The Making of the de Blasio Disaster

Although many in the rental housing industry predicted the unprecedented move, the City Rent Guidelines Board (RGB) voted in favor of the City’s first ever rent freeze for one-year leases at the RGB Final Vote on Monday, June 29th. There will be a 0% increase on one-year leases and a 2% increase on two-year leases commencing October 1, 2015 and ending on September 30, 2016.

What we have suspected for some time has now been confirmed: Mayor Bill de Blasio has declared war on the rental housing industry.

Prior to Mayor Bill de Blasio taking office last year, there had never been rent guideline increases below 2% for one-year leases in the history of the RGB. Last year, despite nearly achieving a rent freeze, the Board voted in favor of 1% increases for one-year leases. During his campaign in the summer of 2013, then-Public Advocate de Blasio made a promise for a rent freeze and now, after appointing all nine members of the RGB, has delivered the ultimate blow to the City’s rental housing industry.

The proposal of a rent freeze, which was placed on the table by RGB tenant members Harvey Epstein and Sheila Garcia, was approved by a vote of seven to two with owner members Sara Williams Willard and Scott Walsh voting against it. Historically, the tenant members of the Board strongly advocate for a rent rollback. However, despite immense pressure from tenant advocates in attendance, Epstein and Garcia acknowledged that the tenants would not get the votes needed to support a rollback. It is also important to note that public member Steven Flax, who last year voted in favor of rent increases with the understanding that “it costs money to run buildings,” voted in favor of the rent freeze as well.

Rachel Godsil, who is the RGB’s Chairperson, claimed that the final vote by the Board was not “predetermined” or politically driven. Chair Godsil stated that with this year’s Price Index of Operating Costs (PIOC) only increasing by 0.5% as a result of a large drop in fuel costs, she believed that the data did not support rent increases on one-year leases. Last year, despite the PIOC increasing by 5.7%, Chair Godsil also supported a rent freeze, making it very hard to believe the notion that Mayor de Blasio did not have any influence on the Board’s decision to approve a rent freeze this year. Following the Final Vote, Mayor de Blasio released a statement supporting the decision of the rent freeze, saying that the Board “got it right.”

Although rent stabilization was never designed to be an affordable housing program, this Board and Mayor are determined to force owners of stabilized properties to bear the burden of maintaining and subsidizing affordable housing regardless of whether or not the tenants in this housing are actually in economic need. RSA made tireless efforts to educate the de Blasio Administration and his RGB of how lethal a rent freeze would be to the City’s stabilized housing stock, but they chose not to listen.

The majority of the RGB and Mayor de Blasio also continue to ignore all other rising operating costs for owners, which include property taxes and water and sewer rates that will increase again as of July 1st. Property owners continue to struggle with yearly increases in operating costs, but these challenges were completely disregarded by most of the members of the RGB. RSA made it very clear throughout this year’s RGB process that with rising costs and inadequate rent increases, it will be very difficult for property owners to preserve and maintain the City’s affordable housing stock.

A rent freeze was nearly approved last year, however, the rental housing industry dodged that bullet with minimal increases. The difference this year, however, was that the Board would consist of all appointees handpicked by Mayor de Blasio. From the moment zero guidelines were once again placed on the table at the Preliminary Vote in May, RSA prepared for the worst but along with our members, fought down to the wire for the best.

Although a rent freeze is a defeat for the rental housing industry, this will serve as the centerpiece of RSA’s fight in next year’s RGB process. This Board clearly does not understand how vital reasonable rent increases are for property owners who are trying to maintain the City’s affordable housing stock as a healthy one.

The RGB has predicted that the PIOC will once again increase next year and if that occurs, there will be no justification for any additional inadequate rent increases. A 1% increase over a two-year period cannot be tolerated. The RGB carried the perception this year that property owners have been overcompensated through rent increases. Now, with a rent freeze, the RGB cannot defend their logic during next year’s RGB process.