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.

With Second Straight Rent Freeze, de Blasio Will Never Learn

The “politics before policy” reputation of the City Rent Guidelines Board (RGB) continued once again this year as Mayor Bill de Blasio’s Board voted in favor of another rent freeze for one-year leases at the RGB Final Vote on Monday, June 27th. Mirroring last year’s guidelines, there will be a 0% increase on one-year leases and a 2% increase on two-year leases commencing October 1, 2016 and ending on September 30, 2017.

The majority of the Board, excluding Owner Members Scott Walsh and Mary Serafy, continued to stand by the notion that owners have been overcompensated by past rent guideline increases and that a negative Price Index of Operating Costs (PIOC) as a result of a dramatic decrease in fuel costs, as well as an increase in property owner Net Operating Income (NOI), were grounds for an unprecedented second consecutive rent freeze.

The motion for the rent freeze, which was put on the table by Chairwoman Kathleen Roberts, was approved with 7 votes in favor and two abstentions coming from the Owner Members. Chair Roberts stood strongly by the notion that the Board determined these numbers based off of the data that was analyzed throughout this year’s deliberations. This is also the second year in a row that all members of the Board, excluding the Owner Members, voted in favor of a rent freeze. Prior to last year, RGB Final Votes were typically 5-4. Once Mayor de Blasio began appointing more members to the RGB, Public Members of the Board have fully committed their votes to tenant friendly guidelines, resulting in votes of 7 to 2.

Chair Roberts’ motion was the third to be placed on the table, following motions by the Owner Members and Tenant Members. The Owner motion was the first to be heard and was proposed by Scott Walsh, who called for a 3% increase for one-year leases and a 5% increase for two-year leases. Mr. Walsh defended the Owner proposal, saying that the numbers were determined based off of zero-to-minimal increases approved the previous two years, as well as continued increases in all other building operating costs. Ultimately, the Owner proposal was denied by a vote of 7 to 2.

It’s important to note that Mr. Walsh began his proposal with recommendations for State and City lawmakers that could assist rent burdened tenants throughout the City, as well as assist rent stabilized building owners burdened by severe property tax increases. After hearing hundreds of tenants testify throughout the public hearings in June, Mr. Walsh believed that elected officials should be doing more to enhance current rental assistance programs and develop additional subsidy programs for tenants, rather than calling for rent freezes that will ultimately hurt the City’s existing affordable housing stock. Although Mr. Walsh’s proposals were logical and ideas that elected officials such as Mayor de Blasio should consider, such common sense proposals do not advance progressive political agendas. So more than likely, we will never see such proposals come into fruition.

As a result of the RGB’s adoption of yet another rent freeze, RSA announced that we will initiate a lawsuit against the RGB to seek the invalidation of the new guidelines. The vast majority of the RGB, as well as Mayor de Blasio, ignore that fact that owners continue to be burdened by increasing costs to maintain their buildings. The difference between this Administration and those of the past is that reasonable rent increases were awarded to offset the increasing operating costs, while de Blasio’s RGB is merely carrying out a political agenda.

Despite publicly applauding the RGB’s vote for a rent freeze once again, Mayor de Blasio oddly urged tenants to take a two-year lease, saying the “two-year lease in particular gives you two years of security in knowing that your rent will go up very little.” Mayor de Blasio unexpectedly acknowledged that it is uncertain what the rent guidelines will be next year and that fuel costs are already on the rise.

Next year’s RGB deliberations will commence as Mayor de Blasio begins his campaign for re-election in the fall. Although a rent freeze and housing affordability have been the platform for this Mayor’s Administration, it will be incredibly difficult for the Mayor and RGB to justify a third consecutive rent freeze when the PIOC is expected to rise. It is also important to keep in mind that next year’s RGB data will finally reflect the then-historically low 1% increase on one-year leases in 2014 when the PIOC was 5.7%.

