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.

Testimony: Kelley Boyd

The following testimony was presented by Kelley Boyd, a tenant in Washington Heights who has been actively fighting illegal overcharges in her building:

Hello, I am Kelley Boyd and I am a technologist working in the city’s startup movement. I have lived in the Washington Heights neighborhood for over 6 years and have become very active in the community. As an entrepreneur advocate I believe the biggest problem facing our culture is the unbelievable rents in the city. We could start more businesses and bring more fiscal diversity to the city with better rent oversight. Though I believe in a free market - many landlords have gotten the benefits they signed up for whether they deliver the value the city has bargained for or not! Full disclosure - most of my knowledge / experience in this area of springs from my having filed a rent overcharge complaint at HCR. At this time that claim is still in process.

Through the experience I have learned a lot about what is happening in my building – and in many buildings in my area. People are fleeing the exorbitant rents and moving to "WaHi" thinking they are getting a great deal when in reality they are paying "market rates" and over for apartments that should be rent stabilized. The new tenants are unaware that the apartments have been illegally deregulated because of the scheming of well schooled landlords. Our area is being hit especially hard because we are a largely residential neighborhood that has not seen the turnover of other areas which means there are lots of apartments that should be in the $900 - $1200 range but are being rented at $2000 and more. The landlords know how to work and beat the system that is supposed to keep them honest by inflating improvements, claiming false improvements and just filing false documents with HCR. Even if they are not lying, cheating and stealing, LL are in an enviable position as of now. It was reported just yesterday that Manhattan rents have soared 3.5% with median rent at $3200 - rent today is just $13 shy of an all time high! 

Owners should bear their fair share of economic burden because their profits are increasing. 

I do not begrudge anyone success but I estimate my LL has collected well over a million dollars in illegal overcharge in the last 5 years, and those are just the 5 apartments in my building that I know about! Add to that he inherited the buildings and has no mortgage on them, in fact hold them in trust in Texas to better manage his tax liability. Figure that he owns three buildings with another 11 under management and you can extrapolate that there is a big number to be at years end in someone’s account... he and his kind certainly do not need your help increasing rents and making money off their
buildings. 

RECOMMENDATIONS

I understand that the RGB serves a wide variety of constituents and in doing so you must make determinations that are fair to large and small landlords alike, all the while keeping true to the statutes and the spirit of fairness that tenants rely on you for. It used to be “impossible” to reliably get enough information from “everyone” and their unique situation but I think in real terms it is much easier than it ever has been. As a technologist there are ways to better manage the burden of how to treat landlords and tenants fairly in this process. Small landlords who are absolutely getting squeezed with resource increases and having a tough time with outstanding building repairs and improvements should have the mechanisms in place to apply for an receive relief in the form of increases, waivers or temp variances from codes. I have absolutely no heartburn with that. But there are so many that are not really challenged in their circumstances and are taking advantage of unwitting tenants, and then more that are simply thieves. 

The RGB should embrace innovation and craft a process that allows for some kind of "means test" for buildings when rent increases are in review. In my opinion there should be NO MORE RENT INCREASES AT ALL until you have a system in place to grant increases fairly.

Final Vote: Tonight, 5:30

After four months of presentations, analysis, testimonies, and hearings (formal and otherwise), the Rent Guidelines Board will vote tonight on a rent adjustment for over one million stabilized apartments and SROs. We hope they have listened to the many tenants who testified that the RGB's proposed rent increases are simply too high. We hope they remember the invited guests who testified that New York is facing a severe affordability crises. We hope they recall the analysis presented on this blog, arguing that the Board's own data supports the case against another high rent increase.

We hope we have cogently and persuasively made the case that tenants cannot afford the kinds of rent increases proposed by this Board, and that the hikes demanded by owner advocates are unwarranted. Countless households throughout the city are already forced to choose between basic necessities- such as food and medicine- and making the rent. These increases could push many over the edge, and into chaos. At the same time, property ownership in New York City continues to be an extremely profitable enterprise, despite the endless protestations of the landlord lobby.

For all these reasons, and for the reasons elaborated on this blog many times before, we urge the board to reject the proposed increases.

The final vote of the New York City RGB will be held tonight at 5:30 PM in the Great Hall at Cooper Union, located at 7 East 7th Street. We urge tenants to be there, bear witness, and speak to reporters after the vote about how the final guideline will affect you.

