California Debate Mirrors RSA Arguments Made in NYC

This recent Mountain View, California rent control debate echoes arguments RSA had made for years to the New York City Rent Guidelines Board (RGB): CPI adjustment does not adequately compensate rental owners.

During a Mountain View Rental Housing Committee meeting, a committee member said, “To use the (regular) CPI is not a great way to look at the market for landlords. We can do better and choose a different index that better reflects the market conditions.”

Unfortunately in New York City, RSA must continue to educate the tenant-friendly and biased members of the RGB in order to have them understand this notion.

After Small Rent Increase, de Blasio Administration Beginning to Understand

Although most may believe that a 1.25% increase on one-year leases in the midst of a 6.2% average increase in owner operating costs is not suitable enough for rent-stabilized property owners (especially after two straight rent freezes), we must look at the glass half full rather than half empty.

With re-election approaching for Mayor Bill de Blasio this November, we expected nothing more than another rent freeze to rally the tenants and tenant advocates that have supported him from his days as Public Advocate. With the largest rent increase approved by the Mayor’s handpicked the Rent Guidelines Board since 2013, it’s hard not to believe that this Administration is slowly beginning to understand the plight of the rental property owner.

Operating costs, specifically property taxes, are continuing to increase year by year at an astounding rate. If the Mayor hopes to make a dent in his affordable housing plan, as well as combat the record homeless crisis, he must help the City’s largest providers of existing affordable housing. The only way this can be done is to properly compensate owners through much needed rent increases as building expenses continue to skyrocket.

Yes, a 1.25% increase is nowhere near proper compensation.During this year’s RGB deliberations, RSA repeatedly urged this Board for a 4% increase on one-year leases and an 8% increase on two-year leases. These suggested numbers were very modest considering the 6.2% average increase in building expenses, as well as two straight years of no rent increases.

However, we must take this small rent increase with an optimistic approach for the future. Based on property taxes alone, RSA fully expects that the RGB will continue to calculate increases in building operating expenses over the next few years. Although it is no secret that this Administration has had influence over this Board over the last four years, it is important to realize that although they are undercompensating, the Tenants Members and the Administration have finally recognized the need for some form of rent increases. This is undoubtedly a step in the right direction.

In the months leading up to next year’s RGB deliberations, RSA will further educate the Members of Board to show them why the RGB does not have the needed data available to properly gauge owner profitability and that the Net Operating Income (NOI) component of the RGB Income and Expense Study is incomplete at best. The Board cannot accurately determine that all property owners are profiting well and RSA will work tirelessly to get make sure that these facts resonate.

RSA’s education efforts, along with property owner participation at the public hearings, could be the difference between lower and higher rent guidelines moving forward.