On Tuesday, March 25, the Rent Guidelines Board had its first official meeting of the 2008 season. If the guidelines of recent years are an indicator, this year’s guidelines will not be sufficient to cover this year’s steeply rising costs of running a rental building, much less making up the shortfall of past years.
Over the past six years building operating costs, as measured by the RGB, have increased by more than 40% while the rent guidelines have increased income by 20% at most. Effectively, the Rent Guidelines Board has mandated the rental building industry to assume responsibility for subsidizing their clients.
New York’s antiquated rent regulations are notorious across the world, and have often been cited by economists writing in various newspapers, including England’s The Economist, for causing the lack of rental housing choices and skewed rental costs in New York City.
And yet only one-third of the City’s residents live in regulated rental housing. How do they manage to convince New York politicians in general, and the Rent Guidelines Board in particular, to consistently vote for regulations and guidelines that are patently unfair to building owners, as well as the majority of New York City residents?
That’s where the tenant activists come in. They’re well organized, and determined to hold on to rights they consider theirs in perpetuity. The retirees and homeless individuals bussed to the Rent Guidelines meetings -- or the voting booth -- demonstrate the activists’ determination and political savvy. They know that, in the long run, politicians are better at counting heads than profit and loss statements.
The two-thirds of New Yorkers who lack the benefits of rent regulations don’t realize they are adversely impacted both by the regulations themselves and insufficient guidelines, which skew property taxes as well as the availability of apartments, creating artificial shortages and pricing inequities in the process. The RSA has already launched a targeted ad campaign through the City Hall News and is considering an advertising campaign to make such information public before the next election. In the meantime, property owners must rely on the Rent Guidelines Board, which, supposedly apolitical, is and always has been under political scrutiny.
In the eighties, when desperate owners flocked to the Rent Guidelines hearings in equal numbers to the tenants, they were awarded guidelines that matched Operating Costs. Now, few owners attend the hearings and the guidelines are unsustainably low. Is there a cause and effect?
The Price Index Of Operating Costs
Known as the PIOC, the Price Index includes most costs of running a rental building, such as taxes, heat, insurance, maintenance, etc.
These costs do not include the hidden costs of running a rent stabilized building, such as the multiple forms and reports that are required by the regulatory system. Owners of large buildings must by necessity hire individuals to take care of the massive amounts of required red tape. Small owners have little choice but to do the work themselves—often after working at a full time job.
Each time a State or City agency demands new reports, or the City Council passes a new law, it imposes additional costs of time or money on the building owners. For instance, the harassment law recently passed by the City Council, which managed to ignore that most harassment, physical violence, and even murder are committed by tenants against owners and not the other way around, will prompt some tenants to file frivolous suits in Housing Court in an attempt to evade paying rent. The time and money spent by owners in Housing Court is not part of the PIOC.
In a small building, a single tenant who does not pay rent or otherwise disrupts the functions of the building can single-handedly plunge the building into insolvency. The costs borne by the owner are not reflected in the PIOC.
Why Owners Should Testify
The RSA has heard from many owners who are having trouble paying their bills because of the insufficient guidelines of recent years. These owners should make it a point to testify at the Rent Guidelines hearings. There is a general feeling among the public and the media that owners have failed to show up in recent years because “they are doing well,” and don’t need further rent increases to meet increased costs.
The reality is quite the opposite, as all RSA members know. But many owners who are suffering real hardships fail to come to the hearings because they feel their testimony is not going to make any difference, or because they are nervous about public speaking.
Please plan to come, and bring your spouse or building employees. You will be allowed three minutes to testify:
- Speak calmly and clearly.
- Tell the Board about the effect of the insufficient Guidelines of the last few years on the solvency of your building.
- Tell the Board about specific cost increases you’ve experienced, and what you need to keep your building solvent.
- Please turn to the next page for the Rent Guidelines schedule and the names of the Rent Guidelines Board Members.
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