Testimony: Mariel De La Cruz

The following testimony was presented by Mariel De La Cruz, a rent stabilized tenant in Washington Heights and a tenant organizer in HUD-financed buildings across New York state:

My name is Mariel De La Cruz a rent stabilized tenant in the beautiful Washington Heights neighborhood in Manhattan. I have lived in the same apartment for almost exactly 19 years and wouldn't have it any other way. Now that I have grown up and have graduated Fordham College, I have come to a realization that I want to live in my neighborhood, my block, my apartment for a very long time. Many of us who attend Jesuit institutions find that they love to work with less resources themselves. Many of us go the nonprofit route, not making the big bucks. Besides what the “usual” narrative is for young people raised in Washington Heights, I work hard and I have invested my time, growth and energy to my neighborhood. Now that I take care of the bills I have been blessed enough to find full time employment, but with my many student loan payments (along with other expenses) I am still struggling to make ends meet. I am afraid that the yearly increases (especially those proposed for this year) threaten my ability to stay in the place that I know and love. 

As you all know, a rent increase from the tenants is not the only way for owners to make
a profit. There has been significant turnover in some of the units in my building, allowing for the owners to renovate the units to get the big rent increases from each of the new tenants that have moved in. In addition, there have been substantial rent increases to benefiting the landlords every year. I understand that costs for owners have gone up but like I said before owners have been getting steep rent increases every year but sadly, our incomes don’t have the privilege of doing the same. 

While most of us tenants are struggling to make ends meet, owners on average are making major profits for each rent stabilized unit they own. So what I am saying is that tenants are ever increasingly carrying the burden, while owners are and will continue to make significant revenue for each unit. This is why I believe there should be no increases this year, to ensure that tenants are not priced out of their home in this increasingly difficult time for lower and moderate income tenants in NYC. 

I ask that when you all are making your decision, you think of recent college grads like me who have full time jobs, but who are drowning in student loans that make it harder for ends to meet. I am asking you to consider some of my neighbors and family members, like my mother, who live on fixed incomes in which a rent increase would be too much to bear because their incomes don’t increase just because their rents increase. Think of those people who think of their home beyond their apartment. Please think of us.

Voices from the People's RGB

Many tenants and advocates were upset  that the Rent Guidelines Board chose not to hold an outer borough hearing this year. We found it unacceptable that the board would consider voting on an increase without first consulting with the communities most impacted by their decision.

So, we organized. We asked the board if they would hold a hearing in the Bronx if we provided a free room and guaranteed a good attendance; they declined. We invited them to attend our "People's RGB" in the Bronx and make it formal part of their public calendar; only the tenant members chose to attend. We tried to bring their voices into the public hearing via video testimony; we were shut down. Outer borough tenants have tried to participate in the Rent Guidelines Board process, but their efforts have not been rewarded.

Click on these names to see video clips from the People's RGB, and hear the testimonies of tenants who could not attend the one formal RGB hearing, held in Manhattan, primarily during business hours. These are the voices of outer borough tenants who cannot afford yet another RGB rent increase.

• Fitzroy Christian

• June McMillion

• Doris Attah

• Ignacio Garcia

• Gladys Roble

• Vincent Falls

• Melida Martin

• Alfie Katz

• Carmen Guillen

• Soledad Franco

• Brenda Dawson

• Maria Mejia Garcia

• Grace Torres

• George Sotroff

• Lucy Arroyo

• Terri Ham

• Jaime Valencia

• John Nevarez

• Catherine Wilson

• Ed Figueroa

Testimony: Nicole Zinardi

The following testimony was submitted by Nicole Zinardi, Tenant Organizer at Tenants & Neighbors, who has been working in rent stabilized buildings across Brooklyn, Queens, Manhattan and the Bronx:

My name is Nicole and I am a tenant organizer at Tenants & Neighbors. I work almost exclusively in Rent Stabilized buildings. I work with tenants in buildings in Inwood, Manhattan, various areas in the Bronx including Parkchester, Pelham Bay, Norwood, and Fordham Heights, as well as in Flatbush, Brooklyn, and Jamaica, Queens. The buildings I work in vary greatly in terms of size and tenant demographics. Some are small, while the largest building I work with has 169 apartments. Most tenants at 2425 Nostrand Avenue in Flatbush are from Trinidad or Jamaica. The majority of tenants in my buildings in Harlem and Fordham Heights are African American, while 9016 171^st in Jamaica is home to a mix of Hispanic, Indian, and African American residents. In Manhattan, most tenants I work with are from Eastern Europe, Puerto Rico, and states across the U.S. I work with tenants who are community organizers, musicians, researchers, receptionists, and dentists. I work with tenants who are unemployed, retired, and in school. Most are low to moderate income adults who work long hours to make enough money to support their family in New York City.

Despite differences in location, size, and tenant demographics, all these buildings share distinct troubling characteristics that render any major rent increase unwarranted, especially the increases proposed by the Rent Guidelines Board last month. The poor management, bad conditions, and rent overcharges currently festering in hundreds of buildings in the city contribute to the decline of the well-being of people and the buildings they live in as well as community vitality and cohesion. I have seen the situation expanded and prolonged by these shortcomings: tenants are forced to live with degrading physical conditions as well as the tormenting mental condition brought on by landlord harassment and illegal overcharges. Failures of landlords cannot be justified to continue through an inflated award of profit to landlord corporations.

 Tenants across the city suffer from poor building management. Buildings are managed with blatant incompetence and neglect of tenants‘ rights and needs. Conditions continually deteriorate because of under-qualified staff, and there is a lack of comprehensive communication systems between tenants and the landlord. At 3224 Grand Concourse in the Bronx, there is one superintendent for all 8 buildings. He is not qualified or certified to make the electrical and plumbing repairs he is responsible for, and there is no system for inspection or repair appointments. Tenants have had ongoing plumbing and electrical issues that have been ignored and, if fixed, not fixed sufficiently. Tenants are forced to use their own money to find other means of repair. In addition, tenants have no straightforward means of contacting their management or relaying their concerns and requests. There is no on-site management besides the super, and the management is unresponsive to phone calls.

Another aspect of poor management is lack of organization in regards to leases and rent. At 3224 Grand Concourse, tenants do not receive rent slips, and many tenants have their rent rejected for no given reason. In addition, a lot of tenants wait months to get a new lease after their last one expires. Clearly, this opens the door for confusion and rent overcharges. Management systems like this create uncertainty and frustration for tenants. It is not acceptable that tenants are upholding their end of their lease while landlords ignore their responsibility to provide management that correctly and effectively provides required services and operates a transparent system of communication and rent payment.

The conditions at 9016 171^st in Jamaica, Queens highlight the horrible conditions I have seen in buildings across New York. Landlords try to save money and time by ignoring services, repairs, and maintenance. At 9016 171^st Street, there are 271 HPD violations registered on this 23 unit building, 217 of which are classified as hazardous. The building has not had gas since April 3^rd, which means tenants are not able to cook in their apartments; they are forced to spend money to buy meals for their families. In addition, tenants suffer from leaks and the nuisance of mice and rodents. Tenants also claim that the electricity is turned off at random times, and, like almost every single one of my other rent stabilized buildings, the heat and hot water are grossly inconsistent during the winter months, as the landlord tries to save money by keeping the temperature at well below the legal levels, especially at night and in the early morning. In addition, the landlord owes the Department of Buildings $2,500 for failure to comply with the mandated boiler conditions. The boiler is too small to provide adequate heat to all units in the building, and half of the building consistently has no hot water. Any landlord that is letting conditions deteriorate to this extent in a building does not deserve the proposed rent increase. Landlords must be held accountable and demonstrate that they are using tenants’ rent to keep the building in a legal and acceptable condition for families to live. If they are not using rent to provide required services and maintenance, it is not acceptable that those rents are raised. In addition, because of these horrible conditions, tenants are forced to use their own money for things such as space heaters, take-out meals, and the hiring of exterminators and plumbers, and they cannot afford to pay higher rents while simultaneously funding repairs and supplemental purchases made necessary by the landlord.

