Groundhog Day at the Rent Guidelines Board: Part 5, “No Airborne Chairs”

July 21, 2014 | Affordability, Apartments, de Blasio, democracy, Housing, Markets, mobs, New York City, Politics, Rent control, Rent Guidelines Board, Rent Stabilization, Rental, Takings | No comments 162 views

[Continued from last week's Part 4 and the preceding Part 1, Part 2, and Part 3.]

By:David A. Smith

                      

gd_02_glum

Psychiatrist: I think we should meet again. How’s tomorrow for you?

[Phil begins punching himself in the head through pillow]

Psychiatrist: Is that not good?

– Groundhog Day

Every year without fail, New York City’s Rent Guidelines Board hearings, as we saw yesterday in Part 4, degenerate into street theater of the absurd, with residents banging drums, shouting and chanting, but fortunately no airborne chairs (this year, anyhow), in striking contrast to the tactics adopted by owners, who are invariably careful, polite, and respectful to their political opponents.

When a clutch of owners of small apartment buildings banded together to form an association almost three decades ago, one word was notably absent from the name they gave themselves.

Landlord.

“We stopped calling ourselves landlords in 1984,” said Roberta Bernstein, who owns 40 apartments in Upper Manhattan. “Landlords are people who tie tenants to railroad tracks.”

roberta_b_04

roberta_b_02

Portrait of an owner (2011); the quotes are worth reading too

Sources for this post

The Indypendent (May 11, 2005; powder-blue font)

New York Post (June 24, 2009; brown font)

New York Times (June 24, 2010; violet font)

New York Times (June 27, 2011; yellow font)

The Real Deal (December, 2011; navy blue font)

Rent Stabilization Association blog post (October 11, 2013; sepia font)

New York Observer guest editorial (May 14, 2014; peach font)

New York Daily News (June 11, 2014; emerald font)

New York Daily News (June 13, 2014; blue font)

New York Daily News (June 17, 2014; olive font)

New York Daily News (June 23, 2014; black font)

New York Post (June 23, 2014; teal font)

New York Post (June 24, 2014; orange font)

Curbed New York (June 24, 2014; lavender font)

New York Post (June 25, 2014; gray font)

Rent Stabilization Association blog (June 26, 2014; red font)

Crain’s New York (July 9, 2014; magenta font)

A profile of Ms. Bernstein from The Real Deal (December, 2011; navy blue font), which included this exchange:

How did you get into real estate?

I was a schoolteacher and I was fascinated by “the real world.” As teachers, we always felt like we were in a cocoon. So I started looking at the business world. In 1971, I bought a brownstone on 81st between First and Second avenues. The building cost $175,000 and had five units and an owner’s apartment.

For those of you too young to remember, back then this was, if not the Wild West, certainly the frontier of New York’s neighborhoods: close to the Hudson River and a fair way up.

needle_park_1971

1971, the year of The Panic in Needle Park

Then I bought derelict buildings in Chelsea — one 12-unit building and one 28-unit building. I really didn’t know what I was in for! I taught until 1976, and then I took a temporary leave of absence to focus on my properties. I always thought I’d go back, but I never did.

In other words, Ms. Bernstein worked on these properties for forty years, buying them when New York City was heading down, owning and managing them through a tough decade (1971-1981), including the period when Rent Stabilization came into effect (1974) to supplant rent control – and by 1984, she and the others had figured out that the business they had chosen made them sitting ducks to be stereotyped and caricatured.

sly_caricature

Ya but ah’m a public figyah

2C. There’s no downside to political misbehavior

Acting-out at the Rent Guidelines Board hearings has become de rigueur because over the years,

residents and their advocates have learned that outrageous behavior has political upside (favorable press, intimidation of the Board) with no downside:

With members wearing headphones so they could hear each other over the roar of angry tenants, a sharply divided Rent Guidelines Board last night approved rent hikes of 3% and 6% for one- and two-year lease renewals in rent-stabilized apartments.

Headphones to speak over the roar of angry tenants?

Mind you, that’s from 2011. 

knight_throws_chair

Not a rent stabilized tenant

At one point in the meeting, which was punctuated by jeering but no airborne chairs

It sounds almost as if the Times was apologizing for the lack of chairs being thrown.  What kind oc circus is that?

– tenant protesters drowned out the comments of a board member with shouting that continued for several minutes.

Too bad about the airborne chairs, but evidently the tenants didn’t need them:

A proposed fuel surcharge of 1% was not voted on.

When intimidation works, it has no downside and is reusable. 

3. Government of the unwilling, by the unaccountable, for the uninvested

Phil: Morons, your bus is leaving.

– Groundhog Day

Unlike a legitimate government comprised of the people who chose to form it, run by the people to governs, and for benefit of the people it governs, rent stabilization is anti-democratic because it is:

1.     Of the unwilling.  Property owners never consented to having their property covered by Rent Stabilization’s retroactive application to properties built before the law was conceived; they have no ability to opt out, and because real estate is immovable, they cannot emigrate their capital.

