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.

Urban rents and suburban poverty

The New York Times published an article today on a new study from the Brooking Institution that shows rising poverty in the New York suburbs. How does this relate to the NYC RGB? The Times reports that one of the leading factors behind this phenomenon is the disappearance of affordable housing in the city. 

"Christopher Jones, vice president for research of the Regional Plan Association, blamed higher housing prices for the demographic shift. The rising cost of shelter pushed poorer people out of Manhattan and Brooklyn, in particular."

New York's rent regulations were spurred by an urgent "housing crises."  That crises continues to rage today, and is causing working and middle class households to leave the city in search of lower cost options. If New York City hopes to retain these residents and workers, it must consider the impacts of high rent increases for rent stabilized apartments, and issue the lowest possible guideline in 2013.

Here's the article that appeared in today's New York Times:

Suburbs’ Share of Poor Has Grown Since 2000

By SAM ROBERTS

 

The suburbs, which in 2000 accounted for 29 percent of the region’s poor people, a decade later were home to 33 percent of metropolitan New Yorkers living below the federal poverty level, according to an analysis of the latest census results.

The analysis, released on Monday by the Metropolitan Policy Program of the Brookings Institution, also found that while the number of poor people in New York City and Newark declined by 7 percent, or 120,000, the number in the suburbs rose by 14 percent, or 100,000, from 2000 to the census’s rolling 2008-10 American Community Survey.

The poor have typically been concentrated in big cities and rural America. Increasing poverty in the New York metropolitan area’s historically affluent suburbs mirrored a national trend detailed in the analysis, “Confronting Suburban Poverty in America” by Elizabeth Kneebone, a fellow at the Metropolitan Policy Program, and Alan Berube, a deputy director of the program.

The first decade of the 21st century was a tipping point, the authors wrote. Suburbia, they said, is now home to the “fastest-growing poor population in the country.”

While New York and Newark’s combined share of poor people in the region dipped from 71 percent to 67 percent, the cities were home to twice the 800,000 or so people who officially qualified as poor in the suburbs in 2010.

“It seems like as the city prospered and got more expensive over the 2000s, poverty crept up in a lot of the region’s older suburban communities,” Mr. Berube said.

“It might not have been people moving from city to suburban neighborhoods per se, but as the region creates more low-wage jobs, and attracts more new immigrants, low-income households that in the past might have located in the Bronx or Brooklyn are now settling in places like northern New Jersey and Westchester County.

“It’s telling that the city’s ‘suburban’ borough, Staten Island, is the only one that saw its poor population increase over the 2000s.”

Christopher Jones, vice president for research of the Regional Plan Association, blamed higher housing prices for the demographic shift.

The rising cost of shelter pushed poorer people out of Manhattan and Brooklyn, in particular.

Also, he said, a smaller percentage of workers from suburban areas like Nassau County were commuting to high-paying jobs in Manhattan, and the jobs that were in their hometowns were at shopping malls, in health care and in landscaping, and generally paid less.

At the same time, tenants were doubling up and living in illegal apartments.

Dozens of smaller cities, townships and boroughs registered double- and even triple-digit increases in their poverty rates over the decade.

Among the places where the population of poor residents increased since 2000 were, in New Jersey, Bayonne, Bergenfield, Clifton, Edison Township, Garfield, Hoboken, Hunterdon County, Lakewood, Linden, Mount Olive, New Brunswick, Passaic, Paterson, Perth Amboy, Raritan, Summit, Teaneck and Woodbridge; on Long Island, Brookhaven and Glen Cove; in Westchester, Ossining; in Putnam County, Carmel; and in Rockland County, Ramapo.

Poverty rates increased in some places even after the recession officially ended in 2009, according to the Brookings analysis, but the poor population declined from 2000 to 2010 by 11 percent in Brooklyn and by 10 percent in Manhattan.

It rose 18 percent on Staten Island.

According to federal guidelines, the current poverty level for a family of four is annual income below $23,350.

NY Observer: "The Return of Hooverville"

The New York Observer has published an important feature about the explosion of homelessness in New York City. More and more families are entering the shelter system every day. Many of them have been priced out of their apartments, and cannot find new affordable accommodations. This is one piece of the growing affordability crises in New York, which tenants described to the Board in testimony on April 25th (see samples here and here).

The RGB alone cannot solve homelessness, but they have the power stop to the rent increases that have put so many families on the street. The "Supplemental Rent Increases" the board has considered in recent years have disproportionately hurt very low income tenants; stopping this practice would be an important step in the right direction.

