Almost as good entertainment as the Rent Guidelines Board (_rockinfree, flickr)

Surprise! The rent is going up again next year.

In a move that surprised no one, the Rent Guidelines Board cast a preliminary vote to allow rent increases between 1.75 and 4 percent for one-year leases and 3.5 to 6.75 percent for two-year leases, reports The New York Times.

The ranges will be narrowed to a single percent increase when the board takes its final vote on June 21. Last year the board approved a 3.75 percent increase for a one-year lease and a 7.25 percent increase for a two-year lease.

Of course, these increases apply only to the city's one million rent-stabilized apartments. If you number among the 53 percent of New Yorkers who live in a market-rate apartment, you're basically screwed.

But while the Rent Guidelines Board has been approving rent increases of about 3 percent pretty much without fail every year, some people thought things might be different this year. Just last week the board set the benchmark used to determine rent increases—the rise in landlords' operating costs—at 2.8 percent. It was the lowest number in decades, and it gave the many rent-regulated tenants a warm feeling so rarely associated with New York apartments.

Chalk it up too much hope or not enough, but the crowd did not take the news of the increase well.

"As in the past, protesters jeered from their seats during the vote, under the watchful eyes of police officers, who set up metal detectors at the front doors," writes The Times.

The crowd was smaller than it normally is, with tenants having to chose between the vote and an Occupy Wall Street march on Broadway scheduled for roughly the same time. Nevertheless, a few Occupy protestors did straggle into Cooper Union's Great Hall to offer their support, shouting things like "Greed" and "Shame on Bloomberg."

Still, it's early in the game, and the board's final number could certainly come in on the lower end of the range. Also, the "kangaroo court" will hold public hearings on June 13 and 18, for whatever that's worth.

kvelsey@observer.com

A boarded apartment building in Harlem (photo from Harlem Bespoke)

While some say Harlem is the city's new housing hotspot, hundreds of empty residential buildings bespeak serious issues still affecting the community, The New York Times reports. While storefronts in the neighborhood are generally bustling, an unsettling number of residences above are boarded up, and have been for decades. Business may be good on the ground floor, but landlords, often times wealthy real estate firms, have forsaken the residential apartments, leaving blighted buildings dotting the neighborhood.

While rents have been rising in the area recently, most landlords simply don't want to manage residential tenants, according to The Times.

Although the vacancy rate in Manhattan hovers at 1 percent, at least some of the landlords of these sealed-up buildings are deliberately keeping their buildings mostly vacant, content to earn income from first-floor commercial tenants rather than deal with the trouble of residents.

There is always the hope, of course, that a wealthy developer will come by and offer a substantial sum for the buildings. Many landlords would rather wait for their desired Daddy Warbucks than go to the trouble of restoring the properties themselves.

In other cases, landlords are “warehousing” apartments for the moment that a deep-pocketed developer comes along, as has happened in the blocks just north of 96th Street, East Harlem’s southern boundary.

If only Robert Durst's new townhouse had been warehoused! Oh, long-suffering Harlem!

eknutsen@observer.com

Beautiful on the outside... (PropertyShark)

There are slumlords and then there are slumlords.

Three Brooklyn landlords were arrested yesterday for failing to address a combined 500 open housing code violations on two properties, according to the Department of Housing Preservation and Development.

Lewis Alleyne, Dwight King and Gerald King were arrested after failing to appear in court and failing to comply with court orders directing them to make necessary changes to fix the housing violations. Both buildings—241 Linden Boulevard and 247 Linden Boulevard—are residential and almost fully occupied. Yes, 500 violations for two buildings.

"The buildings were in extremely bad condition," said Eric Bederman, press secretary for HPD, in an email. "They are in our Alternative Enforcement Program—a lot of people refer to it as the city's 200 worst buildings program."

The violations, per the HPD website, are staggering (emphasis ours):

Some of the hazardous (B-class violations) and immediately hazardous (C-class violations) violations that are open and associated with 241 Linden include: Lead paint, roaches, defective wood flooring, loose electrical outlets, broken locks on the entrance door, mold, no heat, defective faucets, obstructed fire escapes, cascading water leaks, missing smoke and carbon monoxide detectors, scalding hot water, peeling and chipping paint/plaster, etc.

Some of the hazardous (B-class violations) and immediately hazardous (C-class violations) violations that are open and associated with 247 Linden include: no heat, exposed electrical wiring, roaches, water leaks, accumulated refuse, smoke detectors, blistered roof coverings, sloping wood floors, broken/defective fire damaged floor joists in the cellar, rodents, no electricity in some units, etc.

"HPD couldn't get into the building to do the work because the owners denied our staff and our contractors access to the property," Mr. Bederman said.