2.     By the unaccountable.  Those who make Rent Stabilization decisions (the Rent Guidelines Board, and behind them the mayor) are not accountable to the owners whose property value and economics the state has confiscated.

3.     For the uninvested.  Those who benefit from Rent Stabilization do nothing to earn it; they do not invest in the property, they have ownership’s economic upside without no downside or obligations of ownership, and they do not even have the societal justification of being needy by any objective or verifiable standard. 

3A. Of the unwilling

Rent Stabilization makes owners unwilling participants in these kangaroo courts:

“The fact that only one person was there is indicative that they know they’re in the wrong,” said Shanequa Charles, 34, one of more than 350 rent stabilized tenants at Hostos College for the first of four hearings leading up to a June 23 vote on rent increases.

Having done everything they can to create an atmosphere of intimidation and the inability of others to speak, Ms. Charles and her friends then sneered at the one man who did:

The one man was Shpend Nezaj, a landlord from Pelham Bay and a member of the Rent Stabilization Association — a group that rolled out a six-figure landlord-backed advertising blitz calling for rent increases last week.

 

nezai_bronx_landlord

Does this look like a slumlord to you? 

Shpend Nezaj, a Bronx landlord, was the only person to testify for a rent increase at the Rent Guidelines Board public meeting in the Bronx.

 

Owners before the Rent Guidelines Board are like C. P. Snow’s mnemonic of Newton’s Three Laws of Thermodynamics: You can’t win, you can’t break even, and you can’t get out of the game.

c_p_snow

A man with the psychological disposition to cope with being a rent stabilization landlord

Nevertheless, Mr. Nezai did his best:

 

“I don’t think that all of the tenants realize the cost that building owners incur,” Nezaj said after asking the board for a minimum 3% increase. “Maybe one day when they own their own home they will understand the expense.”

Though tenants wish that rent stabilization property owners were plutocrats and landed gentry, in the main they are ordinary people who made the mistake of investing their money and their labor by providing affordable housing that New York desperately needs:

[The Small Property Owners of New York] has about 1,000 members, Ms. Bernstein said, most of whom own 10 units or fewer.

Many do not have live-in superintendents; they often handle repairs themselves and work second jobs to supplement their incomes.

Hardly the fat-cats who are better to hate in the abstract.

fat_cat_love

[Continued tomorrow in Part 6.]

PDF Creator    Send article as PDF   

Groundhog Day at the Rent Guidelines Board: Part 4, “Off the wall, off the wall”

July 18, 2014 | Apartments, de Blasio, democracy, Housing, Markets, mobs, New York City, Politics, Rent control, Rent Guidelines Board, Rent Stabilization, Rental, Takings | No comments 196 views

[Continued from yesterday's Part 3 and the preceding Part 1 and Part 2.]

By:David A. Smith

                             

gd_05_camera

Larry: People just don’t understand what is involved in this. This an art-form! You know, I think that most people just think that I hold a camera and point at stuff, but there is a *heck* of a lot more to it than just that.  – Groundhog Day

At the end of Part 3, we has seen that the mayor appoints every Rent Guidelines Board member, with new mayor Bill de Blasio having just appointed six of the nine – two to advocate for owners, two for residents, and five to be ‘public advocates’ – he appeared to have the board packed with people who would vote his way.

Sources for this post

The Indypendent (May 11, 2005; powder-blue font)

New York Post (June 24, 2009; brown font)

New York Times (June 24, 2010; violet font)

New York Times (June 27, 2011; yellow font)

The Real Deal (December, 2011; navy blue font)

Rent Stabilization Association blog post (October 11, 2013; sepia font)

New York Observer guest editorial (May 14, 2014; peach font)

New York Daily News (June 11, 2014; emerald font)

New York Daily News (June 13, 2014; blue font)

New York Daily News (June 17, 2014; olive font)

New York Daily News (June 23, 2014; black font)

New York Post (June 23, 2014; teal font)

New York Post (June 24, 2014; orange font)

Curbed New York (June 24, 2014; lavender font)

New York Post (June 25, 2014; gray font)

Rent Stabilization Association blog (June 26, 2014; red font)

Crain’s New York (July 9, 2014; magenta font)

Then the politically impossible occurred.

Though the RGB staff recommended rent increases in a range between 0% and 3%, thus inviting the Board to propose 1½%, which itself would have been the lowest rent increase in the Board’s 45-year history, candidate de Blasio had embraced a zero percentage increase, and many expected this would happen.

In a surprising act of independence, the board voted 5-4 to raise rents on nearly 1 million rent-stabilized apartments by 1% for new one-year leases and 2.75 percent for two-year leases.

The slight increases were proposed by RGB member Steven Flax, a de Blasio appointee who is vice president for community development at M&T Bank.  [He is, in fact, the bank’s regional Community Reinvestment Act officer – Ed.]

