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Rent row breaks the buddy system as new regs are pushed through Albany

By Sabina Mollot

Politicians left no doubt that the balance of power in Albany has unquestionably shifted during a hearing of the New York State Assembly last week.

At the heart of the debate was a package of tenant-friendly legislation set to be rubber stamped in June by winners of last November’s elections that turned the previously industry-friendly State Senate blue.

At one point, Assembly Member Linda Rosenthal, who represents the Upper West Side, turned her attention to a panel of real estate professionals there to give testimony. 

Assembly Member Linda Rosenthal

“How much money have you used to influence our laws?”, she asked.
When no-one answered, Rosenthal told them, “You’ve had a lot of friends in Albany over the years. Now you have fewer friends.”

Earlier in the hearing, Paimaan Lodhi, senior vice president of policy and planning for the Real Estate Board of New York, cautioned that the city’s housing stock would deteriorate as a result of the bills’ passage. 

Paimaan Lodhi

However, he said the industry is in favor of passing rent regulations that “increase transparency that protects the public from a few bad actors.”

However, Rosenthal told the room, “We have many good bills and we are going to pass them. There is no reason why tenants shouldn’t be protected. You guys get tax breaks. In return, you have obligations you have not met. How come so many landlords fail to register their rent-regulated units?”

Joseph Strasburg, president of the Rent Stabilization Association, said the RSA encourages its members to resister their units, warning there are consequences if they don’t.

He then said there should be more enforcement mechanisms and countered there wasn’t “an upside” to trying to game the system.
Rosenthal disagreed, however, shooting back, “It’s a tactic landlords regularly use.”

When Strasburg asked for data to support her statement, Rosenthal quipped, “We are the ones asking questions, not you.”

Rosenthal also told him that any landlord facing a hardship could sell their building. 

“Tenants,” she argued, “have to have somewhere affordable to live. RENBY, RSA take tenants to court all the time. I have a rent-controlled tenant who’s taken to court every two months by his landlord for baseless reasons. He cannot afford his lawyer anymore and he is on a tenant blacklist, so he doesn’t have a good chance of getting an apartment. Why don’t you cash checks tenants send you? I buy a phone at the store, I pay for it once. Why should I pay forever? That’s what your petty cash MCI funds are all about. You say you can’t maintain your buildings absent the money, but if you don’t maintain it, its worth will go down. You must fix the facade. It’s the law.

“Landlords are doing very well. Tenants are not. I wish you could see not through the eyes of your bank account, but tenants who built communities.”

Lodhi cautioned however that a method of determining property owners’ incomes, NOI (net operating income) was “inflated” and said that should the bills go into effect, to prevent deterioration, the Rent Guidelines Board would need to issue annual rent increases of seven percent. “That’s not good for tenants and that’s not good for the city,” said Lodhi. 

The Assembly has proposed nine bills aimed at universal rent control that they hope to enact when the rent regulations expire on June 15. They are aimed at repealing vacancy decontrol, eliminating major capital improvement rent increases (MCIs), individual apartment improvements (IAIs) and vacancy bonuses, prohibiting evictions without just cause, making preferential rents permanent until vacancy, expanding the period of time tenants can file overcharge complaints, establishing rent control/stabilization parity on rent increases and expanding the Tenant Protection Act, which would allow municipalities across the state to regulate rents during a housing emergency.

Several times throughout the hearing, Strasburg brought up a bill he supports — not currently among the nine being considered — that would offer a rent freeze subsidy to low-income tenants. In response, Linda Rosenthal told Strasburg, “We’re debating the bills we proposed, not one bill you wish was proposed. If you want to legislate, you run for office.”

JOE STRASBURG

When Strasburg said he thought the hearing was supposed to be an opportunity to “exchange and debate the merits of the legislature, otherwise there is no need to have a public hearing,” Rosenthal shot back, “It’s not a debate. It’s a hearing. We ask questions. You answer them.”

Earlier, several tenant leaders and well as two representatives from the Department of Housing, Preservation and Development and the City Council speaker, Corey Johnson, spoke in favor of the legislation.

Johnson told the Assembly members, “The steps we take now will define the city for years to come.” 

He added that the various ways rent can legally be increased, such as MCIs, IAIs and vacancy bonuses, can eventually take an apartment out of regulation once the tenant’s rent reaches the threshold of $2,774.76. The current system, he argued, has led to 300,000 units leaving regulation since 1994.

“We must dismantle predatory housing practices that have existed for decades,” said Johnson.

Lucy Joffe, assistant commissioner of policy for the HPD, said rent increases that an owner is entitled to after an apartment becomes vacant, such as vacancy bonuses, IAIs and longevity increases, were leading to a less stable housing market.

A longevity increase is an increase of 0.6 percent that can be applied to a new tenant for each year that the prior tenant had been in the apartment if that tenant was there for eight or more years. For a tenant who’d been there eight years, it would be a 4.8 percent increase.

“It’s incentive to harass tenants,” Joffe said, and asked the legislators to take “incentives away from vacancy. It puts tenants who may have aged in place at risk.”

The HPD said the city is still in a housing crisis, which is defined by a vacancy rate of under five percent. In 2017 the vacancy rate was 3.6 percent with the vacancy rate for apartments renting for $1,000-$1,500 being 2.5 percent. That year, a typical renter paid 34 percent of their income towards housing. Of the city’s housing stock, the HPD has some kind of oversight or involvement in about 350,000 apartments.

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