A sea of angry renters.

Every year, for the past 41 years, the nine members of the Rent Guidelines Board have gathered to reach a secretive consensus that sets the annual rent increases on rent-regulated apartments at somewhere around 3 percent, a move that without fail earns the ire of tenants and property owners alike.

It is unlikely that the Rent Guidelines Board harbors any illusions about its popularity at this point, but this year looks to bring unprecedented animosity. It's only April and insults are flying,  months before the board inevitably makes its rage-inducing decision.

"We need to move away from the days of a kangaroo court," shouted City Council Speaker Christine Quinn, who took to the steps of City Hall Monday morning to call for reforms to the hated board. "Regardless of the data... the rents go up!"

Speaker Quinn was joined by several other councilmembers, Assembleymen Brian Kavanagh and Richard Gottfried, State Sen. Daniel Squadron and a vocal, sign-waving crowd of tenants and tenant-rights advocates.

Although proposed state legislation won't necessarily stop the rent from going up, it would change the selection and composition of the Rent Guidelines Board, requiring City Council approval of mayoral appointees and opening up membership to include a broader range of professional backgrounds—urban planning, social services and public policy to name a few (the current requirement is at least five years experience in either finance, economics or housing).

This is not the bill's maiden voyage, but proponents see an opening, especially with the debate over rent control re-energized by the possible Supreme Court battle over rent regulation (the court may decide whether or not to hear James D. Harmon Jr.'s challenge to rent control in the coming weeks). The case has the possibility to "end rent control as we know it," City Councilmember Jessica Lappin warned the crowd, especially "given the Roberts court."

Although the bill would have no effect on this year's RGB, the season of rent rage is here—the board's annual vote is looming and with it the prospect of yet another inevitable rent increase, riling the residents' who are fortunate enough to live in rent-regulated apartments. While no one mentioned it, it seems evident the situation was especially heated given the fact rents are at an all-time high, according to first quarter reports from CitiHabitats—never mind the fact the city is still weathering economic doldrums.

"It's an extraordinarily important body, not only to tenants who live in those buildings, but to the basic economic future of our city," said Assemblyman Kavanagh. "As always, the increases of the Rent Guidelines Board should reflect the economic realities of both tenants and landlords... this is a bill we think is ripe to get done now."

State Sen. Squadron called City Council confirmation of appointees to the "opaque" board "an absolute no-brainer."

"Let's empower our local legislative body to have a say in the lives of millions of New Yorkers," he urged the crowd.

In fact, it turns out that the RGB doesn't even like itself. Adriene Holder, a tenant member of the RGB for the past 10 years (and the head of the Legal Aid Society's Civil Practice) also stepped up to the podium to vent her dissatisfaction with the board.

"I've seen nothing but increases!" cried Ms. Holder. "Why is it that the last three years, during the worst recession in recent history... we've seen unprecedented increases in rent?" (To be fair, this has something to do with the fact that so few people are buying because of the recession, and instead renting in the interim, though no doubt other economic pressures are to blame for rising rents.)

Ms. Holder's criticism was slight compared to that of Councilman Jumaane Williams, the former executive director of Tenants and Neighbors, who took to the microphone to declare that "The Rent Guidelines Board is a sham. That's basically what it is."

Ouch!

Perhaps the Rent Stabilization Association, an association to represents 25,000 property owners and agents responsible for some one million units of housing, would have a kind word for the RGB.

"We would say that the RGB has been overzealous in protecting tenants to the detriment of the housing stock," said executive vice president Jack Freund when the Observer reached him on the phone. Mr. Freund said that the association would like to see rent increases that reflected the annual price increases.

Well, my enemy's enemy is my friend and all that. Was Mr. Freund in favor of the proposed reform?

"City Council approval is the kiss of death because you’re not going to have rational, objective people on the board," Mr. Freund said. "I’m sure they’d be very happy if it was filled with five homeless housing advocates, and that might be more representative, but it wouldn’t fulfill the function of the RGB, which to preserve existing housing stocks by providing the rent increases that are necessary each year to cover the rising costs of taxes."

