Mayor Bill de Blasio just announced his 10-year housing plan to build and preserve 200,000 affordable apartments, but he may have already doomed it to failure.
The city’s single largest source of existing affordable housing is now threatened by the mayor’s Rent Guidelines Board (RGB), which voted for a possible rent freeze for nearly 1 million rent-stabilized apartments. One of his RGB appointees even voted for a rent rollback of up to 6 percent!
A rent freeze may make good campaign rhetoric, but it would be disastrous public policy. A rent freeze adopted in Westchester County resulted in the wholesale conversion of stabilized apartments to co-ops and condos, and the city experienced its own wave of conversions in the recent past. The same could certainly result again if owners cannot muster enough rent to pay their bills.
Acknowledging the rising costs of operating rental properties, the mayor’s housing plan says that the increase in utility and fuel costs alone has “eroded bottom lines for property owners, which can lead to deferral of maintenance and capital needs.” Yet the mayor’s rent board threatens to make rental housing even more precarious by proposing a rent freeze and inadequate levels of rent increase.
Rental property owners want to provide safe, well-maintained, affordable housing for our tenants, but the cost of providing these services keeps rising. This is a fact.
The RGB itself measured a 5.7 percent increase in building operating costs last year, with most of these costs imposed directly by government through continually increasing real estate taxes and water charges, regulatory compliance costs and mandated improvements.
As a result, owners pass 30 to 40 cents of every rent dollar right back to the government, which uses that revenue to fund city services (police, fire, sanitation) and social services (rent subsidies).
By virtue of maintaining and operating their buildings, owners create jobs in our neighborhoods and support local businesses. In 2013, the city’s rent-stabilized housing alone spent $10 billion and supported 160,000 jobs to maintain and improve a housing stock that largely predates Word War II.
Why would a Mayor de Blasio-appointed RGB want to shut down an economic engine that contributes substantially to the city and state economy and serves as the backbone for the vitality of the city’s varied neighborhoods?
The RGB’s concession to the economic reality of ever-rising operating costs is the possibility of rent increases up to 3 percent for a one-year lease and 4.5 percent for a two-year lease but still below the 4 percent and 7.75 percent increases approved last year when there was a similar rise in operating costs.
The RGB has historically never approved rent increases at the top of its proposed preliminary range. So the rental industry is looking at zero or, at best, inadequate rent increases this year—and potentially for the tenure of this administration.
Without necessary rent increases in the long term, housing conditions for tenants will deteriorate, and the industry will support fewer jobs and generate less tax revenue. This is not the promise of the mayor’s housing plan.
The mayor’s housing plan relies on the survival of the existing affordable rental housing. But that stock cannot survive on a rent freeze or inadequate increases. As long as building operating costs increase, rents will have to rise.
We understand this financial reality could be a problem for impoverished households, to which government must respond with increased rent subsidies, just as the government recently did by increasing to $50,000 the annual income eligibility threshold for the Senior Citizen Rent Increase Exemption Program. Government needs to provide more rent subsidies to help needy households cope with the reality of increases costs.
The mayor may not be able to freeze property taxes and water charges to help keep rent increases low, but a revamp of the property tax system to reduce the relative burden on rental properties should be in the housing plan.
The mayor could also reduce costly government mandates and provide relief from nuisance administrative fees and penalties as he has promised to do for other small businesses.
We want to work with the mayor to make sure his housing plan is a success, not a disaster. The decision on rent increases for 2014 by the mayor’s Rent Guidelines Board will be an early indicator of whether the city’s rental market and economy continue to thrive and grow—and whether his housing plan will succeed.
The mayor will find many willing and able partners, as long as his goals are reasonable and realistic. We’ll know on June 23, when the RGB votes on final rent guidelines, if the mayor will succeed in preserving the city’s affordable housing.
Aaron Sirulnick is the chairman of the Rent Stabilization Association.