Mr. Flax was appointed by the mayor to represent the public interest, and to be independent, and he did both of those things.  So of course he has been praised by the man who appointed him:

sarcasm_sign

Closed captioned for the irony impaired

Mayor de Blasio is furious that the Rent Guidelines Board he supposedly controls refused to go along with his public call for a rent freeze, according to one insider.

de_blasio_barking

Off the wall, off with his head!

“He’s off the wall, off the wall,” said the source.

I believe the mayor is furious not out of the RGB’s decision itself but because he made a political calculation, threw away some principles, and now got nothing for it.  From the Rent Stabilization Association [owner perspective] blog post (October 11, 2013; sepia font):

Democratic mayoral candidate Bill De Blasio has maintained his call for a rent freeze on one million stabilized apartments next year. A De Blasio spokesman told Crain’s New York, “The rent freeze speaks for itself”.

But De Blasio was for a rent increase before he was against a rent increase.  

During this year’s Rent Guidelines deliberations, De Blasio was quoted as being in favor of a rent increase for small property owners.

After being pummeled by the other Democratic candidates for his stance, De Blasio switched his position and called for zero rent increases across the board.

Thus the candidate abandoned his belief in pursuit of votes; having got their political equity, he evidently felt he had to give his voters their return:

keep_promise_freeze_02

Vote your conscience, or vote your promise?

If De Blasio is elected Mayor [written October 11, 2013], we will soon know whether he remains mired in campaign rhetoric or whether he has the courage to stand up to his supporters and do what is necessary to maintain affordable housing in New York City.

Unfortunately for mayor de Blasio, he appointed someone appointed (Board member Steve Flax, about whom more later) who had more principles than he did:

tenniel_queen

Off with his term!

Uh – not until 2017, Mr. Mayor, you just appointed him

Still, the mayor will have multiple opportunities to appoint others whose independence is more to his liking:

The source said the mayor intends to replace two Bloomberg appointees, David H. Wenk [Cushman & Wakefield] and Carol Shine, who voted with landlord reps to increase stabilized rents by 1% and 2.75%.

“Our terms are up at the end of the year, when he will appoint someone else in all likelihood,” Wenk told The Post.

david_h_wenk

His remaining term is measured in months, not Wenks

Mr. Wenk probably regards his eventual departure from the RGB with great relief, as the job is thankless for all concerned.

2. Street theater of the absurd

Larry: People just don’t understand what is involved in this. This an art-form! You know, I think that most people just think that I hold a camera and point at stuff, but there is a *heck* of a lot more to it than just that.  – Groundhog Day

Do the same thing annually once a year for forty-five years and eventually you get bored with the basics, racing through them to introduce baroque or even rococo variants, such as this (The Indypendent, May 11, 2005; powder-blue font):

What turns senior citizens into irate foul-mouthed spectators and brings armies of homeless folks out from shelters? A Rent Guidelines Board vote to raise rents, of course.

When the repeated event is zero-sum (at best), political, public, and played without accountability (to come in Section 3B below), naturally enough the posturing and verbal flame wars become occasions in their own right.  Long ago the Rent Guidelines Board hearings lost the standard of evidentiary decorum in favor of anything-goes mob tactics – the street theater of the inequitably absurd.

2A. The demonstration *will* be staged as scheduled

nyt_tenant_shouting

Despite a ban on noisemaking instruments, tenants sneaked in whistles, and earplugs. (2008)

(For a video of the chaos, watch this YouTube video.)

Good governance requires public deliberation and public input; further, New York is large and diverse, so commuting, public access, and the variety of circumstances all require that there be multiple hearings.

The first of four public hearings held by the Rent Guidelines Board will take place Thursday at Hostos College in the Bronx, giving rent stabilized tenants a chance to argue in favor of an historic rent freeze.

Measured by people, tenants outnumber landlords, so naturally public hearings will be dominated by speaker after speaker expressing basically the same ideas about his or her own apartment.  I’ve been to such public hearings in Massachusetts, and all sorts of understandable human behaviors occur.  (I also was picketed once.)  Many residents are nervous, intimidated by the specter of government (which many of them fear), intimidated by public speaking (which ranks ahead even of going to the dentist as an anxiety source), intimidated by government.  Their nervousness, and their organization by a community advocate (almost invariably), means they arrive in packs and huddle among themselves working up their courage. 

In response to a landlord-backed ad blitz calling for rent increases, tenants’ rights groups will hold a rally before the meeting encouraging board members to back the freeze — which would be the first in city history.

They also fear being tongue-tied, so many write down what they intend to say, and may be hesitant when they start to speak.  And they tend to say the same thing over and over, speaker after speaker.

hostos_community_college

Full house at Hostos Community College in the Bronx for the Rent Guidelines Board public hearing. More than 100 tenants testified that they would like to see a rent freeze.

This makes them pliable clay for agitators who love the theatrics more than the outcome.

