the State level, and, frankly, 12 anywhere else in the country, other than -- other 13 than New York. 14 JOSEPH ROSENBERG: Yeah, we're aware, too, 15 that it -- you know, it's not just economic, but the 16 crime statistics, too. 17 When you add instances, where, in the bad old 18 days, when you had lots of in rem stock, and 19 buildings that might have been abandoned, and vacant 20 lots -- 21 AARON SIRULNICK: Drugs. 22 JOSEPH ROSENBERG: Absolutely. 23 -- you replace that with new construction, 24 rental, home ownership, I mean, the world changes. 25 The area becomes safe, there's more 1 stores up, and it just is a domino effect, in a 2 good manner. 3 RUTHANNE VISNAUSKAS: And, you know, what 4 Raphael said, too, on the, sort of, the economic 5 investment, that, you know -- so, last -- in this 6 past June, we -- it was, sort of, the end of our 7 fiscal year. 8 So, in sum total, for the year before that, 9 we had done about 200 construction loans. 10 As I had said before, we put out, about, 11 $300 million a year in subsidy, and that leveraged 12 up about a billion and a half of investments. 13 So, just in the, last June to this June, 14 which is not un- -- atypical for us for the last 15 couple of years, to be able to put a 16 billion and a half dollars into the city's housing 17 stock and investment, whether it's new construction 18 or rehab, is really, sort of, a tremendous economic 19 driver that doesn't always get talked about when 20 people talk about housing. 21 JOSEPH ROSENBERG: And there's a -- just 22 like, Livonia, I mean, the work goes on, a really 23 blighted area in Brooklyn. 24 RuthAnne's sent out an RFP. 25 And, how many responses were there? 1 RUTHANNE VISNAUSKAS: Yeah, we got between -- 2 I think we had a little more than 15 responses, for 3 folks who want to redevelop parcels on the 4 Livonia Avenue corridor, which is a great, you know, 5 response. 6 AARON SIRULNICK: Let's not, Senator, forget 7 one component as well: That, affordable housing, 8 and owners, such as Chris and myself, we're 9 employers. We have a large number of people. 10 JOSEPH ROSENBERG: That's right. That's 11 good. 12 AARON SIRULNICK: You know, the service 13 employees and the contractors and vendors, and so 14 forth, the manufacturers who make the products for 15 the vendors, we're a trickle down, from us to the 16 working force in the city. 17 So, I think that's really important. 18 SENATOR YOUNG: Yeah, it's very important. 19 Yep. 20 So, we've got our work cut out, trying to 21 address some of these situations, because it's going 22 have a major impact, from the economy standpoint, 23 from quality of life, and loss of -- 24 JOSEPH ROSENBERG: Absolutely. 25 SENATOR YOUNG: -- opportunities. 1 One of the issues that we had down here, 2 too, was -- just switching gears again, a little 3 bit -- the impact of real-property taxes, water 4 charges, other City fees on the cost of operating 5 affordable multi-family buildings for -- on, both, 6 for-profit and non-profit owners. 7 And, I'm sure that you have some input on 8 that. 9 AARON SIRULNICK: I've created -- 10 I didn't bring it with me today, which I'm 11 sorry about, and I will provide it to you. 12 -- a schedule of, just on a 50-unit, 6-story 13 building -- 14 Forget my real-estate taxes. Those are all 15 public record. 16 Forget the water charges. You can all 17 figure those out on [unintelligible]. 18 -- just the cost of operating a building, 19 outside of payroll, of, fees, fees on fees, 20 fees to pay fees, fees that you've already 21 paid, that you now have to pay to another agency, 22 because the first agency needs the second agency to 23 look over its shoulder, it is vast. 24 And, if you're a small property owner -- 25 And I'm just giving you an example of a 1 50-unit building. 2 -- if you have a 10-unit building, or what 3 have you, these fees don't really change. 4 They are, for your boiler. If you continue 5 the building, you may have an elevator. 6 But, your boiler, elevator, your compacter, 7 your sprinkler for your compacter; any number of 8 systems have various agencies overseeing the 9 operation and certificate of fitness for these rooms 10 and systems, that the fees pile up to be 11 prohibitive. 12 On top of the fees, are the fines that 13 are levied for not paying the fee. 14 So, where I understand the City has an 15 economic obligation to close its budget, it seems to 16 me, that it's being closed on the backs of property 17 owners. 