Of course! Blame it on the tax man. 'Tis the season.

kvelsey@observer.com

We've posted one above, since they're all basically the same variation on a theme: have an outer-borough landlord talk about a Daily News article and Citizens Budget Commission study that shows only Manhattanites making six-figure salaries stand to benefit from the changes; followed by a plug for the affordable units they own outside "the City," be it 43 in Flatbush or six in Crown Heights; then exclaim how tougher regulations will make it tougher to run these buildings. The transcript to all four spots are on PolitickerNY.

Meanwhile, Azi points us to a blog post by Megan McArdle of The Atlantic decrying the problems with these new guidelines.

mchaban [at] observer.com | @mc_nyo

Today, the Working Families Party has begun a push to use the video in order to call for clean elections.

Strasburg's candor is unusual. People like him usually learn to stay in the shadows. But we owe him our thanks. In the words of Bob Dylan, "money doesn't talk, it swears." And Strasburg is just telling it like it is.

There's a better way. It's called Voter-Owned Elections, with public financing. In this system, eligible candidates raise small contributions from individuals, and then receive public matching funds. Big money would not vanish, but it would mean less.

And we'll save taxpayers a lot of money when politicians no longer dole out sweetheart subsidies and tax loopholes to their corporate donors. 

(Is it a coincidence that Verizon spent $1.2 million in political donations and then got $614 million in government subsidies? We think not.) 

Fortunately, Governor Cuomo has publicly endorsed the idea of Voter Owned Elections with public financing. But it's up to us to give the proposal momentum and make sure the decision-makers in Albany know we're serious.

Please help us recruit 50,000 supporters to push for a Voter Owned Elections law this year. Our state can't afford to wait another day.

Cuomo has said he is supportive of publicly financed elections as part of a larger ethics push. The Daily News reported today that Shelly Silver has signed on to an ethics bill, however no mention was made of a clean elections law.

Splitting 5-2, the New York State Court of Appeals overturned lower court rulings and ruled in favor of a 2008 Rent Guidelines Board move to allow small dollar increases on rent for apartments with one-year leases that have been occupied for at least six years. The state's rent regulation legislation already allows landlords to raise rents on some regulated apartments by 4.5 percent, but landlords have argued that the proportional increase doesn't allow them to keep up with the cost of repairs.

"Landlords will say it was a bit of sanity in a very broken system," said Jeffrey Turkel, of prominent real estate law firm Rosenberg & Estis, who represented the pro-landlord Rent Stabilization Association as an intervener in the case. "We're going to give you relief because those apartments are not keeping current with the cost of running those apartments."

Tenant advocates called it a "poor tax," and the Legal Aid Society and Legal Services NYC filed a lawsuit in 2008 saying the board overstepped its authority. They were unsurprisingly disappointed by today's ruling. "We still believe that the law does not permit the board to punish low-income people as they've been doing for the last couple of years," said legal aid lawyer Ellen B. Davidson.

The decision comes as a blow just as tenant advocates fight to renew and strengthen rent regulation up in Albany. On the other hand, it might help rally support behind the claim that rent laws need to be strengthened to properly protect tenants.

lkusisto@observer.com

"If any of you know the history of the Cuomo family, it's either my way or I'm going to screw you," said Joseph Strasburg, head of the pro-landlord Rent Stabilization Association, at a townhall meeting last night. We learned of the comments via a heavily edited video from advocates of stabilized tenants, who were at the meeting.

Mr Strasburg continued: "He will do whatever is necessary for himself. If you're in his way, he'll crush you like his father did."

Many in Big Real Estate remember Mario Cuomo as the governor who spearheaded the late '80s tax changes that industry people say all but halted real estate trades. But thus far the outspoken opponent of rent stabilization has been largely diplomatic about the new governor, telling The Observer he strongly supports the younger Mr. Cuomo's agenda of fiscal reform.

And we should note that the video is so heavily edited that the time of day appears to change, while the crowd remains the same.