2B. The many shout down the few

Bronx tenants boo landlord and call for rent freeze at raucous city meeting

Residents are explicitly coached to make noise, to cheer loudly for each other, to wave their pre-printed placards, and to boo loudly anyone who disagrees with them:

There was a lot of yelling, even as members of the RGB were trying to speak. While that delayed the proceedings, it didn’t seem to do any more than that.

rgb_storming_140623

Instantly outraged tenant advocates storming the stage after the vote

Ms. Levine’s words were soon drowned out by boos and yelling from an agitated crowd of tenants, who have long used the annual meeting as a forum to vent their frustrations over the city’s soaring housing costs. [From 2010, and similar reports in other years. – Ed.]

The tenant organizers seek to turn any hearing into a political spectacle.

The Rent Guidelines Board held the first of four planned public meetings before voting on whether or not to allow landlords to increase rents.

Chanting “slumlord” and calling on a citywide rent freeze, hundreds of tenants shouted down one brave landlord willing to appear at a Rent Guidelines Board hearing Thursday.

rgb_tenants_shouting

The louder we chant, the more coverage we get!

It’s all straight out of the agitation handbook:

[Continued next week in Part 5.]

PDF24 Creator    Send article as PDF   

Groundhog day at the Rent Guidelines Board: Part 3, “Scores of screaming tenants”

July 17, 2014 | Affordability, Apartments, de Blasio, democracy, Housing, Markets, mobs, New York City, Politics, Rent control, Rent Guidelines Board, Rent Stabilization, rental, Takings | No comments 163 views

[Continued from yesterday's Part 2 and the preceding Part 1.]

By:David A. Smith

gd_09_clock_punch

Rita: Do you ever have déjà vu?

Phil: Didn’t you just ask me that?

—Groundhog Day

Through Part 2 of this grimly lengthy post on Rent Stabilization and the Rent Guidelines [sic] Board, we’ve seen that it is among the worst possible approaches to affordable housing: mandatory, un-incentivized, not means-tested or means-adjusted, and uninterested in the viability of individual properties. 

Sources for this post

The Indypendent (May 11, 2005; powder-blue font)

New York Post (June 24, 2009; brown font)

New York Times (June 24, 2010; violet font)

New York Times (June 27, 2011; yellow font)

The Real Deal (December, 2011; navy blue font)

Rent Stabilization Association blog post (October 11, 2013; sepia font)

New York Observer guest editorial (May 14, 2014; peach font)

New York Daily News (June 11, 2014; emerald font)

New York Daily News (June 13, 2014; blue font)

New York Daily News (June 17, 2014; olive font)

New York Daily News (June 23, 2014; black font)

New York Post (June 23, 2014; teal font)

New York Post (June 24, 2014; orange font)

Curbed New York (June 24, 2014; lavender font)

New York Post (June 25, 2014; gray font)

Rent Stabilization Association blog (June 26, 2014; red font)

Crain’s New York (July 9, 2014; magenta font)

The result are rents whose fairness is purely eye-of-the-beholder, and hence purely political:

eye_of_beholder

There are objective standards of beauty, you know

New mayor de Blasio never misses a chance to swipe at his predecessor:

Speaking at a bill-signing ceremony in Queens [the day of the Rent Guidelines Board’s hearing], the mayor said the board under the Bloomberg administration has granted undeserved increases to landlords and it was now time to make amends.

Isn’t it nice to know that the mayor thinks the previous Rent Guidelines Board was either crooked or incompetent? 

More seriously, are we to make policy on the basis of score-settling with a previous mayor by a new mayor who’s already showing skins of thin-skinned grudge-holding worthy of a Boston mayor?

menino_angry

Who do you think you are to say I’m thin-skinned?

“I’m encouraging all the members of the Rent Guidelines Board to vote for a freeze. We need a course correction,” the mayor said.

He specifically called for a zero percent hike for one-year leases renewals.

So much for property viability. 

1D. Testimony is not subjected to any standard of evidence or veracity

Even more than other jurisdictions I’ve worked in, New York City makes the rent increase or rent-setting process into a judicial advocacy hearing, as if economic truth is best found in a political trial; so the Rent Guidelines Board ‘takes testimony.’ 

“The board will make its determination based on the data and testimony it receives,” added Wiley Norvell, spokesman for Mayor de Blasio.

Testimony implies veracity (the Latin root references an independent, third-party witness), or at least verifiability, and the Rent Guidelines Board takes testimony from anybody and everybody, and storytelling is rewarded.

The Rent Stabilization Association — which represents 25,000 landlords — launching a six-figure ad campaign.

That’s not testimony.  Nor is this:

“Landlords have been profiting quite handsomely,” saidFitzroy Christian, a leader of tenants’ group Community Action for Safe Apartments [Where RGB member Sheila Garcia comes from – Ed.]

That’s not testimony; Mr. Christian has no idea whether landlords are making money or not; he adduces no evidence at all.

[Random obscure fact: Mr. Fitzroy is 68 and apparently lives (irony alert) at 15 Featherbed Lane, Apartment 8e, Bronx, NY 10452-1612. – Ed.]

