The Stealth War

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So far, no one’s making a huge amount of noise–not the landlords, not the tenants. Despite a few rallies in support of New York’s rent laws, the decibel level has been decidedly low.

But anyone who thinks there’s not much at stake in the renewal of rent regulations this year ought to go to Queens.

There, in the bedroom borough far from the gentrification battlegrounds of Manhattan and Brooklyn, the new frontier in the battle over rent regulations is taking shape.

Consider, for instance, the Brussels and the Marseille, two buildings on 67th Avenue in Rego Park. This twin-building development, built 41 years ago by developer Samuel LeFrak, might not seem a likely candidate for high rents. It’s far out in Queens, after all, a long subway ride from Manhattan. But Janet Henne, president of the Bru-Mar Tenants Association, reports that at least two-dozen apartments–5 percent of the 485 units in the two towers–are no longer rent-regulated. Taking advantage of provisions in state law, the landlord has jacked up rents for those apartments beyond $2,000 a month, exempting them from New York’s rent stabilization mandates.

“People really don’t believe it’s happening in Queens,” says Henne, who moved into the complex 40 years ago and has lived there ever since. In the last few years, she says, “I have seen rents rise from $600 to more than $2,000. All of the three-bedrooms and many of the two-bedrooms here are already that high.”

The rent jumps appear legal–a combination of increases the owner could make when apartments became vacant, rent hikes for renovations, increases for “major capital improvements” on the elevators and the boiler, and more. To Henne, they signal a move to pull the building out from the rent stabilization system. “They’re definitely trying to get out from under rent regulations,” she charges. “They’ve said so.”

Henne’s landlord can deregulate apartments thanks to a change in the laws developed by the City Council in 1993 and extended by the state in 1997, after a frantic last-minute deal in Albany that supposedly saved the regulation system [see “The Victory That Wasn’t,” page 21]. Now, once the rents on stabilized apartments hit $2,000 a month, landlords can remove them from rent regulations–a phenomenon called vacancy decontrol.

Today, the average stabilized rent in Manhattan has vaulted beyond $1,000, and landlords no longer see a $2,000 rent as the Holy Grail. Now, it’s well within reach. “The $2,000 issue sent my practice through the roof,” says tenant attorney Sam Himmelstein. “It creates this tremendous incentive for landlords to phony up evictions, and my practice has tripled.”

Ten percent of all rent-regulated tenants–100,000 households–move each year. And this, tenant advocates say, means that landlords can easily use legal means to thrust rents throughout the city beyond $2,000 and thus get apartments out of the stabilization system. “Every apartment that becomes vacant in Manhattan, and many larger apartments in the boroughs, are in danger,” says Judith Goldiner, a staff attorney with the Legal Aid Society.

The New York State Tenants & Neighbors Coalition estimates that 99,000 apartments have been deregulated over the past 10 years because their rents rose beyond $2,000–and the group sees the trend accelerating.

Landlords scoff at this number. “I think that’s an exaggeration,” says Dan Margulies, executive director of the landlord lobby known as the Community Housing Improvement Program. He suggests that 40,000 to 50,000 high-rent apartments have been deregulated over the past decade.

All the numbers are estimates, because landlords don’t have to get approval or even file a notice to remove the high-rent apartments from regulation. The Tenants & Neighbors figure is an extrapolation from U.S. Census data showing that the number of unregulated apartments in rental buildings has increased that much. The group argues that since most new buildings are co-ops or condos, or are part of the rent regulation system because they have received city tax incentives, this growth in the number of unregulated units represents the net loss due to vacancy decontrol.

The landlords don’t offer any statistics to back up their estimate. But even supposing Margulies’ number is correct, the impact is still huge–50,000 apartments is approximately 5 percent of all rent regulated units.

Given the mounting evidence that seemingly small changes in rent laws have had massive consequences in the real estate market, you might expect both landlords and tenants to be staking big claims as the rent laws come up for renewal. Six years ago, the last time rent regulations were set to expire, the verbal volleying was at fever pitch for months. Landlords and tenant groups were highly mobilized, and both mounted high-profile advertising campaigns. For the most part, the press echoed the landlords’ claims that the rent laws were a curse on the city. And the final political deal–which folded rent regulations into New York State’s budget package–was passed in such a rush that most state legislators didn’t even have time to read the bills they were asked to approve.

This time around, it’s as if landlords, tenants and politicians have all fallen into a black hole. No more rancor and clamor. No more gnashing and snapping. The hot button issue of six years ago has gone cold fusion.

Governor George Pataki, quizzed by reporters back in February, said, “I don’t see any need for any dramatic changes”–though he suggested the possibility of some “minor changes to be made here or there.” He added that he believed the law as amended in 1997 “has worked very well.”