The court had previously instructed the defendants to correct the violations by July 9 of last year, but when the landlords failed to comply with the court's orders, they were arrested and now have to fix the violations before Sept. 16 to erase their civil contempt case.

pengel@observer.com

Residents have long had to worry about their neighbors smoking, and landlords were often held to account, but never before had a case been brought in court over the matter until last month. Now, a judge in Nassau County has ruled that a renter in an Upper East Side apartment building had cause to break her lease, according to Crain's.

While this was an isolated matter, and the case was largely a matter of six months' unpaid rent, at least one expert believes it could have more far-reaching repurcussions.

While there won't likely be an avalanche of similar cases, tenants will begin to use secondhand smoke as an offensive measure against landlords, said Stuart Berg, a partner at Kurzman Eisenberg Corbin & Lever. "Landlords should take notice and start modifying leases to become stricter in terms of who to lease apartments to."

For co-ops, it may become a trickier situation. Mr. Berg is working with two co-ops in the city now, where the co-op boards are requiring smoking tenants to install ventilation or air filters in the apartment. Dealing with the issue is a little bit harder in co-ops because they have to vote and amend co-op bylaws. "It is easier for non-co-op residential landlords to deal with it by modifying leases and not permitting smoking in the apartment," he said. "Co-ops do not have that flexibility."

Harsh!

And with talk now circulating about banning smoking out front of buildings, pretty soon the only place left for New York smokers will be inside their cars (those that have them).

mchaban [at] observer.com | @mc_nyo

That perception should change tangibly based upon a new study released last week by Urbanomics, the acclaimed economic consulting firm. The study is an expanded survey of owners of rent-stabilized buildings in New York City. The Community Housing Improvement Program (CHIP), with the cooperation of the Rent Stabilization Association (RSA), retained Urbanomics to prepare the survey to better understand who rent-stabilized owners are as well as the problems they face. The survey was performed by the polling firm Business Beanstalk, which had no direct contact with CHIP or RSA.

This highly comprehensive study is the first of its nature in more than 25 years and consists of cumulative data and information based on a sampling of 50,000 rent-stabilized buildings. The study provides strong evidence to dispel the Potter-like characterization that rent-stabilized owners are primarily large corporate interests, speculators, frequent “flippers” of properties or absentee owners who make obscene amounts of profits, unfairly taking advantage of their tenants.

In fact, the survey shows that a typical owner is a long-term investor and an immigrant managing his or her own properties through a family business, living in or near the properties and dependent upon the rental revenue for a significant portion of his or her income. If we take a closer look at some of the myths about multifamily building ownership, using statistical data from the survey, the results are impactful.

Myth No. 1: Owners are primarily large corporate interests. In actuality, 48.2 percent of all owners are immigrants or children of immigrants. In Queens, this percentage rises to 58.8 percent. Interestingly, nearly 40 percent of owners are minorities and 75.1 percent of owners either own individually or are part of a family business. In the Bronx, this percentage increases to 83.7 percent. Moreover, the survey found that 39.8 percent held 10 or fewer total units and 76.1 percent owned fewer than 50 total units.

Myth No. 2: Owners are speculators and frequent flippers. Tenant advocacy groups like to vilify owners as speculators who are only in the game for quick profits. I find the reference to “speculators,” in this case, almost as amusing as President Obama referring to secured bondholders in Chrysler as speculators. Perhaps his speechwriters should have done a little due diligence to understand that a significant percentage of those “speculators” were actually retired teachers, laborers and municipal workers who were investing their retirement funds on a relatively conservative basis (or so they thought before the White House vaporized their senior rights).

Owners of multifamily properties are not speculators; they are investors. Speculators passively speculate that something will be worth much more in the future based upon short-term occurrences over which they have no control. Stock speculation is the quintessential example of this. Owning and managing rent-regulated housing in New York City profitably requires a lot of hard work. The very complicated maze of regulations is difficult to navigate and creates a tangible hurdle for first-time buyers. Often, it is only through capital investment and operating efficiencies, over the long term, that profits are realized. It is for these reasons that the survey found that 70.5 percent of all owners have held their properties for more than 20 years. Only 13.4 percent of owners have had their buildings for less than 10 years and, of these, nearly half (46.4 percent) are foreign born.

Myth No. 3: Owners are not hands-on, and operate as absentee landlords. The survey found that an astonishing 92.1 percent of owners manage their own properties and, more surprisingly, 30.5 percent live in one of their buildings. Of those that live elsewhere, 25.1 percent live in the same borough and an additional 13.1 percent live in another borough of New York City.

Myth No. 4: Owners are making obscene levels of profits. The fact is that operating costs are increasing at a much more rapid rate than revenue is increasing based upon allowable regulated increases. Water and sewer charges, fuel and real estate taxes have all seen massive increases for many years running. Given these conditions, the survey found that 49.1 percent of owners said the profitability of their buildings has decreased in the past five years; an additional 24.1 percent have seen little change. Also, 8.9 percent said their revenues do not cover operating costs, and 31.2 percent barely break even.

