By Bob Tannenhauser
Approximately one million New Yorkers live in rent-stabilized apartments, nearly 50 percent of all renters. Every year around this time, the process of determining how much landlords can raise their rents begins. On April 20, the New York City Rent Guidelines Board (RGB), which ultimately makes the decision, took the first step by presenting its annual report on operating costs for buildings with rent-stabilized apartments, which helps determine what increases will be permitted for one-year and two-year leases signed or renewed on or after October 1, 2023 and prior to September 30, 2024.
This year’s report — the Price Index of Operating Costs (PIOC) — showed that landlords’ operating costs increased 8.1 percent from April 2022 to March 2023. When you consider that in 2022, the PIOC was 4.2 percent, and the rent increases granted by the RGB were 3.25 percent for one-year leases and five percent for two-year leases — the highest in a decade — you can understand why some fear double-digit increases are on their way this year.
How Are Rent Increases Calculated?
The board’s formula for determining the PIOC is based on sample data collected from multiple sources on a variety of expenses. This year, the board’s survey showed that real estate taxes rose 7.7 percent, labor costs 2.9 percent, fuel 19.9 percent, utilities (electric, water, sewer) 8.8 percent, maintenance 9.4 percent, administrative costs 3.3 percent, and insurance 12.9 percent.
The RGB is also required to consider the increase in the PIOC for the next year, when the new rents have taken effect. The report estimated next year’s PIOC to be 3.7%.
The PIOC and projected PIOC are then plugged into three formulas to project a range of rent increases that would be needed to compensate owners for their increased costs. The formulas are complicated, but their aim is to ensure building owners that their net operating income remains stable. Of the formulas, the one that would yield the highest increases would mean a rise of 8.25 percent for one-year leases and 15.75 percent for two-year leases. The lowest would result in a 5.3 percent increase for a one-year lease and a 6.6 percent increase for a two-year lease.
In a sense, the RGB is responsible for determining where the burden lies for affordable housing. During the question-and-comment period of the April 20 meeting, one member asked whether non-stabilized tenant rent increases could offset increases for stabilized tenants? Another wondered whether the RGB should also consider increases in renters’ expenses, such as food or healthcare costs. Another noted that there are rent subsidies for tenants but none for landlords, and one pointed out that there are multiple owner costs not accounted for, such as lead abatement and the “astronomical” local law 11 expenses. (Local law 11 requires that the exterior walls and appurtenances of NYC buildings over six stories tall be inspected and repaired every five years, often requiring scaffolding.) Clearly inflation and rising costs adversely affect both tenants and landlords. The RGB must balance the needs of both, and if the past is any indicator of what will happen, neither side will be happy with the decision it makes.
The next RGB meeting will take place on Thursday, April 27 at 9:30 a.m., and can be live streamed here. It will give voice to representatives of tenants and owners. There will be a preliminary vote on the rent increases on May 2 at 7:00 p.m.
You can watch the entire April 20 meeting below.
The RGB consists of nine members appointed by the mayor with staggered terms. Two members are appointed to represent tenant interests, with one serving a two-year term and the other a three-year term. Two members represent owner interests, with similar terms to the tenant members. Five of the members are appointed to represent the general public. The terms for four of these members range from two to four years. The chair serves at the pleasure of the mayor. There are some conflicts of interest rules that apply to RGB members and staff. For example, they may not have an ownership interest in property subject to the RGB’s orders. There is no restriction, however, on continuing to live in a rent-stabilized apartment.