When residents of rezoning neighborhoods discuss access to new affordable housing, the debate often centers on the income and rent levels of the new units, or on the share of apartments set aside for homeless people, seniors or residents of the local community district. Yet there’s another important factor that can impact who obtains those units: how developers disqualify applicants who apply to the lottery.
Last October, the Department of Housing, Preservation and Development (HPD) reformed the rules that govern the tenant-selection process. Under the guidelines of the new Marketing Handbook, developers are no longer allowed to reject applicants based on poor credit history alone, or because of involvement in housing court for minor matters not involving an eviction or bankruptcies that occurred more than two years ago. Homeless applicants can’t be rejected for any past bankruptcy, provided they are complying with a bankruptcy order.
But in a new report by Public Advocate Letitia James says even more could be done to protect low-income applicants from rejection.
Developers of city-backed affordable housing projects are still allowed to reject applicants based on factors such as a prior for-cause eviction—an eviction when the tenant has breached the lease—within the past four years, a history of landlord-initiated actions in tenant court that ultimately allowed the landlord to gain possession of the apartment, debt over a certain level, a bankruptcy slightly more than two years old, certain unsatisfied money judgments and rent delinquencies, and bad credit when combined with another factor that is a cause for rejection.
Homeless applicants, while subject to less rigorous requirements than non-homeless applicants, can also be rejected for similar reasons.
The Public Advocate argues that these criteria ultimately end up penalizing the very people whom affordable housing is supposed to help, especially in the areas that the city has targeted for rezonings.
“Under Mayor Bill de Blasio’s plan to build and preserve 200,000 affordable housing units, many low-income residents in proposed rezoned areas fear that they will be shut out,” the report asserts. “Due to unemployment, low wages, no health coverage, and medical debt, many low-income people and people of color tend to have no credit history or low credit scores, debt, and rent and other delinquencies.”
The report does not offer exact language for a revised tenant selection criteria, but offers broad suggestions for how HPD can make further reforms to ensure residents are evaluated not based on past financial distress or housing instability, but on their ability to pay rent going forward.
Any changes that are too bold, however, are likely to meet resistance from housing developers who, seeking to pay their mortgages and maintain the upkeep of their buildings, want substantial proof that selected tenants will pay their rent.
One affordable housing developer, speaking on the basis of anonymity to City Limits, says that while he supports HPD’s efforts to prevent applicants from getting rejected based on credit score alone, he’d object to policies that require developers to evaluate tenants based only on their ability to pay the rent. The developer maintains that a tenant’s past rent delinquency history and credit history is often a good predictor of the likelihood they will pay rent going forward, and further argued that if a one-time emergency has marred an otherwise responsible applicant’s record, the applicant could always explain this in an appeal to a rejection.
As for HPD itself, Commissioner Maria Torres-Springer said at a panel hosted by the Center for Community and Ethnic Media last Friday that she supports reducing the barriers to city-sponsored affordable housing and is open to further reforms. Spokeswoman Juliet Pierre-Antoine elaborated on HPD’s efforts in an e-mail to City Limits.
“HPD is deeply committed to reducing the barriers to city-sponsored affordable housing and ensuring that the homes we build and preserve serve the New Yorkers who need them most,” wrote Pierre-Antoine. “Last fall, we reformed our marketing guidelines, restricting the use of credit scores and housing court history to determine eligibility, and remain open to considering new reforms. We’ve also taken a number of additional steps to better support and prepare affordable housing applicants through outreach materials, education provided by our Housing Ambassadors program, and financial counseling provided in partnership with the Office of Financial Empowerment.”
Debt, poor credit hits communities of color hardest
The report argues that the current Tenant Selection Criteria exclude many low-income New Yorkers of color, who suffer disproportionately from a lack of access to credit. Such communities continue to suffer from a dearth of banking facilities, among other systemic causes.
In New York City’s low-income neighborhoods, 43 percent of adults have no access to credit accounts, compared to only 15 percent of adults in high income neighborhoods, according to the report. A 2010 report by the Woodstock Institute found that 39 percent of people in New York City living in majority-African American communities and 34 percent of those living in majority-Latino communities had credit scores below 620, compared to only 13 percent of residents in white communities.
