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

June 17, 2010

Thank you for this opportunity to present testimony before the New York City Rent Guidelines Board (RGB) on its proposed rent increases for the approximately one million apartments that remain subject to the New York City Rent Stabilization Law. My name is Thomas K. Duane and I represent New York State's 29th Senate District, which includes the Upper West Side, Hell's Kitchen, Chelsea, Greenwich Village and parts of the East Side, including the East Village, 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 large a portion of their incomes towards rent.

In light of the heavy toll the current recession has taken on average New Yorkers and the steady rent increases the RGB has approved in years past, I am dismayed that the RGB is even considering rent increases of 2% to 4% for one-year lease renewals and 4% to 6% for two year lease renewals. Passing additional financial burdens onto tenants, many of whom are still reeling from prior increases, would be an unfair and unnecessary hardship, particularly given that the RGBfs own yearly Income and Expense Studies from 2007 to 2009 have shown landlordsf profits have increased 1.9%, 8.8% and 9.3% respectively.

As you know, these are especially difficult times for New York City's working people. In his Fiscal Year 2011 Executive Budget released on May 6, 2010, Mayor Michael Bloomberg stated that the City has thus far lost 169,000 jobs during this recession, and that wage levels still remain below those of 2008. A study released on May 10, 2010 by the Fiscal Policy Institute notes that in measures "that matter," such as the falloff in total wages and the rise in joblessness among city residents, this recession is every bit as bad as, or worse than, the two that preceded it. From early 2008 through December 2009, citywide unemployment has more than doubled – the sharpest rise in the 34 years that monthly unemployment data has been collected. By its own count this March, the Bloomberg administration found that the number of people living on New York's streets and subways had soared by 34% in a year. In addition, almost 39,000 people – including 16,000 children – are living in shelters.

According to the U.S. Census Bureau's 2008 New York City Housing and Vacancy Survey, 80% of low-income renters were paying more than 30% of their income on rent, and nearly half were paying more than 50%. Further, recent economic forecasts predict an unusually slow recovery. Locally, the employment forecast by the City's Independent Budget Office indicates the unemployment rate will not drop below 6% before 2014. Under these circumstances, New York's rent regulated tenants simply cannot afford another rent increase.

The RGB has historically justified annual rent increases by citing its Price Index of Operating Costs (Price Index). This year's Price Index found that operating costs for rent stabilized buildings increased by 3.4% in the past year – down from 4% in 2009, and 7.8% in 2008. However, as I have noted in my testimony before you in previous years, the Price Index measures changes in the cost of items landlords typically purchase to run their buildings, rather than actual expenditures, and it contains no information about the income landlords collect from tenants.

A more meaningful report is the RGB's annual Income and Expense Study because it shows landlords' income after all operating and maintenance expenses are paid – the "Net Operating Income" (NOI). Last year, the RGB ignored its Income and Expense study, which showed landlords' NOI had increased 9.3% after adjusting for inflation, and the RGB passed increases of 3% for one-year lease renewals and 6% for two-year lease renewals. This exposes the degree to which the system is skewed against tenants. Indeed, this fundamental anti-tenant bias is one of the reasons New York State Assemblymember George Latimer and I have introduced and are committed to passing the Rent Board Reform bill, which would revamp the method of establishing rent adjustments for rent regulated apartments in New York City and suburban counties.

While we continue to press for passage of this legislation, it behooves the RGB to reject rent increases that serve only to enhance landlord profits and further destabilize New York Cityfs affordable housing stock. As you all are very much aware, New York continues to be in a housing crisis as our affordable housing stock rapidly dwindles in the midst of the worst economic downturn since the 1930s. According to the RGB's own report, "Changes to the Rent Stabilized Housing Stock in New York City in 2009," there was a net estimated loss of 10,052 rent stabilized units in 2009, 22% more than in 2008 and the highest single year loss in the history of the report. In fact, the New York State Division of Housing and Community Renewal's 2009 rent registration records, which the RGBfs report cites, indicate that 13,557 units were deregulated in 2009 under the High Rent/Vacancy Decontrol provision, up 6% from 2008 and an alarming 30% from 2007. The citywide vacancy rate has dropped to 2.91%, legally constituting a housing emergency. Furthermore, loopholes in State law, including allowances for phony demolitions and owner occupancy scams, have allowed countless other units to be deregulated.

Year after year the RGB's own statistics do not support the landlords' primary argument that increased rents are necessary to meet increased operating costs. Rent regulations have been stripped away and landlords' profits have been consistently rising in the last ten years. An honest assessment of the real numbers shows not only that landlords can afford – and will still profit from – rents remaining constant, but also that most regulated tenants cannot afford any rent increases.

By law, the RGB 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 Rent Guidelines Board bases its decision on these standards – and I strongly urge it to do so – it will impose a freeze on rents for all rent regulated apartments as well as for lofts, hotels, rooming houses, single room occupancy buildings and lodging houses. Given all the facts, this is the only acceptable outcome.

Thank you for your consideration of my remarks.

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