This Mayor will never learn. His grand affordable housing plan is not a feasible one without helping the owners of the existing housing stock. By helping, we mean not raising operating costs, particularly devastating property tax increases, while cutting off the only source of income for property owners.

Throughout the two days following the Final Vote, Mayor de Blasio basked in his glory over the rent freeze publicly. Come on Mr. Mayor, can you make it any more obvious that these unheard of rent guidelines were all your doing? The puppet strings that you hold over this RGB are easy to see and now we are not the only ones who see it.

RSA’s public relations campaign has made a big impact in 2016 and it has resonated not only with several elected officials, but with the media as well. Take these powerful editorials by the New York Post and New York Daily News for example. A rent freeze might sound good to the public, particularly tenants, but the sound of two straight rent freezes even has the media calling out Mayor de Blasio on his political agenda. Even the press knows rent freezes are not healthy for the City’s aging housing stock. It may not show right away Mr. Mayor, but in the long run, rent freezes are not the best idea.

And we told you so.

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.

 

Teaneck Rent Freeze Forecasts Upcoming Rent Guidelines Process

In October, New York City enacted the lowest rent increases in the 46-year history of the City’s Rent Guidelines Board. The only positive result to come out of last year’s Rent Guidelines process was the evasion of a rent freeze that many thought was inevitable. In Teaneck, New Jersey however, a rent freeze was not avoidable.

As a result, many property owners are seeking legal action to nullify the rent freeze that the city has imposed. One particular owner has called the rent freeze “arbitrary, capricious and unreasonable, and otherwise contrary to the laws and standards applicable to rent control regulations.” Owners have rejected the notion of a rent freeze for obvious reasons: building operating costs are not being frozen and are actually continuing to rise. Some of the Teaneck City Council members have admitted that they were motivated to vote for a rent freeze simply as a result of sympathy for tenants while others, rejected a motion for a rent freeze with the understanding of rising costs for owners.

As we approach another Rent Guidelines process, we patiently await as Mayor Bill de Blasio is expected to make new appointments to the City Rent Guidelines Board. Last year, Mayor de Blasio appointed five new members to the board, including the chairperson. It is expected that Mayor de Blasio will once again campaign for a rent freeze this year. Avoiding a rent freeze this year will be much more difficult, considering the possibility that all nine members of the RGB could be influenced by the Mayor’s requests.

Should these predictions become reality, it will be a much bigger battle than last year to avoid a rent freeze. As a result, we could end up in a very similar situation as property owners in Teaneck. If operating costs continue to rise, the RSA and the entire housing industry will have a legitimate argument that will justify the need for rent increases.

RGB Approves Historically Low Rent Increases, but Rejects Rent Freeze Backed by Mayor De Blasio

A historic Rent Guidelines process has finally come to an end. Although the process typically begins in March, it felt as if this year’s RGB process began last summer when Mayor Bill de Blasio, then Public Advocate, promised to fight for a rent freeze while campaigning. Mayor de Blasio kept a low profile throughout the entire Rent Guidelines process this year until one week before the vote when he stated that the members of the Rent Guidelines Board should “look at a lot of information and decide what makes sense first and foremost based on the actual facts, the actual numbers.” On June 23rd, the morning of the Final Vote, the Mayor disregarded his previous statement and once again came out supporting a rent freeze, urging the members of the RGB to approve zero rent increases. Despite the pressure from the Mayor and dozens of City elected officials, the RGB voted 5 to 4 in favor of the following rent increases:

For a one-year lease: 1%

For a two-year lease: 2.75%

Yes, the increases are the lowest in the 46-year history of the Rent Guidelines Board, but a rent freeze seemed imminent for a board consisting of six members appointed by Mayor de Blasio earlier this year. The proposal for these guidelines were submitted by RGB Public Member Steve Flax, a de Blasio appointee, and were then placed on the table for a vote by Owner Member Magda Cruz. Despite being outraged that his proposal was suggested by the Owner Members, Flax went with “his conscience” and voted in favor of the increases.