15_featherbed_lane_bronx

One can see from this picture that obviously the landlord is making vast profits at 15 Featherbed Lane

While it’s impossible to generalize across a million apartments, I found this statistic compelling (New York Observer guest editorial, May 14, 2014; peach font)

The RGB itself measured a 5.7% 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, or sanitation) and social services (rent subsidies).

Because affordable housing always costs money, if government refuses to provide financial resources or subsidies, then owners and landlords are locked in a zero-sum or negative-sum game, and their dialog consists of people talking past one another:

– “despite the economic conditions which have been devastating to most of the city’s residents.”

If by ‘economic conditions’ Mr. Christian means cost of living, he’s belied by the Consumer Price Index for New York/ Northern New Jersey:

cpi_nyc

Typical household expenses have risen less than 2% a year for the last two years

It was suggested that previous rent increases were based on projections that never came true –

That’s not evidence because it’s hearsay, unsubstantiated, and unverifiable.

sheila_arcia_casa

Ms. Garcia is a community organizer at Community Action for Safe Apartments, which brought large demonstration contingents to the hearings

– and RGB member Garcia [Former resident advocate – Ed.] said they had to “right a wrong.”

Even though invalid in an evidentiary sense, all this is testimony in a political sense, in that it provides expressions of what people say they want, and allows those with prejudices to have them reconfirmed by selecting hearing the ‘evidence.’

n recent weeks, housing advocates have made the case for freezing rents. Among them was Christine C. Quinn, speaker of the City Council [and former mayoral candidate – Ed.], who noted that about 400,000 New Yorkers were out of work.

So let me get this straight: because New Yorkers are out of work, all landlords should get no rent increases? 

let_me_get_this_straight

Now let me get this straight

“It should be zero,” said Melida Martin, 66.

If that’s plausible, why not just bring back the Quartering Act? 

quartering_act

We’re going to house 400,000 unemployed New Yorkers here

Oh, wait, that’s Unconstitutional.

“I don’t feel that they deserve a hike in rent when people can barely afford what they pay now.”

Ms. Martin is facing eviction from her Sheridan Ave. apartment after a change in landlords

Ms. Martin’s testimony might be more compelling if (a) we had any idea what her income was, and (b) she wasn’t already in an eviction proceeding, which (this being New York) can only be for non-payment of rent.

This, on the other, is or could be demonstrated to be testimony (from the Rent Stabilization Association blog):

What tenants and the Mayor continued to ignore were the rising costs for owners that was summarized by a 5.7% increase in total building operating costs.  [I presume the RSA can back this up with member evidence. – Ed.] 

1E. The Rent Guidelines Board is comprised of the mayor’s political appointees

Hizzoner [Mayor de Blasio – Ed.] appointed six of the nine board members, giving him a big say over how they vote.

He’ll appoint the remaining three members later in his term to replace holdovers from the prior administration.

Some regulatory boards are intended to be non-partisan or bipartisan; not the Rent Guidelines Board, which (like the Boston Redevelopment Authority, about which I’ve posted at length) is governed in a manner to make it wholly an instrument of the mayor’s wishes – and candidate de Blasio made the claimed unfairness of the Rent Guidelines Board an element in his campaign:

A historic Rent Guidelines process has finally come to an end. Although the process typically begins in March, it felt as if this year’s RGB process began last summer when Mayor Bill de Blasio, then Public Advocate, promised to fight for a rent freeze while campaigning.

Rarely has a politician been clearer about offering a direct quid pro quo of political equity: Vote for me and I’ll freeze your rents.  Thus it was no real surprise when the mayor, on the eve of the vote, stated his desire for a rent freeze.

de_blasio_freeze

Freeze, you hear me?

The board meets tonight at Cooper Union to decide on increases for about a million rent-stabilized apartments.

Since its creation in 1969, it has never voted for increases less than 2% for one-year lease renewals and 4%% for two-year leases.

Yes, but that was before the new mayor offered his political testimony the day of the meeting:

De Blasio called for a rent freeze last year when he was campaigning for City Hall. But, until today, he has only made general statements this year about what the board should do.

So much for evidence and not prejudiced the independence – yet, in an event akin to a political mutation, the board in fact did vote an increase, albeit historically small at 1%.

The surprise of the evening, though, was not that scores of screaming tenants drowned out most of the proceedings or that landlord and tenant representatives were constantly at odds –

In the next section, we’ll come back to the proceedings’ incivility, which though a feature in political terms is a bug in terms of anything resembling sensible policy-making. 

– but that a rift had developed among the five public members who frequently act as a united coalition.

If there are five public members, two to represent owners and two to represent tenants, and all five public members vote in lock-step, then in effect everything is window dressing … and yet, astonishingly, that did not happen:


steve_flax

The hero of the piece: Steven Flax

[Continued tomorrow in Part 4.]

Create PDF    Send article as PDF   

Groundhog Day at the Rent Guidelines Board: Part 2, “These Horror stories”

July 16, 2014 | Affordability, Apartments, de Blasio, democracy, Housing, Markets, mobs, New York City, Politics, Rent control, Rent Guidelines Board, Rent Stabilization, Rental, Takings | No comments 169 views

[Continued from yesterday's Part 1.]