But could the comments be taken out of context? Not according to Joseph Strasburg. "It is what it is," he said when reached this afternoon by The Observer, adding he knew someone was filiming him. "He's a very tough governor," he told us. "Everybody has to understand he is the 800-pound guerilla."

Mr. Strasburg also had some controversial comments about disgraced former Democratic Senator Pedro Espada (whose fall from grace is credited by some with ending Democratic hopes of strengthening rent regulation the last time around). He said:

The guy who saved this industry was Pedro Espada, and everybody makes fun of him because he's in litigation, but if it wasn't for him, this industry would have been hit on all those issues I just rattled off.

Espada a savior and Cuomo a bully? Indeed.

lkusisto@observer.com

Mr. Strasburg: The City Council has other responsibilities in terms of their policies, but clearly, in terms of what’s more important, it is Albany.

How’s that been going this past session?

There is a level of dysfunctionality in Albany. At least at the City Council, they’ll notice a bill, they’ll have a public testimony, you’ll debate it, and it’s rare that any legislation will make it out the first time out. It’s a deliberative process.

Not in Albany?

Nobody wants to negotiate. Because the feeling was—it was like, ‘We don’t have to negotiate. We believe we have the votes, and we’re going to do what we want to do.’

It seemed like this spring, when tenant advocates seemed like they may repeal vacancy decontrol, they were either going to go all the way, or they weren’t.

Everybody was focused on vacancy decontrol, and I honestly will tell that I expected at least a discussion.

This past spring, you focused on a few key Democrats?

Five to six Democrats.

[Coup leader Pedro] Espada.

Historically, the energies of the industry were more focused on the Republican control [in the Senate], and nothing happened on the Assembly—it didn’t matter what the Assembly did. But we did have long-term relationships with Democratic senators, regardless.

This year, there was a greater emphasis in terms of … dealing with senators who we deemed to be reasonable. … I actually believe that had the issue been brought to the floor—vacancy decontrol—and people were left to vote the way they wanted to, I believe there were not enough votes to pass this.

Malcolm Smith—both sides suggested he had said he was on their side.

Not suggest—I’m telling you what he said, and the other side will tell you what he said. And the frustration was: Where was Malcolm? It was like Malcolm in the Middle. The question was, where was he really?

Does it come up again in 2011 when vacancy decontrol expires?

Once it expires, you have to deal with it.

So is 2011 going to be a big fight?

It’s possible that we may be fighting this issue at this time next year.

Do you think a major overhaul would happen in 2011?

Absolutely not. That requires some foresight, and planning. And so I believe that [legislators] go in terms of the direction that has the least pressure politically to them. So what will happen is that 2011, you’ll still have a Democratic governor, you may or may not have a Democratic Senate, but what will happen is that there will be some changes that have been advocated, but it’s the same cycle of ideas, instead of well-thought-out—how do you make these changes from a long-term perspective?

In the long run, just demographically, the state’s shifted Democrat.

I think the Republican Party, in my mind, needs to get rid of some of the social debates. … It shouldn’t be social fighting. It should be, ‘Where are your philosophies on taxes and spending?’

Going forward, if the Democrats in the long run control Albany, do landlords have political power beyond writing checks?

If they want to have a greater role in establishing policy on a statewide basis, they need to do more than write a check. … The reality is, you really need to fine-tune another party on those issues that matter, and if that’s the Independence line, or if that’s the creation of a taxpayer party, I think that’s the direction that they should consider. It’s not an easy thing to set up. It takes a while.

How much money would that cost?

Several million dollars, over a period of time. But to me, if you do a cost-benefit analysis, if you’re going to get whacked and whacked, then this industry especially—if a lot of legislation gets enacted, you’re going to have a direct impact on the city of New York. … [In response to unfavorable legislation], owners can’t put their buildings on their back and move out. That they can’t do. Any other business, you say, ‘I’m out of here.”

What do you think would happen if we got rid of all the rent-stabilization rules and everything went free market?