The Public Advocate looked specifically at the average credit scores in the neighborhoods targeted for rezoning. The community districts of East Harlem, Jerome and East New York all fall into the “Poor Credit” range of 600 to 649. The districts including the Bay Street rezoning and Gowanus rezoning both fall in a “good credit” range, as both community districts include stretches of wealthier homeowner neighborhoods. Still, the Public Advocate is concerned that residents of many of the rezoning neighborhoods will not be able to access the new affordable housing that may be built there.
Thanks to HPD’s reforms, applicants can no longer be rejected based on their poor credit alone. But the Public Advocate argues that a lack of good credit can mean that a low-income person, confronted by one major life emergency like the hospitalization of a parent, can enter a period of debt, bankruptcy, and rent delinquency—all of which can still be used against them in the lottery. If the applicant is homeless but has secured some sort of rent subsidy while in the shelter system, that should be enough, the Public Advocate believes, to be considered for a subsidized apartment.
The Public Advocate argues that it’s possible for someone to still be in debt, but also able to pay rent going forward; they may have a form of income that cannot be garnished to pay back debt, like Social Security Disability. Rejecting applicants based on debt “might run afoul of city laws prohibiting sources of income discrimination,” the report argues.
Finding the right balance
For homeless referrals, the report recommends banning the use of credit reports, credit scores, eviction, debt, delinquencies, unsatisfied liens, past bankruptcies, or unsatisfied court judgments as criteria.
For all applicants, the report says developers should be required to use one year’s worth of on-time rental payments as evidence of a positive rental history, allow tenants to use qualified guarantors for rent, and weigh guaranteed income, such as Social Security Disability (SSD), more strongly than past debt, evictions, or financial history.
The report does not detail specifically how these criteria would interact. For instance, it does not spell out whether a non-homeless individual with a low credit history, a history of recent evictions, many past rent delinquencies, and no record of on-time rental payments, but possessing a guaranteed income source like Social Security Disability would or would not qualify. Ultimately, the Public Advocate wants HPD to undertake another revision of the criteria, while keeping in mind the economic realities faced by many low-income New Yorkers of color.
Asked whether the criteria could be made more lenient, a couple organizations that work on both housing development and tenant advocacy suggested that the devil is in the details of the reforms.
“It’s a thorny issue,” says Scott Short, housing director at Ridgewood Bushwick Senior Citizens Council. “We’re first and foremost tenant activists and we’d like to see everybody who needs an affordable apartment in New York get an affordable apartment, but we’re also owners and developers of…affordable housing real estate, and those projects are not underwritten with huge margins on the operating side, meaning that if you fill a building with tenants and 10 percent of them are not paying, now all of a sudden I can’t [maintain] my building.”
Short says that while it’s true that a year’s worth of good rental payments is one good indicator, he still thinks it’s important to look at other aspects of an applicant’s financial health as well. That said, he is aware that although all developers must follow the minimum requirements of HPD’s manual, some developers are still more lenient than others in accepting applicants, and says it would be ideal—though politically challenging—to create one universal standard in order to reduce the subjectivity of the process. He also recommends that the city invest more resources in helping applicants understand their credit history and apply for the lottery.
The Public Advocate’s recommendations also extend beyond the selection criteria. The report says HPD should increase the transparency by publishing detailed information about the results of each lottery, as well as require developers to locate leasing offices in the local community and to partner with city-registered and qualified not-for-profit housing organizations to market the development to the community and help with the application process.
It’s worth noting that in addition to the tenant selection criteria, HPD’s new Marketing Handbook includes other reforms to make the affordable housing lottery more accessible, such as by requiring interview locations be accessible and interpretation be offered.
In addition, following a joint study conducted last winter by HPD and the Department of Consumer Affairs on the barriers facing applicants in the affordable housing application process, HPD and DCA began sponsoring financial counseling for New Yorkers seeing to apply to affordable housing and released a new application guide in Spanish and English. HPD also launched a new video series, on the application process and launched an expansion of its Housing Ambassadors program. Last but not least, the agency is working on continuing to improve NYC Housing Connect, the lottery application website, and improve advertising procedures.