RGB Vote on Preliminary Guidelines Sets Stage for Unprecedented Rent Freeze

On May 5, the Rent Guidelines Board (RGB) approved preliminary numbers for increasing rent-stabilized rents. The board approved rent hikes of between 0 and 3 percent for one-year renewal leases and increases of between 0.5 percent and 4.5 percent for two-year renewal leases commencing between Oct. 1, 2014, and Sept. 30, 2015. Additionally, the RGB approved a sublet allowance between 0 percent and 10 percent and a special guideline for decontrolled apartments equal to the maximum base rent plus 30 percent or the HUD-issued Fair Market Rent, whichever is greater.

The range was passed by a rare vote of 8 to 1. Historically, tenant and owner representatives on the board have voted no. In this case, only one owner representative was opposed. In addition, the approved range for the one-year lease includes the potential for a rent freeze, which has never occurred in the 46-year history of the rent-stabilization system. Last year, the RGB hiked rents 4 percent and 7.75 percent on one- and two-year leases respectively, which was the largest increase in five years.

This is the first cycle in the process to approve rent increases under Mayor Bill de Blasio, and the vote was widely viewed as a test of his influence. He has made housing a centerpiece of his effort to ease the economic strains facing many New Yorkers, and he campaigned on a pledge to freeze rents. To help accomplish this, he appointed six new members to the board, including a new chair. And he will appoint more this year.

Owners Burdened with Increasing Costs

Meanwhile, owners have to deal with rising costs and the prospect that this rent hike range won’t meet their needs. According to the 2014 Price Index of Operating Costs report by the RGB staff, rising insurance bills, high fuel costs from a harsh winter, and a heavier city tax burden have driven owner operating costs 5.7 percent higher in the fiscal year that ended on March 31. Last year, the staff had forecast costs in that period would rise only 2.6 percent.

The report also found utilities rose an unexpectedly steep 8.4 percent, mainly because of higher natural gas costs. And insurance costs were up 9.3 percent. Payments owners made to the city also rose. They paid 5 percent more in property taxes, and 5.6 percent more in water and sewer utility charges. Labor costs and administrative costs and supplies rose far less.

Tenant activists have long claimed that the price index for owner costs overstates operating costs. They highlight other RGB data showing that net operating income for buildings with at least some regulated tenants has been rising in the past few years. Net operating income is the income after operating expenses. It covers the cost of capital improvements, debt service, and depreciation.

In response to tenant concerns, the board began a study last year comparing the Price Index of Operating Costs and the RGB Income and Expense Study. It looked at changes in the weighting it gave various costs in its landlord operating index to reflect separate city income and expense data. But the report issued on March 27 was disappointing to tenant leaders. The study found the alternate methodology reduced the increase in landlord costs from 5.7 percent to only 5.2 percent this year.

Upcoming Public Hearings

Public hearings will be held in the Bronx, Brooklyn, Queens, and Manhattan for the public and owners to weigh in on what final rent increases the board should set within the approved ranges. The final vote will be on June 23 at Cooper Union in Manhattan. Preregistration is now open for those wishing to speak at any of the four public hearings. Those who wish to register to speak may call (212) 385-2934.

The schedule of the upcoming RGB meetings is as follows:

• Thursday, May 29, 2014. Landmarks Preservation Commission, Conference Room, Municipal Building, 1 Centre St., 9th Fl., New York, NY 10007—9:30 a.m.
• Thursday, June 12, 2014. Public Testimony; Repertory Theatre of Hostos Community College/CUNY, 450 Grand Concourse, Bronx, NY 10451—5 p.m. to 8 p.m.
• Monday, June 16, 2014. Public Testimony; Emigrant Savings Bank Building, 49-51 Chambers St., New York, NY 10007—2 p.m. to 6 p.m.
• Wednesday, June 18, 2014. Public Testimony; Brooklyn Borough Hall, 209 Joralemon St., Brooklyn, NY 11201—5 p.m. to 8 p.m.
• Thursday, June 19, 2014. Public Hearing, Queens Borough Hall, 120-55 Queens Blvd., Kew Gardens, NY 11424—5 p.m. to 8 p.m.
• Thursday, June 23, 2014. Public Meeting (Final Vote); The Great Hall at Cooper Union, 7 East 7th St., New York, NY 10003—6 p.m.