The Real Estate Board of New York is calling for a minimum of a 2.4 percent increase on rent stabilized rents, claiming that the coronavirus pandemic has only added to the financial burden of property owners.
“The real estate industry has always served as the City’s key civic partner and invisible economic engine, but as a result of this public health and humanitarian crisis, real estate is also now one of the City’s most visible and critical public health tools – homes,” said Paimaan Lodhi, senior vice president of policy and planning at REBNY.
“Even before the Coronavirus crisis, there were early warning signs that the housing market was in trouble. Now more than ever, it is critical that the Rent Guidelines Board determine responsible increases in rent that correspond to continued increases in property taxes to keep New Yorkers safe and our economy moving.”
The call came as the city’s Rent Guidelines Board met remotely to debate future rents on one million stabilized apartments.
In the midst of the pandemic, Mayor Bill de Blasio has urged the board to freeze rents this year while tenant advocates are calling for a rent rollback.
But in testimony to the board, the Rent Stabilization Association, a group which represents building owners, called that “misguided and inappropriate,” and said federal government should be providing more aid instead of local governments playing politics with the rent.
“The pandemic has created unprecedented consequences for New York City,” said RSA spokesman Vito Signorile. “We are left to wonder how low-income tenants and tenants who have lost their jobs will be able to pay their rent.
“But at the same time, when nearly 40 cents of every rent dollar pays for property taxes and water bills alone, how building owners be able to pay for their operating expenses if rents are not paid is an equally important question.”
“This is an opportunity for the federal government to step in and not a one size fits all approach by enacting another politically-motivated rent freeze does not provide the immediate assistance some tenants are in need of right now
The Rent Stabilization Association is asking for a 2.5 percent to 4.5 percent increase on one-year increases and a 3.5 percent to 5.5 percent increase for two-year leases.
REBNY, meanwhile, pointed to the RGB’s reliance on old data for formulating rent hikes while noting the City’s own 2020 RGB Price Index of Operating Costs (PIOC) study, which analyzes 2-year-old data, found that increases between 2.5 and 3.5 percent for one-year leases and 3.3 to 6.75 percent for two-year leases are required to maintain owners’ current dollar Net Operating Income (NOI).
For 2020-2021, REBNY recommends a minimum of a 2.4% increase for 1-year leases, commensurate with the weighted increase of expenses dedicated to property taxes.
“Smart decision making starts with good data. We all can see the challenges our City is facing so we are relying on sound government strategies that will solve – not create more – problems,” said Lodhi.
“Policies that jeopardize a property owner’s ability to pay for basic maintenance or renovations only jeopardize the safety of tenants, exacerbate the affordable housing crisis, contribute to economic job loss and, ultimately, will saddle the City with budget shortfalls for years to come. We can’t afford to get this wrong.”
The real estate industry represented more than half of the City’s total annual tax revenue in the last fiscal year.
Over the past five years, the City has increased property taxes for rent stabilized buildings by 23 percent, while allowing for rent increases of 4.25 percent% over the same period of time, effectively ignoring the impact of their own actions when determining what a fair rent increase is, said REBNY.
In its own reports, the board projected that increases of 2.5 percent and 3.5 percent for one-year leases and 3.3 percent to 6.75 percent for two-year leases would be needed to maintain net operating income for landlords of rent-stabilized buildings.
However, tenant advocates say many low income New Yorkers are on the edge of housing instability. Oksana Mironova of the Community Service Society of New York said over half of rent regulated tenants recently surveyed were already having difficulty affording basic expenses.
“Covid19 is a major economic shock that has pushed hundreds of thousands close to insolvency,” said Mironova. “The RBG cannot address systemic issues like wage stagnation or federal disinvestment in affordable housing, but addressing tenants hardships is within its purview and I call on RGB to freeze rents and help mitigate the immediate impact of the coronavirus pandemic and provide some sense of long-term stability during an incredibly turbulent and uncertain time.”
The RGB will make its preliminary vote on the rents on Thursday (May 7).