2014: Year of the Rent Freeze?

Will the city’s Rent Guidelines Board freeze rents this year, as Mayor Bill de Blasio promised when he was running for election?

There are signs that the mayor may renege on what he pledged during his campaign — for example, when he told a Bronx housing forum that it would be unfair to raise rents when almost half the city’s people are living close to or below the poverty level. The Rent Guidelines Board (RGB) — which now has a majority of de Blasio appointees, five out of nine members — left the issue open on May 5. It voted to suggest a range of possible increases for the city’s 1 million rent-stabilized apartments: zero to 3 percent for a one-year lease renewal and 0.5 to 4.5 percent for two years.

The board will set the final guidelines for 2014-15 on June 23. “We’re in an information-gathering phase,” new chair Rachel Godsil said when tenant representative Harvey Epstein asked her to justify her suggested increases. The plight of tenants is “obviously moving,” she said earlier, but the board also has to consider that landlords need revenue to maintain their buildings.

“It’s not going to be easy to get a rent freeze,” says Sheila Garcia, a Bronx housing organizer who de Blasio picked as the RGB’s other tenant member, but she adds, “I think it’s really possible.”

Curbing Housing Costs

Picking RGB members willing to freeze rents is one of the few things de Blasio can do to curb housing costs, as state law denies the city home rule over rent regulations. Under Mayor Michael Bloomberg, the RGB routinely rubber-stamped rent increases, to the point where former chair Marvin Markus was nicknamed “Marvin Markup.” In contrast, says Garcia, the new public members are paying serious attention to the data beyond landlords’ costs and are returning phone calls from tenant groups. On May 5, new public member Cecilia Joza joined Epstein and Garcia in voting for a 6 percent rent rollback, but the proposal lost 6-3. 

However, longtime housing activist Michael McKee of Tenants PAC suspects that the de Blasio administration is discreetly opposing a rent freeze because it doesn’t want to upset the city’s economic oligarchy. “My view is that de Blasio needs the real-estate industry to cooperate with his new production plan, and is afraid to alienate them lest they say they will not build,” McKee says. 

The housing plan the mayor released in May (see page 5), he notes, avoided calling for the repeal of the state vacancy-decontrol law, which de Blasio had pledged to support as a candidate. The mayor says his housing plan will “preserve” 120,000 affordable units, but somewhere between 30,000 and 60,000 rent-stabilized apartments are deregulated each year, McKee says.

On May 21, deputy mayor Alicia Glen, who is in charge of housing policy, told a Harvard Club forum that she didn’t think anyone believed that a rent freeze “is good for the rental stock, any portion of the rental stock,” although she added that a smaller increase than usual would be justified.

Renters’ Realities

Tenant groups have three main arguments about why even a small increase would be unfair.

First, it would ignore the reality of renters’ incomes. An increase of less than 2 percent for a one-year lease and 4 percent for two years would be the lowest in the 45-year history of rent stabilization — but would be more than the 1 percent annual raises that teachers and transit workers, who have two of the strongest labor unions in the city, will be getting in the first years of their new contracts.

Second, the RGB voted in substantial increases throughout the recession, including 4 percent and 7.75 percent last year, despite high unemployment and record levels of homelessness. From 2009 to 2013, it allowed increases that added up to more than 15 percent for one-year leases and 20 percent for two-year leases — while city workers went four years without getting a raise. 

Third, the board primarily considers landlords’ costs to determine what increases are justified, and doesn’t look at their overall incomes. In 2009, the RGB’s Income and Expenses (I&E) study found that owners’ net operating income had risen more than twice as fast as its Price Index of Operating Costs (PIOC, pronounced “pie-ock”). Tenants also argue that the PIOC exaggerates how much landlords’ costs are going up, as it estimates that figure based on the price of items such as fuel oil or light bulbs and not on what they actually spend. (Landlords claim it underestimates their costs).

Rent Freeze or Rent Reduction?

While more than 40 housing and community organizations have demanded a rent freeze, many are also arguing that rents should be reduced. “For the past five years the board unconscionably and indefensibly inflated owner incomes while a homeless and affordability crisis mounted,” former RGB executive director Timothy L. Collins, now a tenant lawyer, told a board meeting May 1. “Rents must be rolled back. While this may seem like an extreme recommendation, it is made in the wake of an extreme abuse of the system.”

Board data from 2012 show that net operating income went up for the eighth year in a row. On average, owners of rent-stabilized housing now spend roughly 60 percent of their income on running and maintaining their buildings, leaving almost 40 percent for debt service and profit. Before the recession, Collins calculates, they spent about 64 percent — so bringing what landlords spend on operating costs back to the proportion it was in 2008 would require lowering rents by 6 percent.

Public Hearings

More than 200 tenants and supporters turned out to protest at the May 5 preliminary vote despite abnormally tight security, significantly more than how many showed up in the last few years. The tenant movement is now focusing on getting people to testify at the four public hearings the board has scheduled for June. Under Bloomberg, the RGB usually took testimony from tenants and landlords only during the workday in Manhattan. This year, it will hold hearings in the Bronx, Brooklyn and Queens that will start at 5pm.

“Tenants have to come to the outer-borough hearings to talk about their experiences,” says Garcia.

Ultimately, she says, the question is, “What kind of city do we want to live in?” Do we want to have a city where an office cleaner can afford an apartment, or one where working people can’t make enough to live on their own? “I can’t tell you how many families I know are doubling up,” she says.

RELATED COVERAGE:

A Tale of Two Housing Plans, by Tom Angotti

Thinking Inside the Box, by Keith Williams