The Rent Guidelines Board season is scheduled to begin on March 27, 2014 and the rental housing industry will be watching closely to see how Mayor de Blasio fills the vacant seats for Chairman and a Public Member (one Tenant seat is also vacant). The choice of RGB members may indicate whether Mayor de Blasio will carry through on this campaign pledge to freeze rents.
If the Mayor chooses Public Members who are obviously biased towards tenant interests and zero rent guidelines, this will send catastrophic signals to the real estate industry and could well lead to disinvestment in existing and new rental housing.
The RGB is supposed to play an impartial role in approving rent guidelines. With two Tenant Members and two Owner Members on the Board, the rent guidelines are usually enacted by the five Public Members who steer a course between the tenant demand for zero rent increases and owners’ call for rent increases equal to the ever-increasing cost of operating rental properties. As a result, while building operating costs have increased in excess of 6% per year, rent increases have only averaged 3% per year.
Zero guidelines this year will provide a clear indication that the rent setting process is now part of the political process. We may see zero guidelines stretching into the future regardless of real increases in building operating costs. Existing owners will not be able to maintain their buildings. Developers will not be able to count on reasonable increases going forward to sustain their new projects.
The fact of the matter is that some level of rent increase is necessary and justified as long as real estate taxes, water charges, oil, insurance and other operating costs continue to increase.