Ditto for State Senate Majority leader Joe Bruno. His staff told reporters that Bruno–who once vowed to “end rent control as we know it”–did not want to do anything to disrupt the system in 2003.

Indeed, landlords and tenants, who almost never agree on anything, concur on this: things are unnaturally quiescent. “We’re not on the radar this year,” says landlord lobbyist Margulies. “It’s an issue in our own minds but not in Albany’s. I think we really do have a budget crisis and we have a war on. And both are distracting.”

Michael McKee, who heads rent regulation campaigns for the Tenants & Neighbors group, suggests that things are quieter because the Republican rhetoric has been more reasonable. There’s a tenant action day planned in Albany on May 13, and McKee suggests tenants have a good chance to win back some of the items lost in 1997. “We’re going into negotiations in a better position,” McKee says. “The renewal is a given. The laws are going to be extended.”

“There’s not that much going on,” adds tenant activist John Fisher, who runs TenantNet, an internet-based information service. But unlike McKee, Fisher finds the silence profoundly disquieting. He’s concerned that the more conciliatory words coming from Albany have sucked the wind out of tenant organizing.

And he may have reason for his fear. Just because Albany seems relaxed on the rental front right now doesn’t mean that landlords have given up their desire to end rent regulations. They’re just willing to do it gradually. “Our goal is vacancy decontrol,” says Jack

Freund, executive vice president of the Rent Stabilization Association, a landlord group. “But we’ve never said, ‘End the rent laws immediately.’ We’ve said, ‘Phase them out.'”

This year, landlords are looking for some behind-the-scenes changes. “We’d like to see the vacancy decontrol concept extended,” says Freund. Margulies gets more specific: he’d like to see the high-rent trigger for vacancy decontrol lowered to $1,750, perhaps with a phase-in to $1,500 over the next few years.

Hearing this, tenant attorney Himmelstein offers a terse response: “There go Brooklyn and Queens.”

_______

New York’s rent regulations are actually two programs–rent control and rent stabilization. Rent control, which was designed to keep families of desperate veterans in their homes during World War II, is gradually phasing out. Today it limits rent hikes on just 52,000 apartments. As each controlled apartment becomes vacant, it floats to market rent and then joins the second program, rent stabilization.

In addition to increases governed by law, stabilization cushions tenants from displacement by guaranteeing them an automatic one- or two-year extension every time their lease comes up for renewal, and gives them certain rights in court. All buildings constructed after 1974 are exempt from rent stabilization, unless a developer received certain types of public financing.

Approximately 1 million apartments are rent stabilized, which makes rent stabilization by far the most important affordable housing program in the city. By comparison, housing projects provide 243,000 low-cost apartments across the five boroughs.

The rent laws must be renewed every few years by the state legislature because they are nominally emergency regulations–and thus must be triggered by a finding of a housing emergency. Though the laws affect only certain buildings in New York City and in Nassau, Westchester and Rockland counties, this also means they must win the backing of upstate Republicans. The current rent laws are due to end on June 15 unless renewed by the state legislature and governor.

In February, the Assembly passed a strong bill that would extend the regulations and remove the most egregious change endorsed in the 1997 bill–vacancy decontrol of higher-rent apartments. But it’s what they call in Albany a “one-house bill”–it’s supported by the Democrats who control the Assembly, but not by the Republicans who dominate the Senate, and not by the Governor.

Like most business in Albany, the rent laws will be negotiated in whatever passes for a smoke-filled room these days. And that means that three people will ultimately decide the fate of a million downstate apartments.

“When the deals get struck, at this level and magnitude, there are only three players,” says State Senator Liz Krueger, a Manhattan Democrat. She’s referring to Pataki, Bruno and Assembly Speaker Sheldon Silver. “The list of trade-off issues is enormous–and only those players know what they are holding out for.”

In 1997, when the rent laws were part of the negotiations over the budget, the dealmaking became so frenzied that the laws actually expired for four days before the extension bill was passed. Earlier this year, it looked like it might be déjà vu all over again.

But in late April, that didn’t seem likely. The Assembly and Senate hammered out a joint budget deal. Pataki declared he would veto it. And rent regulations were not part of the debate. “As far as I know, there has been no substantive discussion with the Senate involving rent regulations,” says Jonathan Harkavy, chief of staff for Assembly housing committee chair Vito Lopez.

If the rent laws don’t turn out to be part of the horse-trading for the budget, the Democrats will lose an issue they can use as leverage to get Republicans to come on board. Lopez suggests that Republicans have other legislative needs–such as bills to facilitate the cleanup of toxic brownfields, or certain upstate tax proposals–that the Democrats can hold hostage to force Republicans to accept the rent laws.

Judith Goldiner, the Legal Aid staff attorney, is conflicted about the possibilities. “I don’t think it’s a good thing for the rent laws to be tied up with this budget,” she says. “But I don’t know how much power the Assembly has without it.”

