NYC’s Endangered Species: A Rent-Controlled Apartment

They are the dama gazelles of the New York City rental market. From a high of more than 2 million in the 1950’s, there are now only 27,000 “rent-controlled” apartments in the city – down from 38,000 just three years ago.

Rent-controlled tenants live in buildings built before 1947 and have lived there continuously since 1971. They tend to be seniors on fixed incomes. They are beneficiaries of the city’s first rent control laws, which were established after World War II to protect returning soldiers and their families from being gouged by greedy landlords.

And due to tenancy succession rules, which require cohabitants or family members to live in an apartment two consecutive years before the lease holder passes away, the city could very well be looking at its last generation of rent-controlled residents. Like those gazelles of the Sahara Desert, they are approaching endangered species status.

This group is not to be confused with their statistically younger and more affluent first cousins,” rent stabilized” tenants, who occupy just over 1 million apartments and represent 47 of the city rental market. Unlike rent-stabilized tenants who have to renew leases, rent-controlled tenants are considered “statutory” tenants. They basically come with the property.

So as various interest groups prepare to converge on Albany this spring to restore, strengthen or thwart the rent regulation laws, which are due to expire on June 15, rent-controlled tenants find themselves a minority within a minority, accounting for just 1.2 percent of the rental stock in the city.

And like any other endangered species, they are outnumbered and nervous.

“People pick on rent-control tenants because we’re like the little kids in the school yard. There’s so few of us, we can’t fight back,” says Lucy Levy, a rent-controlled tenant who has lived in her two-bedroom apartment on Ninth Street in the Village since 1955.

Bullied or not, the rent-controlled tenants have one big issue they want addressed this spring: a fix to the formula that has driven their rents sky high.

Urban legend

The prevailing misconception about rent-controlled tenants is that most of them are paying $250 a month for posh Manhattan digs. To be sure, some rent-controlled tenants pay very little in rent. Brooklyn Assemblyman Joe Lentol volunteered that he has a cousin in Greenpoint, a veteran on a fixed pension, who pays $150 a month for a three-room railroad apartment. But this is hardly the norm.

Recently released figures from the city’s 2014 Housing and Vacancy Survey show that the median rent for a rent-controlled unit in the city is $1,020 a month — this for a population whose median household income is $29,000. By way of contrast, rent-stabilized households, whose median income is $40,600, are paying $1,300 a month in rent.

Thousands of rent-controlled tenants are shelling out $2,000 or more for rent each month, amounts that are inhaling upwards of 50 percent of their income.

“It’s killing me,” says Levy, a 61-year-old paralegal, about her $2,100 a month rent. “I’m paying a lot more than 50 percent of my take home pay to rent. My monthly rent increase was $150 [last year]. My salary hasn’t gone up.”

Olive Freud, a retired schoolteacher, and her husband, Edgar, a retired engineer, also pay more than $2,000 a month in rent for their rent-controlled, two-bedroom unit on West 72nd Street.

In her 80s, Freud says she and her husband can handle the payments for now. But if one of them were to pass away, it would be a struggle. Her 52-unit building is now 50 percent co-op, and she is angry that once she and her husband are gone, their apartment will become just another pricey Manhattan property for the super-rich. The “middle-class,” she says, is getting shut out of the neighborhood.

“We are the kind of people that that made this neighborhood desirable,” says Freud, a resident in her building since 1964. “We made sure the streets were taking care of, the parks were taken care of, we fought for good schools … A few people die and now the landlord is asking for millions. It is outrageous what’s going on here.”

Calculating the costs

The enemy, rent-controlled tenants and their advocates say, is the 45-year-old formula used to calculate the rent hikes. The formula was adopted by the city, but is now administered by the state Division of Housing and Community Renewal (DHCR). Under state law, the city cannot change the formula.

“The whole formula is grossly unfair,” says Michael McKee, treasurer of the Tenants Political Action Committee and a board member of the Metropolitan Council on Housing. “It’s archaic, and like any formula … that was enacted in 1970, it just makes no sense anymore.”

The formula has two parts.

Every two years, the DHCR calculates what’s called the “maximum base rent” for every rent-controlled apartment in the city. This dollar amount, based on water and sewer rates, property taxes and other data, serves as a ceiling for what can be charged for the apartment.

The second part to the formula is a rule that caps year-to-year rent increases at 7.5 percent. Mush the allowable rent hike and the “maximum base rent” together and one gets the “maximum collectible rent,” the amount the landlord can actually charge the tenant.

If the landlord doesn’t file an application with DHCR for the rent hike, the tenant won’t pay it. And if the building isn’t violation free, the rent hike won’t be granted. Some have estimated that as much as a one-third of landlords with rent-controlled tenants don’t apply for the rental increases, perhaps anticipating these tenants won’t be around long-term.

But for the landlords who have kept their buildings up to code and do file for the rent increases, are virtually guaranteed double-digit percent rent hikes over a two year period – an amount that far outpaces the rent hikes granted landlords of rent stabilized tenants in the city. The rent-stabilized rent hikes are determined by the city’s Rent Guidelines Board whose members are appointed by the mayor.

Last year for example, the RGB capped the rent increase on a 1-year lease at 1 percent. At the same time, Levy was socked with a 7.5 percent rent hike for her Ninth Street apartment.