18 If we don't raise the tax rate, we raise the 19 assessed valuation. 20 If we don't have the money to pay elevator 21 inspectors, we create a fee. 22 If we don't have the money to pay the boiler 23 inspectors, we double the filing fee to another 24 agency, as part of the City. 25 And I'm not even going into, the State has 1 its hands in our properties as well. 2 So, I will be happy to provide -- 3 SENATOR YOUNG: [Unintelligible] to see that. 4 AARON SIRULNICK: -- more than myself 5 specifically, a schedule of just the fee side of 6 operating real property. 7 SENATOR YOUNG: So, there isn't any 8 differentiation between a fee in a very small 9 building, versus a very -- 10 AARON SIRULNICK: Very, very little. 11 Negligible. 12 Chris's 10-story building -- 10-unit 13 building, and my 100-unit building, for all intents 14 and purposes, will have the same set of fees, 15 unless he doesn't have -- and if he doesn't an 16 elevator, he's one component less -- 17 CHRISTOPHER ATHINEOS: Right. 18 AARON SIRULNICK: -- but, the fee structure 19 is the same. 20 And it's annual, and it is overwhelming. 21 And I think I -- I mean, just, unrelated to 22 our industry, you listened to 1010 Wins this 23 morning, about the initiative to listen to 24 restaurant owners who are upset with the -- you 25 know, the ABC -- 1 SENATOR YOUNG: Grading system. 2 AARON SIRULNICK: -- system. 3 And, a year into that program, they realized, 4 that it neccess- -- it's really creating more havoc 5 than creating -- the benefit certainly didn't come 6 to fruition. 7 Everyone wants an A. 8 Everyone gets a B. Figures, the business has 9 suffered by 20 percent. 10 And, if you get a C, unless you're 11 Papaya King, you're closed. 12 So -- it's true. 13 Nothing's is going to close the Papaya King. 14 JOSEPH ROSENBERG: Can't kill it. 15 AARON SIRULNICK: I think you'd have an F. 16 JOSEPH ROSENBERG: Ya can't kill it. 17 AARON SIRULNICK: I'm F'ing you. 18 JOSEPH ROSENBERG: I'm laughing, because I go 19 there more than I should be. 20 AARON SIRULNICK: But, it's true. I mean, 21 the systems are created, with all good intentions. 22 The fees are created to close the budget. 23 And, I think that if you were to look at the 24 fee structure of just operating an elevator in the 25 city of New York -- in a private building, not a 1 commercial building, because I can't speak for 2 that -- I think you would find that we are paying 3 multiple fees for the same effort. And, it's just 4 how they're worded, and how they're charged. 5 So -- 6 SENATOR YOUNG: It would be very interesting 7 to see that. 8 AARON SIRULNICK: The only thing that hasn't 9 changed, $13 fee from HPD, [slaps table], staying 10 consistent. 11 JOSEPH ROSENBERG: You shouldn't have said 12 that. It's going up next week. 13 [Indiscernible discussion between all 14 participants.] 15 AARON SIRULNICK: I know. When this comes 16 into effect, and all of my friends around the table 17 say, "Man, why did the fee go up to $18?" -- 18 "Aaron." 19 JOSEPH ROSENBERG: Exactly, we'll blame it of 20 you. "He said he would pay it." 21 RUTHANNE VISNAUSKAS: We'll edit that out of 22 the video. 23 AARON SIRULNICK: That's fine. 24 But it's -- the point is, that the fees 25 are -- 1 RAPHAEL SISTERO (ph.): And that doesn't even 2 get to taxes and water and surchargers. 3 AARON SIRULNICK: I've omitted those. 4 RAPHAEL SISTERO (ph.): Are -- I mean, 5 property tax on rental-property owners has been 6 going up and up and up for years. And, you know, 7 it's hard to know where the end is. 8 AARON SIRULNICK: There is no end. 9 As long as there's a deficit in the budget, 10 that difference was made up in the assessed 11 valuation. 12 RAPHAEL SISTERO (ph.): Yep. 13 And the people that are tax experts, which 14 I'm not, would tell you, that while the -- the end 15 of -- the sort of end of that story, around property 16 taxes going up and up, affects the housing 17 industry significantly. 18 The cause of that really gets to arcane tax 19 law in New York State, that causes -- that -- that 20 ties the City's hands in how it is able to -- not 21 just New York City, any -- you know, how it is -- 22 how cities are able to raise revenue through 23 property tax. 24 And, I'm not even going to remotely get into 25 the recent, you know, law that was passed around 1 the -- around property taxes, but, I'm sure that has 2 an effect on it some way. 3 But, in New York City, you know, the majority 4 of the -- of the impact goes to rental-property 5 owners, who end up paying more taxes, and more 6 taxes. 