Timing of When Legislature Will Make Changes Remains Uncertain
At a Joint Legislative Public Hearing on the 2019-2020 Executive Budget Proposal on February 4th, RSA presented testimony opposing potential changes to the State rent laws that were highlighted in Governor Andrew Cuomo’s State of the State speech on January 15th.
In his address, Governor Cuomo outlined potential changes to State rent laws. The biggest question will be whether these items will be included as part of the State budget come early Spring as proposed by Governor Cuomo, or if the State Legislature will make the rent laws the focal point of their discussions as the laws come up for renewal in June.
Regardless, RSA made sure that thorough testimony was presented in order to commence productive dialogue with all State lawmakers and inform them of the consequences that these proposed changes to the laws would have on the City’s economy and aging affordable housing stock.
To set the tone, RSA explained that the vast majority of RSA’s members own less than 50 apartments, many of whom work day jobs and maintain their buildings themselves at night and on their days off. These owners rely upon the profits generated by their rents to pay their ever-increasing property taxes and water and sewer charges, to make improvements and to pay for all of the other costs that are associated with maintaining and operating an apartment building. Any efforts to dramatically change the rent regulatory laws will impair the economic value of regulated properties and the ability of owners to maintain and operate their buildings.
With regard to the rent laws that tenant advocates seek to change or eliminate, these proposals would have nothing less than a punishing impact upon property owners, especially smaller owners, and would do nothing to aid tenants who are struggling with affordability.
The testimony then detailed the effect that specific proposals could have on the rental housing industry, such as:
• The repeal of high rent deregulation.
• The repeal of the preferential rent law
• Restrictions or elimination of building-wide major capital improvement (MCI) rent increases
• Restrictions of individual apartment improvement (IAI) rent increases
• Restrictions or elimination of the statutory vacancy allowance
Throughout our testimony, RSA provided facts to dispel certain myths that exist when it comes to these particular rent laws, such as preferential rents, which despite what tenant advocates and elected officials convey to the media are actually a legitimate benefit to tenants. To counter the perception that owners typically raise preferential rents to unaffordable levels for tenants, RSA provided the following facts:
1. 90% of preferential rents in a given year remain preferential the following year
2. The median increase for renewal leases for tenants with preferential rents is just 1.8%, bringing the median rent to $1,440
3. For vacancy leases for a preferential rent apartment, the increase was just 7%, bringing the median rent to $1,850
4. The median rent for all preferential rent apartments in 2017 was $1,499
RSA also explained why owners need sufficient cash flow to maintain and improve their buildings and how the work that is done to their buildings has a significant impact on the City’s economy and workforce.
In 2018, for example, property owners spent $13.3 billion to maintain and improve rent stabilized properties resulting in a total economic impact of $22.4 billion. To put this number into perspective, the economic activity resulting from expenditures by owners of rent stabilized properties is equal to more than 25% of the City’s $72 billion budget for 2018, and includes $3.7 billion in real estate taxes paid directly to the City to hire police officers, firefighters and teachers. Overall, owners of rent stabilized properties supported more than 180,000 jobs in 2018 with an average salary of $62,300, which generated nearly $12 billion in total income.
These are just some of the examples that RSA cited the testimony to the State Legislature. You can read the testimony in full on RSA’s website by clicking here.
We will have up-to-date information about the rent laws in the upcoming editions of the Reporter.