Testimony By New York State Senator Thomas K. Duane Before The New York City Rent Guidelines Board Hearing On Proposed Rent Increases

My name is Thomas K. Duane and I represent New York State's 29th Senatorial District, which includes the Upper West Side, Hell’s Kitchen, Greenwich Village, Chelsea, the East Side, Stuyvesant Town, Peter Cooper Village and Waterside Plaza. This mixed-income district is composed largely of tenants, thousands of them rent-stabilized, many of whom already allocate too high a percentage of their incomes to pay their rent. Thank you for this opportunity to present testimony before the New York City Rent Guidelines Board (RGB).

As you know, last month, I testified before the RGB regarding the Rent Board Reform Bill (S.8235/A.11097) that New York State Assemblymember George Latimer and I have introduced in the State Legislature. The need for that legislation’s common sense reforms, which will make the system much more even handed and ensure that its determinations are based upon more accurate and relevant information, is painfully apparent in the thoroughly predictable, dysfunctional process in which we are presently engaged.

Let's be honest: We know that when the final vote is taken on June 19, the RGB will approve rent increases for one and two year leases that will further squeeze tenants, despite the RGB's own 2008 Income and Expense Study that shows that landlords’ median rental income has increased more than their median operating costs. Meanwhile, the 2005 NYC Housing and Vacancy Survey conducted by the U.S. Census Bureau found that the median income for rent-stabilized households in New York City has fallen 5.6% in real dollars since the last survey, and 43% of renters citywide paid 50% or more of their income for rent. Clearly, the system is broken.

The RGB justified this year's proposed rent increases of 3.5 to 7% for one year and 5.5 to 9.5% for two year leases by citing its 2008 Price Index of Operating Costs, which found that operating costs for rent-stabilized buildings increased 7.8% in the last year. But, as I noted in my testimony before you last month, the Price Index measures changes in the cost of items landlords typically purchase to run their buildings, rather than actual expenditures. Worse, it contains no information about the incomes landlords collect and is thus misleading. My and Assemblymember Latimer's bill bars the use of this one-sided, deceptive report.

The RGB's annual Income and Expense Study is a more meaningful report, because it shows landlords' Net Operating Income. According to the RGB's 2008 Income and Expense Study, which is based on 2006 data, landlords’ operating costs increased by 4.1% over the prior year; however their rental income increased by 5.6% and net operating income increased 8.8%. As the report itself stated, "Because operating costs grew less than the increase in income, net operating income (revenue remaining after operating expenses are paid) increased." Let us recall that the RGB approved rent increases of 7.25% on two-year leases and 4.25% one-year leases in 2006, the same year in which the data show landlords’ Net Operating Profits increased 8.8%. This exposes the degree to which the system is skewed against tenants.

I implore the RGB not to make the same "mistake" this year. To prevent such anti-tenant determinations from being perpetrated in the future, my and Assemblymember Latimer's bill not only requires the New York City Rent Board to consider current Income & Expenditure data in determining adjustments, but it also requires all landlords of apartments subject to rent stabilization or rent control to submit annual income and expense reports, and penalizes those who don't comply. It also moves the deadline for the Rent Board vote from July 1 to October 1 so that the most up-to-date, relevant financial data may be considered.

The urgent need for a fair and balanced Rent Board is underscored by the rapidly dwindling affordable housing stock in our City. According to the RGB report entitled, "Changes to the Rent Stabilized Housing Stock in New York City in 2007," there was a net decrease of 5,088 rent-stabilized apartments throughout the five boroughs last year. The report cites Division of Housing and Community Renewal (DHCR) rent registration records that indicate 10,342 units were deregulated in 2007 because of the decontrol law, an increase of about 10% from 9,983 in 2006. And loopholes in State law, including allowances for phony demolitions and owner occupancy scams, have allowed countless landlords to empty buildings of rent-regulated tenants whose former homes became fair game for exorbitant, non-regulated rents. The RGB should be proactive in preserving New York City's affordable housing so that poor and middle-class working people can continue to live here, but the current process, which amounts to a rubber stamp on rent increases, serves to enhance landlord profits and further destabilize New York City's affordable housing stock.

It is absurd that the RGB is even considering passing additional financial burdens onto tenants this year. The Board is meant to determine rent adjustments based on the relative cost of maintaining and financing buildings, the available housing supply as defined by the vacancy rate, and the cost of living. If the Board bases its decision on these standards – and I strongly, though futilely, urge it to do so – it would impose a freeze on rents for all rent regulated apartments as well as for lofts, hotels, rooming houses, single room occupancy (SRO) buildings and lodging houses.

While I appreciate the public service that you, the Board members, perform, there is no question in my mind that the current system is not designed to uphold these standards. That is why I joined Assemblymember Latimer in introducing the sweeping, but common sense Rent Board Reform Bill. I count on having greater success in swaying my colleagues to pass this desperately needed legislation than I and other tenant advocates have historically had in influencing the RGB.