7 And, you know, I got into this argument -- 8 not an argument -- into a friendly debate with 9 the -- the -- one of my former commissioners -- 10 one of my former colleagues, when I was 11 commissioner, about this. 12 And, you know, the -- you know, it -- you 13 know, we were saying: Well, why do we have all of 14 these tax-abatement programs? 15 What do we need all these tax-abatement 16 programs? 17 Why don't we just tax the building based on 18 what its income is, and then it just pays its 19 fair -- you know, that way, a building that has 20 very, very low rents wouldn't pay that much in 21 taxes? 22 Well, unless you want to take on the 23 challenge of completely writing the tax law, you 24 can't do that. 25 And, so, you have all of this "alphabet soup" 1 of tax -- J-51, 421-A, 420-C, blah blah blah blah -- 2 because, the rental-housing stock in the city can't 3 support the tax burden that it's currently -- that 4 it's currently paying. So, you end up with all 5 these programs to provide tax abatements to 6 different kinds of buildings, for different 7 reasons, because they can't just -- they can't 8 just afford -- they can't afford to pay the taxes 9 with the rents that they're able to collect. 10 AARON SIRULNICK: It's the same thing with 11 water. 12 CHRISTOPHER ATHINEOS: Same thing with water. 13 AARON SIRULNICK: Water is even more 14 egregious. 15 Water can't be that expensive. We can make 16 it in a test tube. 17 But, I mean, it is -- 18 EDWARD JOSEPHSON: Chemist water in a test 19 tube, [unintelligible]. 20 AARON SIRULNICK: I'll figure it out, the 21 less that I'm paying in water. 22 But, we figured out a change from frontage to 23 meter. We changed it from a guesstimate to an 24 actual. 25 And I think that there are ways by which to 1 change the arcane system of real-estate tax 2 evaluation of that analysis to a realistic means of 3 what the income of the property is. 4 RAPHAEL SISTERO (ph.): I think you would 5 find the real-estate industry, overall, 6 affordable -- small, large, whatever -- would be a 7 very interested in a debate and a discussion at the 8 State level, about the property-tax system in 9 New York City, and would be, you know, supportive of 10 trying to figure out a way to do something 11 different. 12 JOSEPH ROSENBERG: As everyone knows, we 13 provide many tax exemptions tied to certain 14 types of property, whether it's formerly 15 City-owned or low-income, but, it tends to be geared 16 toward the previously City-owned and the low-income 17 component, or the [unintelligible] development fund 18 companies; except when you have J-51 and 421-A, 19 which is tied to something else. But, there's many 20 different ones, and they're all, certainly, pretty 21 challenging to figure out. 22 SENATOR YOUNG: I bet. 23 EDWARD JOSEPHSON: Call me cynical, but I 24 think if they were discussing the rewriting of the 25 tax code, you'd find a lot of people saying that, 1 you know, struggling owners should be paying less, 2 but, not a lot of outcry for hugely profitable 3 owners to be paying proportionately more. 4 And that's always the problem with these 5 discussions. 6 You know, arguably, yes, the way to do it is, 7 the people who are really making the big profit 8 should be paying those taxes -- 9 AARON SIRULNICK: Well, I don't think that 10 Raphael was suggesting the tax issue be tied into 11 profit. 12 I think he's saying it should be tied to 13 income, which is totally different. 14 CHRISTOPHER ATHINEOS: The small property 15 owner, you know, our building could be a rental -- a 16 rent-regulated rental building, and right next door 17 of could be a co-op building. It could be two exact 18 same buildings, built by the same builder, but, 19 the co-op is paying considerably less that the -- 20 RAPHAEL SISTERO (ph.): That's really the 21 discrepancy. 22 The discrepancy is how -- 23 AARON SIRULNICK: I mean, the political -- 24 RAPHAEL SISTERO (ph.): -- co-ops on 25 Park Avenue are taxed versus how everyone else is 1 taxed. 