The ABCs of the RGB
The Rent Guidelines Board is the bureaucratic equivalent of a sports car: It accelerates from a snooze to a nightmare in only eight meetings. Beginning, as it did this week, with a stream of statistics that measure the enormity of the city's housing crisis, the RGB toils in virtual obscurity through the spring and then suddenly bursts into action, which sometimes includes fisticuffs.
No wonder. The board's job is to "adjust" the rents of the city's 1 million stabilized apartments, which means dipping into the pockets of more than 2 million tenants. Even the tiniest hike translates into a major economic transfer: A 1 percent jump, for instance, sends more than $72 million from the hands of tenants into the accounts of landlords.
Most New Yorkers know only the end result of the RGB's annual ritual, since the media tend to ignore the board until its last, roiling meetings, which culminate in a late-June vote on rent hikes. Rife with politics, deadened with statistics, and peppered with enmity, the RGB can baffle even seasoned observers. To the landlords and tenants who must abide by the board's rule, it's a minor mystery. Who are these guys? (The current board is indeed all male.) How'd they get the job? Why is no one ever happy with them?
Here's a primer on the RGBthe lowdown on why your rent is going up.
What is the RGB?
The RGB is a nine-member board established in 1969 to set guidelines for rents on stabilized apartments. Its members are appointed by the mayor. Two represent landlords. Two represent tenants. The remaining five are called "public" members who serve as swing votes to be won over by landlord or tenant members. A chairperson from among the public members serves at the pleasure of the mayor. Terms for other members vary, and there are commonly "holdovers" who sit long after their terms expire, unless they do something to peeve a subsequent mayor. One current member, landlord rep Harold Lubell, was appointed by Ed Koch; public member Agustin Rivera was appointed by David Dinkins. The remaining members were named by Rudy Giuliani.
While the RGB's main job is setting rates for stabilized apartments, it is also responsible for rent rates in lofts and single-room occupancy (SRO) hotels. It often exercises its option to impose an additional monthly surcharge on low-rent stabilized apartments, and to give landlords a hike for stabilized apartments when they become vacant.
RGB members must have at least five years' experience in finance, economics, or housing. They may not own or manage buildings covered by the rent stabilization law. No member of any tenant or landlord group can serve. Appointment to the board is considered more of a burden than an honor: The $100 per diem compensation has not increased since 1969, making it one of the lowest-paying boards in the city. Outrage expressed by landlords and tenants alike at meetings, says one former member, makes the board feel "like a hydrant surrounded by a pack of dogs."
How does the board set rents?
How much did lightbulbs cost last year? Toilet seats? Pine disinfectant? Those are among the questions the RGB asks when determining how to adjust rents; while under no obligation to actually raise rentsthe board could freeze themthat is what it has always done. The board also takes into consideration, among other things, how much landlords pay for insurance, mortgages, and labor; what tenants earn and pay for rent, how many get evicted, and how tight the housing market is.
By law, the board must consider cost-of-living factors and the economic conditions of the residential real estate industry. Its staff produces five reports each year, beginning in the spring. Experts present additional information and public hearings are scheduled; this year there will be seven meetings before a final vote on rate hikes, which must be formally adopted by June 30. The hikes apply to renewal leases beginning the following Octobers; three-year leases were discontinued in 1984.
The staff reports that form the heart of the RGB's research are:
- The Price Index of Operating Costs: Described as a market basket of goods and services that building owners buy, the PIOC is a landlord's consumer price index, presenting data on the cost of dozens of items and services from boiler repairs to detergent, fuel to refrigerators. When the PIOC is highlike last year, when a 54 percent fuel cost spike hiked the overall index to 7.8 percent after several nearly flat yearslandlords argue that the PIOC is a true indicator of their rising costs, and that rents must follow. In years when the PIOC is low, owners dismiss its relevance, saying hikes are still needed.
Income and Expense (I&E): Since 1990, the RGB has used data that landlords give the city's Department of Finance (DOF) to measure what it costs them to operate buildings, and how much income they generate in rent. The data are reviewed only in summary form, so the board does not have details on specific buildings. From the data, the RGB staff determines the Net Operating Income (NOI) of landlords citywide.
The NOI is what they have left after paying maintenance expenses and real estate taxes. It doesn't include debt service payments or income taxes, but does give some indication of the financial condition of the city's landlords. In 1998 (the most recent year available), landlords overall netted $295 per month per apartment; Manhattan landlords got $451.
