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.
These adjustments together with an Income and Affordability Study, an Income and Expense Study, public testimony, and other data are utilized by the RGB to make its determination.
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.
Here’s a radical idea that will never happen: Anyone who lives in a rent stabilized or rent controlled apartment must submit proof that their income is below a certain threshold every year or be evicted (with sufficient notice up to 6 months) to find a more suitable, market rate apartment. Far too many people who shouldn’t be permitted to, take advantage of these subsidized rental rates pushing out those who truly need these rates to afford their apartments. Personally, I know that I make less than some living in apartments that cost half my market rate.
Or even better yet – phase out the system entirely, make building new units easier, and let the market do its job.
NYS tried that with luxury decontrol. When democrats rewrote RS laws in 2019 they got rid of that bit.
https://www.evictionrealestatelaw.com/luxury-decontrol.html
https://www.cityandstateny.com/policy/2019/06/what-do-the-new-rent-regulations-mean-literally/177233/
There are new construction RS apartments where rents start at well over $2K or even $2,5k per month.
Look at some of the RS rents for “affordable” lottery apartments. https://newyorkyimby.com/category/affordable-housing-2
My proposal would be a time limit of say five years – once per lifetime, biased towards lower income and people with ties to the region.
This would spread the benefit around more people.
First and foremost outside of NYC parts of LI and Westchester RS/RC does not exist. Only thanks to 2019 changes in law opening things up to other areas allowed Kingston to opt into RS, something that has prompted numerous legal battles.
Outside of largely downstate no one else in NYS cares about rent stabilization.
Rest of your post is not workable due to nature of RS.
Under RS it is the unit that is regulated and nothing speaks to means testing household income nor tying rent to same. RS is not NYCHA nor can NYS force private landlords into such a system.
RS in NYS has only survived numerous court challenges by state claiming (and courts agreeing ) that the system does not violate takings clause of USC.
You’re turn the system into a form of welfare.
You’d think, huh. But I guess we also live in the city where we basically pay developers to raffle off a handful of sub-market rate luxury units to people with six-figure salaries. The city with a property tax-exempt Mercedes dealership. Welfare here is for the rich (or the lucky).
Maybe… if more people turned out during local primaries and we stopped electing shill after shill for big real estate, things would be different. But I shout about it from the rooftops every election cycle and everyone I know still somehow forgets =/ But yeah, they’ll stick it to the big orange man every four years, when a vote from a NY democrat is worth less than the sticker you get afterwards.
Why don’t RS tenants have to prove their income every year or every other year or whatever?
I assume RS apartments were created to ensure that those New Yorkers who make modest incomes can still stay in the city. What is the benefit to NY of allowing a tenant who could afford market rate to stay in a RS apartment?
“modest” means covers incomes of more than $80,000 per year.
The rent laws were created to protect both those of modest means and also the middle class, that they happen to protect a few very well off tenants is immaterial.
The fact that “they happen to protect a few very well off tenants” is NOT immaterial, Jay.
And certainly ban the nonsense of passing the r-c apartment on to the next generation, who may easily bave a seven-figure tech job or $100mm in crypto.
Hear, hear. I follow a UWS influencer on Instagram who lives in a huge pre-war apartment and pays peanuts for it. She openly brags that people have lived in that apartment for generations for nothing. How is this fair? She is a rich socialite who makes her money peddling things on Instagram. How many people are taking advantage of this system like she is?
Succession to a RS lease may happen only once and to limited set of persons. Next time someone in household wants to “succeed” to that apartment a new lease is required.
Yes, unit will be RS but LL has right to put whomever is applying through same vetting as any other applicant.
In either situation things are rarely automatic. Most LLs as matter of principle contest every claim of succession rights. Their hope is to wear people down via attrition. In no small number of cases it usually works.
Why are people surprised? At my co-op, maintenance has risen 40% in six years, and we watch our costs very carefully. Presumably the costs of operating rent-controlled buildings also has risen 40% or so in the past six years, yet we have not seen even a 20% cumulative increase in rent stabilized/controlled rents in the past six years.