2 CHRISTOPHER ATHINEOS: -- situation, I mean, 3 one-family homeowners in the outer boroughs are 4 paying a lot less, and co-ops are paying a lot less. 5 And, I guess [unintelligible] -- 6 AARON SIRULNICK: I don't want to argue the 7 co-op part -- 8 CHRISTOPHER ATHINEOS: -- and no one wants to 9 touch that. 10 RAPHAEL SISTERO (ph.): -- but I think that 11 they would argue that their tax rates are unjustly 12 [unintelligible] -- 13 CHRISTOPHER ATHINEOS: Everybody would argue 14 that. 15 I think that was your point: Everybody would 16 argue that their tax rates were unjustly -- but, 17 you know -- so, that's why it's a hard debate. 18 SENATOR YOUNG: And it is. 19 But -- so, in the meantime, we have 20 programs like J-51, and we have programs -- you 21 know, we have the MCI program, the IAI program, in 22 order to provide incentives for upgrading of 23 housing situations. 24 And, so, I think that those are very 25 important endeavors, and we need to continue to 1 work to make them work, until we have other 2 alternatives. 3 JOSEPH ROSENBERG: That's right. 4 SENATOR YOUNG: So, good. Good discussion. 5 The last question that I had, was: What is 6 the availability and penetration of refinancing in 7 government programs targeted to assist 8 mortgage-distressed, affordable multi-family housing 9 projects in the city? 10 Do you have some input on that? 11 RUTHANNE VISNAUSKAS: So, I can jump in a 12 little bit on that one, and then I'm going to 13 actually run, so -- 14 SENATOR YOUNG: Yeah, I know. It looks like 15 we're running out of time. 16 RUTHANNE VISNAUSKAS: So we, about 18 months, 17 or 2 years ago, started seeing a lot of the 18 distress in the multi-family housing stock, as 19 everyone else did, and trying to figure out what -- 20 you know, what the City's role in that should be. 21 And, so, we've done a couple of things. It's 22 a really challenging problem, citywide. 23 So we, sort of -- we put together a bunch of 24 resources, and, sort of, went out publicly, and 25 said, you know, we're concerned about the 1 multi-family distressed stock, where people wanted 2 to buy distressed buildings, or buy distressed 3 notes, to come talk to us; we'd be happy to look 4 at refinancing situations. 5 We've been partially successful in that, and 6 we've been able to work with some of our partners, 7 to buy what were some very distressed portfolios 8 that had been on the market, which I think has been 9 a great success. But, it's only, sort of, a drop in 10 the bucket compared to what's out there. 11 I think there's a lot of challenges, on the 12 bank side, to taking losses, recognizing losses. 13 I think there's a lot of challenges on the 14 buyers, where there's a lot of folks out there 15 who are, sort of, still doing, kind of, drive-by 16 purchases of distressed stock, and not really going, 17 you know, in the building and seeing what's really 18 there. 19 And, so, providing, you know, very high 20 valuations on properties that, you know, when we 21 would, sort of, look at them, think that the prices 22 should dropping down more, and they're just not, 23 because there's -- capitalists are back in the 24 market and people are out there. 25 And, then, I think the third thing that we 1 tried to do, was -- since the deals weren't really 2 coming to us, was to put together a really analytic 3 base to looking at the problem. 4 And, so, we started running a lot of data -- 5 citywide data, on the city's housing stock, to look 6 at what buildings were trending towards 7 distressed. 8 So, as Raphael had mentioned before, we have 9 the Alternative Enforcement Program, which looks 10 at the city's worst 200 buildings. 11 We were trying to look at, who was headed 12 that way, and how could we do, sort of, an early 13 intervention. 14 So, we're about a year in now to the program, 15 which has been really successful. 16 We've looked at over 500 buildings, and we do 17 it on a monthly basis, where, we go in and look at 18 what buildings this data was based on; violation 19 data are trending into distressed. 20 And, then, we have field staff that go out to 21 the actual buildings, and say -- and, sort of, talk 22 to the owners, and try to see what's going on. 23 Offer financial assistance where we have it, where 24 there, you know, may be a bad actor, perceived as, 25 sort of, more a code violation-type route, and, 1 really try to get a handle on that stock. 2 So we, sort of, have tried to approach it 3 from two sides. 