The I&E is considered flawed because it relies on landlords' honesty in reporting to the DOF. A 1992 audit found that 15 percent of the costs landlords claimed were not legitimate business expenses, and a later audit found landlords generally exaggerated costs by 8 percent.
- Mortgage Survey: One of the board's most straightforward reports, this is usually the first presented each year. The study surveys lenders to see how much financing costs landlords. Last year, the staff sent surveys to 68 lenders; 27 responded. They found an average interest rate of 8.71 percent for a multifamily mortgagethe biggest jump in three years. But even so, a robust market meant that mortgages remained affordable. Foreclosures and nonperforming loans were also down.
- Income and Affordability (I&A): This is the only study devoted exclusively to tenants, quantifying how much they earn and how much rent they pay. While last year's report found that most stabilized tenants paid about 30 percent of their income for rent (in line with federal guidelines), nearly a third paid at least half their income or more. Despite the booming economy that ushered out the '90s, the inflation-adjusted income of stabilized tenants slipped .5 percent. While jobs and wages were up, so were the population and demand for housing. A close look reveals the city's ever growing dual economy: From the late 1970s to the 1990s, the inflation-adjusted income of the poorest 20 percent of New Yorkers fell 21 percent; in that same time, the richest fifth gained 43 percent.
Housing Supply: Relying on the triennial Housing and Vacancy Survey (HVS) completed by the federal census bureau, this RGB report measures just how scarce New York City apartments are. Key to the housing supply issue is the state-set standard that defines a housing emergency as a vacancy rate below 5 percent. A rate above 5 percent would mean rent regulation could cease. The current vacancy rate, based on 1999 figures, is 3.19 percent, with variations among the boroughs: Queens was the tightest (2.11 percent), Staten Island the roomiest (5.82 percent).
The 2000 Housing Supply report noted an increasingly tight market even as new construction meant more apartments. The reason: Most of those apartments were for sale, not for rent, and even the 12,000-plus new units could not keep pace with the population. Among stabilized apartments, there was a drop of 6000 units; rent-controlled units plummeted by 18,000. As of 1999, of the city's 2,018,000 rental units, 52 percent were rent-stabilized.
What are the board's politics?
While staff research provides the board with empirical, unemotional evidence, in the end the RGB is arguably less blinded by science than pummeled by politics. The assault comes on three levels.
First, the entire debate takes place within the context of what may be the city's most enduring hatefest, the one between landlord and tenant. Landlords argue that government is already overreaching its bounds by regulating their profits, that rent laws are a communist instrument, and that tenants by and large can afford to pay more. Tenants hold that as long as profit-seeking private landlords control the supply of an essential and limited commodity, regulation is a must and is too lax as it is.
Then there's City Hall, which observers say exerts the greatest political influence. Since RGB members are mayoral appointees, most Gracie Mansion residents have not been shy about making their interests known. Under David Dinkins, for instance, the board did not pass an additional "low-rent supplement"also known as the poor taxon cheaper apartments. Giuliani's board reinstated the surcharge. Mayors themselves walk a fine line, trying to avoid making enemies with either tenants, who make up a large voting bloc, or the real estate lobby, a major political contributor.
Giuliani has removed at least three RGB members for political reasons. At the board's final meeting in 1995, public member Jane Stanicki expressed her "dismay and disappointment at the attempted interference of the city administration in the final decisions of this board."
"We are," she proclaimed, "by law an independent body and the efforts of City Hall to get us to do their bidding in my view is a blatant attempt to compromise our freedom." Six months later, the mayor dismissed her. In 1999, he opted not to renew tenant rep Ken Rosenfeld's term after Rosenfeld sued board chair Ed Hochman for failing to release a report on how rents spiraled after the revised rent laws of 1997. In December, Giuliani notified public member Edward Weinstein that his services were no longer needed; Weinstein had complained about the administration's lobbying regarding the 2000 rent hikes.
Finally, there are the politics within the board itself. With four members representing specific constituencies, the five "publics" are the swing voters who can be lobbied. Often, deals are cut around the margins: adding or dropping a percentage point on the rates for stabilized apartments, trying to ditch or retain the poor tax, adopting or avoiding special rules regarding things like sublets or fuel surcharges.
