New York CIty Council Member Ben Kallos

New York City Rent Guidelines Board (RGB) Public Hearing and Comment on Proposed Rules

New York City Rent Guidelines Board (RGB)

Public Hearing and Comment on Proposed Rules

June 19, 2018

 

I am Council Member Ben Kallos, representing the Upper East Side, Midtown East, Roosevelt Island and El Barrio.

Good afternoon to the Rent Guidelines Board Chair Hon. Kathleen A. Roberts, Public Members Camarena, Joza, Reiss and Pinsky, Owner Members Pinsky and Walsh, and Tenant Members Garcia and Goodridge.

To New Yorkers here today, and especially tenants, thank you for attending this hearing. I am proud to stand with you today.

This year, I am calling on the Rent Guidelines Board to vote for a rent freeze.

After two straight years of historic rent freezes, last year, the Board voted for a rent increase of 1.25% for one-year leases and 2% for two-year leases. While this was a lower increase than the disproportionately high increases of previous years under prior administrations, more still needs to be done to balance tenants’ rent burdens with landlord’s revenues.

Year after year, as rents go up, tenants have shouldered an undue burden. Meanwhile, income cannot keep pace; average incomes only crept up by 2.3% between 2005 and 2013 in real terms. The approved rent increases each year were largely based upon the landlord’s operating costs, measured by the price index of operating cost (PIOC). This practice not only failed to consider tenants, but was also proven to be inaccurate: based upon data from the Department of Finance (DOF), the PIOC has overstated landlord costs by 11% since 2005. This miscalculation led to unfairly high rent increases in past years, which must be corrected with a rent freeze.

Over the past four years, the Board has done a lot of work to improve this process, both by adapting the way it evaluates the data, and by expanding its public hearings to reach more tenants and landlords in more parts of the City. In 2016, the Board instituted a second hearing in northern Manhattan, and has kept up that level of accessibility since then. Thank you to the members of the Board for these changes.

 In establishing rent adjustments this year, we must acknowledge that, even after the freezes and low increases of the past four years, Rent Guidelines Board increases have far outpaced inflation and the consumer price index. I have compared 23 years of RGB increases to the Consumer Price Index and found that the rent increases outpaced the Consumer Price Index by over 10%. That means a $500 a month apartment in 1994 is now a minimum of $926.69 a month with an annual rent of at least $11,120.31. Following inflation, that same unit would be $832.01 a month and $9,984.15 a year.   

Those increases have come with consequences. A unit is considered affordable if the rent is no higher than 30% of their household income. The median rent-to-income ratio of tenants in rent stabilized apartment is 36.4%. By this standard, a majority of rent-stabilized tenants have units that are not affordable. The stress of financial insecurity takes a toll on New Yorkers every day.

The impact of this rent squeeze is seen in our city’s dire homelessness crisis. This morning, 62,498 New Yorkers woke up in a shelter, having nowhere else to go.

The rent freezes of 2015 and 2016 began to address these problems, but they also showed that more must be done. Despite the freezes, landlords’ net operating incomes continued to increase, as landlords have pursued Major Capital Improvements, preferential rents, Individual Apartment Improvements, and vacancy bonuses to raise the rents. Last year, an analysis found that over the prior six years, rent stabilization landlords have received nearly $1 billion in MCIs, including nearly $300 million in 2016 alone. These staggering numbers show that rent freezes have not been enough to provide true relief for rent-burdened tenants, after so many years of overcharging.

To correct for these disproportionate increases, tenants must get another rent freeze.

For the twelfth straight year, landlords’ net operating incomes have risen. It is time to consider the needs of our tenants, and now is when landlords can afford to correct for years of high rent increases and subsequent burden on tenants. This is a city of renters, but we will only remain one if we vigorously protect the affordable housing we already have.

The steady loss of rent-stabilized units, one of our most precious housing resources, is mostly due to high rent vacancy deregulation. Raising rents is both an enormous burden for tenants currently in their apartment and contributes to the overall loss of affordable housing. The city has lost an estimated 250,000 to 400,000 rent stabilized units in the past twenty year and, we are at risk of losing many more. As we spend millions of dollars of city subsidy to build new affordable housing, the board should take into consideration the effect of this enormous loss that is canceling out many of our gains..

The time is now for a rent freeze, for the 29,000 rent-stabilized units in my district and for tenants across New York City.

Comparison Chart of Rent Guidelines Board Orders and Consumer Price Index

14% Difference between RGB One Year Increases and Annual CPI Average

 

Year

1 Year

2 Year

RGB Order

Avg. CPI

1 yr. RGB & CPI Difference

Sample Rent Increases based on RGB

Sample Rent Increases based on CPI

2017

1.25%

2.00%

49

2.10%

0.85%

$  926.69

$  832.01

2016

0.00%

2.00%

48

2.10%

2.10%

$  915.25

$  814.90

2015

0.00%

2.00%

47

0.70%

0.70%

$  915.25

$  798.14

2014

1.00%

2.75%

46

0.80%

0.20%

$  915.25

$  792.59

2013

4.00%

7.75%

45

1.50%

2.50%

 $  906.19

 $  786.30

2012

2.00%

4.00%

44

2.10%

-0.10%

 $  871.33

 $  774.68

2011

3.75%

7.25%

43

3.20%

0.55%

 $  854.25

 $  758.75

2010

2.25%

4.50%

42

1.60%

0.65%

 $  823.37

 $  735.22

2009

3.00%

6.00%

41

-0.40%

3.40%

 $  805.25

 $  723.64

2008

4.50%

8.50%

40

3.80%

0.70%

 $  781.80

 $  726.55

2007

3.00%

5.75%

39

2.80%

0.20%

 $  748.13

 $  699.95

2006

4.25%

7.25%

38

3.20%

1.05%

 $  726.34

 $  680.89

2005

2.75%

5.50%

37

3.40%

-0.65%

 $  696.73

 $  659.77

2004

3.50%

6.50%

36

2.70%

0.80%

 $  678.08

 $  638.08

2003

4.50%

7.50%

35

2.30%

2.20%

 $  655.15

 $  621.30

2002

2.00%

4.00%

34

1.60%

0.40%

 $  626.94

 $  607.33

2001

4.00%

6.00%

33

2.80%

1.20%

 $  614.65

 $  597.77

2000

4.00%

6.00%

32

3.40%

0.60%

 $  591.01

 $  581.49

1999

2.00%

4.00%

31

2.20%

-0.20%

 $  568.28

 $  562.37

1998

2.00%

4.00%

30

1.60%

0.40%

 $  557.13

 $  550.26

1997

2.00%

4.00%

29

2.30%

-0.30%

 $  546.21

 $  541.60

1996

5.00%

7.00%

28

3.00%

2.00%

 $  535.50

 $  529.42

1995

2.00%

4.00%

27

2.80%

-0.80%

 $  510.00

 $  514.00

1994

2.00%

4.00%

26

2.60%

-0.60%

 $  500.00

 $  500.00

 

[i] Consumer Price Index Data from 1913 to 2014 (CPI-U) provided by U.S. Department of Labor, Bureau of Labor Statistics, available from the US Inflation Calculator available at http://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/

[ii] NYC Rent Guidelines Board, Changes to the Rent Stabilized Housing Stock in New York City in 2013, 9, 13.

[iii] Tom Waters, Community Service Society of New York. The Geography of Rent Regulation and Legislative Districts, http://b.3cdn.net/nycss/21de717dd5b4b8e395_5gm6i6zlu.pdf

 

 

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