By:David A. Smith

gd_03_annie

Phil: [to Rita] I’m reliving the same day over and over.

– Groundhog Day

Yesterday’s Part 1 of this potentially-recursive post introduced the mechanisms of the New York City Rent Guidelines Board, whose mandate results in process without principles, where members can choose for themselves what goal they think the rent stabilization board should be pursuing.

Sources for this post

The Indypendent (May 11, 2005; powder-blue font)

New York Post (June 24, 2009; brown font)

New York Times (June 24, 2010; violet font)

New York Times (June 27, 2011; yellow font)

The Real Deal (December, 2011; navy blue font)

Rent Stabilization Association blog post (October 11, 2013; sepia font)

New York Observer guest editorial (May 14, 2014; peach font)

New York Daily News (June 11, 2014; emerald font)

New York Daily News (June 13, 2014; blue font)

New York Daily News (June 17, 2014; olive font)

New York Daily News (June 23, 2014; black font)

New York Post (June 23, 2014; teal font)

New York Post (June 24, 2014; orange font)

Curbed New York (June 24, 2014; lavender font)

New York Post (June 25, 2014; gray font)

Rent Stabilization Association blog (June 26, 2014; red font)

Crain’s New York (July 9, 2014; magenta font)

Such a system guarantees the parties will talk past one another, or shout over each other, and leaves the commissioners forced to decide how they think they should be deciding:

zero_percent_signs

Tenants were angry after the board voted against a freeze, but landlords were also disappointed that the hikes were the lowest in history.

Earlier in the meeting, another board member, Risa A. Levine, criticized elected leaders for not tackling rent reform and said it was “imperative that we look beyond the annual chimera” that the rent guidelines board meetings had become.

In a statement that won her fellow board members’ vocal support, Ms. Levine said the board was unfairly saddled with the impossible task of trying to balance the needs of tenants with the demands of landlords. The tenants are worried about paying bills, while the landlords face rising taxes and operational costs.

That was in 2010, and there has been no structural reform since then (or ever).

Jack Freund, a landlords’ representative at the Rent Stabilization Association, had warned that a rent freeze would have a chilling effect on the development of affordable housing.

jack_freund

Waiting until the affordable housing market freezes over

“It can’t have anything but a negative effect,” he said. “The rental market is going to go into a tailspin, there will be less investment, there will be fewer jobs generated, there will be fewer taxes generated.”

Though I sympathize with him, Mr. Freund is being illogical: the rent stabilized inventory is 100% finite (and shrinking), and affordable housing in New York City is being generated 0% from conventional property and 100% by incentives-laden new developments.  You can’t harm something that is already dead.

Invariably, she said, both sides have been left unhappy. It would be far more effective, she said, for low-income housing programs to be expanded.

Yes, it would – and that pitch should have been made more emphatically back in 1969.  By enacting Rent Stabilization, then enforcing it and never reforming it, NYC killed any hope of ever having a classical affordable housing market emerge, one with balance between demand and supply.  Instead, NYC is driven into the odd corner where the mayor must tub-thump for mandating new affordable housing because it’s too expensive to produce from city resources, in large part due to the housing shortage created by subjecting all normal landlords for four decades of structural abuse.

Landlords were nearly as irate as tenants — saying the hikes are so paltry they are practically a freeze.

“It is wrong, it is irresponsible and will ultimately stifle investment in our city’s most important affordable housing stock,” said Patrick Siconolfi, the executive director of the Community Housing Improvement Program, which represents owners of more than 350,000 units.

stifle_yourself_edith

Stifle yourself, Edith: we ain’t getting no affordable housing

1B. Rent Stabilization has no targeting, no means testing

Although the Rent Guidelines Board is only involved with rent setting, the inclusion of ‘cost of living indices’ as among the factors for it to consider places front and center both the question of affordability  and also that of eligibility.  If rent stabilization is justified, it must be on grounds of the public interest, meaning helping those who cannot find quality housing in the market – so there ought to be a definition of eligibility (wo can move in) and priority (whose needs are more urgent).  But there is not.

Every affordable housing program of any kind – local, state, or national – explicitly defines who is eligible and who is priority.  Not rent stabilization; it simply takes property rights for benefit of whoever can get them:

Others complained about the random allocation of the city’s remaining one million or so rent-regulated apartments. Landlords tell tales of rent-stabilized tenants who keep fancy cars and homes in the Hamptons.  [Or those who have four apartments, actually live in Los Angeles, or rent out their apartment as hotel rooms. – Ed.]

hickey_hulme

Eileen Hickey-Hule, rent-stabilized at 460 Greenwich Street, who listed her flat for $250 a night on Airbnb, and in an interview

in an “Artists Among Us” profile done by Hamptons.com said she lived in the Hamptons: “I have my own little studio there where I can do my work. Being close to the marina where my boat resides is very important to me.”


“There is no effort to determine whether someone living in rent stabilization needs a subsidy,” Mr. Silber said.

