In Adams, Landlords See Hope for a Rent Hike on Regulated Apts as Bills Pile Up
The Rent Guidelines Board kept rent increases historically low during the de Blasio administration. The board must vote on rent prices by July 1, and Mayor Eric Adams’ recent appointees are worrying tenant advocates.
Squeezed by higher property taxes, soaring energy costs and unpaid rent during the pandemic, landlords of regulated apartments are hoping for the biggest increase from the city Rent Guidelines Board in at least a decade.
Property owners may well get the rent hikes they’re looking for when the board votes in June, at the conclusion of what is always a contentious annual public review.
Mayor Eric Adams is advancing a much different approach than his predecessor Bill de Blasio, who pressed his board appointees to vote for rent freezes during his tenure.
“My administration is committed to making decisions based on data,” Adams said in a statement last month when appointing two new members of the rent board. One is an attorney for landlords. The other is a business economist who has voiced skepticism of rent regulation.
So far, Adams has left a seat on the board meant for tenants vacant.
The body makes rent decisions for the more than 966,000 rent-regulated apartments, which comprise 44% of the city’s rental apartments, according to the RGB’s 2021 Housing Supply Report.
To Fitzroy Christian, Adams’ approach and RGB appointments spells trouble for renters. Christian is a rent-regulated tenant union leader in the Mount Eden neighborhood of The Bronx and a member of the Rent Justice Coalition, which has advocated for a rent rollback.
“With Adams, we’re getting the feeling that we’re going back to the Bloomberg and Giuliani era, where the board is going to be totally unsympathetic to the poor folks,” he said.
During those two mayor’s terms, the board approved increases every year between 2 and 5% for one-year leases, RGB records show. Two-year lease increases of between 7 and 9 % were not uncommon.
It would be a big change from the de Blasio years, he said, when the rent board raised prices on rent-regulated apartments in the city by just under 1% for one-year leases, on average. In three instances, the board froze rents for one-year leases — a move not previously made in the board’s four-decade existence.
“He did not do enough, not nearly enough,” said Christian of former mayor de Blasio. “But he was fairly open to us.”
Already, the board has released research that landlords have pointed to as a reason for a rent increase: RGB’s annual Income and Expense report, released in late March, shows net operating income for owners of buildings with rent regulated units was down 7.8% between 2019 and 2020, the first year of the pandemic.
Net operating income measures earnings left over after operating and maintenance bills are paid, but does not include taxes and mortgage payments. As the pandemic struck New York, net operating income dropped in nearly every community district in the city.
The research also showed that 6.5% of rent-stabilized buildings in 2020 were “distressed,” or had costs higher than their gross income. The percentage of distressed buildings rose one percentage point between 2019 and 2020, the report found. More than half of the distressed buildings in 2020 were in Manhattan.
“We are optimistic that people on the board will look at the data and vote based on the data,” said Jay Martin, executive director of the Community Housing Improvement Program, which represents small and mid-sized owners of rent regulated properties.
Both CHIP and the Rent Stabilization Association, another lobbying group for landlord members, believe that an increase between 3% and 4% on one-year leases is required to offset the rising costs.
The median monthly rent for regulated units citywide was $1,280 in 2020, the Income and Expense report found. It varied widely by borough: median rent in Manhattan was $1,625; $1,317 in Queens; $1,221 in Brooklyn; $1,092 in Staten Island; and $1,043 in The Bronx.
Overall, landlords of rent-regulated apartments spent 60.2 cents out of every dollar earned on operating and maintenance cost in 2020, down two-tenths of a percentage point from 2019, the report says.
That’s important context to Oksana Mironova, housing analyst at the Community Service Society.
“The negative percentage point doesn’t mean that the buildings are distressed, or the landlords are not making money,” she said. “It’s just that they’re making slightly less money in the first year of a pandemic than they were the previous year.”
Property tax increases and energy costs that have nearly doubled in the last year top a long list of cost increases borne by landlords.
While the city has not increased the property tax rate since the early years of the Bloomberg administration, soaring assessed values have increased taxes dramatically. In the first year of the pandemic, the city lowered assessments on properties to account for the expected decline in income. But because the pandemic didn’t lead to a major decline in values, it increased assessments for rental buildings for the coming year to pre-pandemic levels.
