After landlords’ operating costs jumped 4.2 percent last year, the Rent Guidelines Board staff released reports Thursday recommending rent increases of 2.7 to 4.5 percent on one-year leases for rent-stabilized units and 4.3 to 9 percent on two-year leases.
The ranges are considered starting points, and the board has often ignored the suggestions. In fact, the board froze rents in 2020 and approved a partial freeze on one-year leases last year, despite initial recommendations for higher increases.
The agency uses three formulas with different approaches to the goal of keeping landlords’ net operating income from rent-stabilized units constant.
The oldest of the formulas, which looks at both the increase in costs this year and the projected increases for next year, called for a 2.7 percent hike for one-year leases and 4.3 percent for two-year deals. A formula that inflates debt service resulted in the highest increases: 4.5 percent for one year-leases and 9 percent for two-year deals.
Landlords’ costs jumped across the board from April 2021 to March 2022 except for property taxes, which dropped 3.7 percent because buildings lost value. Fuel costs rose the most, 19.6 percent, followed by insurance at 10.9 percent and maintenance at 9.2 percent.
Christina Smyth, an owner representative on the board, cautioned that the drop in taxes is an “anomaly,” caused by the pandemic.
“It can’t be understated that across the board, expenses are up,” she said. “We’re not trying to hit home runs for either side. We’re just trying to cover expenses.”
Economy-wide inflation helped drive up costs this year, and a separate report found that average interest rates for new multifamily mortgages increased 15 basis points, to 3.91 percent — the first increase in four years.
Tenant advocates are worried that the board will approve increases this year, in part because Mayor Eric Adams appointed NYU finance professor Arpit Gupta as a new public representative on the board. Gupta, a fellow at the free-market think tank Manhattan Institute, expressed skepticism about rent control in a December article, leading some tenant leaders to question his fitness to deliberate on rent for regulated apartments.
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Adams also appointed Legal Aid Society attorney Adán Soltren to fill the tenant representative vacancy on the board. In a statement Thursday cheering the selection, Legal Aid called on the board to approve an “indefinite” rent freeze.
“During this time of great uncertainty, it’s unconscionable to consider any rent increase on some of our most vulnerable neighbors,” the group said.
During the de Blasio administration, the board froze rents on one-year leases three times, and last year for the first six-months on such leases. Increases otherwise hovered below 2 percent for one-year leases, and below 3 percent for two-year leases.
Overall, the de Blasio-era increases were about 1 percent annually. The final vote during the Bloomberg administration hiked rents 4 percent on one-year leases, and 7.75 percent for two-year renewals. The city has about 966,000 rent-stabilized apartments.
Mayor Eric Adams has publicly stated that he would support a rent freeze if it were supported by analysis. He has also said, however, that he would not back a freeze because it would harm small property owners. It is unclear how much influence Adams has on board members appointed by his predecessor.
Landlords are expected to request higher increases than those laid out by the board staff Thursday. Vito Signorile, vice president of the Rent Stabilization Association, said the board’s analysis is flawed because it is seeking to keep net operating income at a constant, when it is at an historic low.
A separate report by the board’s staff found that net operating income, which does not include taxes or mortgage payments, plunged nearly 8 percent, the largest decrease in 17 years.
“We had no doubts that the message this year is: follow the data,” he said in an interview. “The board has no reason at all to shy away from this recommended data.”
Correction: An earlier version of this story identified Arpit Gupta as an owner representative. He is a public member.