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Tenants, Legislators Propose Major Reform Of Rent Board System For Rent-regulated Apartments

 

Members of the Real Rent Reform Campaign today unveiled legislation to revamp the method of establishing rent adjustments for rent-stabilized and rent-controlled apartments in New York City and suburban counties. The four Rent Guidelines Boards would be restructured and renamed simply "Rent Boards," discarding the euphemism "guidelines."

The tenant advocates were joined at a news conference at City Hall in New York City by State Senator Thomas K. Duane (D, WFP-Manhattan) and State Assembly Member George S. Latimer (D-Mamaroneck), who will introduce the Rent Board Reform Bill next week in the State Legislature. Also attending the news conference was City Council Member Letitia James (D-Brooklyn) who plans to introduce a home rule message in the Council calling on the State Legislature to pass the bill.

Highlights of the Rent Board Reform Bill:

  • Requires City Council approval of mayoral appointments to city rent board, and requires County Legislature approval of County Executive appointments to suburban rent boards.

  • Changes board composition from two tenant, two landlord and five public members to three each, thus ending annual "Both sides are unhappy, so we must be doing something right" charade.

  • Expands qualifications for public members.

  • Eliminates the misleading, one-sided Price Index methodology in NYC in favor of suburban method whereby boards consider current Income & Expenditure data.

  • Moves deadline for vote from July 1 to October 1, and effective date of rent adjustments from October 1 to January 1.

  • Eliminates lease renewal system and substitutes statutory tenancy protections for rent-stabilized apartments, as in rent control.

  • Ends 7.5 percent statutory rent increases plus fuel and labor pass-alongs for rent-controlled apartments, placing them under jurisdiction of NYC, Nassau and Westchester County rent boards.

  • Annual rent adjustments to be effective for all rent-controlled and rent-stabilized apartments on the same date every year: January 1.

"These are common sense reforms," said Senator Duane. "This will make the system much more evenhanded, with information that is much more accurate and relevant. These reforms are overdue."

The R3 Campaign points out that the Rent Guidelines Board system was designed by the real estate industry itself, in collaboration with the administration of Mayor John Lindsay. "Given their origins, it is hardly surprising that the rent boards tilt toward landlords," said Jenny Laurie, executive director of Metropolitan Council on Housing, a citywide tenants union. "This bill levels the playing field, and also greatly simplifies the system, making it easier to enforce and easier for the public to understand."

The reform bill alters the method of appointing board members. In New York City, the mayor alone chooses the nine board members, but under the bill such appointments must be confirmed by the City Council. In the suburban counties, the state housing commissioner appoints board members upon recommendation of the County Legislature. The bill removes the commissioner and the NYS Division of Housing and Community Renewal from any role in choosing members of the boards, assigning the responsibility to the County Executive, subject to confirmation by the County Legislature.

"It is not reasonable for the commissioner of the state agency responsible for enforcing the law to pick the members of the board who decide if rents are going to be increased," said Assemblyman Latimer. "When I was chair of the Westchester County Board of Legislators, this system was a disaster. The logical method is for the executive, the Mayor in the city and the County Executives in the suburban counties, to submit nominees to the legislative body." Rent regulation exists in Nassau, Rockland and Westchester counties, in addition to New York City.

Landlords will be required to file annual Income and Expense statements with the boards, similar to current practice in the suburbs, but the bill mandates an annual audit of a representative sample of such statements. Landlords who fail to submit I&E reports are barred from collecting rent increases, as are landlords whose buildings have hazardous violations.

The bill bars the use of a Price Index of Operating Costs, which the advocates maintain is a one-sided, deceptive report. This annual study - used in the city but not in the suburbs - measures price changes in items landlords typically purchase to run their buildings, rather than actual expenditures. Worse, it contains no information about the incomes landlords collect, and is thus misleading. This flawed methodology is the major reason that rent increases in the city tend to be higher than in the suburbs.

The 2008 Price Index, released on Tuesday, reported that operating costs had increased by 7.8 percent over last year, when the rise in the Index was 5.1 percent.