For an eight-unit building she owns in The Bronx, Valentina Gojcaj is facing a 40% increase in her tax bill for 2022 over the previous year, she said.
Aaron Weber, whose firm Weber Realty manages close to 30 buildings with 400 apartments, said he paid the same amount in fuel costs in the first three months of this year as he did for all of last year.
“Each oil refill now costs $10,000 for one 40-unit building that heats with oil and two months ago the cost was between $5,000 and $6,000,” he said. (His buildings heated with natural gas have faced smaller increases but still their bills are about 40% higher).
Like other landlords, he noted that insurance premiums have increased as well as all the supplies they need to purchase. Some of his buildings suffered damage from the remnants of Hurricane Ida that required thousands of dollars in repairs.
Many buildings are barely breaking even. For her eight-unit building, Gojcaj’s said her annual revenue is $144,000 if all the apartments are occupied and the rent is paid on time. Her actual expenses for 2021 on that building were $38,000, the property tax bill for the coming year is $57,000 and her mortgage is $48,000, leaving a cushion of $1,000.
Because of the pandemic, she is not collecting a sizable portion of her rent, and she says that some tenants who received rent relief from the state Emergency Rental Assistance Program (ERAP) have fallen behind. She believes they expected another bailout.
She has begun nonpayment eviction cases against 107 tenants of the 250 residential units that she owns or manages for other owners. Once such a case is filed, the tenants become eligible for help from the city’s Human Resources Administration, which she hopes will allow her to avoid evictions.
In the meantime she has cut costs wherever she can by reducing extermination to once a quarter from monthly and deferring replacement of infrastructure like roofs for as long as she can.
“We had to scale back on repairs and we used to do exterminations every month. Now we do them quarterly,” she said.
RGB Is ‘a Political Body’
As property owners ready their case for hikes as the board votes on a rent increase in late spring or early summer — exact date to be determined, but hearings usually take place in June ahead of the board’s July 1 deadline — tenant advocates are ready to fight with their own evidence of vast need among renters.
Christian of the Rent Justice Coalition pointed to the mountain of eviction cases piling up in New York’s courts, the $1.6 billion in unpaid rent and high jobless numbers among the poorest neighborhoods. Unemployment among Black New Yorkers was stuck above 15%, THE CITY reported in February.
“The population is badly suffering from the pandemic,” he said. “Why would you not want to protect these very vulnerable people making sure they can stay in their homes?”
Mironova at Community Service Society stressed that, though the RGB is supposed to look at data and make a fact-based, economic decision, the group is ultimately a mirror of who appoints them.
“The Rent Guidelines Board is a political body,” she said. “The decisions are often reflective of the politics of the mayor.”
Lawmakers at the state level are meanwhile taking steps to address ongoing financial strains among tenants. The new state budget added $800 million in relief through the formerly federally funded ERAP for tenants who can prove pandemic-related hardship, as well as $125 million for landlords whose tenants declined to apply for the program.
Some lawmakers are also pressing for a “good cause” anti-eviction bill that would extend rent caps to most apartments statewide, not just ones registered within the Rent Guidelines Board system or similar local programs in other cities.
Looking for a ‘Return on Investment’
The financial struggles voiced by property owners come on top of fiscal constraints that predate the pandemic, they say. The 7.8% drop in net operating income shown in the RGB’s latest research is mostly the result of unpaid rent during the pandemic and rising costs.
But real estate groups argue the figure is also the result of years of tiny rent increases combined with 2019 changes to state law overhauling rent regulation overhaul, which sharply limited the ability of owners to increase revenue by renovating vacant apartments and boosting rents. Some say they are choosing to leave their units empty rather than spend money to fix them up, as described in a recent New York Post opinion column.
The change at City Hall has given landlord groups hope that the board will listen to their pleas.
“We understand the economic conditions over the past two years, but there has to be some return on investment,” said Vito Signoril, a Rent Stabilization Association vice-president.
He added that the key will be whether board chair David Reiss, a professor at Brooklyn Law School, will be able to convince other members to support a significant increase.
Reiss declined to comment for this article, deferring to City Hall. A spokesperson for the mayor referred to Adams’ previous statement on his board appointment.
“It obviously has been the most difficult time for landlords and it is disheartening,” said Gojcaj. “How are we supposed to provide good housing? How are we supposed to keep our properties up?”