RGB Study Shows Landlord Profits Soared to Record 41.7%

On March 8, the city Rent Guidelines Board released its 2018 Income & Expense (I&E) study, showing how landlords are doing financially based on data from 2015- 16, the most recent available. Not surprisingly, their profits reached a new all-time high.

On the first page, in the section “What’s New,” we are informed that landlords’ net operating profits, which went up 4.4 percent, increased for the 12th straight year. That’s only “new” because last year, they had only risen for eleven straight years.

“On average, owners of rent stabilized properties spent roughly 58.3 percent of revenue on operating and maintenance costs,” the report says. That’s a record low. It means that landlord profits before income taxes and mortgage payments, also known as net operating income, have risen to an astounding 41.7 percent of every rent dollar. No other industry has a remotely comparable profit margin.

Since 1990, the study found, net operating income has increased by 64 percent after inflation, to a citywide average of more than $560 a month per apartment. Rents went up by 43.1 percent during that period, while operating costs including property taxes rose by 35.5 percent.

Despite these exorbitant profits, the Rent Stabilization Association will no doubt once again argue that the RGB should allow across-the-board rent increases for the one million rent-stabilized families, in order to protect an imaginary sector of struggling landlords. But the I&E study found less than 5 percent of rent-stabilized buildings “distressed,” with operating and maintenance costs that exceeded their gross income—“the lowest ever recorded” since the RGB began conducting the study in 1990.

Meanwhile, the number of “distressed” tenants remains massive. According to the RGB’s 2017 Income and Affordability (I&A) study, well over half of all rent-stabilized households are “rent burdened,” paying more than the federal affordability standard of 30 percent of household income. One-third of rent- stabilized tenants spend at least half of their income on rent. The 2018 I&A report is expected to be released on April 5.

In 2015 and 2016, the RGB adopted rent freezes for one- year lease renewals, keeping rents at their already exorbitant levels, but in 2017, it allowed increases of 1.25 percent for one year and 2 percent for two-year renewals. This year, the need is clear to roll back rents to a level where tenants can afford them, while landlords will still extract more than reasonable profits.

The RGB’s Income and Expense and Income & Affordability studies are available at nyc.gov/rgb, under Research.