June means the start of summer, but for many New York landlords, it’s also decision time at the Rent Guidelines Board, which controls how much more money tenants in rent-stabilized apartments will have to fork over in the coming year.
Landlords typically cry poor at the hearings that lead up to the annual decision on the size of the rent hike they’ll be allowed to impose. Despite evidence that shows their revenues actually climbed last year, this year they’re practically shouting.
They say an 11.5 percent jump in water rates, the largest annual increase in more than a decade, and the prospect of further 8 percent annual hikes, pushes their profit margins to the edge.
Property taxes are also on the rise, as residential building rates climbed about 2 percent under last year’s reassessment.
In addition, there’s the new Safe Housing Act, which empowers the city’s Department of Housing Preservation and Development to crack down on negligent landlords. The new law obliges landlords to pay to fix major housing code violations.
The act, which adds teeth to existing laws, will target 200 buildings a year, and it comes after a report from New York University’s Furman Center for Real Estate and Urban Policy showed that the number of serious code violations in rental buildings jumped 52 percent from 2002 to 2006.
Less sweeping but also potentially harsh is a 2004 lead abatement law that places responsibility squarely on landlords if a child gets sick. Formerly the burden used to be on tenants.
In early May, the Rent Guidelines Board recommended that rent be increased between 2 and 4.5 percent for one-year leases and between 4 and 7.5 percent for two-year leases.
“There’s continuing concern about cost increases, yes,” said Michael Slattery, a senior vice president for the Real Estate Board of New York, the trade group representing landlords as well as brokers, managers and industry executives.
He said that while rent increases may seem punitive to tenants, they usually don’t cover stepped-up costs. Tenants might have a hard time acknowledging this, but nobody said New York is cheap.
“When it comes down to it, the city is an expensive place to do business,” Slattery added.
Thomas Elghanayan, president of Rockrose Development Corporation, which owns 7,000 housing units in the city — some of which are rent-stabilized — believes that in terms of added costs, 2007 is shaping up to be his worst year ever.
“No one will say, ‘I’m not going to build a building just because the water and sewer have gone up,'” he said. The effects are “on an incremental basis,” he added.
Water charges are typically absorbed by the building owner and not passed on to tenants, since they are included in rents. And the problem with higher water rates, said Elghanayan, echoing other landlords, is that it’s hard to crack down on wasteful use.
Sandra Erickson, a landlord who owns 14 buildings, most of which are located in the southwestern Bronx near Yankee Stadium, agrees.
As president of the Bronx-Manhattan North Association of Realtors, whose 1,000 members own “tens of thousands” of apartments, she also hears complaints that there’s little difference now between water and fuel bills.
“Water is very hard to regulate, because you don’t know if tenants are turning it on to defrost meat in their sink, or if they have a leaky toilet,” Erickson said. “You have to be very proactive.”
Association members tell her that the Safe Housing Act is a less pressing concern, since the HPD has gotten more judicious in its inspections, Erickson said.
Mayor Michael Bloomberg’s promised rebate checks may lessen the blow of higher property-tax bills, but only for owners of smaller buildings, landlords and analysts say.
On June 26, the Rent Guidelines Board is scheduled to vote on raising rents on the approximately 1 million rent-stabilized units in New York City. Last year, the board approved increases of 7.25 percent on two-year leases and 4.25 percent on one-year leases.
So far, hearings have featured landlords citing their additional operating costs as justification for a similar rent increase — costs rose 5.1 percent last year, according to an April board report — though some tenants’ rights groups aren’t buying it.
Annually, landlords claim they will be forced out of business, “but the same ones keep showing up, year after year,” said Natasha Winegar, a spokeswoman for New York State Tenants and Neighbors, a 33-year-old advocacy group that’s pushing for a change in board membership to give tenants a greater voice.
“To be honest, the process has turned into a sham,” said Winegar, adding that revenues are going up for landlords — they climbed 4.7 percent in 2006, the board reported in April — while tenants’ wages are falling.
Winegar also said landlords’ arguments often fly in the face of reason.
“They fail to remember that investing in rent-stabilized buildings,” she said, “is typically a good investment.”