Industry balks at proposed rent hikes - increases for rent stabilized leases proposed by New York City Rent Guidelines Board

Real Estate Weekly, May 20, 1992 by Lois Weiss

The New York City Rent Guidelines Board has proposed increases for rent stabilized leases amounting to 3 percent for a one-year lease and 5 percent for a two-year lease. The vacancy allowance, which helps owners make up some rent and gives them an "allowance" to paint and redecorate between tenants, was given nothing by the board. If passed in June, the proposed guidelines would go into effect for leases signed beginning October 1 of this year.

The vacancy allowance, which helps owners make up some rent and gives them an "allowance" to paint and redecorate between tenants, was given nothing by the board. If passed in June, the proposed guidelines would go into effect for leases signed beginning Oct. 1 of this year.

Meanwhile, in Albany, the State Senate has passed a measured decontrolling apartments for tenants whose incomes top $ 100,000 and where the rent goes over $2,000. Five different bills have been introduced in by the City Council minority leader Alfred Cerullo III of Staten Island. The bills propose to decontrol units under several criteria including where tenants are earning $75,000 or more, units are renting for $750 or more and as units become vacant.

In light of the poor economy owners and representatives believe the Rent Guidelines Board is insensitive to owners' rising costs. The increase in multiple dwelling tax delinquencies.

John J. Gilbert III, president of the Rent Stabilization Association, said the guidelines are a total disaster. "One would think that an industry that provides $2 billion a year in property taxes would be treated with respect by the Rent Guidelines Board but their actions treated us like second class citizens," he said.

Harold A. Lubell, an owner-member of the RGB and a partner in the law firm of Robinson Silverman Pearce Aronsohn & Berman, noted that there are large numbers of people who cannot afford to pay their rent but that this is nothing new in New York City.

"It's absurd to say |zero' (for a vacancy allowance)," Lubell noted, "when that has no effect on tenants in place or on those who are unemployed or on fixed incomes. It's probably the most effective method in this cockamamie situation of letting owners catch up."

"It's not the fault of the owner that someone is on a fixed income or someone is unemployed," Lubell said, "but they are being made to pay for it. It's a major social problem."

Co-ops, which are still reeling from past fiscal problems, could see the recent effects of refinancing being diluted as holders of unsold shares are spread thin once again between maintenance costs and actual rent collected by tenants in place. "Where maintenance exceeds [a rise of] 3 percent how do they recoup this?," Lubell asked.

Mary Ann Rothman, executive director of the Council of New York Cooperatives, said the proposed guidelines "seem so incredibly unrealistically low to what it actually costs to run a building." Co-ops, she said, try to operate efficiently and at a break even cost. "It's been clear over the last decade that there is a regular cost of living increase between 4.5 percent and 7 percent annually," she said.

Dan Margulies, executive director of the Community Housing Improvement Program (CHIP) agreed the proposed guidelines will discourage a rebound in the co-op market. "This puts further economic pressure on the existing co-ops and creates foreclosure and lost housing opportunities in co-ops because of the effects of their actions in not meeting maintenance increases," he said.

Margulies said, "It's exactly this kind of irresponsibility by the Guidelines Board that makes the case for deregulation clear. If there was ever any justification in the system, these guys have completely undermined it by ignoring all of the data before it."

Last year the vacancy allowance was 5 percent, as it was the year before. In Oct. 1989, the vacancy allowance was 12 percent, while the one-year renewal was 5.5 percent and the two year renewal 9 percent. A supplemental rent of $5 was also added that year to any rents under $325. Increases have gone down steadily since.

"This year the Mayor's appointees are intent on eliminating the vacancy allowance altogether just as they killed the low-rent supplement," Margulies said. "This is clearly driven by the Dinkin's agenda and is being championed by the |public members' he has appointed."

Two of the public members, Ellen Gesmer and Hilda Blanco, a new appointee, lined up immediately with the tenants' representatives, Margulies said, and established a four-vote block with Victor Marrero and Augustin Rivera. "The Mayor's representatives were far more pro-tenant than the tenants' representatives," agreed City Council Aide Marc A. Wurzel.

The most telling comments, Margulies recalled, were by the new board member Hilda Blanco, who said in trying to strike a balance between owners' costs and tenants' ability to pay, the |ethical weight' was on the tenant's side because there are more tenants than owners.

"It's that kind of political unethical thinking that is destroying the housing stock," Margulies said.