As you know, the system of rent stabilization creates huge incentives for landlords to raise rent in an apartment above $2500. Illegally overcharging tenants in rent works two-fold for landlords: in addition to bringing the rent closer to the $2500 mark, they force many lower income tenants out of their apartment who cannot afford the higher rent, thus gaining a further increase through the vacancy bonus, in turn bringing the rent on the unit even closer to the market rate threshold. I have seen evidence of rent overcharge in a number of the buildings I work with. Tenants are charged illegally inflated appliance surcharge fees and construction costs are exaggerated so the landlord can tack on huge IAIs to the rent. Tenants at 2425 Nostrand Avenue in Brooklyn are charged over $20 each month for an appliance surcharge, which in their case refers to the A/C unit in their apartment, the fee for which should legally be around $5. And, one tenant at 854 West 180^th Street moved into an apartment with a rent of $2150. In addition to the apartment being illegally listed as market rate on the lease, the rent was a huge increase from the previous tenant’s rent of $1477.17, and there was no explanation for the increase. While there was construction done on the unit in between tenants, the landlord would have had to spend at least $41,000 on construction in order to legally raise the rent by the amount it was raised. Now, the tenant must go through the lengthy and burdensome process of applying for a rent overcharge through HCR, which may or may not deliver any results. It is unacceptable to grant landlords the proposed rent increases while they are currently collecting illegal amounts of rent. Rent increase decisions should be based on a determination of how completely legal rents are allowing landlords to fulfill their obligations to rent stabilized tenants, this determination is distorted when landlords charge illegal rents, and allowing an increase is not justified if landlords are already collecting more money than they are legally allowed.

Rent Stabilization exists in New York City for a reason-to keep acceptable and comfortable living affordable for the city’s people. Clearly, the system has a number of negative side-effects that inhibit the system’s intended goal, most prominently: poor management, bad conditions, and rent overcharges. Any one of these issues taken independently is enough justification to demand a more moderate rent increase than the one proposed. When all three of these issues clash and build upon one another, the proposed rent increase should be unthinkable.

And I can say this from first-hand experience. I have seen these buildings, I have been inside these apartments, and I have formed relationships with these rent stabilized tenants. I have experienced the worry, frustration, and exhaustion tenants struggle with on a daily basis.  Approving the rent increase will further break down the intended purpose of the rent stabilization system by allowing and strengthening these effects. To hand landlords an increase in profits under these circumstances is absurd. They first must be held accountable and prove they are capable of using their funds intended application: to foster affordability and livability for tenants in New York City.

Testimony: Michael Gillett

The following testimony was presented by Michael Gillett, a rent stabilized tenant in Sunset Park, Brooklyn who has faced repeated permanent and compound Major Capital Improvement rent increases, on top of the annual RGB adjustments:

Good afternoon Board Members and thank you for this opportunity.  My name is Michael and I'm a Rent Stabilized tenant in Sunset Park Brooklyn.  I've lived  in an 8-unit building since late 2006.  Since I've lived in this apartment, my rent has gone up over $500.  I've come here today because I'd like to express to you why it is that the magnitude of increase you've proposed for two-year leases is entirely too high and would be burdensome to me.

There are a broad range of Rent Stabilized tenants in this city.  Some have lived in their apartments for many years but a lot of us are young adults working 9-5 and have had virtually stagnant wages in this tough & persistently negative economy.  Personally, my Landlord has used at least 3 separate Major Capital Increases as a method to speed units within the building to the high-rent threshold which would remove them from rent protections.  I have been the only person to stand against them in the building.  One downstairs neighbor of mine was so intimidated and unnerved by the process that he moved his entire family out of the building when he deliberated the prospect of compounding rents + MCI charges in the years to come.  The Landlord wasted no time in getting the permits needed and then gut-renovating that apartment and charging the new tenants market rate rent.  There is also another apartment in the building with tenants paying market rent.  Considering the perpetual nature of MCI rent increases he will have permanent residual income aside from whatever increase you decide.  He also owns many buildings across Park Slope Brooklyn with tenants paying market rate rents.

Landlords have also been receiving substantial profits in recent years.  In my borough of Brooklyn, the Net Operating Income stands at approximately 33%.

I would like to board to know that if you go through with this increase, you will harm the diversity of this city.  I could not afford my apartment at market rate, and having to pay this extra money would be burdensome and could price a lot of people out of their apartments.  With this being said, I would like to strongly implore you to consider a 0% increase at this time.