Rudy's Landlord Giveaway

Fat City About to Get Fatter for Owners

How would you like to hand over several million dollars more to the city's landlords starting this fall? Like it or not, that's what's on order for New York's 2.4 million rent-stabilized tenants, as the Rent Guidelines Board heads into the final stretch of its 1999 season. When it casts its final vote next week, the RGB is expected to follow its preliminary guidelines, which call for tenants to pay 2 percent hikes for one-year lease renewals and 4 percent for two-year leases, beginning October 1.

This major transfer of cash from tenants to landlords will take place despite the fact that landlords are doing just fine, thank you, according to several studies conducted by the RGB's own staff. On average, staff reports found, landlords' net income rose 11.4 percent from 1996 to 1997, and net income per apartment is the highest it has been in a decade. Those gains, coupled with all-time-low mortgage rates and operating costs that went up a piddling .03 percent, make these healthy times indeed for owners of rent-regulated property. In fact, the staff calculated that landlords could keep their income steady even if the board allowed no rent hike for one-year leases and only a 1.8 percent hike for two-year leases.

But in a preliminary vote on May 13— to be made final June 24— the RGB squashed a proposal to allow no increase for one-year leases and a 1 percent hike for two-year leases. (It also ditched a landlord plan for 4 percent hikes for one-year leases and 8 percent for two years.) In the end, it settled on the 2 and 4 percent hikes, which are technically subject to change before the board's final vote next week, but which are expected by landlords and tenants alike to be finally adopted. The hike mirrors the rates the board has set for four of the past five years.

But with landlords doing well and staff studies finding many tenants hampered by unemployment, wage stagnation, and welfare cuts, why didn't the board set rent hikes accordingly? Look no further than Mayor Rudy Giuliani's political ambitions, sources say. "The fact is Rudy Giuliani is not so dependent on city tenant votes if he runs for higher office," says Terry Poe, an organizer at the West Side Single-Room Occupancy (SRO) Law Project and longtime observer of the RGB. "I think he may have done a calculation that the money he'll get from landlords is more important than votes from tenants."

Indeed, board members say Giuliani's administration has consistently sent orders about what rates should be set; in fact, in 1995, he bumped RGB member Jane Stanicki from the board after she publicly complained about City Hall's attempts to interfere with the board's vote. Just before the start of this year's season, the mayor bounced outspoken tenant representative Ken Rosenfeld, who was regularly critical of the mayor and who sued the board last year to force the release of a staff report on rent hikes.

While rent-stabilized tenants constitute the biggest group whose rents are regulated by the board, they may not be the hardest hit this year. Unless the RGB changes what appears to have been a mistaken vote cast in its preliminary hearings, that status will belong to many SRO tenants, who face a 5 percent increase for a one-year lease. Already among the city's poorest and oldest tenants, SRO residents have recently been under tremendous landlord pressure to move out so their rooms can be converted into lucrative tourist-class hotel rooms.

The RGB's proposed hike appears to be something of a mistake, since board chair Ed Hochman said he did not realize until after voting that it would affect many SROs; he thought it would apply only to a small class of hotels. Ed Weinstein, the RGB member who had introduced the hike, refused Hochman's request to recall the vote.

While the hike itself is high, it is especially so considering that the board has not raised SRO rents at all since its 1994­1995 guideline. Sources say it is likely to be changed at the June 24 vote, but there's no guarantee the board will adopt another year of zero-increase leases for SRO tenants.

Also facing substantial hikes are tenants who live in rent-stabilized apartments that rent for less than $450 a month. The board regularly adds a supplement— more aptly called a "poor tax"— on such units in response to landlords' pleas that they cannot run buildings with such low rent rolls. This year, the board has proposed a $15 monthly hike for such apartments, plus the 2 or 4 percent hike that would accompany a lease renewal.

Landlords will also cash in when rent- controlled units become vacant— usually because a longtime tenant has died— and enter the rent-stabilization system. RGB-proposed guidelines would make the first rent-stabilized rent at least $650 or 80 percent of the maximum base rent that could have been collected under rent control.

Ironically, the lowest proposed rent hike appears to be going to those who arguably need it least, loft tenants, who as a class have some of the biggest and cheapest living spaces citywide. The RGB's preliminary vote calls for a 1 percent hike for one-year leases, and 2 percent for two-year loft leases. That said, loft tenants remain jittery as the state law that protects them is up for renewal. Typically, state senators hold the law hostage, seeking to horse-trade during budget hearings. This year is likely to be no exception: The state assembly on June 1 extended the loft law until 2004, but the senate has yet to act. The law expires June 30, and is likely to limp along on short-term extensions until a state budget— already 76 days overdue— is accomplished.

The RGB will hold one more public hearing, on June 22, before it casts its final vote on June 24. The hearing begins at 11 a.m. at the Great Hall at Cooper Union, and is scheduled to last until 9:30 that evening. The vote, also at the Great Hall, begins at 5:00 and is to be comp- leted by 9:30. Details of the RGB's proposals and schedule can be found on its Web site, www.housingnyc.com.

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