The RGB is more than just statistics and politics. It's theater. For those who suffer through the stultifying early meetings, the last roundssometimes 13-hour marathon sessionsare bursting with action. In one late round in 1990, two landlords donned kangaroo costumes to show the kind of court they consider the board to be. A fistfight broke out between a landlord and a tenant. After a particularly raucous series of RGB hearings held at Brooklyn Borough Hall in 1998, which included a landlord's arrest for attacking a tenant who was filming the proceedings despite the presence of a phalanx of cops, the board was asked not to return the following year. Last year, three senior citizens were arrested after chanting antilandlord slogans. In October, tenants protested the implementation of the board's hikes4 percent for a one-year lease and 6 percent for two yearswith a sleep-out at City Hall.
What to expect this year
Aside from the possibility of marauding marsupials, there are a few things to watch for. First is the unusual situation caused by the fact that two of last year's public membersWeinstein and Justin Macedoniawon't be returning, whittling the public contingent down to three members, which will intensify the lobbying by landlord and tenant members. Giuliani may replace the two by the time the board meets, but it's also possible the seats will remain empty for the bulk of the sessions.
Sources are as yet unwilling to speculate on what rent hike proposals will be put on the table by landlords, or what the final votes might be, but climbing fuel prices and a softening market are expected to influence the mix.
Two bills are pendingone in the City Council and one in the state legislatureto alter the board's composition by replacing the current requirements of five years' experience in housing, finance, or economics with experience in public service or service with a nonprofit; the housing requirement would remain. The state law would have the board consider landlords' profitability and make landlords file annual income and expense reports directly with the board. The city bill would require the council to approve mayoral appointees.
Also this year, look for meetings held outside the RGB's typical Lower Manhattan haunts. One is scheduled for Harlem and several for Brooklyn's Metrotech Center. The board hasn't been banned from the Borough of Churches entirely.
The next RGB meeting is scheduled for Tuesday, April 10, at Spector Hall, 22 Reade Street, 9:30 a.m. to 12:30 p.m.; the Income and Expense report will be presented. For the full schedule, call the RGB at 212-385-2934. For more information on the RGB and other useful housing-related issues, visit the board's Web site at www.housingnyc.com.
Research: David Blanks, Allen Edwards
|Going Up: RGB Increases Since 1968|
|Leases From||One Year||Two Years||Three Years|
|7/1/68 to 6/30/70||10%||10%||15%|
|7/1/70 to 6/30/71||6||8||11|
|7/1/71 to 6/30/72||7||9||12|
|7/1/72 to 6/30/73||6||8||10|
|7/1/73 to 6/30/74||6.5||8.5||10.5|
|7/1/74 to 6/30/75||8.5||10.5||12|
|7/1/75 to 6/30/76||7.5||9.5||12.5|
|7/1/76 to 6/30/77||6.5||8||11|
|7/1/77 to 6/30/78||6.5||8.5||11.5|
|7/1/78 to 6/30/79||4.5||6.5||8.5|
|7/1/79 to 6/30/80||8.5||12||15|
|7/1/80 to 6/30/81||11||14||17|| "Low-rent Supplement" |
If rent is less than...
|10/1/81 to 9/30/82||10||13||16|
|10/1/82 to 9/30/83||4||7||10|
|10/1/83 to 9/30/84||4||7||10||$200, add $10 a month|
|10/1/84 to 9/30/85||6||9||$250, add $10|
|10/1/85 to 9/30/86||4||6.5||$300, add $15|
|10/1/86 to 9/30/87||6||9||$350, add $15|
|10/1/87 to 9/30/88||3||6.5||$325, add $10|
|10/1/88 to 9/30/89||6||9||$325, add $5|
|10/1/89 to 9/30/90||5.5||9||$325, add $5|
|10/1/90 to 9/30/91||4.5||7*|
|10/1/91 to 9/30/92||4||6.5*|
|10/1/92 to 9/30/93||3||5*|
|10/1/93 to 9/30/94||3||5*|
|10/1/94 to 9/30/95||2||4||$400, add $15|
|10/1/95 to 9/30/96||2||4||$400, add $20|
|10/1/96 to 9/30/97||5||7||$400, add $20|
|10/1/97 to 9/30/98||2||4||$400, add $15|
|10/1/98 to 9/30/99||2||4||$450, add $15|
|10/1/99 to 9/30/00||2||4||$500, add $15|
|10/1/00 to 9/30/01||4||6||$500, add $15|
*Low rents were not supplemented during Dinkins's administration.
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