Inside The Rent Guidelines Decision

Monday June 23rd 2014, both tenant’s rights activists and building owners/landlords finally saw the first set of decisions made by the new New York Rent Guidelines Board. Many in the often raucous audience, especially those in the housing movement, hoped to see the first city wide rent freeze. What occurred instead was a decision that left both sides of the political divide feeling burned. In fact the only ones who saw 0% rent increase for the next coming year were SRO class (A) and class (B) residents, along with those in rooming houses. It is important to note this due to the fact that these forms of housing have been the hardest hit by everything from the warehousing of apartments to mass evictions and even the problem of illegal hotels. To date there are only 17,000 SRO units left which should signal how vulnerable this form of housing really is. In many cases these residents are being charged three to four times the legal amount that each room is registered. For those residents the days’ outcome was good news. For other renters however the results were mixed at best. Non-SRO restricted buildings saw a 1% rent increase for one year leases while those with two year leases will see an increase of 2.75% next year. While these are record low increases, those within the housing movement felt betrayed by public representative and Bill De Blasio appointee Steven Flax who sided with the owner’s reps in voting for the measure which passed by a 5-4 vote.

Building owners and other in the real estate sector also came out of the event upset as well, many stating that the nominal increases would not be enough to account for the rise in their expenditures. . As noted in a City Limits piece Patrick Siconolfi, executive director of the Community Housing Improvement Program, a trade group stated his disappointment with the decision stating that "It is wrong, irresponsible and will ultimately stifle investment in our city’s most important affordable housing stock," Building owner rep Magda Cruz scolded the tenant representatives calling any move for a rent freeze a political stunt which flies in the face of the current financial reality in her view. She cited the latest RGB report which she said proves that building costs are on the rise and that the measure that she felt forced to vote for didn’t even begin to pay for these increases. She was one of those who supported a 5.5% rent increase on one year leases early on but knew it would never pass on the current board. The claims by the owners and their representatives did come into question throughout the proceedings.

It should be noted that there are some positive findings in the board’s latest reports. New York City’s overall economy has grown by 2.7% in 2013 compared to the year before which saw 0.8% growth. 83,100 jobs have been created throughout the five boroughs also in 2013. This was the fourth year of measurable job growth. Overall wages increased by 6.5%. The number of non-payment filings in 2012 fell by 1.1% while actual non-payment cases fell by 7.8%.

It also should be noted that overall operating prices for building owners has increased 5.7%. Fuel costs rose by 6.2% for natural gas while fuel oil rose between 5.6% and 7.8%. Further Real Estate taxes rose by 5.0% because of the increase in prices of class two properties. And labor costs rose by 3.0%. For further break down of cost increases one can read the report by clicking the above link. These rises in operation costs and the above mentioned economic improvements over the past few years were the sited reasons given by the owner representatives as why a rent hike freeze was not only unjustifiable but also flew in the face of overall economic realities and should be considered nothing more than a political stunt. What was left out of their argument was the negative indicators found in the latest round of reports.

For starters the overall rate or evictions rose by 0.4% in 2013 from 2012. This comes despite the fact that actual eviction cases dropped. Cash assistance programs rose by 0.6% between 2012 and 2013. This marks the 5th year in a row that those who were forced to join these programs rose. The authors of these reports also found that NYC’s rate of poverty also saw an influx between 2011 where the rate sat at 20.9% and 2012 which saw an increase to 21.2%. These numbers are even starker when broken down by borough. In Staten Island the poverty rate cited at 11.6%. In Queens the rate of poverty is at 16.2% while Manhattan is at 17.8%. Brooklyn’s rate of poverty is at 24.3%. The Bronx fared worse of all the other boroughs with their poverty rate at a staggering 31.0%. When broken down by age groups the gravity of the situation becomes even clearer. The rate of poverty for 18 year olds as of 2012 was at 31.4%. For those who fell in the range between 18 years old and 64 the rate of poverty was is at 18.4%. 19.1% of those 65% live in poverty. Families who live in poverty is at 18.2% while families with more than one child under 18 years of age comes in at 26%.

As of 2011, the latest year in this report of statics when it comes to rent rates, half of the tenant population who live in rent regulated apartments pay 33.6% of their income in gross rent. What this means is the following “Rent stabilized tenants are facing a higher financial burden than tenants on the whole, with a median gross rent-to income ratio of 34.9%, meaning a majority of rent stabilized tenants are not able to afford their apartments, based on the HUD benchmark for housing affordability.” An apartment is considered affordable when one pays only 30% of their income. Those who live in a pre-war apartment building pay about 35.5% of their income while those who live in post-war buildings pay on average 33.8%. 32.5 of all renters pay 50% (half) of their income in gross rent.

These numbers should give some context to the rate in homeless in New York City. In 2013 the confirmed number of homeless was well over 49,000, a 14.1% increase from 2012. The fourth quarter of 2013 was 8.7% higher than the same time the year before. This level of homelessness is the highest since the great Depression according to several sources.

While it may be debatable if a rent freeze was warranted or not, what is not debatable is that the middle class and lower income residents of New York City continue to feel the brunt of inflated rent costs and the landlords/building owners rush towards ending rent regulation, turning all five boroughs into a modern day Rome. In fact one stark example is that there are only 17,000 SRO units left in New York City, down from several hundred thousand. Further more than 300,000 rent regulated apartments have gone to market rate under suspect procedures. In order for economic diversity to survive, a rent freeze very well may be needed.

Until next time…

Inside The Hearings


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