Rent Must Be Rolled Back! RGB Preliminary Vote April 29

Met Council and other housing advocates are calling on the city Rent Guidelines Board to recommend that rents be rolled back when it holds its preliminary vote on April 29. This would correct 40 years of unwarranted increases that have created an unprecedented affordability crisis for the city’s one million rent-stabilized households and contributed to record homelessness. 

According the RGB’s 2015 report on tenant income and affordability, released on April 2, the median annual income of tenant households is $40,600, Half of rent-stabilized tenants pay at least 36.4 percent of their income for rent, up from 34.8 percent in 2011 and far above the federal hardship level of 30 percent. Tens of thousands of low-income families pay 70 percent or more. 

This is directly related to the disappearance of housing that people with incomes below $40,000 a year can afford. Between 2011 and 2014, the number of city apartments renting for less than $1,000 a month fell  by more than 90,000 units, according to the 2014 Housing and Vacancy Survey conducted by the U.S. Census Bureau, released in February. 

Meanwhile, landlords’ net operating income rose for the ninth straight year, according to the RGB’s study on owners’ income and expenses. On average, landlords make a profit of almost 40 percent on every rent dollar on the costs of running their buildings, before long-term costs such as mortgage payments—an exorbitant margin with no match in other businesses.

In 2014, after new Mayor Bill de Blasio appointed five new RGB members, including new chair Rachel Godsil, the board voted to increase rents by 1 percent for a one-year lease renewal and 2.75 percent for two years. While these were the lowest increases ever imposed since rent stabilization began in 1969, they made a terrible situation a little bit worse. In the first year of the de Blasio administration, homelessness increased by 10 percent, to 60,000 women, children, and men. This figure would have been far higher but for a robust anti-eviction program initiated by Human resources Administration Commissioner Steve Banks, which has included expanded legal services for low-income households and enhanced rent-arrears grants to keep them in affordable apartments.

Last year, before the preliminary vote, tenants provided expert testimony from Tom Waters and Victor Bach of the Community Service Society, Patrick Markee of the Coalition for the Homeless, and former RGB executive director Tim Collins. They documented that the affordability crisis has reached unbearable levels for New Yorkers and made the case for rolling back rents. Collins said that, taking 2008 as a base year, rents should be rolled back by 2 to 6 percent because the RGB had repeatedly raised rents beyond owners’ cost increases. “This board must act without hesitation to provide relief where it has inflicted so much unnecessary harm,” he urged, in order to restore “the balance achieved in 2008.”

That analysis is actually far too conservative. By 2008, owners’ profits had already skyrocketed to 35 percent, and rents had already been ratcheted up to unaffordable levels, due to unwarranted RGB increases year after year during the Rudolph Giuliani and Michael Bloomberg administrations, combined with the state’s weakening of rent regulations in 1997 and 2003. As far back as 1997, a study by Suzanne Mattei of Public Advocate Mark Green’s office (which is available on the RGB Web site under “other research”) showed that between 1975 and 1997 the RGB had significantly overcompensated landlords due to faulty and speculative predictions of future cost increases, which were translated into rent increases imposed on stabilized tenants. So by 2008, rents already reflected 33 years of unwarranted—and compounded—increases.

Some advocates say rents should be rolled back by at least 5 to 10 percent. City Councilmember Ben Kallos (D-Manhattan) has suggested 10 to 20 percent, which is in line with what the history of excessive increases would suggest.  

 

“Exorbitant and unconscionable rent increases… constitute a grave emergency”

A major reason for the RGB’s unwarranted increases in past years stems from the mistaken belief that the board’s mission is to maintain owners’ profit margins, combined with a faulty calculus which assumes that landlords’ costs have increased without having them open their books. Under Giuliani and Bloomberg, the five public members all came from the business and finance sectors, and many were openly skeptical of if not hostile to the very concept of rent regulation, subscribing to discredited market-economic theories that the way to preserve affordable housing is to keep rewarding owners with big rent increases. 

This reflects a fundamental misunderstanding. The RGB was created by the Rent Stabilization Law of 1969, whose purpose is expressed in the opening section, “Findings and Declaration of Emergency.” Its alarming words still ring true today: “The Council hereby finds that a serious public emergency continues to exist… action is necessary in order to prevent exactions of unjust, unreasonable, and oppressive rents and rental agreements and to forestall profiteering, speculation, and other disruptive practices tending to produce threats to the public health, safety, and general welfare… exorbitant and unconscionable rent increases… [and] severe hardship to tenants… such conditions constitute a grave emergency.”   

 

Enough is Enough!

The RGB’s preliminary vote in 2014 recommended a range of possible actions that included a rent freeze, but not a rollback. In its final vote in June, the proposal for a freeze fell one vote short, and rents were increased again. A year later, the case for a rollback is stronger. The affordability crisis has deepened, homelessness continues to rise, and owners’ profits have gone up yet again. 

With three more new RGB members appointed by Mayor de Blasio, including new public members Helen Schaub and Sabeel Rahman, it is likely that finally a majority of the board understands the dimensions of the housing affordability crisis, why rent stabilization is important, and their role responding to it. Schaub is state policy and legislation director of Local 1199SEIU, one of the unions leading the drive to raise the minimum wage to $15 an hour, and Rahman is a Brooklyn Law School professor who is an expert on economic inequality. [See article on p.8 ]

One million tenant households across the city, already pushed to the breaking point, hope and expect that at least three of the five public members will join with the two tenant representatives to include a rollback in the range of actions the RGB will propose in its preliminary vote on April 29—and to take action to lower rents at the final vote on June 24.

 

To get involved in the fight to roll back rents, contact Met Council at (212) 979-6238 or active@metcouncilonhousing.org.