Rent board approves first full-year, post-Covid hike: 3.25%

Landlords and tenants, both unhappy with vote, say reform is needed

New York /
Jun.June 21, 2022 09:43 PM
(Getty/Illustration by The Real Deal)

(Getty/Illustration by The Real Deal)

Another rent board vote, another disappointment for tenants and landlords.

To the chagrin of both sides, the Rent Guidelines Board voted 5-4 Tuesday night to raise stabilized rents 3.25 percent on one-year leases and 5 percent on two-year leases.

Separately, the board voted 7-2 to freeze rents on stabilized hotels. Both adjustments take effect Oct. 1, 2022.

The full-year hike for rent-stabilized apartments was the first since Covid hit and signaled an end to the de facto protection the board had afforded tenants over a year and half of freezes.

For landlords, it wasn’t nearly enough.

Just as tenant advocates argued that many renters would be unable to shoulder any added expense, owners were adamant that the moderate increase would not offset their rising costs.

In a rarity, the parties did find one point to agree on: The system for determining rent increases is in need of reform. But no such effort is being considered, and it is unlikely that the two sides would agree on one in any event.

Ahead of Tuesday night’s hearing, renters and tenant advocacy groups, including the Rent Justice Coalition and the Met Council on Housing, rallied outside the site of the final vote in NoHo to demand a rent rollback.

But Rent Justice Coalition member Julius Bennet was the first to admit that a reduction was a near impossibility. The board last month preliminarily approved a 2 to 4 percent increase; final decisions have always fallen within approved ranges.

Rather, the groups’ real aim was to criticize a reconstituted rent board they claim has prioritized landlords’ profits over tenants’ financial security as inflation soars and a recession looms.

“I do not get the feeling that we’re being heard too well,” said Bennett, referencing the four public hearings held this spring that offered New Yorkers a platform to speak on rent adjustments.

The tenant activist said the forums felt more like “an exercise” than an avenue to influence board members.

Speaking over the cheers of protesters, a newly appointed tenant representative on the board, Adán Soltren, said he felt the neutrality of the panel had been compromised.

Backed by fellow tenant member Sheila Garcia, Soltren characterized the board members, who are mayoral appointees, as tools used by the city to ensure the real estate industry, a major donor to Mayor Eric Adams and previous administrations, is pulling in enough money.

“Shame on this administration and any administration that will put members in place on this board that clearly believe investments deserve more respect than people,” Soltren said.

“This process has been performative at best and for the tenants of the city, I am truly sorry,” he added.

Mayor Eric Adams, in a statement after the vote, recognized that the increase would be hard on some tenants, but that small owners are facing bankruptcy after years of freezes. He blamed “this system.”

“We cannot pit landlords against tenants as winners and losers every year,” the mayor said.

Landlord groups argued that the board didn’t do owners any favors by approving an increase in rent smaller than their expenses rose.

“The data is clear. The adjustment approved by the RGB today will not put a penny of profit in the pockets of small property owners,” said Jay Martin, executive director of the Community Housing Improvement Program. “The RGB has simply taken steps to limit their losses for the next year.”

In the months ahead of the vote, dispatches from the rent board signaled an increase that would take landlords’ rising expenses into account. A March report revealed owner profits in Covid’s first year had plummeted by 8 percent excluding some major expenses; the next month the board staff recommended a 2.7 to 4.5 percent increase.

And ahead of the final vote, all but two proposals put forth for board members to consider included a hike for one-year leases.

But owners who called for a hike as high as 9 percent to offset rising costs, including for property taxes, water rates and energy, viewed the 3.25 percent bump as both a pittance and evidence that the city’s method of determining rental adjustments needs an overhaul.

“The RGB vote proves this is a broken system,” said Joseph Strasburg, president of landlord group the Rent Stabilization Association. “It fails landlords and tenants.”

His implication was that rent increases too small to keep buildings well maintained will leave more than 2 million tenants in increasingly substandard housing.

Landlords argue that the rent board’s adjustments are based on data that doesn’t offer a full or up-to-date picture of owner expenses.

“It’s time for a different approach,” Strasburg said. The group’s president didn’t specify changes to the rent board itself. Rather, Strasburg suggested that state lawmakers reform property taxes, address rising insurance rates and expand the housing voucher system to funnel more money to tenants and thereby landlords.

CHIP floated introducing offsets for stabilized landlords or a different system for implementing rent hikes last week.

Public member Christian Gonzalez-Rivera, who joined both tenant members in voting for a rent freeze, echoed the call for policy change. He floated lower property taxes and a more generous tax abatement to help landlords afford repairs.

Most of those changes would depend on the state legislature, which is in recess until January.

City Comptroller Brad Lander did convene a group of lawmakers and housing advocates last week to call for property tax reform as the 421a tax break expired. And the city and state have both taken recent action on housing vouchers, bumping the caps for the FHEPS program at both levels of government to Section 8 rates this year.

Still, the sentiment from both sides is clear: Something’s got to give.

“If our elected officials truly care about affordable, well-maintained housing as a human right, they will use their powers to make sure that landlords have the money they need to make repairs,” Gonzalez-River said.





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