More Bedrooms, More Money for Landlords With Voucher Tenants

11 minutes read

Forget “location, location, location.” Real estate is really “location, bedrooms and bathrooms.”

When I bought a Brooklyn condo unit in a converted single-family brownstone, I noticed the developer had put bathrooms back-to-back in the middle of each floor. Why? Having two baths is good for marketing.

But it left us with a tiny kitchen — and we rarely used the second bathroom. So my wife ripped it out and expanded the kitchen.

The next year she had twins. Luckily they were boys, so one bathroom was enough.

I was reminded of this story upon learning that landlords are getting creative with renovations to maximize revenue from rental vouchers.

Voucher payments are pegged to the number of bedrooms. But adding legal bedrooms takes a lot more than moving mattresses.

New York City bedrooms must have natural light, meaning at least one window. (This inflates the cost of housing, especially when converting a building with large floor plates into apartments.) The CityFHEPS voucher program also requires bedrooms to be at least a certain size.

But with a good architect, a landlord can overcome these hurdles.

Diego Rios, a broker and mortgage originator at Home Global Realty in Cypress Hills, said he sees this especially with top-floor apartments. Owners will relocate a living room or kitchen to the center and put in a skylight above. This creates space at the unit’s front or back — or both — for bedrooms.

“This way the requirements for windows at each bedroom are satisfied,” Rios said. “These units barely meet the room size requirements but pass inspection.”

Going from one bedroom to two increases the CityFHEPS payment to $3,058 from $2,762. In a year, that adds up to $3,552 — usually not enough to justify a renovation.

However, going from two bedrooms to three pushes the monthly rent for a voucher unit to $3,811, an annual gain of $9,036. (With CityFHEPS, the tenants pay 30 percent of their income toward the rent, and the voucher makes up the difference.)

One thing that bothers Rios is that rental vouchers pay strictly based on the number of bedrooms. It seems to him that the quality of the unit should count for something.

“Some landlords just don’t care as long as the city keeps paying,” he told me. “Others go out of their way to make the apartments better than livable.”

Rios believes apartments should be issued a grade at the initial voucher inspection and periodically after that, with higher grades resulting in more money for the owner. That would move some to make improvements. But he acknowledged that the city would struggle to administer such a program.

I would also worry that the prospect of repeated inspections would discourage landlords from renting to a voucher holder in the first place. Numerous inspections could lead to a unit being disqualified after having initially been approved for a voucher user.

The loss of a voucher can immediately put a tenant into arrears and cost the owner crucial revenue. This is why it’s crucial to think about all the ramifications of regulations before introducing new ones, however well-intended they might be.

One idea I haven’t heard much about lately is changing the light and air requirements for a room to qualify as a bedroom.

The Berkshire Hathaway billionaire Charlie Munger offered to donate an initial $200 million to build an 11-story, 1.7 million-square-foot dormitory with “virtual” windows in 94 percent of the bedrooms. Disney cruise ships also have virtual portholes in interior cabins, so why not for students?

Unfortunately, Munger’s plan was met with a severe backlash, entirely from people who were not offering to donate $200 million for student housing. The plan was scrapped in August 2023. Munger died three months later.