The four members of the board who voted against the hikes, which included RGB Chair Rachel Godsil, stormed off of the stage in disbelief as tenants and tenant advocates made their way to the front of the room to protest the decision. Immediately following the vote, Mayor de Blasio released a statement declaring that although a rent freeze was not approved, the lowest increases in City history was a step in the right direction for tenants. Just two days later, however, the New York Post reported that de Blasio was “furious” that the RGB was not able to vote in favor of a rent freeze with a spokesman stating the Mayor was “off the wall” over the decision.

Tenants, many of whom thought the vote for a rent freeze was locked up, were also livid with the vote despite receiving the lowest rent raises in City history. What tenants and the Mayor continued to ignore were the rising costs for owners that was summarized by a 5.7% increase in total building operating costs. Avoiding a rent freeze is in fact a victory, but we must remember that these miniscule percentage increases do not come close to the rising costs that owners face when maintaining their buildings. So while small property owners are going to continue to struggle maintaining their buildings with rising costs and tiny rent increases, Mayor de Blasio, who is preparing to move into Gracie Mansion, is planning on renting out his Park Slope home while he lives on the taxpayer’s tab for at least the next three and a half years. According to a source, de Blasio could receive at least $5,000 per month while renting his home and possibly much more. Not only will de Blasio collect rent payments on his actual home, but will continue to collect rent on a two-family rental that he owns. According to the article, annual rental income on that property rose from $47,500 in previous years to $52,000 last year. For at least the next year, owners of rent stabilized units will struggle to preserve the City’s affordable housing stock with 1% increases while the Mayor continues to benefit from unlimited market rents.

So while owners are subject the smallest rent increases in City history, we must not forget that tireless efforts from the RSA, its members, other organizations and owners in the housing industry made to dodge the City’s first ever rent freeze. The politicking by Mayor de Blasio this year is a clear indication that he will continue to fight for a rent freeze in future Rent Guideline processes, especially since all nine members of the RGB will be his appointees beginning next year. Because of this, the fight to earn reasonable rent increases for owners next year has already begun. The RSA will not take a back seat after this recent victory and neither should RSA members.

Owners Must Act Now for Reasonable Rent Increases

It has been a little over a week since the Rent Guidelines Board has proposed the possibility of a zero rent increase, a first in the 46-year history of the RGB. The proposed Preliminary Rent Guidelines are as follows:

For a one-year lease, a range between 0% and 3%.

For a two-year lease, a range between 0.5% and 4.5%.

A sublet allowance between 0% and 10%.

A Special Guideline for decontrolled apartments equal to Maximum Base Rent (MBR) + 30% or the HUD Fair Market Rate (FMR) whichever is greater.

A 0% increase for all classes of hotels, rooming houses and Single Room Occupancies (SRO’s).

Although Mayor de Blasio campaigned on a promise of fighting for zero rent increases, that promise may now become a reality. The Mayor packed the Board with five new “impartial” appointees. The guidelines listed above are the direct result.  Just as unprecedented as the proposal for a zero rent increase was the unprecedented vote of eight in favor and one opposed to the Preliminary Guideline.

Guideline proposals are historically carried by the five Public Members of the Board, with the two Tenant Members and the two Owner Members opposed. However, the six members appointed by Mayor de Blasio, including Chairperson Rachel Godsil, were joined by two holdover Public Members to vote in favor of the proposal with only long-time Owner Member Magda Cruz courageously voting against this irrational proposal. Even more outrageous is the fact that any owner representative would vote in favor of zero Rent Guidelines, as newly appointed Owner Member Sara Williams Willard, did.

Despite the Price Index of Operating Costs (PIOC) showing a 5.7% increase, which includes increases in all categories for property owners, Rachel Godsil laid out the rationale for the zero guideline vote. Godsil suggested that, based on the RGB staff Income and Expense Study, owners’ “profits” increased by 9.6% and by 31.5% between 1990 and 2012 while tenant income in the last six years had barely increased. Although the sympathy towards tenants was obvious, Godsil stressed that this was only a Preliminary Guideline and that the RGB will continue to listen to testimony and stories from owners and tenants at next month’s public hearings.

