RGB proposes 5-7% increases

Real Estate Weekly, May 22, 1996 by Lois Weiss

The nine-member board voted last Thursday night, May 16th for a preliminary rent increase of 5 percent on one-year lease, and a 7 percent increase on a two-year lease. The two-year lease renewal, however, will be fought by owners who believe it will not be enough to cover increasing costs, particularly the 6.5 percent rise in water and sewer charges that will kick-in next year.

The RGB board also proposed a 9 percent vacancy allowance that does not affect tenants already in the units and a $20 low - rent supplement for rents under $400.

No rent increase is proposed for either SRO's or hotels while loft dwellers are also subject to the proposed 5 percent and 7 percent kicks, with the low-rent supplement but no vacancy allowance.

Owners and tenants were out in force for the hearings that were not as contentious as in past years. Tenants came prepared with pre-printed signs and two-color painter's caps while many small owners hurt from escalating costs and in danger of losing their buildings, brought their hand-lettered home - made signs.

Owners group leaders are urging everyone to appear at the hearing on Thursday, June 20th beginning at 1 p.m. at the auditorium at One Police Plaza to either testify or show their support for those that do.

A separate hearing for SRO, hotel and loft units will take place on Monday, June 17th beginning at 2 p.m.

Owners may sign-up to speak by calling the RGB office at (212) 349-3321. The hearings are expected to last well into the night and the proposed guidelines can change up or down when the board finally votes on Monday, June 24th, beginning at 5 p.m. in the same location.

RGB Chair, attorney Edward Hochman, said, "These are highly emotional issues. I would encourage people to show up and express themselves in a reasonable manner. There is a difference between holding up a sign and blurting out."

This year's RGB has more members appointed by Mayor Rudolph Giuliani. Tax Commission President Earl Andrews Jr., who is familiar with all building costs through his review of property tax assessments, was the most recent appointment made last month.

Other public members include Hochman, an attorney who operates his own law office; Paul Atanasio, a municipal finance expert appointed last year; Elissa Fitzig, an investment banker who was previously on the Water Board; and Augustin Rivera, who was first appointed by Mayor Edward Koch, and reappointed by both Mayor David Dinkins and Giuliani. Rivera has been both a residential and commercial tenant and residential and commercial owner and informally represents the institutional history for the board along with his formal vice-chairman position.

The other members, who represent owners and tenants respectively, are all attorneys. The owner members are Harold Lubell, partner Robinson Silverman Pearce Aronsohn & Berman and Joseph Forstadt, a partner with Stroock, Stroock & Lavan, while the tenant members are Ken Rosenfeld and Leslie Holmes, both Legal Aid attorneys.

Hochman said he considers the four other attorneys the advocates who have to convince the "jury" of the other five public members of their arguments, and that they all make convincing cases.

Hochman believes the low-rent supplement to be very problematic. "The terrible thing is the surcharge applies to a very distressed universe," he explained. "Many of the tenants cannot afford to pay more and many of the landlords will throw in the towel if they can't get more."

And there are no government programs to help out, he added. "If they walk away from their buildings it will add to the problems," Hochman said. "It's a recipe for a lot of unhappiness on a lot of levels."

The tenants usually target the low rent supplement, claiming it affects the poor disproportionately, noted Dan Margulies, executive director of the Community Housing Improvement Program (CHIP) a middle market owners group. "Obviously it's not the poor in apartments below 96th Street, it's the lucky," Margulies said. In other areas of the city, many of the rents have already gone up to what the market will bear.

Joseph Strasburg, president of the Rent Stabilization Association that represents 25,000 owners around the city, is pushing for a $500 level for the low-rent supplement because even the city recognizes they cannot operate units for much below that number.

"It costs the administration $489 without the costs of real estate taxes, water or insurance," said Strasburg.

Hochman also agrees with the owner - groups' leaders that the city has a looming housing crisis.

"There is a tidal wave coming and it's only a matter of time before it hits," said Strasburg of potential abandonment.

Margulies said that while the guidelines proposals are higher than in the recent past, they will not capture the storm damage emergency repairs, increases in office expenses to keep up with bureaucratic demands and the escalating water bills.

"We're fighting the battle of trying to get more," stressed Margulies, "particularly on the vacancy allowance and the two-year renewal. And we are fighting to keep what we have because the tenants will be mounting a massive political campaign to bring these numbers down."