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Making rent stabilization fair

Charles Rangel, top, and David Paterson

When news broke this summer that U.S. Rep. Charles Rangel had been renting multiple rent-stabilized apartments in Harlem for decades, it set off a flurry of articles about the program that keeps rents low for more than 1 million apartments in New York City.

A USA Today op-ed on Rangel, which was titled "A Congressman's Arrogance," for example, maintained that "by occupying so many apartments, Rangel is sticking it to his constituents." Other articles took note of the fact that a number of famous New York politicians — including Governor David Paterson and former mayor David Dinkins — also have leases on rent-stabilized pads.

The hubbub touched off by Rangel comes as winds of change are buffeting the rent-stabilization program.

Landlords and many in the real estate industry are lobbying to maintain vacancy decontrol, or the rent threshold at which landlords can make an unoccupied apartment market-rate. Opponents of rent-stabilization claim the program is detrimental to building owners and all New York City renters. Tenant activists, on the other hand, are eagerly eyeing Albany, hoping that if Democrats achieve a majority in the state Senate this November, rent-stabilization laws will be strengthened and extended.

The host of factors that may affect rent-stabilization include bills in the state Legislature that seek to get rid of luxury vacancy decontrol and give the City Council more authority over who sits on the Rent Guidelines Board, the body that votes on yearly increases to rent-stabilized apartments.

So, which way is the wind blowing?

While no one's sure, those in favor and against rent-stabilization in its current form can agree on one thing: The program is unlikely to be abolished anytime soon.

Media attention on Rangel's leases primarily focused on one aspect of rent-stabilization above all others: How can you call a program that allows a powerful politician to rent four apartments at below-market rate fair?

For many in the real estate industry, that question has a simple answer: Rent-stabilization is unfair. Other housing assistance programs, like Section 8, are tied to a tenant's income, while rent-stabilized tenants are able to lease an apartment without proving that their income falls below a certain mark. Some rent-stabilization foes also argue that by keeping rents for upwards of a million apartments artificially low, the program inflates rents for the city's market-rate apartments.

"Whose responsibility is it to provide rent assistance for individuals?" asked Steven Spinola, president of the Real Estate Board of New York. "I would argue that it is the responsibility of government and not owners."

Spinola said that REBNY and the landlords it represents are pushing for the reform of several facets of rent-stabilization, and they'd especially like to see luxury vacancy decontrol rules strengthened.

"We believe luxury decontrol is the right way to phase out of what is in our opinion an unfair program that provides subsidies for people to live in the city of New York," said Spinola.

Under vacancy decontrol, which was first introduced in 1993, landlords can take an apartment out of rent-stabilization if rent on a unit is more than $2,000 and the apartment is vacated by its tenant, or if a tenant makes more than $175,000 for two consecutive years.

Spinola noted that there's no way for landlords to verify tenant income, and that it's easy for someone who runs their own business to shelter income so that it doesn't hit the $175,000 mark for two years running.

In addition, Spinola said REBNY would like a provision introduced to the program that disallows people who own homes outside of New York from maintaining a rent-stabilized apartment.

"How many people own a home in the Hamptons and have a protection on their apartment in New York City?" he asked.

Tenant activists, on the other hand, said articles about perceived abuse of rent-stabilization by rich or powerful people like Rangel are the real estate industry's way of trying to kill a program that allows lower- and middle-income New Yorkers to live in the city.

"What the real estate industry does is select celebrities like Mia Farrow or politicians like Rangel who are living in these apartments in order to dramatize what they say is an unfair situation," said Andres Mares-Muro, rent-regulation program coordinator for the nonprofit organization Tenants and Neighbors. "The fact is, most people are not in the category of the examples they highlight. The vast majority of people would not be able to afford the apartments they have without rent-stabilization."

Mares-Muro said tenant activists are supporting a package of bills that would repeal vacancy decontrol — in effect, ensuring that tenants could keep a rent-stabilized lease for their whole life — and would give the City Council final approval over the appointments of people who sit on the Rent Guidelines Board, the body that votes on yearly increases to rent-stabilized leases. At present, the mayor appoints all members of the board. The bills passed the Assembly in May and are expected to be introduced in the Senate in January.

The bills are unlikely to become law without a fight. According to Lisa Breier Urban, a managing partner with the law firm Breier Deutschmeister Urban & Fromme who has represented both rent-stabilized landlords and tenants for more than 15 years, landlords are already unhappy about annual rent increases not covering their expenses.

"A lot of small property owners think it's unfair that rent increases aren't keeping up [with] rising fuel costs," said Urban.

Urban notes that rent-stabilization is unlikely to be repealed when the current law governing it expires in 2011, because "a renewal is built into the law if the vacancy rate is below 5 percent in the city. Assuming the vacancy rates stay below 5 percent, I think rent-stabilization will stay renewed."

While Spinola doesn't think rent-stabilization will disappear in the near future either, he says one of the reasons the city has been financially healthy for much of the Bloomberg administration is because more apartments have come out of rent-stabilization.

"Fewer real estate taxes are paid when you keep apartments in rent-stabilization," he said, and the program keeps investors from having more money to spend on building new developments.

Mares-Muro of Tenants and Neighbors, unsurprisingly, doesn't buy Spinola's line of reasoning.

"The rent-stabilized program has served as an incentive for many owners because they get some breaks on some taxes and abatements," he noted. "It's also the case that many of the developments that have happened in the city over the past several years are high-end. They're not buildings that a firefighter or a teacher could afford to rent apartments in."