It is absolutely essential that owners come out to share your stories at these public hearings. It is even more important to join as at the final vote, which will take place on Monday, June 23rd.

Mayor Makes New Appointments to the Rent Guidelines Board (Finally)

Mayor de Blasio took it right down to the wire, making five new appointments to the Rent Guidelines Board just two hours before the first meeting of the board on March 27th.

The Mayor replaced one of the two owner representatives of the RGB without any consultation with industry representatives. The new owner’s representative appointee is Sara Williams Willard, who will join Magda Cruz, the other owner representative. Joining the RGB as the Mayor’s two public member appointees are Cecilia Joza, who is currently the housing counseling program director at Mutual Housing Association of New York and Steven Flax, who has spent over 30 years involved in community housing and development projects.

The Mayor’s newly appointed tenant representative is Sheila Garcia, who is the Community Organizer at the Community Action for Safe Apartments (CASA) New Settlement and has over 20 years of experience in tenant advocacy. The second tenant representative is Harvey Epstein of the Urban Justice Center, who has been serving on the RGB since April 2013 and was officially re-appointed by Mayor de Blasio.

Although we still await the Chairperson of the RGB to be appointed, the other members are in place. Now that the rent guidelines process is underway, we cannot ignore the elephant in the room, which is Mayor de Blasio’s campaign promise of a zero rent increase. A de Blasio spokesperson downplayed the Mayor’s campaign promise, stating that these appointees were chosen to produce balance on the board based on their experience in the housing field. The truth is, these are in fact Mayor de Blasio’s appointments and the Mayor has called for a zero rent increase.

The next public RGB meeting will be taking place in two weeks on April 10th, with a Preliminary Guidelines vote expected at the May 5th meeting. In the last twelve years, former Mayor Michael Bloomberg typically stayed out of RGB discussions of rent increases. Mayor de Blasio now also seems to be taking a hands-off approach to the RGB, having appointed members who presumably are in-tune with his thinking.

Will the Rent Guidelines Board Remain Impartial?

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.

De Blasio: “the rent freeze speaks for itself”. Really?

Democratic mayoral candidate Bill De Blasio has maintained his call for a rent freeze on one million stabilized apartments next year. A De Blasio spokesman told Crain’s New York, “the rent freeze speaks for itself”.

But De Blasio was FOR a rent increase before he was AGAINST a rent increase. During this year’s Rent Guidelines deliberations, De Blasio was quoted as being in favor of a rent increase for small property owners. After being pummeled by the other Democratic candidates for his stance, De Blasio switched his position and called for zero rent increases across the board. Bill De Blasio is a smart man and his initial position on rent increases probably recognized the fact that most property owners would need a rent increase as long as city taxes, oil, insurance and other operating costs continue to escalate. If De Blasio is elected Mayor, we will soon know whether he remains mired in campaign rhetoric or whether he has the courage to stand up to his supporters and do what is necessary to maintain affordable housing in New York City.

Rent-Freeze Pledge Chills Landlords

De Blasio Proposal Would Affect More Than One Million in Stabilized Apartments

By JOHN SURICO

Among the policy proposals pushed by Democratic mayoral nominee Bill de Blasio to make New York City more affordable is one that would affect more than one million residents: a moratorium on rent increases in rent-stabilized apartments.

A so-called rent freeze hasn’t happened in the 44-year history of the Rent Guidelines Board, a body of nine mayoral appointees that sets monthly rates for a million apartments. The idea is opposed by Republican nominee Joe Lhota and the city’s real-estate community, with which Mr. de Blasio is friendly.

The next mayor will have significant leverage over the rent board when he takes office on Jan. 1, with power to appoint four new members. Mr. de Blasio has said he would select what he described as pro-tenant, pro-stabilization board members. Continue reading