Yahoo Finance Why Winning The New York City Housing Lottery Is Almost As Good As Winning The State Lottery
Winning the New York State Lottery is a rags-to-riches dream many New Yorkers share. However, winning the New York City housing lottery might be the next best thing because it allows a few lucky New Yorkers to live in luxurious apartments in some of the city's best neighborhoods for pennies on the dollar. Better still, the city's rent control laws allow winners to lock in their low rate for life.
CNBC recently profiled a housing lottery winner who is paying $997/month for a luxury apartment where standard rate apartments are currently going between $5,500-$8,100/month. That translates to a monthly savings of $4,500/month on the cheapest apartment in the building; over $50,000/year. If the tenant resides in that apartment for 20 years, their housing lottery will save them $1,000,000 in rent expenses.
That's not quite the same as getting a giant check on TV from the NY State Lottery Commissioner, but it's a financial windfall to anyone lucky enough to win the New York City housing lottery. A New York City Housing Lottery win also comes with other intangible benefits that can improve the future of winning families. Luxury apartments in places like Manhattan are usually clustered closely with other high-end real estate.
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Since many public schools draw funding from local property tax revenues, the children of area residents typically attend high-quality schools with the best educational resources. That's important because a great deal of scholarly research shows that access to good public schools is a key rung on the upward ladder of success for young children as they progress into adulthood.
There is no doubt that winning the New York City housing lottery can improve lives. That's the good part. The bad part is that like all lotteries, the New York City Housing Lottery has infinitely more losers than winners. The average studio or one-bedroom rent in Manhattan ranges between $3,500 and $4500, a rent that even senior-level tech sector workers earning $135k/year struggle to afford.
The lack of affordable housing is a decades-old issue in New York, and city leaders have tried various measures to ease the crisis. Some, like rent control, have made it possible for long-term tenants to remain at fixed rent rate increases dictated by the city. It's not uncommon for a long-term rent-controlled tenant to pay pennies on the dollar $800 for a 3br that landlords could rent for $7,000 at market rates.
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That works for current and long-term residents, but it doesn't provide any relief for anyone in the apartment market today. Some real estate analysts also believe rent control disincentivizes multifamily housing developers from building in anything but the high-rent sector. If the tenants are going to be locked in at their base rent plus a rent increase as determined by the rent board, it only makes sense to target the top of the market.
That imperative is also driven by the high cost of buying land and building in New York City. This is where the housing lottery comes into play. Tenant rights groups, like the ones who got New York to pass rent control, began pressing city leaders for more affordable housing units. This happened when NYC developers began buying and knocking down rent-controlled buildings to create larger, high-rent developments.
City housing authorities used a combination of tax breaks and the promise of friendly loan terms to encourage developers to designate a certain percentage of units at new developments for affordable housing. Even under that arrangement, the number of apartments set aside as affordable housing vastly exceeded the number of potential residents who needed them. This opened the question of how to allocate affordable apartments fairly.
Thus, the city housing lottery was born. Whenever a new development opens or breaks ground, prospective tenants who meet the income requirements are invited to apply for affordable apartment openings. The only impartial way to choose who got them was to create a lottery where the lucky winners get a life-changing opportunity.
Unfortunately for the applicants who don't win, New York's housing lottery is a winner-take-all game. Housing lotteries have created wonderful housing options for many New Yorkers who deserve a break. However, the ultimate drawback of the housing lottery is that it can't create enough winners to alleviate New York's affordable housing problem.
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