4 One is, making sure we're finding the 5 buildings, first of all. And, then, from there, 6 trying to provide aid, you know, through our loan 7 programs, to folks who might not know about us; 8 or, just hadn't, sort of, gotten around to talking 9 to us, as well as, sort of, pursuing the folks 10 that are bad actors in that realm. 11 But, it's a -- it's, certainly, still a 12 challenging problem today; and, we're, sort of, 13 two years in. 14 SENATOR YOUNG: So, do you -- so, you feel 15 that you're making headway, even though it's 16 challenging -- 17 RUTHANNE VISNAUSKAS: We have had really 18 great success stories. 19 We worked with a fair amount of folks, to buy 20 distressed portfolios that were on the market. 21 And, had a lot of success working with 22 owners, working with banks, and working with 23 regulators, to sort of elevate the issue, and put, 24 sort of, a spotlight on it, and say: This is really 25 important to us, and it's really important to the, 1 sort of, the fabric of the city, and to the 2 neighborhoods, that, sort of, make New York what it 3 is. 4 And, so, this has to be something that 5 everyone, you know, sort of, agrees is a problem, 6 and is willing to work jointly on. 7 So, we have -- we have -- I don't have 8 numbers with me, but we've done -- we've, probably, 9 almost 1,000 units of -- where we've gone in and, 10 either, bought notes or actual buildings on 11 distressed properties, and done rehab on them. 12 And, so, it's been successful. 13 But, 1,000 units is great, but it's certainly 14 a small number, you know, citywide. 15 EDWARD JOSEPHSON: Yeah, I think it's worth 16 keeping in mind that there's a lot of distress on 17 the horizon, potentially, because there were -- you 18 know, during the boom, there were a huge number of 19 portfolios that became overleveraged, and, a 20 number of them have bottomed out. 21 And, they were the ones that, you know, we 22 actually worked with HPD on a number of these. 23 And -- and, some of them had wonderful outcomes, 24 after horrible experiences for the people who 25 lived in them. 1 But, they are more on the horizon, because 2 it's just a question, [unintelligible] the build 3 coming due. 4 And we're -- you know, one thing, we were 5 talking about the outer boroughs, and how you, you 6 know, the mom-and-pop people in the outer 7 boroughs. 8 But, the other thing, is that, a lot of 9 speculators went into the outer boroughs and bought 10 up big portfolios of buildings for unsustainable 11 prices; and, then, now, are now crashing. 12 And, the Bronx was heavily affected. Queens 13 is affected. 14 And -- and, one of the big problems is not 15 getting the buy-in from the banks, who helped to 16 create this problem; and, then, they're not helping 17 to solve it. 18 So, I'm not sure, quite, what the ask is 19 from -- from, you know, on the State level. 20 It's really something, you know, the federal 21 government, you know, could step in on a lot more. 22 But, conceivably, you know, if only moral 23 pressure from the electeds who are -- have 24 jurisdiction of, from the Banking Committee, are 25 making more funds available to, potentially, these 1 preservation transactions. 2 But, we did one, you know, the Millbank 3 portfolio in the Bronx, we had 600 units. The 4 worst conditions you could ever imagine. I mean, 5 just total disaster. There were vacancies. 6 And, it dragged out for two years in 7 foreclosure, with the bank, kind of, looking the 8 other way. 9 And, in the end, you know, a really excellent 10 outcome. It was steered to a responsible owner, and 11 with rehab money coming in, and somewhat of a 12 write-down from the bank. 13 But, it took a lot of sweat and, kind of, 14 bluff poker going on, to try to get the bank to do 15 the right thing. 16 And, with more tools, it would have been 17 much, much easier. 18 Right? 19 So -- and, then, we'll see more of that, and 20 we would really need assistance on it, I think every 21 level of government, to make those deals possible. 22 SENATOR YOUNG: Very good. 23 So, what do we need to do on the State level, 24 just in general? 25 We've covered a lot of ground today. 1 So, what other things would people like to 2 see New York tackle? 