Affordable Housing Institute : US

Do a favor once, runs the adage, and your beneficiary is grateful. 

 

Once is okay!

 

Do it twice and it has become an obligation.

 

Twice isn’t so good.

 

Nowhere is this more true that in the sense of animated, near-hysterical entitlement that rests righteously in the hearts of those who benefit from New York City rent control and rent stabilization — indeed, the sense extends beyond entitlement to a fanatical zeal, as demonstrated by this June 28 New York Times report of a raucous hearing to allow rent increases:

 

Rents for New York City’s one million rent-stabilized apartments can increase by as much as 7.25% over the next two years, the city’s Rent Guidelines Board voted last night …

 

That works out to a little over 3.5% annually. 

 

To put that in context, over the last two years, the CPI-Urban increased 7.4%. 

 

CPI generally — the CPI Urban has tended to run higher

 

So the Rent Guidelines Board basically allowed rents to track basic inflation — hardly the stuff of controversy, no?

 

… in a raucous meeting that was disrupted for hours by jeering tenants protesting the state’s control of the city’s rent laws.

 

Jeering tenants?  Why?

 

Cooper Union’s Great Hall, in pre-rent control times

 

The vote came after hundreds of tenants filled the Great Hall at Cooper Union in Manhattan, armed with everything from drums and whistles to aluminum-foil roasting pans and handmade rattles. The meeting was disrupted for the better part of an hour, prompting the board chairman, Marvin Markus [A managing director of Goldman Sachs — Ed.], to adjourn for the next two and a half hours.

 

Honoring democracy? 

 

The board finally voted shortly before 10 p.m., more than four hours after the meeting started. The bellowing and pounding had become so deafening that the stenographer recording the proceedings had to go onstage to hear Mr. Markus, shouting into his microphone, read the proposal into the record.

 

“I’ve been sitting on this board for 21 years,” said Harold A. Lubell, one of the two board members appointed to represent the interests of building owners. “It appears that there is a concerted effort by the tenants to shut down the meeting, which is one of the most undemocratic things I’ve heard of in my 21 years.”

 

But Jumaane D. Williams, executive director of Tenants & Neighbors and one of the organizers of the tenants’ protest, said: “This is fantastic. We’re trying to show the importance of home rule. We want to stop this meeting from happening. This meeting is a sham of the democratic process.”

 

No, that was a sham of the democratic process.

 

This was a city rent board; how could it be a sham?

 

“We are trying to let them know that we can’t afford these increases,” said Milagros Cruz, a teachers’ aide from Washington Heights, who had turned out for the protest that was aimed at bringing attention to the issue of home rule. “We’re working hard but it’s too much.”

 

Much though I endorse affordable housing and affordability, framing the issue in terms of what particular families can afford is a complete trap — because it turns the discussion into a referendum on Mr. Cruz’s life.  If the question is what Mr. Cruz can afford, then only Mr. Cruz can judge how he will spend his money and his time, and ultimately there is no judge but Mr. Cruz.  The question as framed is self-referential and recursive, and therefore irrefutable to Mr. Cruz.

 

Deborah Jones, who owns six buildings in Manhattan, the Bronx and Brooklyn, said the increases should have been “in the double digits.” She said: “I’m not happy with them but I accept them.  My costs have increased more than that.”

 

Who sounds reasonable here?  Who sounds greedy?

 

“But, then again, I didn’t expect that much of an increase.”

 

Let’s examine Ms. Jones’ claim:

 

According to a report by the board released in the spring, costs for the owners of rent-stabilized buildings rose by 7.8% in the last year — a steeper rise than the 5.8% increase the previous year. The jump in costs was driven largely by a 22.8% increase in fuel costs and a rise in real estate taxes.

 

Fuel costs and real estate taxes are two of the four great ‘uncontrollable’ operating costs (hazard insurance and security are the other two). 

 

The four great uncontrollable risks: taxes, utilities, insurance, security

 

Real estate taxes, as we know, go back to the city, and fuel is completely external to the landlord.  So there is no possible argument that Ms. Jones and her ilk are bilking the residents.  In fact, even after this rent increase, their buildings will lose economic ground:

 

At the same time, another board report found that building owners spent an average of 62 cents of every dollar of revenue on operating and maintenance costs in 2004, the most recent year statistics were available. That figure represented a slight decrease in the landlords’ cost-to-income ratio from the previous year.

