Attempts by tenant advocates to disrupt a meeting on June 19, 2008 did not prevent the NYC Rent Guidelines Board (RGB) from adopting higher renewal rent increases as well as a minimum rent increase for low-rent, long-term occupancy apartments. By a vote of 5 to 4 the RGB approved increases of 4.5% for 1-year leases and 8.5% for 2-year leases (where heat is provided by the owner) for leases entered into between October 1, 2008 and September 30, 2009. In addition, where there has not been a vacancy lease for six or more years prior to the renewal date, the minimum rent increase is $45 for a one-year lease and $85 dollars for a two-year lease (affecting renewal leases of apartments with rents of less than $1,000).
Where the owner does not pay for heat, the guidelines are lower: 4% for a one-year lease and 8% for a two-year lease with a minimum increase of $40 and $80 when there has been no vacancy lease for six or more years.
The practice of providing additional adjustments for low rent apartments was a feature of renewal guidelines beginning in 1983 but has not appeared in a guideline since 2001. This year’s formulation is unique in two ways. First, the additional adjustment is expressed as a minimum rent increase, rather than a supplemental dollar amount for rents below a certain level. Second, the minimum rent adjustment only applies when there has been no vacancy lease for an apartment for six or more years prior to the date of the renewal lease.
This year, the RGB also departed from it’s recent practice of enacting zero rent guidelines for hotels and SRO’s. Instead, all classes of hotels, SRO’s and rooming houses will be eligible for a 4.5% rent increase provided that no less than 85% of the total units in the buildings are occupied by permanent rent regulated tenants. (Please see page 4 for a complete summary of RGB Order #40 or go to the RSA website for the complete Order.)
Rent Guidelines: A Long Process
The final vote of the RGB came at the end of long process which began in March, 2008. Throughout the Spring, the RGB met to hear a variety of staff reports about the economic condition of the housing industry, the availability of mortgage financing, the housing supply and changes in the housing stock, as well as tenant incomes and housing affordability. The real kick-off for the RGB’s deliberations, however, starts with the announcement of the Price Index of Operating Costs, which measures the increased cost of maintaining rental buildings over the past year.
On May 29, the RGB released this year’s Price Index which measured a 7.8% increase in owners’ operating costs, primarily driven by an indisputable 37.4% increase in heating costs. The Price Index, as measured for buildings which heat with oil, was even higher at 10%.
The Price Index report also provides the RGB with a range of “commensurate” rent adjustments, a set of rent increases intended to compensate owners for their increased costs based on various assumptions. This year, the commensurate adjustments ranged from 4.75% to 7.5% for a one-year lease and from 9.5% to 13.5 % for a two-year lease.
Both property owners and tenant representatives were given an opportunity to present their concerns and arguments at a Public Meeting of the Board held on May 2. RSA Executive V.P. Jack Freund presented an analysis of the industry’s economic condition and argued that RGB rent guidelines have failed to keep owners whole in the face of rising costs in this decade. These inadequate guidelines, apparently a reaction to concerns about tenant affordability, have put rental housing in jeopardy. It is the responsibility of government, not private owners, to subsidize tenants who cannot afford reasonable rents. Mr. Freund called on the RGB to enact double digit rent increases and a minimum rent adjustment of at least $60 per apartment per month.
Also testifying were RSA Board Members Frank Annelante, Michael Schmeltzer and Chris Athineos. Mr. Annelante and Mr. Schmeltzer emphasized the plight of low-rent housing outside core Manhattan. They explained that a low percentage increase did not translate into the minimum dollar amount needed just to pay the increased oil bills. Mr. Athineos emphasized the difficulties faced by small owners and their importance in maintaining sound neighborhoods. Many of the points made by the RSA were echoed in a statement read by the RGB Chairman prior to introducing the motion for the final rent guidelines.
The RGB Public Hearings
The RGB public hearings, when tenants, owners, and other interested parties have an opportunity to share their thoughts with the Board, are an important part of the rent setting process. In recent years, these hearings have been lop-sided affairs with testimony from a long list of tenants and their advocates, but with hardly any property owners testifying. This year, however, was different.
An unprecedented number of property owners were alarmed by rising costs throughout the year. The RSA then launched an all out campaign to let members know that their concerns could only be addressed by getting involved in the RGB process. RSA outreach through mailings, telephone calls and meetings resulted in a tremendous turnout of owners at both public hearings, one in Brooklyn and one in Manhattan, as well as at the meeting for the final vote.
The Brooklyn hearing began at 4 pm with continuous testimony from property owners until 11 pm when additional owners rushed to get their voices heard. In Manhattan, the hearing began at 10 am with owner testifying one-to-one against tenants until nearly 11 pm. Martin Rosenman, President of Stuyvesant Oil told the Board about the difficulty owners were having paying last winter’s oil bills and his concern that he would not be able to extend credit to many customers next winter. Mr. Rosenman’s testimony was backed up by a property owner who said that he was a customer of Stuyvesant Oil and still owed $40,000 for last year’s oil bills. He hoped that he would be able to get credit for next year’s oil bills.
Owner testimony came in many forms. Karen Abinacer, who identified herself as a tenant, said that she never realized all the difficulties property owners faced until she went to work for a property management firm. Now she understood how rising costs had to translate into increased rents. Many owners who could not attend the hearings submitted written testimony to the Board. Ms. Charlotte McKeon of the Bronx, for example, wrote “In my 98 years of life, I have never seen a situation where everything is increasing so exponentially at the same time.”
The Final Vote
A large group of property owners also attended the final meeting of the RGB on June 19 waving signs and chanting “help small owners”. However, the meeting was dominated by the shrill sound of whistle blowing as tenants attempted to disrupt the meeting and prevent the RGB from voting on final rent guidelines.
The tenant activists did manage to disrupt the normal process of the final meeting, denying both owner and tenant representatives on the RGB an opportunity to state their positions and introduce guideline motions. However, they did not prevent Chairman Marvin Markus from reading a statement into the record prior to making the guideline motion which was approved, a statement which was undoubtedly influenced by the many hours of testimony provided by property owners.
Chairman Markus noted that “this board has under compensated owners for expenses incurred in 2003 and beyond.” His statement specifically agreed with RSA’s argument that the Board has failed to provide guidelines in the commensurate range suggested by its own staff reports.
Chairman Markus also stated that it was the responsibility of government, not owners, “to subsidize tenants’ inability to pay rents.” His statement said that the rent stabilization system would be more rational if it were based on tenants’ income and suggested that a SCRIE type of program would “allow the board to increase rents to owners while maintaining affordability for tenants that need it the most.”
The Chairman then introduced his guideline motion which was approved amidst the deafening shrill of whistles. After the final vote, RSA President Joseph Strasburg said, “While the minimum rent increase may help some owners with long-term tenants offset the burden of fuel costs, the percentage increases fall short of meeting the increasing operating costs that owners are facing this year.”
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