An excerpt from "The Return of Hooverville: The Deepening Crises of Family Homelessness":

Brooklyn is now the second most expensive place to live in America (after Manhattan), with townhouses that sell for $12 million and jars of pickles that sell for $9, but nearly half of its population can’t afford to live there. According to a recent study from the Center for an Urban Future, almost 40 percent of the borough’s population works in low-wage jobs, making less than $27,000 a year. At that salary, affordable rent (affordable is defined as costing no more than 30 percent of income) tops out at $675 a month. Minimum-wage workers can’t afford to pay more than $375 a month—a virtual impossibility.

A lot of people make do, of course. They triple up with relatives, live four to a room, work two jobs, display the scrappy ingenuity and hardscrabble bravado that we like to think of as quintessentially New York, until something goes wrong.

The huge increase in families seeking shelter is proof of how precarious the lives of New York’s working poor are.

Click here to read the full article.

Bushwick Rents Rose 20% Last Month

Conservative economists and real estate partisans sometimes ask, “why do we need rent regulation?”

We need rent regulation because the housing market in New York City does not provide suitable homes at prices its residents can afford. This fact has once again been evidenced in Bushwick, Brooklyn, where a new report (highlighted on DNAinfo) finds that in just one winter month, rents rose by an astounding 20%. As the Williamsburg phenomenon creeps eastward, long term tenants are facing more and more pressure to leave in search of illusive opportunities in unfamiliar communities.

If stabilized rents keep rising, where are long term tenants in places like Bushwick going to go? Remaining in their neighborhoods- the places they have built up for years- is becoming a great challenge, given the rate of rent inflation. This is one of the most important questions facing the RGB as they deliberate over this year’s rent adjustment.

Average Bushwick rents, February 2013, MNS Brooklyn Rental Market Report

In Defense of Regulation

Last week, the New York Post published a confounding editorial, arguing that somehow rent regulation is what's holding back both feminism and affordable housing. Tenants & Neighbors replied immediately with the following tweets:

Tenants & Neighbors' Senior Organizer Katie Goldstein countered with this letter to the editor, which was subsequently published in the Post:

As a market-rate female tenant living in Brooklyn, I would like nothing more than for there to be more rent regulated apartments, not less. Rent-regulation is an important resource for the city and laid the foundation for economically and racially diverse city; we need more of this diversity, not less.   In order to ensure that young, creative, and non-profit workers come to NYC, there needs to be protected and affordable apartments. Rent regulation isn't the problem; it is the only system that can save NYC. 

Katie Goldstein

Brooklyn 

Former Manhattan Assemblyman, Stuyvesant Town/PeterCooper Village Tenants Association president emeritus, and long-time supporter of tenant protections Steven Sanders also contested the Post's assertions:

The Post is dead wrong in its conclusions (“Rent and the Single Girl,” Editorial, March 7).The vast number of elderly residents in rent-controlled or rent-stabilized apartments are not some Fifth Avenue heiresses, but retired men and women who worked all their lives and are now living on a limited and fixed income.

Furthermore, owners who set rents for their non-regulated tenants do so based almost entirely on what they can collect based on what the market will bear for a given apartment, not, as The Post suggests, based on the revenue from their other tenants.

Developers can already build as many non-regulated apartment buildings as they wish, so long as they do not accept any government tax abatements.

Deregulating existing apartment units will not lead to any savings for non-regulated tenants, but it will lead to serious hardship for hard-working middle-income tenants and their retired forebears.

Steven Sanders

President Emeritus, Stuyvesant Town/Peter Cooper Village Tenants Association

Manhattan 

Gentrification is a Hungry Monster

Photo: Dave Sanders for The New York Times

The New York Times reports what many of us have observed for years:

• Gentrification is proceeding at an alarming pace, and rents are skyrocketing in the city’s most populous borough.

• The old geographic boundaries of “affordable” and “unaffordable” are disappearing. Once working class neighborhoods have been gentrified; some areas are now undergoing “super-gentrification” and pushing old fashioned speculators outward in pursuit of new territory.

• It’s really hard to find an affordable rental apartment in this city.

Does this sound like a market in which landlords need another rent increase?

We need rent regulation because the real estate market will not provide the kind of stability we as a society desire. Persistent RGB rentincreases, along with vacancy bonuses, IAIs, MCIs and other loopholes in therent laws, have pushed many once-affordable apartments out of the regulation system. Tenants are looking to the RGB for relief.