New York City Rent Guidelines Board (RGB)

Public Hearing and Comment on Proposed Rules

June 10, 2020

 

I am Council Member Ben Kallos, representing the Upper East Side, Midtown East, Roosevelt Island and East Harlem.

Good afternoon to the Rent Guidelines Board Chair David Reiss, Public Members Joza, Schwartz, Gonzalez-Rivera, and DeRose, Owner Members Stone and Walsh, and Tenant Members Garcia and Goodridge.

To New Yorkers following online today, and especially tenants, thank you for participating in this hearing. I am proud to stand with you today.

This year, I am calling on the Rent Guidelines Board to vote for a rent rollback or -2% for one-year leases and -1% for two-year leases. If the Board does not support a rent rollback, I urge you to at least vote for a rent freeze.

While I understand that in your preliminary vote, you voted for a rent freeze for one-year leases, I urge you to consider voting for a rent rollback given the extended pain caused to tenants by the Covid-19 pandemic.

If there’s one thing we can learn from this crisis, it’s that we are all in this together. We cannot continue with a mentality that every person must fend for themselves.

Based on March and April 2020 numbers, New York State is currently seeing higher unemployment than at any time since the Great Depression, and job losses are most serious in New York City.

With a City unemployment rate of 14.2%, many New Yorkers simply cannot make rent. It is important to acknowledge that landlords, particularly small landlords, have also been affected by this crisis. However, while evictions have been delayed, rent has not been canceled, but jobs have, and we must adjust rents to reflect that.

Certain factors have made things easier on landlords as well. The 2019-2020 winter was the seventh-warmest on record, with an average temperature more than 4 degrees above the norm and only 4.8 inches of snowfall compared to an average of 21.3 inches. With the economic fallout from the pandemic, the price of crude oil dipped below $0 and has remained below $40 per barrel throughout the crisis. All of this is to say: it has been and will likely remain a relatively inexpensive time to keep New York City buildings heated—one of the major cost factors for landlords. Further, many landlords have also received mortgage relief during the crisis.

The Board’s Income and Expense report, which was not able to factor in Covid-19 impacted value, found that landlords’ Net Operating Income dipped slightly from 2016–2018. Even following this dip, however, Net Operating Income remains near an all-time high, and it has not dipped back below the record threshold of $500 that was exceeded for the first time in 2014.

As a City, we face great challenges that we must address together. High rents will cause more evictions and put more New Yorkers out on the street, adding to our unconscionably high homelessness numbers. The difference this year is that with businesses closed, the virus posing a risk to anybody who lives within the five boroughs, and many New Yorkers leaving the City, if we raise rents and cause a massive wave of evictions, it will not be easy to find new tenants for those vacant apartments.

We have to remember the lesson of this pandemic: that we are all in this together. The best way to keep New York running and rent coming in is to acknowledge the extraordinary nature of our situation and accommodate the impacted economic needs of tenants to keep them in their homes.

After two straight years of historic rent freezes, the Board has now voted for low increases three years in a row. More needs to be done to balance tenants’ rent burdens with landlord’s revenues.

Year after year, as rents go up, tenants have shouldered an undue burden. Meanwhile, income cannot keep pace; average incomes only crept up by 2.3% between 2005 and 2013 in real terms. The approved rent increases each year were largely based upon the landlord’s operating costs, measured by the price index of operating cost (PIOC). This practice not only failed to consider tenants, but was also proven to be inaccurate: based upon data from the Department of Finance (DOF), the PIOC has overstated landlord costs by 11% since 2005. This miscalculation led to unfairly high rent increases in past years, which must be corrected with a rent freeze.

Over the past six years, the Board has done a lot of work to improve this process, both by adapting the way it evaluates the data, and by expanding its public hearings to reach more tenants and landlords in more parts of the City. In 2016, the Board instituted a second hearing in northern Manhattan, and has kept up that level of accessibility since then. Thank you to the members of the Board for these changes.

This year, as New York City remains in shutdown, the Board has moved to hold its hearings on Zoom. I urge you going forward to adjust your approach to virtual hearings to accommodate more New Yorkers who want to participate. You can do this by providing interpretation at all meetings, keeping the comments section on YouTube turned on so viewers can chime in, and expand your outreach efforts to inform communities of hearing dates and how they can access them.

