Owners call for housing policy changes

Real Estate Weekly, Feb 9, 1994 by Lois Weiss

Rental apartment property owners say they must have many changes if they are to remain in business, providing decent, affordable housing for city residents. Costs are going up much faster than rents at the same time the meager income stream is tied up in a court system that favors tenants, according to many owners.

Water rates are expected to rise 12 percent this year alone, but supers must continually brush off city contractors determined to install water meters that could raise that ante even more.

Sanitation workers follow the weather, giving out tickets wherever the wind blows garbage and snow blowers miss slippery spots.

As one owner said, "you have to do volume, or live in and own a 20-unit building where you can control costs, or you're not going to make it."

REW asked property owners and managers who serve the low and middle class populations of the city what they would like to see revamped.

Suggestions included combining rent control into rent stabilization to save on duplicated bureaucracy; instructing judges to be truly fair and requiring rent deposits in court; dropping the maximum water charge per meter to $350 from $500; getting fair specifications for lead abatement from government to keep lead insurers from walking away; and overall, less red tape, fewer forms to fill out and more streamlined requirements.

Joe Strasburg, the Rent Stabilization Association's (RSA) new president, discussed several issues, noting that unit owners in co-ops and condominiums now share many concerns with apartment building owners. Some of these include lead paint liability and insurance problems, water metering, Division of Housing and Community Renewal (DHCR) regulations and upcoming negotiations with Local 32B-J which represents building personnel.

Lead Liability Question

Lead, he said, is being elevated to the same hysteria as asbestos. What makes it more of a problem is that insurance companies are not willing to insure owners for potential lead liability.

"If there is a jury award against an owner, it is a personal liability," said Strasburg. "The government must set reasonable guidelines to inform the owners as to what they have to do to limit the liability. If they have to tear down the sheetrock, it's going to bankrupt everyone."

On water metering, the RSA is concerned about the prohibitive costs for small property owners who have apartments that are filled with large extended families. "There is no recognition by the RGB [Rent Guidelines Board] that it's a terrible cost for owners," Strasburg noted, saying the new Commissioner of Environmental Protection, Marilyn Gelber, a former official in the Brooklyn Borough President's office, recognizes the problem but will not take over her new job until Feb. 22.

The industry is also about to enter into negotiations with 32B-J, another situation rental owners will share with cooperators. "Owners will have to start figuring those costs," observed Strasburg. If there is a strike, as there was on the last go 'round three years ago, there could be problems that arise - for instance from garbage build up - that city officials might have to handle.

Strasburg is also encouraged by Division of Housing and Community Renewal Commissioner Donald Halperin' s indication that its rules and regulations will have to be reviewed.

Small owners agreed with Strasburg's focus and also brought up additional concerns that must be addressed.

Although former Mayor David Dinkins promised a four-year real estate freeze on the average tax rate that Mayor Rudolf Giuliani has now pledged to support, what Dinkins didn't control was the assessment increases, noted Laurence Guttman, a principle in Laufence Guttman Associates, which owns small buildings in the East Village. "What you have to do is hire a tax certiorari attorney and protest the assessment and give your lawyer a percentage every year," he complained.

While he believes the actual value of these buildings has dropped from about eight times the rent roll in the late 80s to sales at three times rent roll today, the assessments haven't dropped accordingly, says Guttman.

J-51 Program Changed

He also complained the J-51 program hooked owners in originally with promises to bring tenants up to market rents when the J-51 abatement was finished. "That was changed in 1986 and now only affects new tenants if you put in a rider," he noted. But it doesn't pay to enforce it, he said, because if the tenants fight the increase or eviction, the court takes their side.

Escrow Rent Payments

"A little improvement like forcing the tenants to put the money into escrow in court would help," added Guttman, citing a universal lament from owners. "It costs me $2,000 for an attorney to get a payment schedule with a tenant," he said. "It's crazy."

Robert C. Eberhart, a Yorkville owner who also manages properties for others, agreed that Housing Court is a key consideration because it takes about six months as a rule now to remove a tenant for non-payments.

"You're not allowed to collect while you are proceeding in court and the courts don't require the tenant to pay any costs or put up rent into escrow," he complained. "The housing courts are in terrible shape."