Senate Bill S3578

                                BILL NUMBER:S3578

TITLE OF BILL:

An act to amend the administrative code of the city of New York, in
relation to assessed valuation of property for purposes of adjustment
of maximum rents

PURPOSE:

Clarifies the provision of the rent control law under which owners are
entitled to "hardship" rent increases.

SUMMARY OF PROVISIONS:

Section One amends clause 1 of subparagraph (a) of paragraph 1 of
subdivision g of section 26-405 of the administrative code of the city
of New York to state valuation shall be current equalized assessed
valuation established by the city based upon the appropriate tax class
ratio which is established pursuant to article twelve of the real
property tax law.

Section Two provides that the provisions outlined in section One of
the legislation shall be deemed to have been in full force and effect
on or after September 30, 1997, and shall apply to any proceeding
pending on the effective date of this act, or determined thereafter.
              

Section Three is the effective date.

EXISTING LAW:

New Bill.

JUSTIFICATION:

The proposed corrective amendment clarifies the provision of the rent
control law under which owners are entitled to "hardship" rent
increases.. The amendment clarifies that the measure of an owner I s
return on investment (or "capital value") under the hardship formula
is consistent with the measure of the owner's return on investment
under the biennial MBR formula" The amendment is required to insure
that there is an accurate rather than inflated measure of capital
value.

The New York city council in 1997 enacted Local Law 73, which was
effective September 30, 1997, to provide that "Capital value shall be
equalized assessed valuation based upon the appropriate tax class
ratio which is established pursuant to article twelve of the real
property tax law." section 26-405 (a) (3) of the City Rent and
Rehabilitation Act. Local Law 73 was upheld by the New York State
Court of Appeals in city of New York v, DHCR, 97 NY2d 216 (2001).

In upholding Local Law 73, the Court of Appeals found that Article-12
represents a "more accurate" measure of capital value than Article
12-a because Article-12 takes into consideration the specific type of
property while Article 12-a is based upon consideration of all
property in the City of New York without regard to the type of


property. Utilization of Article 12-a to measure capital value results
in a gross overvaluation of property, an inflated return on investment
and the finding of "hardship" where an owner is already obtaining a
fair rate of return. The amendment is necessary to insure that
hardship applications do not lead to the unnecessary displacement of
long-term rent controlled tenants, many of whom are elderly and/or
disabled, on the basis of an overvaluation of an owner's property.
This corrective amendment is deemed in full force and effect on or
after September 30, 1997 so as to make the hardship provisions
consistent with the Local Law 73.

LEGISLATIVE HISTORY:

2009: S.6255 (Duane), Died in Rules
2010: S.6255 (Duane), Died in Housing

FISCAL IMPLICATIONS:

Minimal.

LOCAL FISCAL IMPLICATIONS:

Minimal.

EFFECTIVE DATE:

This act shall take effect immediately: provided that the amendment to
sections 26-405 of the city rent and rehabilitation law made by
section one of this act shall remain in full force and effect only as
long as the public emergency requiring the regulation and control of
residential rents and evictions continues, as provided in subdivision
3 of section 1 of the local emergency housing rent control act.