Tenant advocacy groups claim that owners are making money hand over fist by deregulating apartments. The survey found that only 34.4 percent of owners have had individual units exempted due to high rent decontrol, and a mere 24 percent had units exempted due to high income decontrol. Of these two groups, 72.1 percent had to subsidize regulated units with the income from deregulated units.

IT IS IMPORTANT TO understand that rent-stabilized housing in New York City is misallocated. The rent laws provide maximum benefits to those who have been in place for a long time regardless of their financial status or need. Studies completed by the Wharton School and MIT have independently demonstrated that rent regulation actually keeps average rent levels elevated in New York because of the supply constraint it causes. Tenants in regulated units are reluctant to move, creating fewer options for those looking for an apartment.

Unfortunately, even if every economist in the nation proved to politicians that the elimination of rent regulation would lower average rents for New Yorkers, it would be political suicide for any legislator to take a position against rent regulation. Even those who privately tell you that the system is problematic would never say so publicly. There are simply more tenant voters than non-tenant voters, and evidence of this dynamic is everywhere.

It was amusing to me when, last year, a City Council member referred to the architecture of Stuy Town and Peter Cooper Village as “beautiful and of unique character possessing a wonderful sense of place worthy of landmarking.” If that was not a position taken transparently for 25,000 votes, I don’t know what is. But political pressures to bolster pro-tenant regulation also exist because many elected officials here are beneficiaries of rent regulation themselves. Regulated apartments are supposed to be used only as a tenant’s primary residence. One notorious politico has three rent-regulated primary residences. I must have been absent from school on the day that the math teacher taught that 1 + 1 + 1 = 1.

Fueling the anti-owner sentiment is the list of tenant advocacy groups, which is lengthy and growing. ACORN, NYS Tenants and Neighbors Coalition, Met Council, New York Is Our Home and Urban Homesteading and Assistance Board are just a few of the dozens that exist. Property owners are regularly accused by these groups of using unfair tactics to evict regulated tenants. The point few ever make is that regulated tenants, who are legally in possession of their units, have absolutely nothing to worry about. The fact is that abuses of the system, in the form of non-primary residence occupancy and illegal subletting, is extensive. Prudent owners are simply seeking out these abusers.

I recall, as a young broker in the mid-1980s, conducting an inspection of a building in Washington Heights for an owner who was considering selling. Typical for the area, many of the apartments were three- and four-bedroom units. I was curious why there were padlocks on most of the bedroom doors in so many of the apartments I looked at. I came to learn that tenants were renting rooms to non-family members and, essentially, running mini hotels. While not legal, this was a fairly common practice in the area.

Twenty-five years later, the padlocks are still on many of those bedroom doors. Given the recently released undercover video showing the tactics used by some organizers, might they be instructing tenants how to game the system? They use terms like “predatory equity,” “shoddy lending practices” and “irresponsible ownership” to incite the ire of those who have the power to modify the regulations. All at the expense of and detriment to property owners, very few of whom resemble Mr. Potter.

Perhaps the Urbanomics study will change the way the public perceives the typical property owner. As Patrick Siconolfi, the executive director of CHIP, says, “The survey creates a distinct image of who multifamily property owners are and what their livelihood is all about. We are hopeful that this dispels many of the myths that have been created in the media and in the minds of tenants.”

editorial@observer.com

Robert Knakal is the chairman and founding partner of Massey Knakal Realty Services and has brokered the sale of more than 1,000 properties in his career.

After graduating college, I spent close to two years working in central Brooklyn politics, commuting south every morning from my apartment in Greenpoint to a state senator's office on Flatbush Avenue near Lincoln Place. I worked with families whose homes were in disrepair, mediating fights with landlords over HPD cases; and with community groups, landlords and community affairs police officers over drug-related crime. All the work merely put band-aids on a broken system. I often returned home in utter shock. Perhaps you've seen The Wire.

I was acquainted with Brooklyn long before moving there. Even though I grew up in Manhattan I had friends in the borough and would often cross the river for the sordid experiences Brooklyn once offered in the form of punk rock bars and art collectives.

When I started my job, just shy of my 23rd birthday, I was often mistaken for a gentrifier on my commute to and from the office – where I worked as a community liaison – easily spotted as an outsider by the patrons and workers in storefronts along Flatbush. I spent a lot of time being judged. I struggled to ignore those passing judgement and feel as though I could do something, anything, to make even one person's life more comfortable, to provide them what they deserved or required, according to our country's supposed democratic values. Before bestowing the job upon me, my boss looked at me incredulously and asked, “You WANT this job?” I wasn't sure what I was getting myself into, but I said yes.

