New York City’s 2.5 million rent-stabilized tenants have their eyes on Albany. And for good reason: our longstanding rent-stabilization laws are once again up for renewal, and they’re in the cross-hairs of Senate Republicans and deep-pocketed real estate interests.
Busloads of New Yorkers who care about affordable housing, myself included, will go to Albany this session to demand that rent-stabilization laws be strengthened—not weakened. It is a battle we must win if we want to keep New York affordable for middle and working class families.
But there is another battle brewing that we must not lose sight of: the fight for reform at the Rent Guidelines Board.
The nine member Rent Guidelines Board, empaneled 46 years ago to determine annually how much landlords can set future rents for rent-stabilized tenants, is in need of reform. It’s hard to muster a kind word about the Rent Guidelines Board. But you’ve got to hand it to them for being consistent: year after year they meet, and year after year they raise the rent on rent-stabilized tenants. Irrespective of how much landlords profit, tenants—many living on fixed incomes—are asked to pay more every year.
This must not continue. To that end, I recently introduced legislation in the City Council that calls upon Mayor de Blasio to reform the process for calculating rent increases at the Rent Guidelines Board. The Rent Guidelines Board uses unreliable data to determine landlords’ expenses. They use a measure known as the Price Index of Operating Costs. One of most important things you need to know about the Price Index is that it overestimates landlords’ expenses by as much as one third. It also fails to consider the profits that landlords are making.
The Price Index does not measure what owners actually spend running buildings. Instead, it estimates their costs based on changes in the prices for a “market basket” of goods and services that landlords typically use without accounting for changes in behavior or conditions.
There is a better way. The Rent Guidelines Board does receive actual data on landlords’ income and expenses (I&E), from the annual filings that owners of income-producing property with greater than ten units must make with the Department of Finance. If the Rent Guidelines Board used this readily available, more accurate data, it would result in decisions that more accurately reflect the costs and revenues accrued by landlords.
The I&E data show that while landlords’ operating expenditures have gone up slightly in the last few years, their incomes have risen much faster. Consequently, their average net operating income has increased in each of the last seven years.
The Westchester and Nassau County Rent Guidelines Boards do not use a Price Index—and they have frozen rents several times, something the New York City board has never done. Instead, these counties require landlords to file I&E numbers every year with the state Division of Housing and Community Renewal. This spring, they will be given I&E data for 2014. New York City should do the same.
The 2.5 million rent-stabilized tenants in NYC deserve a metric that accounts for actual income and expenses—not a method that has been derided since its creation. Tenants deserve a fair shot. These reforms, if adopted, would give them a fighting chance against the real estate industry.
