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Rent Guidelines Board Approves Highest Rent Increase Since 2013

Modest Rent Increase is Progress, But Still Undercompensates Owners

Despite owner operating costs increasing once again and economic conditions vastly improving for tenants, the City Rent Guidelines Board (RGB) voted in favor of a 1.5% increase for one-year leases and a 2.5% increase for two-year leases. The guideline increases will apply to stabilized leases renewing between October 1, 2018 and September 30, 2019 (see page 4 of the July/August RSA Reporter for more information). 

This year’s Price Index of Operating Costs (PIOC) increased by 4.5% following an increase of 6.2% last year. Despite the ongoing increase in costs, the Board’s Tenant Members believe that this has not burdened rent-stabilized property owners and believe that the 4.4% increase in Net Operating Income (NOI) is an indication that owners are still profiting comfortably in the midst of historically low guidelines.

The motion for these rent increases was put on the table by Chairperson Kathleen Roberts after both the Owner Member motion (2% and 4%) and Tenant Member motion (0% and 2%) were struck down by votes of seven to two and six to three respectively. With regard to the tenant proposal, it must be noted that Public Member Rodrigo Camarena voted with the tenants and endorsed a rent freeze for one-year leases.

The motion for 1.5% and 2.5% was passed five to four, with votes in favor coming from Chairwoman Roberts, Public Members Hilary Botein, Cecilia Joza, and David Reiss, and Owner Member Scott Walsh. Please keep in mind that, historically, an Owner Representative on the RGB would not vote in favor of such a low guideline. However, Owner Member Walsh understood that if the Owner Representatives did not offer one vote in favor of the Chairwoman’s proposal, there was a very high risk that even lower guidelines would be placed on the table for a vote and could eventually pass.

By law, Members of the RGB must submit individual proposals on the final Guideline Order within 72 business hours of the Final Vote. This year, 12 different proposals were submitted and guidelines as low as 0%, 0.75%, 1% and 1.25% could’ve been placed on the table at the Final Vote. Knowing the risk of going below 1.5% and at least one Public Member guaranteed to vote with the Tenant Members, the Owner Representatives did not want to take any chances and acted on the highest possible rent increase for owners this year.
It certainly goes without saying that a 1.5% increase in the face of a 4.5% increase in operating costs does not properly compensate rent-stabilized property owners. Although the rent increase was higher than last year’s 1.25%, the RGB’s own data clearly justified even higher rent guidelines and the Board blatantly ignored their own commensurate ranges that should have resulted in a one-year guideline of at least 3%.

This year, we strongly believe the majority of the Public Members finally began to understand that owner operating costs far exceed what the RGB uses to calculate the PIOC, which does not paint an accurate picture of how much money owners actually invest back into their aging buildings.

Over the last few months, RSA met with RGB Members, testified before the Board multiple times, and submitted thorough information that detail the list of government mandates that are not considered by the Board. These required mandates include recurring or onerous expenses for owners, such as lead paint removal, facade work and gas conversions.

Furthermore, RSA was joined by some of the Board’s Public Members at our May Membership Meeting. At this meeting, these Public Members had the opportunity to hear directly from smaller mom-and-pop owners about their struggles with ever-increasing property taxes, as well as other every day expenses. It’s hard to say whether or not this meeting ultimately influenced their decision at the Final Vote, but they were undoubtedly more considerate of the property owner side of the story.

With property taxes continuing to rise, as well as fuel costs and water and sewer rates, RSA expects that the PIOC will be even higher next year and that NOI will be much lower considering the historically low guidelines over the last few years.

Should this be the case, RSA will be working tirelessly to carry the momentum of this year’s rent increase into next year’s deliberations. We also plan on continuing our open dialogue with the Board’s Public Members so that they truly understand the owner’s plight.
It also must be noted that this year, owner testimony at the RGB public hearings was at an all-time low. If we hope to achieve higher rent increases under the de Blasio Administration, RSA’s advocacy efforts must be coupled with RSA members making their voices heard during the RGB public hearings. 

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August 2018
01 Aug 2018 00:00
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