The absence of any eligibility or priority rules means that everything is fair game: a single person can testify about his or her poverty, telling a tale that may be shot through with lies or purest fantasy, and the Board is obligated to consider that testimony has having some evidentiary value. 

1C. Rent Stabilization makes almost no connection between rents and property viability

It appears (emphasis on the uncertainty) that under Rent Stabilization, Net Operating Income is supposed to track CPI inflation, and in practice that’s how the board has decided – but lumping everyone together means that any given moment many properties are in arrears or default.

vanessa_gibson

At least seeing two sides: Ms. Gibson

Vanessa Gibson, the lone City Council representative at the meeting, said she could see both sides of the fight — but was siding with the tenants.

 

“I respect our landlords and our building owners,” Gibson said.  “But then I hear these horror stories and it just makes sense.”

 

I’ll credit Ms. Gibson with recognizing the contradiction in putting rent viability and affordability in opposition.  Just as there is no connection between rents and any public-purpose affordability standard, merely a free-for-all of tenants claiming self-described and unverified poverty, there is likewise only the most tenuous connection between rents that are set and property viability. 

 

“This is a very unique opportunity where we could potentially have a rent freeze.”

Rent-setting is city-wide, with no distinctions drawn based on property operating cost, local property-specific real estate taxes or utilities or security or maintenance – so the result is a make-or-break rent with no individual-property exception or appeal.  So if your property falls into default, deteriorates, or pays you nothing for your labor and risk, that’s just too bad.

Several landlords said that while they viewed the changes in Albany as setbacks, they were equally bothered by the relatively small increases they were allowed to pass on to long-term rent-regulated tenants. Such increases, they said, often do not allow them to cover operating costs.

That’s from 2011.

“We are owners who put our life savings into our building,” Ms. Bernstein said. “We often make less than our tenants. We’re very middle class.”

nyc_median_rents

Is this fair?

Joseph Strasburg, president of the Rent Stabilization Association, which represents thousands of landlords, said 10% of the city’s low-income rental units were endangered because owners had fallen behind in real estate taxes and municipal fees.

That’s from 2010.  If it’s true, what kind of system compels 10% of the inventory to delinquency?

He said the city should subsidize tenants and give property owners tax credits, rather than leave the matter up to the Rent Guidelines Board.

There, of course, is a critical point: judicial rent control is simply a seizure of property rights that costs the city no money, whereas subsidizing residents or giving property owners tax credits, both of which are much better policy approaches, actually cost money.  Hence, to a populist politician with few scruples and no understanding of economics, affordable housing policy is hard while rent control looks like a free political win.

de_blasio_fiery

Are you questioning cheap political wins?

Last month, the board set the range it was considering for rent hikes at — 0% to 3% for one-year leases — a lower point than its staffers recommended, keeping open the possibility of a rent freeze.

If one is looking for cheap political wins, why bother with evidence? 

The board typically ends up approving rent hikes around the midpoint of its range.

That’s politics, not administration. 

[Continued tomorrow in Part 3.]

PDF Converter    Send article as PDF   

Groundhog day at the Rent Guidelines Board: Part 1, “A historic Low”

July 15, 2014 | Affordability, Apartments, de Blasio, democracy, Housing, Markets, mobs, New York City, Politics, Rent control, Rent Guidelines Board, Rent Stabilization, Rental, Takings | No comments 212 views

By:David A. Smith

gd_00_opening

Phil: Well, it’s Groundhog Day… again… and that must mean that we’re up here at Gobbler’s Knob waiting for the forecast from the world’s most famous groundhog weatherman, Punxsutawney Phil, who’s just about to tell us how much more winter we can expect. 

– Groundhog Day

Walking into the wrong multiplex theater by mistake is an experience of disorientation, either with CGI explosions (action movie), tearful deathbed reconciliations (chick flick), or unkempt gazing through a bridge-crossing bus window (indie), all leaving you wondering, What just happened? And Haven’t I seen this somewhere before? 

gd_02_glum

Did I come in at the wrong time?

And it was with that feeling that, while trawling through the New York City papers as I always do, I came across a story in the New York Daily News (June 23, 2014; black font):

Ignoring Mayor de Blasio’s recommendation, the Rent Guidelines Board declined to enact a rent freeze Monday night and voted instead for modest hikes.

The nine-member board voted 5-4 to allow landlords of the city’s nearly 1 million stabilized units to increase rents by 1% for one-year leases and 2.75% on two-year leases. 

godsil_5_4

Annals of the one percent?  Board Chair Rachel Godsil announcing the decision

Three holdovers from the Bloomberg administration also voted for the modest hikes, as did Sara Williams Willard, a de Blasio appointee who is supposed to advocate for landlords’ interests.

Wiley Norvell, a spokesman for the mayor, said de Blasio was glad the increases weren’t too steep. “The administration is heartened to keep any increase at a historic low,” he said.

protest_sign

Tenants protest hikes on rent-stabilized units.