We’ve always advocated a slow turnover. Unlike others who say you’ve got to get rid of it overnight, the answer is, you cannot create that level of chaos in this city. You do it through a normal process of when someone dies or they leave. … There are those who believe you have the right to live anywhere you want. By that, I mean the best schools, the best restaurants, whatever. Well, that’s a wonderful concept, but you know what? In every city, there’s going to be the rich coast, the middle class, and there’s always going to be the poorer areas.

Wouldn’t it be dangerous for the city to have all the rich concentrated in the city center and then slowly spread out the poor far away?

First, there are not enough rich people in this world that can occupy every apartment in the city of New York. Number two, I do understand the argument made by others that we used to have neighborhoods; we used to have people who were able to live in Manhattan who drove a truck. … But there is a natural evolution of a neighborhood. Little Italy—how many Italians really live in Little Italy? They own the stores, they own the restaurants. Astoria—Greeks?

But those neighborhoods changed gradually. Do you think in peak times, when prices are soaring, do people have the right to a stable rent over time, or should they be subject to move every few years if they can’t afford rising rents?

If you were talking about four years ago, five years ago, and you asked me that question, I probably would have said to you, in all honesty, that as long as we’re in a capitalist society, you have a right to charge, and people have a right to say no or yes. Would that have an impact on certain communities? Yeah. Something that would have happened anyway would get accelerated. … But since the bubble burst, we’re going to find ourselves where things have gotten a lot calmer. 

ebrown@observer.com

As of early afternoon Monday, the chamber’s housing committee was slated to vote the next day on a far-reaching bill he had championed, and Mr. McKee was expecting a heavy activist turnout. “We told everyone, ‘Wear your T-shirt,’” he said, referring to the bright red “Real Rent Reform” shirts that tenant organizers have handed out.

By his count, he had all the votes needed to pass in the committee and head to the Senate floor, where he said he had “30 or 31 votes” of the 32 required for a full repeal of vacancy decontrol, for instance.

Joseph Strasburg has spent the past half-year playing legislative defense on behalf of landlords of stabilized apartments. This defensive posture was a relatively new one for the president of the Rent Stabilization Association, as he’d enjoyed a years-long alliance with the Senate Republicans, who dutifully blocked any major new rent regulations.

In recent months, Mr. Strasburg has been telling his members to brace for losses on at least some fronts.

“There was a level of expectation that I had cautioned the members here was going to occur,” said Mr. Strasburg, a Bronx native and chief of staff under former City Council Speaker Peter Vallone. “We expected some legislation enacted in terms of Mitchell Lama going into rent stabilization. We expected increased penalties. … We expected a big push on the luxury decontrol issue.”

Particularly if there was a full repeal of vacancy decontrol—which would prevent rent-stabilized units from becoming market-rate—the bills pushed by tenant groups would cost his members millions and, by landlords’ telling, would unleash a wave of defaults on apartment building loans citywide.

And in an instant—3:46 p.m. on Monday, June 8, when the Senate flipped from Democrat to Republican, to be precise—Albany, along with the positions of these two men, was turned on its head.

The fight over changes to rent regulation has been one of the Legislature’s more high-profile battles since the Democrats won control last November, and a climax of some sort was expected this month, as the Senate was likely to pass at least some changes to rent laws that had been blocked for years by Republicans. But now that the G.O.P. has regained control after a tumultuous five months, tenant activists like Mr. McKee have immediately thrown up their hands, declaring all is lost—at least for now.

“We have been tantalizingly close,” Mr. McKee said of the set of pro-tenant bills. Now? “It’s dead. It’s dead.”

The various landlord groups are skeptical that a full repeal was actually in the tenant groups’ grasp, but, as noted by Mr. Strasburg: “It’s a moot point.”

Still, he and his colleagues at the other major landlord groups—the Real Estate Board of New York and the Community Housing Improvement Program—are hardly breaking out the Champagne, at least not publicly. “I think the reality is, it’s a reprieve, albeit a temporary reprieve,” Mr. Strasburg said. “You’re talking about a change that extends to next year,” if the deal sticks.

