Everything Is Broken: Fixing Rent Stabilization

Met Council vice chair Kenny Schaeffer delivered this summary of the Omnibus Housing Act of 2011 (Assembly 2674-A, Senate 2783-A) at the legislative Black and Puerto Rican Caucus in Albany on Feb. 19, as the Real Rent Reform Campaign sent four buses of tenants to the capital looking for relief.

We are going to go over a lot of information in five minutes, but there won’t be a test at the end. The test will be on the morning of June 16, when 1 million families will either wake up secure in their homes or wake up on the street—or in the street. For as Martin Luther King reminded us when peaceful paths to correcting social injustices and meeting human needs are blocked, it leaves civil disruption as the only possible expression. We hope that the peaceful path to addressing this crisis will be successful this year.

New York is divided into two cities: The brokers—power brokers, real-estate brokers—and the broken, whether it’s the people with no jobs, or those working full-time at minimum wage who earn so little that they are still eligible for public assistance, who we at the Legal Aid Society see every day in Queens, or those earning a little more who still can’t make ends meet, or even those in the middle class living in those 300,000 deregulated apartments, paying 50 percent of their income in rent and unable to make plans in their communities.

Rent stabilization too is broken. Particularly in 2003 and 1997, there have been so many loopholes, potholes and sinkholes created that the system is hemorrhaging affordable housing at an alarming rate and needs to be fixed. It can be fixed. That’s where A2674-A/S2783-A comes in. There are 12 provisions. Several are already compromises, and this is the minimum needed to fix the rent-stabilization system.

Part A: Stop “owner’s use” abuse

There’s a provision of the rent-stabilization law that allows an owner to evict a tenant if he plans to live there himself. That sounds like a reasonable idea, but it’s not really. Most owners are doing extremely well financially, so it shouldn’t be grounds for an eviction. And given an inch and taking a mile, owners have used this consideration to evict entire buildings, no matter how many apartments, if they want to live in a castle. This law would limit owners to one apartment and make them prove that they need it.

Part B: Limit Vacancy Increases

The 1997 law established a 20 percent vacancy rent increase whenever a tenant leaves or is evicted, giving owners a big financial incentive to displace existing tenants. That is totally contrary to the purpose and intent of rent stabilization, and it contributes to the complete deregulation of apartments. Our bill would bring the vacancy increase down to 10 percent, which is still 10 percentage points too high, but it would be an improvement.

Part C: Protect Section 8 Tenants

This will protect project-based Section 8 tenants who lose their subsidies. It would also keep landlords from using another loophole, the “unique and peculiar” rule, which lets them get extra rent increases. Owners have argued that being in the Mitchell-Lama program with relatively low rents is a “unique” circumstance justifying large increases when the buildings enter rent stabilization, and this provision would prohibit that and keep rents affordable.

Part D: Restore NYC Home Rule

This will repeal the so-called “Urstadt” law, but let’s call it what it is, the Rockefeller law. In 1971 the monthly shelter allowance for someone on welfare in New York City was $215 and the median rent was $215. Rent control was working. Billionaire Republican Governor Nelson Rockefeller and his housing commissioner, Charles Urstadt, decided to break the system. They passed a law taking away the city’s home rule over rent and eviction laws, which is why we have to be in Albany today. And they passed another law, complete vacancy decontrol, and within three years, 400,000 units had been deregulated. Owners promised that maintenance would increase if apartments were decontrolled, but not surprisingly, the Stein commission found a sharp decline in maintenance.

The Legislature passed the Emergency Tenant Protection Act of 1974, ending vacancy decontrol and reregulating all 400,000 of those units. Now we have the emergency tenant protection act of 2011, Assembly 2674-A/Senate 2783-A.

Part E: Renew Rent Laws Until 2016

This is most important. It renews the laws which expire June 15, which has misleadingly been called a “sunset date”—but sunsets are beautiful and romantic. This would be a natural disaster, the total eclipse of all tenants’ rights and the loss of 1 million affordable apartments. This law renews rent and eviction protections until June 2016, which is a year when the Legislature will have to face the voters, and—we hope after nonpartisan redistricting this year—may more accurately reflect the views and needs of New Yorkers.

Part F: Limit Rent Increases for Individual Improvements

This reduces the ability of owners to raise rents based on improvements to an individual apartment, either with the tenant’s consent or when an apartment is vacant. It would reduce the amount of the monthly increase to 1/60 of the expense, rather than 1/40, slowing the sharp escalation of rents which fuels vacancy destabilization.

Part G: Repeal Vacancy Destabilization

This is the most important repair needed: It eliminates vacancy destabilization and reregulates almost all of the 300,000 units that have been deregulated. For practical purposes, it was recognized that it is harder to justify covering a few of the highest-rent apartments, those renting for more than $5,000 in New York City or $3,500 in the suburbs, so these are not covered.

Part H: End Preferential Rent Abuse

This reforms so-called preferential rents. That is when the owner claims the legal rent is one amount, say $1,500, but rents it to a tenant at a lower amount, say $1,200, and when the lease comes up for renewal, the owner claims a new rent based on an increase on the higher amount. Assemblymember Hakeem Jeffries has spoken about how owners using this pretext examine tenants’ incomes and raise the renewal rents above what they can afford. Once a vacancy is generated, with a 20 percent increase plus unlimited “improvement” increases, the rent can reach the $2,000 threshold to deregulate the unit.

This law restores the rule to what it was before being changed by the legislature in 2003 and requires owners to offer renewals based on the lower amount.

Part I: Limit Speculation

This makes it harder for predatory-equity vultures, by increasing the time they have to own a building before they can apply for a special hardship increase from three to six years. Currently, speculators can buy a distressed building with a depressed rent roll and then try to jack up the rents and displace tenants by claiming they are not making a reasonable profit.

Part J: Reduce Major Capital Improvement Increases

This limits rent increases when owners make capital improvements to a whole building, such as a new roof, elevator, or boiler. This would make these increases a separate surcharge that ends when the owner has recouped his investment, rather than becoming a permanent part of the base rent compounded at each renewal.

Part K: Protect Mitchell-Lama Tenants

More than half of the 80,000 units created under the very successful Mitchell-Lama program have already been lost, and more are threatened. This law extends rent-stabilization protection to all former Mitchell-Lama apartments, and also prohibits rent increases based on claims of “unique and peculiar” circumstances.

Part L: Limit High-Income Destabilization

This concerns high-income destabilization, a much narrower problem than vacancy destabilization, which has caused the loss of hundreds of thousands of units. High-income destabilization affects households with combined incomes over $175,000 for two years in a row with a rent over $2,000. But $175,000 is not really that much money. For example, two state legislators with a committee assignment who decide to live together would be affected.

This law would raise the income level to $300,000 and the rent level to $3,000. We want the middle class to have a stake in rent stabilization and to be part of their communities.

Taken together, the provisions of the Omnibus Rent Regulation bill will go a long way to repair the damage that has been inflicted on rent and eviction protections in the since 1997 and to stop the devastating loss of affordable units.