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"We'd rather have legal apartments than illegal ones," Holden said. "But if the area's not zoned for more apartments, it's not a good idea. I've talked to city officials going back to the Dinkins administration who say, ‘Well, where are they going to go if we really crack down on illegal apartments?' That's ridiculous. Why have building codes and regulations if you're not going to enforce them?"

Housing that reflects needs

Enforcement will never eliminate the underground housing market, said Sarah Watson, a senior policy analyst at CHPC, who noted that increased fines have not lessened the illegal housing stock. "It's too widespread," she explained. "There's no doubt the path forward is difficult politically, but we need to recognize that there's a mismatch between the types of housing we have and the ways we're really living today. The housing stock has not kept up with how people have changed."

The last century of housing laws and building codes were aimed at eliminating overcrowding and dangerous conditions, but the regulations ended up favoring larger two- and three-bedroom units. "There aren't a lot of options for single adults, at every income level," Watson said. "People have to improvise and maneuver around the housing stock that's not designed for them." That's led to the rise in illegal housing as well as a warping of the rental market, where four graduate students, for example, can price a family out of a three-bedroom apartment and the family must find a smaller unit.

"Right now it's illegal for more than three unrelated adults to share an apartment," said Watson. "It's rarely enforced, but it handcuffs the industry from being able to come up with smaller units or any legal shared housing." The laws ensure the continued construction of the same types of housing. "It's quite surreal. People in government talk about households as families when half of New Yorkers are single."

The old options, like SROs, boarding houses, and women's hotels, are gone. "People turn to Craigslist," Watson complained, and risky situations without the protection of a lease. "It's all been forced to go underground."

Homeowners have expressed fears that permitting shared housing or micro-units will create "little SROs for working men," Watson said. "But I always ask, ‘Where does the guy who sold you coffee this morning live? Where does the person who delivered your laundry live?' They're living somewhere. Allowing legal and safe housing options for them doesn't mean that they'll multiply. They're already there."

Illegal housing units are found throughout the city, said Seema Agnani, executive director of Chhaya CDC. Her group has helped homeowners legalize apartments, but the process can be lengthy and expensive. Chhya proposed that larger windows could be turned into second forms of egress. The city responded by asking for sprinkler systems, which Agnani found might cost $15,000 and be "too expensive for most owners." Watson said the city should set up low-cost loan programs to implement new regulations: "You would need to find a way—not just through enforcement—to make it easier for landlords to comply."

Chhaya regards illegal units as an important source of affordable housing. "What we want to do is make them safer and more hospitable," Agnani said. "Also we want to make sure the tenants have rights. Bringing the units up to code would benefit not only the tenants but the owners, who complain that they can't evict tenants for not paying rent. Nobody is happy with the situation." Tenants forced out by the city usually wind up in another illegal apartment. "There's really no affordable housing within their price range." Rents range from $500 to $1,000.

"A lot of elected officials have been scared to touch this, because it's seen as an immigrant issue," Agnani said. "Older residents are asking for additional enforcement." While fears of low-income people might be what's expressed, she said, "I think it's racially driven."

Uncovering problems

Nizam Ahmed didn't know his basement unit was illegal back in 2004, when he purchased his two-family apartment building in Ozone Park. "It was nice," recalled Ahmed, a 57-year-old cabdriver. His loan was based on income from three units. Ahmed's family lived in the basement, while he rented the two apartments upstairs. When his second-floor tenant stopped paying rent, he asked her to move, and she reported him to the Buildings Department.

Complaints about illegal conversions can be made anonymously to 311. Some contractors have reported illegal units in order to drum up business, claimed Agnani, who would like to limit complaints to neighbors. People might complain to "harass" others, allowed Holden. "I think, if you make a complaint to 311 on an illegal apartment, you should have to give your name."

The current system leads to selective enforcement. After city inspectors fined Ahmed $800, he spent another $6,500 on a lawyer. He can't rent the basement unit, and he's now five months behind in his mortgage. He's having trouble getting a loan modification that would help prevent foreclosure. In the meantime, he works double shifts before returning home to his street of two-family homes, many with illegal apartments. "Everybody has a basement rent," he said.