New Real Estate View: Why The Homeless Are Big Business In New York

New York Residential BuildingsIt’s a grim scenario: In New York, there are more than 50,000 homeless. Of that number, 21,000 are children, an increase of 21 percent from last year, according to a report by the Coalition for the Homeless, a New York advocacy group. Even worse, the numbers haven’t been this high since the Great Depression. But some landlords have managed to find a lucrative return from a commercial real estate angle.

Though the methods differ, and opposing views persist, the goal – more homeless individuals and families housed – is aligned, to a degree. Landlords can use their real estate to offer shelter to the percent of New Yorkers who need a place to stay. As reported by the New York Times, landlords can receive up to $3,000 (from the Department of Housing Services), and some are offering tenants up to $25,000 to move out of their current homes to make room. Somewhat problematic, these are often rooms without bathrooms or kitchens. The conditions, as reported by some, are worse, due to drug use, violence, and even prostitution.

Meanwhile, the Department of Housing Services (DHS) has been critical of Mayor Michael Bloomberg’s handling of New York’s homeless population, and recently claimed that the homeless shelter population under his administration increased by 61 percent. Additionally, the shadow of Hurricane Sandy looms rather large, albeit the numbers are not included in the report, it can be inferred that a number of displaced New Yorkers affected by Sandy are likely in the system. The DHS concludes that “for the first time since modern homelessness began, the City now provides no housing assistance to help homeless children and families move from shelters to permanent housing.”

According to the Wall Street Journal, the budget for adult shelters has gone up 43 percent to $317.2 million since 2008, while family shelters now cost $464 million a year, up 15 percent from 2008. And in the past two years, the city has added nine single-adult shelters, six adult family shelters and 11 shelters for families with children. Two hundred and thirty-nine shelters are in the system. So, a shortage of shelters, means opportunity for some land owners. Whether it takes advantage of the system (and displaced New Yorkers) is another matter best left for politicians and newspaper opinion pages.

The facts are this: in January, an average of 11,984 homeless families slept in shelters each night, which was a rise of 18 percent from the previous year. And advocates on both sides have valid arguments. Is it morally gray to offer less-than-favorable apartments to individuals and families in transitional housings? Possibly. But when the shelters are more crowded, and the options for moving from transitional housing has stalled, other solutions should at least be examined.

A policy in response to court settlements in 1979 and 2008, pushed for every homeless person in New York to have some type of housing that would be provided by the city. Landlords willing to house the homeless were given freedom to set their own rental prices and terms. In 2005, Bloomberg’s administration ended the  policy, which had up to that time allocated a share of federal public-housing apartments and federal housing vouchers to homeless families.

The action plan outlined by DHS points to ending “the so-called cluster-site/scatter-site shelter program (i.e., apartment buildings used as temporary shelter at enormous cost),” and phasing out the use of commercial hotels and motels as temporary shelter for families. New mayoral candidates have already started their stump speeches to include this issue. But, really, where does the discussion on this really begin? True, you will possibly have a number of landlords who will use the plight of the homeless as a way to make a profit. However, the idea, if properly implemented with at least a modicum of oversight, could allow for positive results to surface.

When transitional housing and commercial real estate converge – or collide – in New York, there’s bound to be a passionate response. At best, we should be able to find a middle ground. One where real estate thrives, and more people have access to a higher quality of life, moving outside the homeless system, and into independence. It’s good business for everyone.

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