The RSA has just gotten its first look at the some of the ultimate outcomes of the investigations launched by the Tenant Protection Unit (TPU) created by Governor Cuomo within the State Division of Homes and Community Renewal (DHCR) and it’s not a pretty picture.
The RSA received copies of three “Notices of Audit Determination”, each of which involved Individual apartment rent increases (IAI). In each of these cases, the TPU disallowed certain expenses claimed by the owners either because they were not adequately documented or were not considered to be eligible expenses. In each case, the TPU recalculated the legal regulated rent and directed the owner to amend prior rent registrations to reflect a lower legal rent. And, in each of these cases, the actual rent paid by the tenant was not affected because the owners were charging preferential rents which were lower than the legal rent as calculated by the TPU.
These cases raise some serious issues about the justification and the role of the TPU. If the $6 million allocated to the TPU this year alone was intended to protect tenants, then the evidence so far seems to indicate an extraordinary waste of taxpayer dollars because the TPU audits in no way benefitted the tenants in occupancy. However, we suspect that the real purpose of the TPU was to hamstring owners and lay a foundation for further rent restrictions and the TPU is well on its way to meeting that goal. A schedule of allowable costs of IAI’s has never been promulgated and owners must now operate in unchartered waters. We encourage owners to maintain a detailed record of all IAI work going forward including contracts, invoices, receipts and cancelled checks as well as before and after pictures.
With the average asking rent rising over $3,000, New Yorkers continue to wonder “Why is the rent so high?”. Business Insider Writer Josh Barro detailed several key reasons in an article titled “The 8 Reasons WHY New York Rents Are So Ridiculously High” to offer insight into the rising cost. He attributes factors such as limited space, high property taxes, and high constructions costs. Interestingly enough, #3 on his list is “Rent Control”. Here is an excerpt:
3. Rent stabilisation raises your rent if you’re not rent stabilised. While the average rent for available apartments in New York City is now over $3,000, the U.S. Census Bureau says renters in New York City were only paying a median of $1,125 in 2011. What gives?
The answer is, there are lots of cheap apartments in New York. You just can’t get one of them, because they’re rent stabilised, and tenants with great rent stabilised deals cling to their apartments until they die.
The Cato Institute produced some great charts on this back in 1997, but the same dynamics still hold in the market today. In cities without rent control, rents for available apartments form a normal distribution around the Census median rent. Here’s a chart of Philadelphia rents in 1997:
By Business Insider
If you live in New York City, you probably know that your income taxes are high. A combined city and state tax rate of 10.4% kicks in at just $22,000 of taxable income for a single person.
You probably don’t know that New York City has some of the country’s highest taxes on apartment buildings—and if you’re not subject to rent control, much of that cost is flowing through to you as a renter.
Not all property taxes are high here: New York actually has very low taxes on owner-occupied homes. Our property tax system is a perverse cross-subsidy from relatively poor renters to relatively rich homeowners.
If we just taxed all property at the same rate, apartment building taxes would fall by $1,000 to $1,500 per unit.
Here are a few charts that show just how bizarre New York’s tax system is, and how renters are getting screwed.