The Empire Strikes Back: Two Million Rent-stabilized Tenants Face Largest Rent Increase Since Bloomberg Era

Steven Wishnia May 16, 2022

This is the year New York’s real-estate empires are striking back — with tacit support from Mayor Eric Adams.

On May 5, the city Rent Guidelines Board voted 5-4 to propose allowing landlords of rent-stabilized apartments to raise rents 2-4% for a one-year lease renewal, and 4-6% for two years. That would be the biggest increase given since 2013, even if the board adopts the lower numbers at its final vote on June 21.

The only debate on the proposal came from tenant representative Sheila Garcia, speaking from the offices of Community Action for Safe Apartments (CASA) in the southwest Bronx, saying “that 2% increase will be devastating for the people in this room.”

“Keep the pressure on Mayor Eric Adams,” CASA activist Fitzroy Christian told the roughly 40 people in the room after the vote, with other tenant groups and activists watching online.

The real-estate industry sees Adams as its chance to recoup the profits it lost from the RGB freezing rents for 3½ years during Bill de Blasio’s mayoralty. 

“I live on a fixed income. I can’t afford any increase,” said CASA activist Kim Statuto, 62, who pays rent to a property-management company that operates more than 150 buildings in the Bronx. “They’re not hurting,” she says.

The real-estate industry sees Adams as its chance to recoup the profits it lost from the RGB freezing rents for three and a half years during Bill de Blasio’s mayoralty, the state Housing Stability and Tenant Protection Act (HSTPA) of 2019 closing the loopholes landlords used to deregulate rent-stabilized apartments, and the eviction moratoriums of the COVID-19 pandemic.

The HSTPA “eliminated all mechanisms to increase rent outside of this board,” RGB owner representative Robert Ehrlich argued. “We could return to the horrifying days of the ’70s and ’80s.”

“The assumption is that tenants won and now we’re going to the RGB to undo some of that,” Garcia told The Indypendent before the vote.

The vehicle for those demands was the RGB’s annual Income and Expenses (I&E) study, released March 31, which got more press this year than it has in rent stabilization’s 54-year history. Based on financial forms filed with the city for almost 15,000 buildings containing rent-stabilized apartments, it found that owners’ net operating income, profit before taxes and debt service, fell by 7.8% in 2019-20, to an average of $545 a month per apartment. It was the biggest drop since 2002-03.

On April 14, the RGB staff projected that landlords would need increases of up to 9% on a two-year lease to make the same net they had the year before. A 9% increase would have been the largest since 1989.

Landlord groups this year were actively “seeking out press” to push for a big increase, Garcia says. That enabled them “to set the goalposts,” added new tenant representative Adán Soltren, a Legal Aid housing lawyer. 

“Tenants cannot afford these increases, no matter what the numbers say,” said Soltren. 

According to Soltren, more than one-third of the city’s 960,000 rent-stabilized households are low-income. He told the RGB that its mission is to preserve affordable housing, and it’s operating under the false assumption that landlords are entitled to higher profits every year.

 Some landlords have taken to calling themselves “housing providers.”

The numbers in the RGB study are from 2020, the year that COVID shut down much of the city’s economy. It was only the fourth time in the past 30 years that landlords’ net operating income decreased. The biggest decline came in Manhattan’s southern half, led by a 44% drop in Midtown.

Adams told reporters the morning after the RGB vote that he thought a 9% hike was “just too extreme.”

Instead, the owner representatives proposed allowing rents to go up 4.5-6.5% on a one-year lease, and 6.5-8.5% for two years. Christina Smyth, a real-estate attorney, argued that it “will not put a dime more of profit in housing providers’ pockets.” (Some landlords have taken to calling themselves “housing providers,” on the grounds that the term “landlord” is gender-exclusive and evokes a “feudal” relationship.)

“We have to find the right position to look after those small property owners,” Adams said May 6. “They’ve been decimated by the increase in fuel, property taxes, so many other things.”

The current Rent Guidelines Board at their May 5 meeting. Photo: Youtube.

Most rent-stabilized apartments, however, are owned by large landlords, although the real-estate industry often touts the plight of small owners. The Rent Stabilization Association, the main lobbying group for landlords of rent-stabilized buildings, has six members who own more than 6,000 apartments each.

Of Adams’ three appointments to the RGB — Smyth, Soltren, and economics professor Arpit Gupta as a public member — that of Gupta is the most telling. The board’s five public members are supposed to be neutral, but Gupta is an adjunct fellow at the Manhattan Institute, the right-wing urban-policy think tank that provided the intellectual ammunition for Rudolph Giuliani policies such as stop-and-frisk policing. He told Vox last year that he is a “little skeptical of rent control,” because it works as “a one-time transfer of equity from landlords to current tenants.”

Gupta was quiet during the May 5 meeting, as RGB public members rarely speak, but the Manhattan Institute has long been a strident foe of rent controls. It calls rent regulation “one of the worst welfare benefits ever conceived,” arguing that it is “transferring wealth to current tenants at the expense of future and market-rate tenants.”

How directly the mayor influences the RGB varies. Garcia, who is in her ninth year on the RGB, puts it as that the administration “knows what the board is thinking” before it votes, and its “silence is complicit.”

Most rent-stabilized apartments, however, are owned by large landlords, although the real-estate industry often touts the plight of small owners.

Ironically, the mayor pushed furthest by protests in recent history was Giuliani, who chose a free-market libertarian as RGB chair. In 1995, after the board’s preliminary vote recommending taking all vacant apartments out of rent regulations provoked widespread outrage, he scotched the scheme by announcing his opposition just before the final vote.

The RGB’s final vote on June 21, at Cooper Union in Manhattan, will be in-person for the first time since 2019. Fitzroy Christian urged Bronx tenants to prepare testimony for its two public hearings, one in Queens on June 13 and one in the Bronx on June 15.

Tenant activists are upset that the board is only holding two hearings instead of the usual five. Garcia said it makes a difference for board members to see faces and hear stories. One of the reasons the RGB has frozen rents on single-room-occupancy hotels for more than a decade is that no hotel landlords have shown up to ask for an increase.

Its proposed increases would give landlords bigger profits while unemployment in the Bronx is still above 10 percent, Christian told The Indypendent. “When you add cost of living to people whose income is zero, how do you expect them to survive?”

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