CityViews: Squeeze on Regulated Rents Puts Vital Housing Source at Risk

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To read a contrasting opinion, please see “CityViews: Why I Voted for a New York City Rent Freeze”
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Two weeks ago when the New York City Rent Guidelines Board voted on rent increases for 1 million rent-stabilized apartments in the five boroughs, the nine-member panel had the opportunity – in Wall Street speak – to implement a market correction. Instead, the RGB, which is supposed to operate independently of City Hall influence, for a fifth consecutive year prioritized Mayor Bill de Blasio’s political agenda by voting for a woefully inadequate 1.5 percent rent increase on one-year leases.

The RGB overlooked the fact that while it was providing historically low rent increases totaling 2.25 percent in the previous four years – which included two consecutive years of rent freezes – de Blasio raised landlords’ property taxes by 31 percent, and building operating costs of owners of rent-stabilized properties increased in excess of 16 percent during that same period.

The RGB also completely ignored other significant data that should have factored into the recent vote on rent regulations – including this year’s 4.5 percent increase in operating costs of rent-stabilized apartments.

It was time to play catch up. It was a time for the RGB to return to a reasonable balance between owner and tenant interests. The findings of the RGB’s own reports begged for a modest rent increase of at least 4 percent for a one-year lease. But once again, the de Blasio appointed (and controlled) rent board fell far short and failed miserably at providing landlords the income they need to repair, maintain and upgrade apartments.

Before taking office five years ago, de Blasio pledged to address tenant affordability through the RGB process by appointing like-minded individuals to the board to carry out his agenda. But owners didn’t expect the degree to which the RGB would tip the scales to the tenant side and completely abandon the metrics that historically have guided this board.

Over the past five years of the de Blasio Administration, the traditional metrics have been disregarded because the critics claim that these metrics only consider owners’ costs and not the affordability issues confronting the tenant population that falls within a certain economic spectrum. But rent stabilization was never intended to be a rent subsidy program.

The RGB’s mandate and obligation is to enact rent guideline increases that are necessary to preserving rent-stabilized housing stock – and that means providing owners with a fair and equitable rent increase to repair, maintain and improve their properties in order to provide quality housing to their tenants. The protections afforded to tenants by the rent stabilization law are the limitations on the level of permissible rent increases set by the RGB, and not the precise level of rent increases.

By virtue of these rent increase limitations, the owners of the 1 million rent-stabilized apartments are the largest providers of affordable housing, particularly in the outer boroughs of Queens, Brooklyn and the Bronx, and in upper Manhattan. But it doesn’t mean landlords should be subsidizing tenants’ rents – which is precisely how the RGB process, under the de Blasio Administration, has evolved.

We clearly understand the plight of low-income tenants, but landlords should not be asked to shoulder the burden of income-challenged tenants. That’s government’s job. What other private industry has its income regulated by government and is saddled with annual increases in government-mandated costs (real estate taxes, water and sewer rates, etc.), then is forced to subsidize consumer costs?

The rent burdens of income-challenged tenants cannot be resolved with political schemes and rent freezes, but rather by rent subsidies and income supplements like the kind proposed in Albany legislation – which has passed unanimously on both sides of the aisle in the Senate, but is stuck in the Democratic controlled Assembly.

Why wouldn’t the Assembly, City Council and tenant advocates support an income-driven rent subsidy program for all tenants – for which a template exists in the existing senior citizen and disabled rent increase exemption programs? Or perhaps the city could model a rent subsidy program after its recently enacted half-price Metrocard initiative for straphangers earning $25,100 or less annually.

To meet de Blasio’s political agenda, the RGB further ignored the results of the 2017 New York City Housing and Vacancy Survey, which shows that affordability has barely budged in nine years. In fact, incomes are finally outpacing rents, rising 10.9 percent vs. 8.1 percent over the past three years. Some will make the case that this is the yield of two rent freezes and historically low rent increases of the past four years. But we know otherwise.

Who are de Blasio and the RGB really protecting? According to the U.S. Census Bureau, 168,000 tenants with annual salaries of $100,000 to $150,000 are occupying 20 percent of the city’s rent-stabilized apartments. But 172,000 families whose annual incomes are below $25,100 can’t find affordable housing. This data validates the irrationality and misguided conceptions of the RGB, which has reached far beyond its mandate to impact affordability without any reference or consideration of tenant incomes and ability to pay.

Furthermore, even with de Blasio-dictated rent freezes and historically low rent increases, homelessness has reached record levels under his administration – well over 61,000, with children representing 40 percent of that number. This is further proof that housing affordability is not the result of high rents, but rather a product of inadequate incomes for those most in need of a rent subsidy lifeline.

It is evident that affordability continues to be an issue despite increasing incomes outpacing rent increases, an improving city economy and all-time low unemployment, as well as rent freezes and historically low increases.

The RGB’s own studies are already forecasting a 3.4 percent increase in next year’s building operating costs – and these costs don’t account for building facade maintenance, increased elevator inspections, lead paint abatement and many other government mandates, including the dozens of requirements imposed on owners over the last four years under the progressive and pro-tenant City Council.

The RGB had the opportunity to right the ship two weeks ago – to fulfill its mission of maintaining the economic health of the regulated rental housing industry by authorizing rent increases to meet the ever-increasing operating costs that the board has fundamentally ignored for four consecutive years. The RGB’s current approach is unsustainable.

The vast majority of the city’s rent-stabilized apartments are in buildings well over 75 years old and in constant need of maintenance, repairs and upgrades. Choking landlords’ primary income denies them the resources needed to keep up with these costs and repairs. In addition, landlords pay close to 50 percent of the rent towards property taxes, water and sewer rates and other city mandates – which translates into revenue totaling billions of dollars that pays for police, fire, sanitation and other municipal services. It’s an economic engine the city can ill afford to lose.

But if the RGB continues to deliberately ignore the facts and, instead, prioritizes the misguided, ill-conceived politically driven agenda dictated by de Blasio, pull up a chair and get a front-row seat to the largest segment of quality, affordable housing falling into abandonment and deterioration. Remember Jimmy Carter’s 1977 visit to Charlotte Street – a stretch of vacant lots and burned out, abandoned buildings in the South Bronx? It became the poster child for urban blight in America. Thanks to the RGB and de Blasio, we aren’t far from repeating history.

Joseph Strasburg is president of the Rent Stabilization Association, which represents 25,000 owners of the 1 million rent-stabilized apartments in the five boroughs, the city’s largest providers of affordable housing.