I agree with this and several of the other comments higher up. Building owners are entitled to make a living. We have had major inflation lately so all costs have gone up. They should be allowed to re-coup those costs. They are not running a charity.
Similarly, I agree with others that these apartments should be frequently means tested. If you start making a lot more money, you should have to pay closer to market rate. I don’t see what is controversial about this.
But you own the apartment, or your bank does, you can sell and usually make money. That’s not how rental apartments work.
Rent Stabilization and Rent Control are government price-fixing under various virtue signalling empathies . . . which all sound great and sensitive . . . but result in distortions which include shortages and price-gouging.
And a reluctance to invest in new housing stock . . . or maintain existing – regulated – stock. That’s how slums are created.
ANYBODY who ever took basic Economics 101 knows that supply meets demand at a mutually agreed crossroad . . . without government tinkering.
Removal of that government tinkering is never going to happen.
Bureaucrats & pols need to justify themselves, so we are condemned to shortages, price distortions into eternity.
Fossil fuel prices are suppressed by the government, have been for decades.
Hate the “administrative state”?
Love Ayn Rand?
Thank you for the link to The New York Times reporting; a refreshing offset to the Right-Wing commentariat here.
This is fabulous reporting., and so vital. Thank you very much!
Am going to answer several posts in one of my own.
Very long story short rent stabilization in NY was created as form of by rent control “lite” if you will. It never was meant to directly provide “affordable housing” in way say NYCHA does.
https://hypocritereader.com/81/rent-regulation-nyc
https://en.wikipedia.org/wiki/Rent_regulation_in_New_York
Main reasons for enacting RS laws after state sunset of RC was to prevent worse of LL abuses. Other than that RS cannot truly provide “affordable housing” because rents are not tied to income. This was by design and not even 2019 laws changed that fact.
Absent certain LL abuses RS rents go one way every one or two years; up. If a household cannot afford their rent they (in theory) always have option to move elsewhere.
Rent has always been expensive in NYC. Those of us old enough to remember however know finding a “cheap” RS apartment say up until 1980’s or early 1990’s wasn’t that difficult. You may have had to move to Brooklyn, East Village, Lower East side, Yorkville or yes even many parts of UWS, but it could be done.
Problem for RS tenants today is often if they are in below market rate apartments they won’t find another easily if at all. Worse for many tenants in current RS apartments would never pass vetting to get another unit rent controlled or market rate. If you don’t earn 40x rent (and can prove it), you’re not getting an apartment easily if at all.
No, rent stabilization was meant to provide stable rents and affordable housing in a different manner than public housing.
Also apartment rent regulation in NYC has existed since the 1920.
Not mentioned is how rent increases for rent-controlled tenants are calculated. Since the 2019 rent laws went into effect, the way to figure the increase for rent-controlled apartments is to take the last five years of the LOWER rent-stabilized increase, add them together, and then divide by 5. So, for example, if the new increase is 10% for two-year leases and 8% for one-year leases, you take the lower (8%) and add it to the lower increases for the prior four years (hypothetically, e.g., 5% last year, 0% the year before (no increases during the first full Covid year), 4% the prior year, and 6% the year before that). So, 8+5+0+4+6=23, divided by 5 = ~5%. So rent-controlled leases would get a ~5% increase next year.
Numerous studies over past few decades reach same conclusion; RS and RC largely benefit households in Manhattan primarily below Harlem.
Outside of Manhattan and maybe small areas of Brooklyn or Queens legal RS rents are often higher than what market allows.
Meanwhile persons who moved into RC or RS in Manhattan say prior to early 1990’s or certainly 1980’s (and never moved out) have pretty good deals. Their rent is usually bellow to often well under market rate.
On average youngest of such RS tenants are in their 50’s and oldest anywhere from 60’s, 70’s or above. Some of these households can afford to pay more (as in market rate), others cannot. This is why only sane way to end RS would be via vacancy decontrol.