 

Simple algebra: if 62% of one’s costs increase 7.8%, a 3.56% aggregate rent increase leaves the owner with less NOI than before:

 

	Last year	Increase	This year
Rent	100.0%	3.6%	103.6%
Op Ex	62.0%	7.8%	66.8%
NOI	38.0%	-3.4%	36.7%

 

NOI down

 

The combined effect of external cost increases and the rent guidelines board’s decision is that rent stabilized buildings are now worth 3.4% less than they were a year before. 

 

The remaining 38 cents of every dollar of revenue, a figure that increased slightly, goes toward mortgage payments, improvements and pre-income-tax profits. That income, known as net operating income, is considered an indicator of the financial condition of a property.

 

An indicator?  That is the property’s earning power, its fundamental value.  In terms of economic benefit, who really ‘owns’ a rent-controlled apartment?

 

The protest, which one tenant organizer said had been three months in planning, was intended to bring attention to tenant demands that the State Legislature relinquish control over the city’s rent laws.

 

Tenant organizers contend that legislators in Albany are insensitive to the interests of New York City renters and are beholden to landlord interests. Tenant leaders said the current escalation of rents stemmed in part from an erosion of tenant protections since the state began taking greater control in the 1970’s.

 

This is rewriting history. 

 

Property is a crime, man!

 

It was in 1969 that the Rent Stabilization Law was passed (its near-suburb neighbor, the Emergency Tenant Protection Act, was passed in 1974), succeeding the 1947 rent control laws, originally enacted to deal with the ‘temporary emergency’ of high rents caused by returning WW2 GI’s. 

 

With city control, they say, they could lobby their own elected officials.

 

Evidently ‘lobby’ means ‘browbeat, disrupt, and seek to intimidate’ with a view to raising the price of correcting political error, which is one of several reasons why rent control dies so slowly.

 

Early in the meeting, Adriene Holder, one of the two board members appointed to represent tenant interests, moved to add to the agenda a proposal that the board pass an “advisory resolution” stating its support for home rule.

 

There’s nothing wrong with composing a rent stabilization board with designated seats for both landlord and tenant interests, for it assures that certain points of view are always voiced.  A fast Google suggests that over the years, Ms. Holder has used her seat consistently to oppose any rent increase whatsoever.

 

But the board rejected her motion to change the order of business by a 7-to-2 vote, with only Ms. Holder and Mr. David Pagan [The other resident representative. — Ed.] voting in favor. It was not clear that they all necessarily opposed home rule. Jonathan L. Kimmel, one of the five so-called public members …

 

‘So-called,’ New York Times?  Are you trying to imply that they aren’t public?

 

… said he opposed the motion simply because the order of business had been set.

 

Mr. Kimmel’s case for rejecting consideration is even stronger than regular order.  Rent control and rent stabilization are powers devolved to a city by a state government.  Rent control enabling legislation comes from the state government and cities cannot secede from it — home rule must be approved by the state government.  When in 1994 the Commonwealth of Massachusetts repealed rent control at the state level, that precluded cities like Cambridge and Boston from enacting their own, although that has not stopped either city council from proposing and occasionally passing gratuitous fuming resolutions chastising that mean old distant state government (on Beacon Hill, a quarter mile from Boston City Hall) for its refusal to grant home rule. 

 

Ten minutes’ walk between city and state government

 

Back at the Rent Guidelines Board, home rule is (a) a longstanding question, (b) that cannot even be decided by this body, and (c) is most likely a city council petition anyway.  To allow such a diversion to prevent a vote on a legitimate rent increase — that would a sham of the democratic process.  Ms. Williams inadvertently revealed her and her group’s real motivation when she said:

 

“This is fantastic.  We’re trying to show the importance of home rule.  We want to stop this meeting from happening.”

 

And people wonder why New York City has a protracted and worsening shortage of new affordable housing.

 

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