RSA Makes Strong Case for Increase, Board Ignores Data
Although it comes as no surprise after the Rent Guidelines Board (RGB) failed to vote for a range of guidelines at the Preliminary Vote in May, the Board has officially enacted another historic rent freeze at the request of Mayor Bill de Blasio.
The RGB granted the Mayor’s wish for a rent freeze on June 17th and approved a 0% increase for one-year renewals and for two-year leases, a 0% increase in the first year of the lease followed by a 1% increase in the second year.
Please be advised that as a result of clarification issued by DHCR last fall with regard to the Housing Stability and Tenant Protection Act (HSTPA) of 2019, as well as advocacy from RSA, these renewal guidelines will now apply to both vacancy and renewal leases. The guidelines will go into effect for leases commencing October 1, 2020 through September 30, 2021 (see page 4 of the July/August RSA Repoter for more information, or visit http://bit.ly/2NH84VL).
The motion for these rent guidelines were put on the table by Chairman David Reiss and passed by a vote of six to three. The proposal came after both the Owner Member motion and Tenant Member motion were struck down by votes of seven to two and six to three respectively. In a strange turn of events, Tenant Member Leah Goodridge voted in favor of Chairman Reiss’ proposal after proposing an across-the-Board rent freeze just minutes before.
By way of background, in March, Mayor de Blasio called upon Governor Andrew Cuomo to suspend the rent guidelines setting process and automatically enact a rent freeze when the COVID-19 (Coronavirus) pandemic began to severely impact New York. When the State shrugged off the request, Mayor de Blasio then called on the Board to begin their hearings, but to “take your vote and give the tenants who are rent stabilized in the City, over two million New Yorkers, give them a rent freeze. They need it.”
It is no secret that Mayor de Blasio, who has been able to appoint all Members of the Board over the last seven years, had complete control over the guideline setting process even before this year. However, once the Mayor went on record calling for the Board to enact a rent freeze quickly, his involvement had never been clearer.
Coming into this year’s deliberations, fresh off of the enactment of the HSTPA, RSA was ready to present valid arguments that justified the highest rent guideline increases under this Administration. In fact, after the new laws were passed last June, numerous members of the Mayor’s Administration acknowledged that because of the stringent changes to the rent laws, a shift towards more reasonable rent increases would be necessary for rent-stabilized property owners.
Nevertheless, the Mayor seized the opportunity to advance his political agenda in the midst of a pandemic that not only affected tenants, but rental property owners as well. By approving a third rent freeze in the last seven years, aside from the negative effects of the HSTPA, the Board blatantly ignored data that justified the need for reasonable rent increases. For the first time in 15 years, the RGB Income and Expense (I&E) Study showed a decrease in owner Net Operating Income (NOI), something that RSA warned would happen should the Board continue to enact inadequate guidelines.
Furthermore, the Price Index of Operating Costs (PIOC) increased once again by 3.7% and was highlighted by a near-6% increase in property taxes alone. Because of the increase in owner costs and the decrease in operating income, the Board’s own recommended commensurate ranges suggested that guideline increases begin at no less than 2%. However, as we have learned under this Administration, political influence plays a larger role in the guideline setting process rather than facts provided by the Board’s own data.
The mandate of the Board is to balance the needs of both owners and tenants. However, there is no question that a balance does not exist under the de Blasio Administration. Last year, Chairman David Reiss went on the record during the Final Vote and defended a need for rent increases, especially in light of the HSTPA. He recognized at that point that rent increases enacted by the RGB are virtually the only source of income that rent-stabilized owners have moving forward as operating expenses continue to increase. However, the influence of Mayor de Blasio prevailed this year as Chairman Reiss stated that “although the rise in owner costs viewed alone arguably supports an increase in rent adjustments, I believe that this board cannot ignore the more recent impact of the COVID-19 health crisis.” What a difference a year makes.
As the RGB deliberations came to a conclusion this year, the U.S. Department of Labor began releasing promising numbers that showed that our economy was already recovering from the pandemic. By this time next year, employment numbers will rise even more and with another year of the HSTPA on the books, as well as increased property taxes and another rent freeze, owner conditions should certainly call for the highest rent guidelines we have seen in years.
We must also take the time to recognize and show gratitude to the dozens of RSA members who testified during virtual hearings and submitted video or written testimony. Despite the fact that another rent freeze was on the horizon, our members came out in full force and delivered excellent testimony to the Board that painted a genuine picture of the struggles that building owners faced even prior to the pandemic. Unfortunately, the effects of COVID-19 threw a wrench into our case for reasonable rent guideline increases this year and political influence prevailed. We look forward to working with our members during next year’s deliberations as we fight for long-overdue adequate rent increases.