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Time for a Rent Freeze

June 20, 2014

The Rent Guidelines Board (RGB) is poised to vote on Monday, deciding what increases rent stabilized tenants will see for the year. The vote this year could be dramatic, as new de Blasio appointees are considering a zero-percent rent increase for the year as a short-term measure to correct for the overly large rent increases awarded by the RGB in recent years.

The Rent Guidelines Board (RGB) is poised to vote on Monday, deciding what increases rent stabilized tenants will see for the year. The vote this year could be dramatic, as new de Blasio appointees are considering a zero-percent rent increase for the year as a short-term measure to correct for the overly large rent increases awarded by the RGB in recent years. These recent RGB increases that have run far ahead of both the income growth of vulnerable New Yorkers and ahead of the actual increase in owners operating costs.

In this historic moment, ANHD would like to join the call for a zero-percent rent increase this year, as a short term correction to the recent outsized rent increases.

ANHD’s perspective on this question is unique because we are a membership organization of NYC- neighborhood based housing groups- community development corporations, affordable homeownership groups, supportive housing providers and community organizers. We have 98 members throughout the five boroughs who have developed over 100,000 units of affordable housing in the past 25 years alone and directly operate over 30,000 units, providing housing for 100,000 people.

Our not-for-profit community development members have a history of keeping operating expenses in their buildings low to minimize tenant rent increases while still maintaining safe, quality buildings. Furthermore they do so while operating 100% affordable buildings and without the added revenue generated from the share of market-rate units found in many for-profit owned rent regulated buildings. It is important to note that these buildings operate based on market principles, and do not have access to operating subsidies not also available to for-profit and market-rate developers.

The Price Index of Operating Costs (PIOC) plays a key role in the Rent Guidelines Board’s evaluation of building costs and potential rent increase levels. However, reports from our members organizations committed to maintaining affordability suggest that there are serious concerns around the accuracy of the PIOC. Longitudinally, the PIOC has increased ahead of the RGB’s reported Income and Expense Study (I & E). From 1990 to 2011, for which comparative data is available, the RGB reports the PIOC rising by 103.0%, as compared to 93.5% for the reported I & E data. This is an overstatement of costs of approximately 10% during that 21-year period. The results in the average cost growth of only 3.8% as calculated by the RPIE as compared to 5.4% by the adjusted PIOC rate. The decisions of this board should take into account that the PIOC projections used to estimate the costs of building operations for the upcoming year, have outpaced the actual amount landlords reported spending on their buildings.

The disparity between projected and actual expenses in recent years is significant. It has led to an increase in net operating income for landlords for the 6th consecutive year, at the expense of working poor and middle income New Yorkers. There is the suggestion that changes in owners’ operating costs should be matched by increased rents to tenants. However this provides a guarantee of profits and not a preservation of building conditions and management levels. Rents in stabilized buildings remain constant during periods of market decline rather than tracking up and down with the broader rental market. Yet tenants’ rents do not decline when costs decline. This allows net operating income and profits for owners to increase while affordability of housing for tenants decreases. High rent increases by the RGB have, and will, only increase landlord profits and further chip away at New York City’s affordable housing stock, which lost at least 14,175 rent stabilized units in 2011 alone.

The affordable housing crisis in New York City has reached its most severe level in decades as housing in New York City has grown increasingly unaffordable to many residents and families. The 2011 Housing Vacancy Survey found that over half of all New York City renters were rent-burdened, paying more than 30% of their household income in rent, while almost a third of New York’s renters were severely rent-burdened, paying more than 50% of their household income in rent. Furthermore, the
City’s Center for Economic Opportunity’s Poverty Measure Report shows that in 2011, an estimated 46% of New Yorkers were poor or near-poor, making less than 150% of the city’s poverty threshold.

The affordability challenge is slightly greater for those living in rent stabilized units. According to the 2011 Housing Vacancy Survey, 55.3% of rent stabilized tenants paid more than 30% of their household income in rent, and 33% of tenants paid more than 50% of their housing income in rent. We are increasingly troubled by the share of New Yorkers paying such a high proportion of their income on housing as this puts families at risk of cutting cost for other much need expenses such as paying debts, food, healthcare, childcare and other households expenses.

It is imperative that we protect the city’s stock of affordable housing. As the housing vacancy rate continues to lower, and tenants’ rental obligations continue to increase resulting in unfortunately high rent-to-income ratios, this year is critical time to minimize rent increase for tenants.

For these many reasons, ANHD is joining the call for a short-term rent freeze.

[1] Longitudinal RPIE data for 2003-04 is unavailable and therefore 2003-2004 was excluded from this analysis.

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