Over the time I spent working in the district, which includes Flatbush, Park Slope, Crown Heights and Prospect Heights, I became uniquely acquainted with the areas and all of their strengths and faults. Some, like the Slope had fewer major concerns, while areas like Flatbush still reeled from the sort of abuse suffered by Abner Louima in the 70th precinct. I watched helplessly as men and women fought to get drugs off their streets, yet were unable to voice concerns in community meetings for fear of reprisal; while schools deteriorated and landlords let homes go into disrepair to force tenants into further squalor elsewhere in order to renovate and flip apartments in advance of the next gentrification wave; as convicted felons were dropped back into their home borough with nothing, to find nobody waiting for them. I watched while community members were riled up for elections and soon after ignored. I watched while homeless families struggled with the decision to enter shelters to speed up potential housing placements. All the while trying to figure out how to use this broken system to some menial advantage.

Then the first inklings of Bruce Ratner's stadium came up. His representative paid a visit to my office. “What are you going to do for my support?” my boss asked. I sat there, my stomach in knots. I quit soon after.

These are the gritty truths about Brooklyn that often go overlooked by newspapers out to cover the latest violent offense or the newest artsy neighborhood. Luckily, Brooklyn is, outside of Manhattan, the most media savvy borough by far – with all the blogs and message boards dedicated to neighborhoods and niche topics. We're a borough of idiosyncrasies and plenty of forums to discuss them, and it excites me that community discussion is open and free for all to share. What doesn't excite me is the prospect that in these forums, by attacking ideas, we silence them.

Not unlike a character out of a real estate cartoon, Angel met me in front of a building she owns just down the street from the apartment she was renting me. She made it immediately clear how much of an over-sharer she is. “I rent my two-bedroom apartments for $2,000! You will get a good deal here!,” she squealed, before double-speaking. “I represent YOU! This is not my building, I work for the landlord!”

It was hard to know what was true and what was her poor attempt at salesmanship, or, even worse, if she was being dishonest. But, after seeing a few other places, I went ahead with it anyway. I needed a place, and my roommate, Will, had a strict deadline to get out of his place that was approaching in a matter of days. Angel was the only realtor showing us a decent amount of space at a reasonable price.

On top of the mountain of paperwork required, along with the deposit to secure the apartment, Angel was asking for a 15 percent fee. The condition of the apartment would have forced any other reasonable landlord to pay someone to take it off his or her hands. Will and I had entered the alternate reality of realty, where common sense has no effect on price, or anything else, really.

A few days later Angel arranged for Will and I to meet the landlord, Eugene, an African-American man at least over 60, and give him our deposit. When we arrived and handed him the money order he immediately fended off rumors that he was, in fact, the building's landlord. Then we learned he is a talker. Standing in the empty, cold apartment, he told us tales of his 26 years driving a New York City bus (he has the belt buckle to prove it); how he'd come up North during the Great Migration; and how he represents the interests of a family down South, including this building. Regardless, Angel continued to refer to him as the landlord, and so does PropertyShark and ACRIS, where I learned he's even paid off the mortgage.

Deposit down, we began to amass the ridiculous amount of information necessary to secure a (cheap!) place to rest our heads. On top of the nonrefundable $75 credit check fee, Angel required copies of our driver's licenses, social security cards, last four pay stubs, an employment letter, three years of tax returns, a utility bill, current lease, birth certificates and proofs of citizenship. Oh, and three months of bank statements were optional. Having already had my identity stolen, I was skeptical, and gave her as few of the crucial bits of information as I could. Then I talked her fee down by 50 percent to just one month's rent. I felt a little better.

A few days later I got a voicemail from Angel. “Someone else is interested in the apartment,” she said. “So if things don't work out, we have a back up.”

As if the process weren't soul-crushing enough, she attempted to crush me even further. It felt like a boyfriend who just wasn't all that into me anymore.

Finally, we were set to sign the lease, which we did on the hood of Angel's Jaguar in front of a bus stop on Washington Avenue. As Will and I were reading over the paperwork, Angel turned to my boyfriend, Brian, and remarked that she wasn't certain she should hand over the keys just yet – she was unsure our money orders were real. (Obviously, they were.) He looked at her incredulously. Had she forgotten he was with us? She turned back to us, and like a spastic mother, began reminding us of all the things we needed to do now that the apartment was ours. She even shared the fact that Eugene had yet to pay her fees, and she refused to do any more work for his retail space downstairs. We nodded, thanked her, and entered our new apartment.

Will and I have sort of a good guy/bad guy relationship going with Angel now. Mostly I'm demanding and Will's really nice. But what would be really nice is if Eugene replaced the thermostat that he's removed from our living room, forcing temperatures down to the barely legal minimum.