3 RAPHAEL SISTERO (ph.): I mean, I think, just 4 on this issue of, you know, the State Banking 5 Department has -- had convened a discussion, you 6 know, a couple of years ago, but, I think, has 7 not -- has not reconvened a discussion about, sort 8 of, how to -- how to get a handle on this. 9 I think there are some legitimate regulatory 10 issues, especially for some of the smaller community 11 banks that are regulated by the State Banking 12 Department, but not by the federal regulators, 13 that could be helpful in, sort of, working 14 resolutions on some of those -- some of the 15 distressed portfolios. 16 So, you know, it would be -- it would be 17 great to, sort of, get them to reengage in a 18 discussion about, sort of, what's happening with 19 that stock. 20 SENATOR YOUNG: I'll carry that message back. 21 RAPHAEL SISTERO (ph.): Okay. 22 JOSEPH ROSENBERG: And we have -- you know, 23 one of things that -- I think one of the main 24 focuses here was, basically, it's preservation; how 25 do we -- we have all of those tools to try to stem 1 the deterioration of buildings. 2 One is, this way, we can strengthen the 3 7A Administrator Program that's under the State 4 RPAPO. 5 So, that's something we're looking at as 6 well, which is a way, where, 7A administrators 7 can, hopefully, maintain and improve buildings. 8 So, we're looking at that as well, as an 9 initiative, which we would, hopefully, come to soon, 10 as well. 11 SENATOR YOUNG: Okay. 12 RAPHAEL SISTERO (ph.): And the last thing 13 I'd just throw out there, is, you know, there was 14 some activity amongst various parties, about, how 15 receivers are appointed to multi-family buildings, 16 which, in the -- which is governed by the State in 17 the foreclosure law. 18 You know, I know the agency and the 19 City Council had come together, and had some 20 suggestions on what to do. 21 The industry, actually, you know -- the -- 22 the lending industry, actually, has also been pretty 23 vocal on this issue, because the -- you know, the 24 process is less than ideal. And, oftentimes, 25 receivers that are appointed don't know anything 1 about running buildings. And, don't know -- don't 2 know -- wouldn't know a good manager, you know, if 3 they -- you know, if they ran into them. 4 And it -- and it's just a -- I mean, this is 5 what was one -- you know, one of the issues on 6 some of the portfolios that HPD dealt with, was, 7 you had receivers in place who didn't, you know, 8 even know how to manage buildings, and didn't know 9 how to, sort of, protect the asset during the period 10 where the resolution was coming. 11 So, you know, my guess is, you'll see more 12 action on that issue in the coming period, because, 13 as, you know, we've talked about, there's more of 14 this, you know, that's going to come down the pipe. 15 RUTHANNE VISNAUSKAS: And I think that's 16 especially true when you're talking about receivers, 17 for -- I mean, presumably, all buildings that are in 18 foreclosure are in distress, but they're not always, 19 sort of, physically distressed, necessarily. 20 And, so, I think that -- that case is even 21 more exaggerated -- 22 RAPHAEL SISTERO (ph.): Right. 23 RUTHANNE VISNAUSKAS: -- when someone doesn't 24 know how to run a multi-family building. 25 And, that multi-family building, you know, 1 has a lot of physical -- has a lot of capital needs, 2 may have tenants who are on to a rent strike, who 3 aren't paying rents, because they haven't had any 4 services for such a long period of time. 5 And, so, having a different sort of system, 6 where receivers, in multi-family buildings where 7 there's been distress, needing to be able to be more 8 qualified, would be a welcome change, I think. 9 AARON SIRULNICK: Thankfully, this is not a 10 world that Chris or I know. 11 JOSEPH ROSENBERG: That's good. That's a 12 good thing. 13 SENATOR YOUNG: That is good. 14 JOSEPH ROSENBERG: Good thing, right. 15 SENATOR YOUNG: That's very good. 16 So, thank you so much, everyone. 17 And -- 18 AARON SIRULNICK: Thank you. 19 JOSEPH ROSENBERG: Thank you. 20 RUTHANNE VISNAUSKAS: Thank you. 21 SENATOR YOUNG: -- this has been great. 22 And I think most of you know, I like to be 23 very interactive. So, anytime you have any 24 questions, concerns, ideas, I want to hear from 25 you. 1 And, I look forward to continuing to work 2 together. 3 JOSEPH ROSENBERG: Great. Thanks very much. 4 [All participants say "Thank you."] 5 AARON SIRULNICK: Thanks for convening. 6 7 (Whereupon, the roundtable discussion 8 held by the Chair of the New York State Senate 9 Standing Committee on Housing, concluded.) 10 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25