What’s more, Goldiner says, she’s not sure why tenants are trusting Pataki and Bruno to come through on the rent issue: “Personally, I think you rely on George Pataki and Joe Bruno to your peril.”

_______

Following the disaster of 1997, one tenant group has decided to take on Pataki and Bruno from inside their own party. Tenants & Neighbors has targeted four key Republican and Conservative Party districts in and around New York City for its maximum efforts. It has led organizing campaigns in the districts of State Senators Martin Golden of Brooklyn, Serphin Maltese of Queens, and Long Island’s Dean Skelos and Michael Balboni.

The idea is to get these downstate right-wingers to put pressure on the leadership in Albany to extend the rent laws, and it’s a campaign that McKee maintains is working. “There are 15 Republican state senators with rent regulated apartments in their districts,” McKee says. “Tenants are getting clobbered by rent increases and harassed. Landlords are being much more aggressive. Republican senators are hearing from their tenants and we believe this will put more pressure on Bruno.”

Of course, McKee is not the only one trying to influence the Republicans. The landlord lobby is working its magic too, using campaign contributions. Last year alone, the Rent Stabilization Association poured more than a quarter of a million dollars into state Republican and Conservative party coffers–and that doesn’t include contributions to individual candidates.

After prodding by McKee’s group, several downstate Republicans did introduce two pro-tenant rent regulations bills in the State Senate this year–one that would extend the system and another that would eliminate vacancy decontrol. Republican leadership, however, has kept the bills bottled in committee.

To end the Senate stalemate, Krueger made a procedural move to force a vote. That was when a funny thing happened. Even the Republicans who supported the rent laws rejected bringing them to the floor. Instead, they accused Krueger of grandstanding.

“This is childishness,” says Senator Frank Padavan, a Republican from Queens and one of the sponsors of the pro-tenant legislation. “It’s political nonsense, plain and simple. To stand up on the floor of the Senate and say you want your bill voted on: I’ve been there 31 years and I’ve never seen anything like this create something positive. It’s silly.” Padavan says an issue like rent regulations needs “a three-way negotiation” between the Assembly, the Senate and the Governor–and that no political posturing will make that happen faster.

“Hell, yes, I was grandstanding,” Krueger replies. “I desperately want to get this to the floor for a debate and vote.”

It’s because of the perverse nature of Albany politics–where supporters of rent regulations wind up, in effect, voting against bringing them up for a vote–that some tenant activists distrust the Tenants & Neighbors strategy of lobbying the downstate Republicans to put pressure on the upstate Republican leadership.

“If tenants dwell only on Pataki and Bruno, it won’t work,” asserts TenantNet’s Fisher. “You have to ask, ‘Who can really make it happen? Of the three men who will make this decision, who can make it better?’ The answer is Sheldon Silver. Tenants are not focusing appropriately on the Democrats.”

Fisher believes that to win any improvements in rent regulations, the Assembly Democrats, led by Speaker Silver, are going to have to threaten to kill some pet Republican projects. He worries that Democrats won’t play true political hardball unless tenants push them–by making noise and letting the Democrats know that there will be a price to pay for any givebacks to landlords.

This strategy dispute shows a key difference between the tenant tactics in 1997 and the way things are working today. In ’97, tenants maintained a united front. Today, various groups, including, in addition to Tenants and Neighbors, Legal Aid, Metropolitan Council on Housing, and community-based tenant organizations, are working more independently. It remains to be seen whether this approach is a winner or will wind up diluting tenant clout in Albany.

For tenants, Goldiner says, the lesson from 1997 ought to be aggression. “The landlords went for the jugular and we didn’t,” she says. One of her big worries is that the rent laws will be extended, but at the 11th hour–and that changes will once again be slipped in without tenants knowing. This year, she wants tenants to be involved in the negotiations. “In 1997, the landlords were in the room. You’ve got to be there, and you’ve got to try to get into the room,” says Goldiner.

Another wild card this year is the role of New York City Mayor Michael Bloomberg. In late March, he quietly signed the city extension of the rent laws. But his administration has not taken a position on the key issue–whether to repeal the high-rent vacancy decontrol made state law in 1997. “Quite frankly,” says Krueger, “I don’t hear Mayor Bloomberg saying he wants this.” Across the aisle, Padavan also says it’s key for the Mayor to take on the vacancy decontrol question. “He’s preoccupied on the budget–as he should be–and his focus is not on rent regulations,” says the veteran Republican from Queens. “But we certainly need the Mayor to speak out on this issue.” A spokesman for the Mayor did not return phone calls seeking comment.

So, for now, the hush persists. If the Armed Forces were naming it, perhaps this year’s rent war would be called “Operation Enduring Silence.” Tenants can only hope it’s not the silence of the lambs.

