The 2013 Guidelines in Context

With one quick vote, the 2013 New York City Rent Guidelines Board process came to a close Thursday night, with the board approving apartment increases of 4% for one year leases and 7.75% for two year leases, with a rent freeze imposed for Single Room Occupancy apartments.

For those of tenants who have engaged with the process for the past third of a year, it was a startling end and a disappointing result.

In the media narrative and in the popular imagination, the RGB’s final vote is a raucous and chaotic battle between ever-warring constituencies, representing contentious democracy at its best or worst (depending on the perspective). This is a myth. The vote is shockingly dull, and executed with an efficiency born of repetition.

The scene Thursday was ritualistic: the tenant members proposed a low increase; the owner members proposed a high increase; the public members voted unanimously in between the two, appearing as magnanimously Solomonic in the process. The press played its part, reporting equally on the tenants’ and landlord’s frustrations with the result. When the vote was over, landlord representatives spoke to reporters, lit cigars, and posed for pictures with Jimmy McMillan.

The result of this process, however, in anything but dull- it is a recurring regressive redistribution of wealth from tenants to landlords. This year’s increase will be particularly painful. At 4% and 7.75%, the rent hike is not only the largest since before the recession, as reported in the press, but is also higher than the average increase under RGB Chair Jonathan Kimmel (3% and 5.88%, including the 2013 guidelines), higher than the average increase for the much-maligned former Board chair Marvin Markus (3.44% and 6.38%), and in fact higher than the average RGB increase for the board’s entire history (3.3% and 5.84%).

If there is any silver lining to the vote, it is that the Board rejected landlords’ calls for a “supplemental” or “minimum dollar” increase, which would have disproportionately stressed the budgets of low income and senior tenants. Tenant advocates wonder, however, if they are being forced into a pattern of relatively low increases with pro-landlord provisos (like the 2012 vote) followed by high increases without them (as we saw this year).

The board also chose to freeze rents completely for SROs, dispensing with the usual provision that the rent freeze applies only to buildings with a certain percentage of occupied SRO units. This is a victory for SRO tenants and their advocates, and it should be celebrated.

The SRO rent freeze should not, however, overshadow the impact the Board’s apartment increases will have on an estimated 2.5 million tenants throughout the city. In addition to being a mid-recession transfer of income from renters to property owners, this rent increase will be another constraining factor on New Yorkers’ ability to make ends meet. It will force many to chose between rent and other necessities of life, not to mention the less vital aspects of commerce that keep the city running. It is certainly no stimulus to our depressive economy.

The high increase will also encourage many tenants to sign one year leases, rather than two. Even though a two year lease presents tenants with a slight (.25%) benefit over a one year lease, many low income tenants will not be able to shoulder the up-front costs of a 7.75% increase. This adds an additional layer of regression to the 2013 guidelines, as those most equipped to save with a two year increase are those most able to pay higher up-front costs- i.e. higher income or higher net-wealth households.

Finally, this increase cements the Board’s image as a guarantor of landlord profits. Whether by inertia or design, the Board has repeatedly chosen to increase rents to cover for any perceived fluctuations in the cost of running a rent stabilized apartment. This should not be a forgone conclusion; given that landlords have many ways of making profit off their buildings- everything from commercial rents to cell phone towers to the dreaded Major Capital Improvement- there is no need to continuously fall back on renewal lease rent increases to recoup landlords for any change in costs. The board must also rethink the way it calculates these costs, as numerous reports have shown that the Price Index of Operating Costs- the board’s main tool for estimating prices for goods purchased by landlords- seems to overstate real expenses. Whether that is because landlords find a way to economize their purchases or because the prices are overstated, we do not know. All we know is that the price data overshoots the expense data, and is leading Board members to vote for inflated guidelines.

Next year will bring in a new Mayoral administration, and with it a new Rent Guidelines Board. Fixing this broken institution should be a major priority for the next Mayor, both in terms of making responsible appointments and rethinking the Prince Index of Operating Costs. The Mayor should also call on the next Board Chair to hold more public hearings at times and places convenient to the majority of rent stabilized tenants, and present a full accounting of the Board’s decision to the City Council and the public at large. While it is the State Legislature that has the power to rewrite the rules regarding the RGB, it is in the Mayor’s power to change the culture of the Board. Elected officials have spoken out against these increases, and called for Board to change its ways (see examples here, here, and here). Tenants have made their voices heard throughout this process, whether at the People’s RGB, the formal public hearing, or the vote itself. We all know this system flawed; the process must be reconsidered before the board meets again in 2014.