RSA Testimony
This Committee has stated its concern with preserving the rent regulated housing stock. As with any other business, the first and foremost criterion for its preservation is its viability. Today, in this economy, with the credit markets frozen, savings decimated, and rental properties operating on thinner margins than ever before, owners are alarmed and frightened by escalating bills.
The rental housing industry is now under pressure from both the cost and income sides. As you well know, property taxes just increased by 7.5 percent, as water and sewer charges continue to increase by double digits. These costs, imposed by the government, now constitute fully one-third of all building operating costs. It is these costs, levied by government, that have driven up the cost of housing and threaten both for-profit and non-profit housing providers.
At the same time, the current recession is reducing the value of buildings as well as market rents, which some owners rely on to subsidize below-market rents in certain areas.
We have already begun to see the effects of current economic pressures in the bankruptcy and foreclosure of single family homes and small rental properties. Federal funds have been made available to mitigate these bankruptcies. It is inevitable that these bankruptcies will spread to multi-family rental properties. We hope this Committee addresses this critical issue and offers whatever assistance may be needed to avert the catastrophic housing abandonment of the nineteen-seventies.
There has been a tendency, on the part of all levels of government, to act as though more stringent rental housing rules are the answer to all housing problems. Of course, it doesn’t work that way. You can beat a horse to death, but once dead it’s not going to get you where you want to go.
New York rental housing is perhaps the most regulated industry in the country. Micro-managing a complex housing market will inevitably create unintended and negative consequences. For example, if you further limit Major Capital Improvement (MCI) rent increases, owners will stop making those improvements and tenants will live in deteriorating housing. If you start to re-regulate deregulated units, you can be certain that no new regulated units will be built.
The moderate easing of these regulations beginning in 1993 resulted in significant benefits for tenants as well as all residents of New York City. There was, indisputably, a tremendous investment in upgrading the existing stock, the creation of an unprecedented number of new housing units and a huge increase in tax revenues for both City and State governments.
But now, rather than deal directly with the best methods of providing affordable housing, there is pressure to roll back the clock and impose additional regulations instead.
Time and again, we have seen that more regulation means less housing and less regulation means more housing. The expansion of rent regulations in 1969 through the creation of rent stabilization, followed shortly by the repeal of vacancy de-control, led directly to the housing abandonment of the 1970’s. It was not until 1993, when the Legislature took steps to encourage the preservation and development of housing, that we began to see significant improvements and additions to the housing stock.
We ask this Committee: would you do business with someone who gives their word on a deal—and then backs out when the deal is done? Would you play in a game where the rules are constantly changing? Probably not. And neither are the developers of housing, who, quite simply, will be extremely wary of building in New York, particularly when re-regulation and changes in vacancy decontrol are—incredibly and possibly unconstitutionally--under discussion.
The rental housing industry wants to provide housing because that’s its business. Most owners maintain good relations with their tenants, because it’s good business to do so. Most owners want to retain good tenants because the cost of turnover is high.
It is in all of our interests to provide residents of New York with decent, affordable housing. That requires a fair and balanced approach, both pro-tenant and pro-landlord, parts of one symbiotic relationship.
We have seen the proposals that would renege on the deals agreed upon and threaten the viability of our housing stock. But where are the proposals to prevent tenants from profiteering on their regulated apartments by running rooming houses? Where are the proposals to penalize tenants who maintain regulated apartments as pieds-a-terre’s rather than primary residences? Where are the proposals to penalize ‘professional’ tenants who bilk one owner after another?
Today, we ask you to re-think the problems we face. This is not the time to fine-tune a rent regulation system that has demonstrated its inability, over the last forty years, to improve the affordability or the availability of housing in New York. It is time for fundamental change, change that will result in investment, not disinvestment, in regulated housing.
Instead of more regulation, we ask you consider less regulation. If the history of rent regulations in New York has taught us anything, it is that tightening the regulatory screws results in deterioration and loss of housing. When the regulatory system holds the glimmer of an escape hatch, as it has during the last fifteen years, investment dollars flow into the existing housing stock and new units are built.
A further easing of regulations will help the housing industry through the current economic collapse and allow the industry to continue providing affordable housing and generating tax revenue for City and State governments. The Legislature, in turn, should expand programs that will funnel those increased revenues directly to renters truly in need of economic assistance.
The RSA has worked continuously with City and State agencies to improve assistance programs that benefit both tenants and owners. We hope to also work with the Assembly on these important issues.
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