In establishing rent adjustments this year, we must acknowledge that, even after the freezes and low increases of the past six years, Rent Guidelines Board increases have far outpaced inflation and the consumer price index. I have compared 25 years of RGB increases to the Consumer Price Index and found that, even following recent freezes and low increases, rent increases have outpaced the Consumer Price Index by over 10%. That means a $500 a month apartment in 1994 is now a minimum of $950.00 a month with an annual rent of at least $11,400. Following inflation, that same unit would be $864.77 a month and $10,377.24 a year.[i] [JT1] 

Those increases have come with consequences. A unit is considered affordable if the rent is no higher than 30% of their household income. The median rent-to-income ratio of tenants in rent-stabilized apartment is 36.4%. By this standard, a majority of rent-stabilized tenants have units that are not affordable. The stress of financial insecurity takes a toll on New Yorkers every day.

The impact of this rent squeeze is seen in our city’s dire homelessness crisis. As of this morning, 56,116 New Yorkers woke up in a shelter, having nowhere else to go.

As we seek to recover from the Covid-19 pandemic, New York City is at a crossroads. If we take the path of continuing the rent squeeze, we will see more New Yorkers on the streets, and we may not even see their vacant apartments filled. If we acknowledge that we are all facing challenges together, and accommodate our city’s financially burdened tenants with a small rollback, we will keep New Yorkers in their homes and their rents on the rolls.

The time is now for a rent rollback, for the 29,000 rent-stabilized units in my district[ii] and for tenants across New York City.

As a final note, I would like to acknowledge that so much of the data, analysis, and expertise that many of us who participate in this process have relied on over the years came from Tom Waters, who died in April from what was presumed to be Covid-19. Mr. Waters was a board member and former director of Tenants & Neighbors, and the long-time housing analyst at the Community Service Society. For so many Mr. Waters provided the data that underwrote the housing movement, and in his analysis, he thought big about how to provide housing for all New Yorkers. I count myself among the many who owe a debt of gratitude to Tom Waters. Unsurprisingly, his research is cited in this testimony.

 

Comparison Chart of Rent Guidelines Board Orders[iii] and Consumer Price Index[iv]

14% Difference between RGB One Year Increases and Annual CPI Average

 

Year	1 Year	2 Year	RGB Order	Avg. CPI	1 yr. RGB & CPI Difference	Sample Rent Increases based on RGB	Sample Rent Increases based on CPI
2019	1.50%	2.50%	51	1.80%	-0.30%	$  950.00	$  864.77
2018	1.50%	2.50%	50	2.40%	-0.90%	$  938.27	$  849.48
2017	1.25%	2.00%	49	2.10%	0.85%	$  926.69	$  832.01
2016	0.00%	2.00%	48	2.10%	2.10%	$  915.25	$  814.90
2015	0.00%	2.00%	47	0.70%	0.70%	$  915.25	$  798.14
2014	1.00%	2.75%	46	0.80%	0.20%	$  915.25	$  792.59
2013	4.00%	7.75%	45	1.50%	2.50%	$  906.19	$  786.30
2012	2.00%	4.00%	44	2.10%	-0.10%	$  871.33	$  774.68
2011	3.75%	7.25%	43	3.20%	0.55%	$  854.25	$  758.75
2010	2.25%	4.50%	42	1.60%	0.65%	$  823.37	$  735.22
2009	3.00%	6.00%	41	-0.40%	3.40%	$  805.25	$  723.64
2008	4.50%	8.50%	40	3.80%	0.70%	$  781.80	$  726.55
2007	3.00%	5.75%	39	2.80%	0.20%	$  748.13	$  699.95
2006	4.25%	7.25%	38	3.20%	1.05%	$  726.34	$  680.89
2005	2.75%	5.50%	37	3.40%	-0.65%	$  696.73	$  659.77
2004	3.50%	6.50%	36	2.70%	0.80%	$  678.08	$  638.08
2003	4.50%	7.50%	35	2.30%	2.20%	$  655.15	$  621.30
2002	2.00%	4.00%	34	1.60%	0.40%	$  626.94	$  607.33
2001	4.00%	6.00%	33	2.80%	1.20%	$  614.65	$  597.77
2000	4.00%	6.00%	32	3.40%	0.60%	$  591.01	$  581.49
1999	2.00%	4.00%	31	2.20%	-0.20%	$  568.28	$  562.37
1998	2.00%	4.00%	30	1.60%	0.40%	$  557.13	$  550.26
1997	2.00%	4.00%	29	2.30%	-0.30%	$  546.21	$  541.60
1996	5.00%	7.00%	28	3.00%	2.00%	$  535.50	$  529.42
1995	2.00%	4.00%	27	2.80%	-0.80%	$  510.00	$  514.00
1994	2.00%	4.00%	26	2.60%	-0.60%	$  500.00	$  500.00