Regardless, the past few months had seen noticeable efforts from both tenant activists and landlord groups, efforts that, presumably, will be suspended.

Both the Rent Stabilization Association and REBNY had made this a top lobbying priority in Albany, taking the position that rent regulations should be dealt with when the law expires in 2011—not earlier. They had called for extra contributions from members for the issue, according to individuals from the organizations, and both groups hired the Bronx-based political operative Stanley Schlein to lobby on the issue. The RSA had commissioned a study to show the deleterious effects on the construction industry that added regulation could have, and held a luncheon honoring Pedro Espada, the Bronx Democrat who led this week’s revolt.

On the part of tenant activists, the efforts started years ago, by helping to get Democrats control of the Senate, as few if any of their major housing bills ever made it through the Legislature with Republicans in control. Starting after the November election, the groups began calling voters in districts of state senators who had not signed on to a repeal of vacancy decontrol, and went door-to-door on numerous weekends in those legislators’ districts.

As to just how close things were to passing, Mr. Strasburg said uncertainty was rampant.

“Clearly, we were not sure,” he said. “Nobody had a great level of comfort one way or another because the leadership—[Senator] Malcolm Smith—never articulated publicly what he supported or didn’t support.”

ebrown@observer.com

A court on Friday gave Stuy Town landlord Tishman Speyer a stay in having to take any actions after the decision last week, waiting until the results of an appeals process are borne out. Tishman Speyer has applied to appeal to the state’s top court, the Court of Appeals. A state appellate court dealt the powerful landlord, as well as the owners of tens of thousands of other apartments citywide, a major blow that could cost them hundreds of millions—if not billions—of dollars, ruling that many landlords had been improperly converting rent-stabilized apartments to market-rate units.

Rather than immediately re-regulate the 4,000-plus apartments in Stuyvesant Town that have been converted to market rents since 1993, as the appellate court’s decision would require, the stay calls for Tishman to calculate how much money it would owe in back rent to market-rate tenants and put that money in an escrow account.

The attorney that brought the case against Tishman Speyer estimates the landlord could owe tenants around $200 million, a number based on incomplete data—a very big number for a landlord whose $400 million cash reserve account for Stuy Town was rapidly depleting and predicted to run out mid-year.

For Tishman Speyer, other landlords and affected tenants, the court decision last week landed like a bombshell. Landlords who had been receiving modest tax abatements thorough a renovation incentive program, J-51, suddenly were told they were not allowed to have deregulated rent-stabilized units, a practice many had been doing for over 15 years. The state agency that oversaw rent regulation even had guidelines saying that landlords were within their rights to deregulate those apartments.

Further, tenants would be allowed to collect back rent from the landlords, as if their apartments had stayed rent stabilized, and their apartments would be re-regulated.

Now, following the unanimous decision at the appellate court, landlords and tenants are searching for direction. Already, other tenants in Stuyvesant Town have sued Tishman Speyer seeking back rent payments, a case brought by tenant lawyer Jack Lester and the Stuyvesant Town tenants association. That case calls for damages of no less than $10 million.

Joe Strasburg, president of the Rent Stabilization Association, which represents affected landlords, said in an affidavit supporting Tishman Speyer’s appeal that “the “court’s determination represents a seismic and unprecedented shift in the New York rent regulatory landscape.”  

In their court papers, he and Tishman Speyer raised questions that show how far-reaching such a decision could be. Mr. Strasburg said in the affidavit that he did not know of an appellate ruling “that has more jeopardized the financial well-being of (a) thousands of landlords, (b) lenders, and (c) the City of New York, which is largely dependent on real estate tax collections for revenue.”

If landlords were suddenly liable for hundreds of millions of dollars in addition to being unable to count on a large cash flow, as the apartments would be re-regulated, many landlords would clearly come a step closer to default, particularly those who bought at the peak of the market on optimistic assumptions, as did Tishman Speyer.

The appellate court must rule on whether or not Tishman Speyer has the right to appeal to the Court of Appeals. Then, the Court of Appeals would have to decide to hear the case.

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