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Rent Guidelines Board: Will It Hike The Rents?

by Joe Lamport, Jun 07, 2004
 Â Every year, the Rent Guidelines Board decides how much to increase rents on rent stabilized apartments, affecting millions of New Yorkers where it matters most: in their wallets. On June 17, the board will make its final decision, after several highly charged public meetings. Nearly half of the people in the city stand to be directly affected by the ultimate decision.

The board's staff prepares detailed studies of landlords' income and expenses, of the mortgage market, of tenants' incomes and affordability of housing.

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The final outcome is a reflection of what numbers the board's members thought were most compelling. The nine members include two who represent tenants, two who represent landlords and five who represent the public at large. The public members constitute the swing votes. They include an investment banker, an attorney, a real estate developer, a consultant to non-profit organizations and an architect.

Political intrigue is common. This year, the Rent Stabilization Association, which represents landlords across the city, submitted to the board estimates of costs that tenant groups say are greatly exaggerated.

"There's no economic justification for a rent increase this year," said Michael McKee, associate director of New York State Tenants and Neighbors. "All the data show that landlords are doing extremely well and tenants are suffering. The data don't lie."

The "net operating income" for landlords - that is, their profit - rose by 18 percent from 1989 to 2002. From 2001 to 2002, however, profits declined slightly -- by 0.1 percent. Tenant advocates like to point out that in that same two-year period people's real wages declined, and that New York City has lost almost 200,000 jobs since 2001. The advocates argue that landlords are making decent profits on rent stabilized buildings, while tenants are being squeezed: Slightly less than a quarter of tenants have "severe rent burdens" -- that is, they're spending half or more of their income on rent.

The landlords sees it differently from the tenants.

"The range of guidelines that are proposed just barely touch on what is needed for property owners to stay afloat," said Jack Freund, executive vice president of the Rent Stabilization Association. "People can afford a reasonable rent increase. If you don't provide what owners need to maintain their buildings, you're going to hurt the people you're trying to protect."

Freund dismissed the reported increase in net operating income as well as talk of an affordable housing crisis. "To the extent that there is an affordability issue in the city, that is a government issue," Freund said.

The board's meetings put landlords and tenants within arm's length in the same room. Even if they were at a cocktail party, that would be provocative. But when the subject is money, it is going to become contentious, as was clear at a recent board meeting, where there were hisses, boos, chants and shouts. The chairman of the board, Marvin Markus, lost his gavel trying to pound the meeting back to order. "Calm down, Mr. Chairman!" someone shouted. He threatened to have some people removed, but did not ask police at the doors to carry out the threat.

The already passionate landlord and tenant relationship - the second most important relationship after marriage, some say - is on view at these meetings.

At its May meeting, board members rejected proposals from tenant members for no increase and from owner members for significant increases. For the first time, they set a range for increases on one- and two-year leases of 3 to 5 percent and 4.5 to 7.5 percent respectively. The vote was 5 to 4.

In a recent interview, the board's chairman, Marvin Markus, an investment banker, said the housing situation in New York City was not bleak. He also dismissed the exaggerated numbers submitted by the Rent Stabilization Association.

"Last year, the increases (passed by the board) were not anywhere near what the numbers show," Markus said, referring to the increases in costs that landlords faced.

"I can tell you if it's left to Markus the final will be as high as possible," McKee said. "We don't call him Marvin Mark-up for nothing."

McKee said tenants need to come out if they want to show Mayor Michael Bloomberg, who appoints all of the board's members, that the board's decision could cause him political problems.

"It's not an economic decision - it's a political decision," McKee said. "And there's one person responsible, and that's Mayor Bloomberg."

Joe Lamport is the assistant director of the City-Wide Task Force on Housing Court, a coalition of community housing organizations.


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