In 1973, Levy was paying $208.10 a month in rent. Today, she’s paying $2,107 – a 1,000 percent increase.

Over this same period, if she was paying the increases granted by the RGB for rent stabilized tenants — not including extra rent increases for capital improvements her landlord might have made— her rent would be $1,194. That’s $900 less than what she’s paying now.

Beyond the maximum collectible rent, rent-controlled tenants can be hit with fuel-cost pass-alongs and charged extra if labor costs rise.

Levy doesn’t blame her landlord for her high rent.

“He only does what he’s allowed to do,” she says. “And I am obligated to pay it.”

New math proposed

Upper West Side Assemblywoman Linda Rosenthal, who grew up in a rent-controlled apartment, wants to drive a stake through the heart of the maximum base rent/maximum collectible rent mumbo-jumbo.

“The current 7.5 percent is ridiculous,” Rosenthal says. “I doubt there is anyone in DHCR who even understands the formula. It does not reflect the situation today.”

Rosenthal has proposed a bill that would require landlords to raise year-to-year rents by either 7.5 percent or the average of the previous five years of rent increases granted by the RGB — whichever is less.

So for example, if Rosenthal’s proposal had been in effect last year, Levy’s rent would have gone up 3 percent instead of 7.5 percent. Over the past five years, the average RGB increase for one-year leases has been 2.65 percent. Over this same stretch, Levy’s average increase has been 4.2 percent. Rosenthal’s bill would essentially slow down the express train of rising rent control rents.

“The goal is to get the rent increases for rent-controlled apartments to a normal level,” she says. “If we fix the formula, that would mean a lot for [rent-controlled tenants]. It’s not like a long-term impact on the landlord’s income because people are not going to live there another 30 years.”

Rosenthal is also concerned about the harassment of rent-controlled tenants at the hands of landlords who view them as human impediments to them making a lot more money.

“In one case, the landlord went into the person’s apartment and threw all her stuff around. So now she’s very scared. This is a very bad landlord,” Rosenthal says. “I know other tenants who are being harassed. They come here and we do battle with their landlords.”

The political landscape

Besides the Rosenthal bill, tenant and affordable housing advocates have a full menu of changes they want to see implemented this spring as part of the renewing the rent laws.

The boldface items include a proposal to scrap the provision that removes from rent guidelines apartments that rent for $2,500 or more. They want to make temporary the charges tenants pay for major capital improvements. And they want to take away the right of landlords to bump up the rent for an apartment 20 percent after a rent-stabilized tenant moves out.

The activists believe they are waging their battle in an improved political climate relative to years past.

Sidelined by corruption charges, former Assembly Speaker Sheldon Silver is no longer one of the “three men in the room.” He’s been replaced by Bronx Democrat Carl Heastie who has said strengthening rent laws will be his top priority once the state budget is put to bed.

Rosenthal says she has already spoken to Heastie about her bill and he appears to be on board.

McKee believes Heastie will be a more useful ally in the Democratically-controlled state Assembly than Silver was.

“What could we expect from Silver except another half-assed attempt to get tenant reform,” says McKee. “Heastie has to prove himself, not so much to us, but to the members who elected him. And if enough of them are saying [we need stronger rent laws] there will be a lot of pressure on him to deliver.”

As for the two other men in the room, the activists expect opposition from Republican state Senate Leader Dean Skelos and are wary of Gov. Andrew Cuomo whose campaigns have raked in millions from the real estate industry.

But the advocates have also picked up an important ally in the big city: Mayor Bill de Blasio, who has set a goal of preserving and/or building 200,000 units of affordable housing.

“We are cautiously optimistic because we have a mayor who is a strong advocate for affordable housing,” says Delsenia Glover, an organizer with the group Tenants & Neighbors and the campaign manager for The Alliance for Tenant Power.

“Two days ago, he (de Blasio) called for the repeal of vacancy deregulation, which is at the top of our agenda,” Glover adds. “This is a huge deal because over the 12 years of the mayor we had before him (Michael Bloomberg), such a thing was unimaginable.”

De Blasio’s office didn’t respond to inquiries as to the mayor’s plans or concerns about the high rents some rent-controlled tenants are paying.

Landlords want it gone

Frank Ricci, spokesman for the Rent Stabilization Association, the landlord lobby group, thinks the state DHCR is expending more money and resources on the shrinking universe of rent-controlled tenants than its worth. He suggests rent control be done away with, and the 27,000 tenants left in the program folded into rent stabilization.

“I don’t think rent-control tenants can expect to have the best of all worlds – smaller rent increases, plus guarantees (to their apartment),” Ricci says.

“If an owner wants to occupy an apartment for himself or his family, it’s impossible for him or her to get the apartment back. It’s easier under rent stabilization,” Ricci adds.

He notes that unlike rent stabilized tenants who pay “retroactively” for capital improvements, rent control tenants are only charged prospectively.
“There’s a lot of little things, but they add up to big things for owners,” he says. “If they want to fold it all into rent stabilization that would be fine.”

The rent-controlled tenants and their advocates aren’t biting.

Glover reiterated that the goal of her coalition this spring is to preserve rent control and bring down the rents.

Levy, the Ninth Street tenant, says she’s a rent control lifer.

“I would never give up the protections of rent control because come Jan 1st, I know I have a place to live and my preferential rent is not going to disappear,” Levy says. “And hopefully I’ll have heat at night.”

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