"The Price Index is always released a few days before the preliminary vote," said Laurie, "and the pro-landlord members of the board always try to use it to justify another round of excessive rent hikes." The city board is scheduled to take a preliminary vote on rent adjustments next Monday evening at Cooper Union in Manhattan. A final vote is scheduled for June 19, following two public hearings, an evening hearing in Brooklyn on June 11 and a daytime Manhattan hearing on June 16.

The tenants believe a more meaningful report is the 2008 Income and Expense Study, which was released April 15. This study shows that Net Operating Income (NOI) for landlords of rent-stabilized property in the city had increased by 8.8 percent over the 2007 I&E Study, because rents increased more rapidly than costs. Both reports (and others as well) are produced by rent board staff and are available on the board's web site: www.housingnyc.com.

The 2008 I&E Study found that the typical landlord was spending 63 cents of every dollar of income on Operation and Maintenance, leaving 37 cents for debt service and profit. While not an exact measure of profit, NOI is a good indicator of the economic health of the real estate industry.

"Every year the landlords claim they are going to have to go out of business if they don't get big rent hikes," said Senator Duane. "We know that there are pressures on operating costs, certainly, but look at the evidence. The overwhelming majority of landlords are doing well. Thirty-seven cents on the dollar is not a bad net, not bad at all."

The reform bill eliminates the system under which tenants must renew their leases, replacing it with statutory tenancy, the right to remain in one's apartment as long as the tenant wishes. This is the system used under rent control, where tenants do not have leases. New tenants will sign a vacancy lease, but once that lease expires the tenure status switches to statutory tenancy. Instead of paying a rent increase when renewing the lease, any rent adjustment adopted by a rent board will become effective on the same date, January 1, for all regulated apartments under the board's jurisdiction.

The reform bill eliminates the system under which tenants must renew their leases, replacing it with statutory tenancy, the right to remain in one's apartment as long as the tenant wishes. This is the system used under rent control, where tenants do not have leases. New tenants will sign a vacancy lease, but once that lease expires the tenure status switches to statutory tenancy. Instead of paying a rent increase when renewing the lease, any rent adjustment adopted by a rent board will become effective on the same date, January 1, for all regulated apartments under the board's jurisdiction.

 

"Statutory tenancy is a superior form of tenure protection,h stated Michael McKee, treasurer of the Tenants Political Action Committee. "Far too many tenants are under the mistaken impression that if the landlord does not renew their lease, they can be evicted, and unscrupulous landlords manipulate that fear to force tenants to give up their rights. Plus, eliminating lease renewals vastly simplifies administration of the system."

 

The reform bill repeals the statutory vacancy bonus enacted in Albany in 1997. This allows landlords of rent-stabilized apartments to increase the rent by a minimum of 20 percent every time an apartment turns over, even if it turns over more than once in a year. The bill authorizes the four rent boards to adopt an annual vacancy allowance of up to five percent, which can be imposed only once in a calendar year.

 

The bill also ends the Maximum Base Rent system for adjusting rents in units subject to the city rent control law, and places these apartments under the jurisdiction of the NYC rent board. Thus rent-controlled tenants and rent-stabilized tenants would experience the same rent adjustments. Currently tenants in rent-controlled units pay 7.5 percent per year, plus a fuel pass-along. The current one-year rent increase for stabilized tenants is 3 percent. Rent-controlled apartments in Nassau and Westchester are also placed under the jurisdiction of the county rent boards.

 

"It is high time for major surgery to be performed on this dysfunctional system," said Councilwoman James. "Anyone who has ever been to one of these meetings has seen how unfairly tenants are treated. This reform bill is just the medicine we need."

 

The Real Rent Reform Campaign is a new working group composed of all the umbrella tenant organizations and many local groups in the city and suburbs. In addition to Met Council and Tenants PAC, member organizations include Bushwick Housing Improvement Project, Community Action for Safe Apartments, Housing Conservation Coordinators, London Terrace Tenants Association, Mitchell-Lama P.I.E. Campaign, New York Immigration Coalition, New York State Tenants & Neighbors Coalition, Stuyvesant Town/Peter Cooper Village Tenants Association, and the Westchester Tenants Coalition. One labor union, District Council 37, AFSCME, is a member, and other unions are being recruited.

 

The R3 Campaign is also working to win repeal of Vacancy Decontrol, to protect Mitchell-Lama and Section 8 buildings, and to restore home rule over rents and evictions to the New York City Council.