SIDEBAR: The Victory That Wasn’t
It was around 2 a.m. on Monday, June 16, 1997 when Assembly Speaker Sheldon Silver walked up to the microphones in Albany to announce the deal that saved rent regulations. He had gone into negotiations a man alone, and he emerged with a striking victory–or so it seemed.

Governor George Pataki and Senate Majority Leader Joseph Bruno had made no secret of their desire to wipe out the rent regulation system. To counteract the Republicans, Silver had helped broker a renter-labor coalition that became an effective lobbying force. And when tenants went public with a television advertising campaign, Silver’s fingerprints were on the fundraising.

But it only took a few days for the triumphal glow to wear off. Silver’s deal had sounded too good to be true–and it was.

    •By extending the laws for six years, Silver allowed Republicans to remove the rent fight from the political calendar, placing the renewal in a year when Pataki would be safely installed in his second term and no state officials would be up for re-election.

    •In the fine print of the extension, landlords won deregulation of apartments renting for more than $2,000 a month. So-called high-rent vacancy decontrol is not new–a decade ago, the legislature introduced it for all apartments that had reached that level prior to October 1993 and then became vacant. A subsequent city law made vacancy decontrol permanent and ongoing–the same arrangement Silver accepted statewide in 1997.

    •The extension also granted landlords an automatic 20 percent rent increase any time an apartment became vacant. “Sometimes landlords report three vacancies in a year,” asserts Legal Aid attorney Judith Goldiner. “They can raise the rent 60 percent that way without putting in a dime.” For instance, if an apartment renting for $700 turned over three times, the landlord today could legally charge $1,200, without making any improvements–and that doesn’t include the annual rent increases granted under the stabilization program. The latest study from the Rent Guidelines Board shows that while some operating costs are going up, so are landlords’ profits: An average landlord’s net operating profit from rent stabilized apartments is 44 cents on every dollar of rent, up 10 percent from six years ago.

    •The deal Silver cut also reversed a legal precedent that allowed courts to consider old rent overcharges in the process of calculating the legal rent for an apartment. Today, if a rent overcharge remains unchallenged for four years, that illegal rent becomes the legal rent. Landlords are required to register their rents every year, but tenant activists say that in the wake of this change many owners have decided they’re better off not filing their rent information with the state. Now, when tenants want to prove they are being overcharged, in many cases they find there’s no evidence on file with which they can make their case.

    •The package required that tenants who withhold rent must pay it into an account supervised by the court–effectively making it impossible for tenants to go on rent strike without going to court first. This provision, however, proved wildly unpopular among judges, landlords and tenants alike, and has rarely been implemented.

The victory, it seemed to many tenants, was actually a sell-out–and Silver’s been taking heat for it ever since. TenantNet’s John Fisher still feels betrayed. Proclaims Fisher, “Sheldon Silver, despite what everyone says, is not a friend of tenants.”
–RN

SIDEBAR: Banned in Boston
The sky won’t fall. That’s the argument landlords make about ending rent regulations. And for a time, it seemed that evidence from Massachusetts was confirming that contention.

Boston, Cambridge, Brookline, Waltham and Lowell all had some form of rent control for several decades. That was wiped out in 1994, when landlords eked out a 51 to 49 percent victory in a statewide referendum. The result: Rent regulations were banned across the state.

Initially, the result was not dramatic. “Rents went up some at first,” says Lew Finfer of the Organizing and Leadership Training Center, a consortium of six community groups. But then came the dot-com boom, and rents zoomed. “In poor and working-class neighborhoods, to have people paying $1,500 a month is not unusual. And a few years ago it would have been half that.”

And rents have not dropped despite the deep depression in the economy. “Despite the decline in the economy, people haven’t seen rents fall–except at the high end,” Finfer says. And, he adds, “There’s been a completely parallel increase in home and condo prices.”

Steve Meacham, an organizer with City Life/Vita Urbana, notes that the gritty neighborhoods he works in have been hit by the overheated market as well. In working-class Matapan, tenants in one building got hit with a $400 rent increase, bringing their monthly rent for one-bedroom apartments to $1,100.

“I could give you case after case after case,” he says, noting that even apartments in areas overrun with drugs are getting too pricey. “The market doesn’t work. If there’s one thing that’s been shown from the last eight years, it’s that.”

Last November, Boston Mayor Thomas M. Menino proposed a slimmed-down rent control plan that would have allowed tenants to appeal rent hikes, but it was defeated in the City Council. This year, Cambridge tenants are collecting signatures to put a somewhat weakened form of rent regulations on the ballot in November.

But Finfer suggests that the outlook is dim for a return to rent regulations. “It would be very hard politically,” he says. “Local passage is possible, but it requires the approval of the state legislature and governor.” He pauses a moment to consider New York’s prospects, with rent regulations up for renewal this year. “It’s grim out here,” he says finally. “Hug your kids and hold onto your rent control.”
–RN