Last month, during the Rent Guidelines Board’s (RGB) annual deliberation process that determines future years’ rents for about one million rent-stabilized apartments, nearly half of the city’s rental market, advocates for Landlords called for rent increases of more than 9%, drawing on one of four proportional rent adjustment scenarios presented to council by RGB staff.
The call came amid news of rising apartment building values in New York City, a sign of homeowners’ growing wealth. At the same time, we know that the economic impacts of the pandemic continue to worsen and complicate the lives of many of their tenants.
The RGB’s preliminary vote, scheduled for May 5, will have an outsized impact on the lives of low-income tenants, with 365,000 low-income households living in rent-stabilized housing, double that of those living in rent-stabilized housing. public and subsidized combined. . We call on council to reject any proposed rent increase and use its power to stop tenants from accessing Housing Court and getting off the streets.
Even before the pandemic, the incomes of low-income renters with stabilized rents were not keeping up with rising rents, with the median rent-to-income ratio reaching 52% in 2017. The pandemic made matters worse: 40% lost employment income in their household, according to the Community Service Society (CSS) 2021 Unheard Third Survey, the oldest scientific survey of low-income communities in the United States
While government aid curbed a surge in evictions at the height of the pandemic, most of these temporary solutions have expired. So far, city, state and federal governments have failed to replace emergency housing assistance and eviction moratoriums with permanent solutions, such as the expansion of housing vouchers. lodging. It’s no surprise that last summer a third of low-income rent-stabilized tenants in the CSS survey said they feared being evicted or forced to move out with the end of the eviction moratorium. A rent hike will no doubt send some rent-stabilized tenants, who are barely holding out, into an already imploding housing court system, adding to the nearly 227,000 eviction cases currently pending.
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Of course, the pandemic has also had an impact on landlords. This year’s RGB reports, which analyzed 2020 construction data, showed falling homeowner revenues and rising fuel, insurance and administration costs. However, this drop in revenue was temporary and geographically concentrated in Manhattan, below 96th Street. It does not, in itself, justify a large rent increase for rent-stabilized tenants throughout the city.
Indeed, there have been a number of interventions that have helped keep landlords whole during the pandemic, including rent relief, mortgage relief, and increased interest-only mortgages. A recent JPMorgan study showed landlords nationwide had higher cash balances in the summer of 2020 than before the pandemic.
In addition, this decline in net income does not put buildings at risk of being less maintained, given the long-term increase in operating income and the benefits associated with rising values. For over 30 years, RGB staff have presented a range of annual rent scaling scenarios, which are estimates of what it would take to cover changes in operating costs and, in a formula, to protect the net operating income of buildings against the effects of inflation.
These are not staff recommendations, just data points. They do not take into account the larger long-term trends in revenue and profitability. Based on its guidelines and vacancy allowances since 1990, the RGB has authorized rent increases of 214% through 2021. To protect the building’s income from year-to-year inflation , the RGB only needed to increase rents by 182%. Indeed, RGB staff reported that from 1990 to 2020, average building net operating income increased by 47%, after adjusting for inflation. Although rent guidelines have been lower over the past seven years, they have not yet completely improved the great excesses accumulated from 2008 to 2014.
Moreover, the rental income of a building is not in itself an adequate measure of the profits of the owner. Concurrent increases in property values, tracked by the College Neighborhood Housing Program over the past two decades, show that multi-family real estate has generated outsized benefits for homeowners far outweighing the long-term increase in income net of a building. As the testimony of UNHP Director of Research and Data, Jacob Udell, in the Bronx points out, the average selling price per unit has risen from about $10,500 in 1996 to about $175,000 in 2020.
The Rent Guidelines Board cannot set federal or state policy on eviction or homelessness, but it can and should ensure that thousands of rent-stabilized tenants are not pushed into the court of the rent. housing and the accommodation system by an unjustified rent increase. Council should reject requests for rent increases of any kind.
Mironova is a housing policy analyst for the Community Service Society of New York. Collins is an attorney at Collins Dobkin & Miller LLP and was executive director of the Rent Guidelines Board (RGB) from 1987 to 1993.