For the first time since the early 2000s, the Rent Guidelines Board is reporting a decline in average net operating income among rent-stabilized properties in the city.
A report released Wednesday states that NOI declined slightly by .6 percent from 2017 to 2018. It’s the first drop reported since the board’s analysis of income and expenses from 2002 to 2003. Rental income increased by an average 3.7 percent and total income by 3.6 percent. Operating costs increase an average of 5.8 percent.
The board, tasked with determining rent increases on stabilized apartments, will be meeting remotely, starting next Thursday. Last week Mayor Bill de Blasio called on the board to freeze rents.
“The study makes it clear that an increase in rent is warranted,” said Rent Stabilization Association President Joseph Strasburg. “We don’t see how this mayor can ask for a zero increase in light of these numbers.”
The report doesn’t reflect the effect of the economic crisis brought on by the coronavirus pandemic, nor does it show how the Housing Stability and Tenant Protection Act of 2019 — which severely limited the ways that landlords can increase rents on stabilized properties — has impacted NOI.
Both tenant and landlord groups have criticized the RGB’s analysis for relying on incomplete data. The analysis excludes buildings with fewer than 11 units, arguably missing the most cash-strapped properties. Landlords have also pointed to the fact that the board’s analysis of costs doesn’t include debt service and certain maintenance bills.
The report also provides a separate analysis of net operating income adjusted for inflation. Both this year and last year saw a decrease in NOI when taking inflation into account. From 1990 to 2018, after adjusting for inflation, NOI increased 48.7 percent, according to the report.
Last year, the RGB approved a 1.5 percent increase for one-year leases and a 2.5 percent hike for two-year leases for both rent-stabilized apartments and lofts. In 2018, the board approved an increase of 1.5 percent, but that was preceded by two years of rent freezes.
The report notes that it depends on landlords supplying accurate costs and income to the city’s Department of Finance. While the board acknowledges potential misrepresentations, adjustments to the cost and income analysis relies on a 1992 audit of Real Property Income and Expense statements for 46 stabilized buildings. When taking into account the audit, which found that owners generally inflated costs by 8 percent, the average monthly cost per apartment drops from $1,034 to $949.7, according to the report.
Not only is the audit nearly 30 years old, but “results are somewhat inconclusive since several owners of large stabilized properties refused to cooperate,” according to the report.
During one of last year’s meetings, tenant attorney and former RGB executive director Tim Collins called on the board to conduct another audit. He noted that a more accurate picture of costs was needed, saying at the time, “For every owner who tells you they are losing money, well, put up or shut up.”
Write to Kathryn Brenzel at [email protected]