CHIP targets rent regulation

Real Estate Weekly, Sept 11, 1996 by Lois Weiss

That way, when the laws governing rent stabilization and rent control come up for renewal in June, Upstate representatives will be making intelligent and educated choices even as the verbal battles between city tenant advocates and owner allies get ferocious.

Tenants are afraid of dismantling a slow - moving administration that permits them to avoid paying some, if not all, of their rent, and provides them with a lottery ticket in the form of a rent overcharge complaint. They portray owners as evil individuals who are ready to harass and evict all tenants.

Owners say that's all nonsense, they are merely small business owners who want fair rents that actually get paid. They point to strong anti-harassment statutes and one documented case of harassment out of over 25,000 owners, many of whom own one small building where some tenants don't even pay their rent.

But fair rents, they say, would let them keep and improve their properties for all tenants. It would allow owners to make investments that would result in more tax dollars for New York City - and less that Upstate voters have to kick in to help.

Because property tax assessments for rental buildings are based in part on rental income numbers that must be provided by law to the City of New York, as rents go up, assessments and property tax payments will surely rise as well.

According to a report released in 1993 by the Division of Housing and Community Renewal (DHCR), the State agency that since 1983 has administered the rental system, there were 41,189 buildings in New York City subject then to rent stabilization and another 2,603 buildings in Nassau, Rockland and Westchester. There were 855,923 apartments registered with another 52,527 in the neighboring counties.

Although some prominent owners in the real estate industry have been able to take advantage of luxury decontrols and obtain rents that support their apartment buildings, many of the Community Housing Improvement Program (CHIP) members have been unable to obtain this relief.

According to the DHCR report, only 11,436 apartments were renting for more than $2,000 a month, with 11,126 of these in Manhattan. A mere 16 additional apartments were renting for more than $2,000 in the other counties subject to rent stabilization.

More than 61.3 percent of the apartments rented for between $350 and $649; 11.7 percent rented for less; and 23.3 percent rented between $650 and $1,399. Only 3.8 percent rented for more than that.

Unfortunately, the benefits of luxury decontrol do not go to those owners whose buildings lie outside the core luxury market. These owners often cannot even collect current rent guidelines increases because rents are already above the market in areas outside the center of Manhattan.

So CHIP members are kicking in $100,000 to fund a television advertising campaign that will be shown on stations in the Hudson Valley, Albany, Syracuse and Buffalo areas, among other places.

There's a $30 million portion of the DHCR budget that relates directly to rent regulation functions - and it's paid for by all New York State taxpayers.

"We don't think upstate people know their tax dollars are being spent on New York City rent regulation. And if they knew this, they wouldn't tolerate it," said R. Bonnie Haber, CHIP's president. "We want to educate them so they will pressure their Assembly Members and Senators not to vote for this when it comes up for renewal. Otherwise, rent regulation becomes an Upstate versus Downstate issue, and the Downstate legislators will push it through. We want the constituents and legislators to know that this is an issue that affects Upstate, too."

CHIP Executive Director Dan Margulies recalled that when vacancy decontrol was last approved in 1971, it was an Erie County Democrat Assembly Member who cast the deciding vote. In 1974, however, the Emergency Tenant Protection Act ended vacancy decontrol for units in buildings of six or more units, set up rent stabilization for those units that had been deregulated including many first constructed as free market apartments - and also created a system for changing rent controlled apartment to rent stabilization as those were vacated.

"The deciding votes on what happens to rent regulation are Upstate," said Margulies. "The bulk of the New York City legislators will run scared, and vote to continue rent regulations. So it's really the votes Upstate that we can sway effectively."

The 1994 luxury decontrol provisions only affected a small percentage of the one million regulated apartments. "It was certainly a step in the right direction, because it started and the sky didn't fall down," said Margulies. "But the majority of CHIP members are mid-sized owners and are not benefiting from that law."

The city also loses out on at least $100 million a year in property tax revenue because rent regulation keeps property values artificially low, particularly because city assessments are based in part on the building owner's income and expenses.

The $100 million number was based on a 1990 Citizen's Budget Commission study that showed the positive effects on the city as a result of both luxury and vacancy de-control.