On Monday, May 5, the Rent Guidelines Board (RGB) announced preliminary rent increases ranging from 3.5% to 7% for one year leases, and 5.5% to 9.5% for two year leases. In past years, the RGB has voted final rent guidelines at the middle to low end of its proposed ranges. This would indicate that the final guidelines may be well below the 7.8% increase in Building Operating Costs the Board announced a week earlier, and far below the 10% to 15% increase that RSA told the Board was needed to maintain the viability of rent stabilized housing.
Over the last six years building operating costs soared by 40%, while the Board allowed, at most, a 20% increase in rents. This alarming shortfall is being felt throughout the rent-regulated industry and, in particular, in buildings in the outer boroughs which are operating in the red or on the brink of bankruptcy. In the meantime, the RGB continues to ignore the dramatic increase in operating costs reflected in its own reports. “They’re whistling while New York housing is collapsing,” said an observer.
The only way to understand the Board’s unrealistically low rent guidelines is to understand that at least some of the public members appointed by the Mayor are very sensitive to the housing affordability issues raised by tenant advocates. Because there are not enough public subsidies available for all low income tenants, they are placing on property owners’ shoulders the burden of tenants whose income is simply not sufficient for New York City living.
Rent Guidelines Board
Hears Invited Testimony
On Friday, May 2, the Rent Guidelines Board heard testimony from both building owners and tenants.
Jack Freund of the RSA, testifying for the industry, explained the drastic effects of the Rent Guidelines shortfall on a significant percentage of building owners. “Not since the eighties have I had so many desperate phone calls from owners struggling with their bills,” said Jack Freund. “Some owners have taken out equity loans to meet expenses, some are thinking of selling their building—not because they want to, but because they have no choice. Over ten percent of rent-stabilized buildings are now operating in the red, and many more hover at the tipping point.”
Michael Schmeltzer of Tryax Realty Mgmt., who owns buildings in the Bronx and Northern Manhattan, also testified, explaining that for him and other owners with extremely low rents, a minimum rent adjustment of $60 per apartment per month is required just to pay for the increase in heating oil and water and sewer charges over the last year. “It costs as much to heat a building in the outer boroughs as a building in Manhattan,” Mr. Schmelzer said, “but a percentage increase on a low rent just won’t begin to cover the cost.”
Also testifying for owners was Christopher Athineos, whose buildings, owned by his family for years, are located in Brooklyn. Mr. Athineos said that he had excellent rapport with his tenants. “I donated platelets for the child of a tenant with leukemia and raised money for medical care,” he said. “I arranged for a local pastor to give communion to a home-bound tenant every week. But I can’t keep the building going without a sufficient rent increase,” he said.
Frank Anelante, another owner of low-rent buildings in the Bronx and Northern Manhattan, noted that some of the buildings he managed had been in the same family since 1938, when his firm, Lemle-Wolff, Inc. was founded. Mr. Anelante said all his buildings had been renovated and were free of violations. Because his buildings are in good condition and he maintains good relationships with his tenants, he gets very little turnover. Therefore, rents in his buildings, which are in the $700-$900 range, have barely increased over the last three years.
Mr. Anelante presented three years of income and expense data for one of his buildings, which is on the verge of falling into the red, even without a mortgage and said, “I’ll open by books for any RGB member. I invite you to come to my office, pick any building, look at the books and look at the building. But I can’t keep up these buildings without a realistic rent increase.”
The testimony for the tenants was led by Senator Tom Duane, who believes the methodology for assessing cost increases is faulty, and has introduced a bill that will favor his constituency, the tenants, by giving them a greater voice on the RGB.
The tenant representatives also testified that tenants could not afford any rent increases. Some spoke about the plight of immigrant tenants, implying they deserved special treatment, not realizing that half the members of the RSA are immigrants who came over without many resources, and, against all odds, pulled themselves up by their bootstraps.
For those tenants who are demonstrably poor, old and ill, the RSA has repeatedly requested that the City SCRIE program be expanded to all income eligible renters. Under this program, poor renters are exempt from rent increases and the owner receives an equivalent reduction in the property’s real estate tax bill. Instead, the RGB, which is appointed by the Mayor, prefers to place the ever-increasing costs of operating buildings squarely on the shoulders of one single group, the building owners.
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