That amounts to a monthly increase of about $9 for the average one-year lease, and about $25 per month for the average two-year lease.

Nine bucks a month?  One would think this good news for tenants, wouldn’t one? 

The hikes, which apply to leases that begin Oct. 1 or later, are the lowest enacted in the board’s history, but the refusal to pass the first freeze ever infuriated hundreds of tenants who packed the Cooper Union meeting.

Infuriated?, I wondered. 

Angry tenants stormed the stage after the vote while landlords also fumed, saying the low hikes weren’t much better than a freeze.

protesters_gather

Protesters gather at the final vote during the rent guidelines hearing at the Great Hall at Cooper Union on Monday.

With that, I fell down a four-year, seventeen-source rabbit hole:

tenniel_02_rabbit_down

Oh my paws and whiskers, where will this end?

The further down the hole I went, the more I found myself in a maze of twisty little passages, all alike:

paris_catacombs_skulls

Enter the gates of D’Enfer and find the souls of former Rent Guidelines Board members

Sources for this post

The Indypendent (May 11, 2005; powder-blue font)

New York Post (June 24, 2009; brown font)

New York Times (June 24, 2010; violet font)

New York Times (June 27, 2011; yellow font)

The Real Deal (December, 2011; navy blue font)

Rent Stabilization Association blog post (October 11, 2013; sepia font)

New York Observer guest editorial (May 14, 2014; peach font)

New York Daily News (June 11, 2014; emerald font)

New York Daily News (June 13, 2014; blue font)

New York Daily News (June 17, 2014; olive font)

New York Daily News (June 23, 2014; black font)

New York Post (June 23, 2014; teal font)

New York Post (June 24, 2014; orange font)

Curbed New York (June 24, 2014; lavender font)

New York Post (June 25, 2014; gray font)

Rent Stabilization Association blog (June 26, 2014; red font)

Crain’s New York (July 9, 2014; magenta font)

I’ve compiled the articles into a list of sources (see above), so that the story of NYC’s unbelievably dysfunctional rent regulation system can be presented properly, by the issues, and not by the annual circus that the process has become.

1. Procedure without principles

Phil: Can I be serious with you with you for a minute?

Rita: I don’t know. Can you? 

– Groundhog Day

Once upon a time (1974, to be exact), New York City enacted Rent Stabilization as a kinder, gentler (and, I believe, intended to be less obviously Unconstitutional) form of 1947’s NYC rent control.

Rent control versus affordable housing

·         Affordable housing comes from voluntary incentive-based bargaining.  In affordable housing, the government, as an act of conscious policy, creates financial incentives to private sector participants (developers, builders, owners, managers) to induce them voluntarily to create, improve, operate, or preserve the housing as affordable for an interval of time (often decades).  The bargain is explicit: Money in exchange for Affordable Rents/ Costs and Regulatory Oversight.

·         Rent control is a judicial seizure of property rights.  In rent control (by any of its many names), the government uses its police power to seize economic value from private property owners by making it illegal for them to do things they might normally do, such as raise rents, refuse to renew a lease, remove the unit from the rental stock (e.g. move into it or convert it to condominiums).  The owner’s participation is involuntary, it is uncompensated.  And it can be never-ending.

Rent control proponents know all of this, but they recognize that nakedly admitting to taking property rights looks bad, so they obfuscate the seizure with homilies about public need, claims of temporary emergency, specious claims that regulation doesn’t reduce market rent or value, or disingenuous review and appeal procedures.

It is a logical contradiction to be for affordable housing and also for rent control, because they operate under two entirely different belief systems about the rights of private property owners, and they have two entirely different impacts on market behavior.

From that messy birth, the Rent Guidelines Board has always made an impossible mandate that guarantees it can be nothing but a chaotic, virtually anarchic process leading to results guaranteed only to make everyone angry.

[A cynic would suggest a public-choice theory for the Rent Guidelines Board: the Mayor, the City Council, tenant organizers, and un-deserving rent stabilization renters.  The Mayor appoints the board but can say he does not control them.  The City Councilors can grandstand without consequence.  The tenant organizers can vilify landlords and claim perpetual crisis.  In this public-choice theory, the losers are the owners (to be sure), the City of New York’s housing supply, and any semblance of justice or policy.  Over the upcoming parts, readers are invited to evaluate the theory for themselves.  – Ed.]

antishenes

As the antithesis of credulity, I wasn’t the first cynic, and I won’t be the last

1A. The Rent Guidelines Board has no clarity of purpose

The Rent Guidelines Board’s political disingenuity is established in its name.  It doesn’t set guidelines, it sets hard caps on rent increases according to the following (umber font):

The Rent Stabilization Law sets forth the factors that must be considered by the Board prior to the adoption of rent guidelines. These include:

1.     The economic condition of the residential real estate industry in N.Y.C. including such factors as the prevailing and projected (a) real estate taxes and sewer and water rates, (b) gross operating maintenance costs (including insurance rates, governmental fees, cost of fuel and labor costs), (c) costs and availability of financing (including effective rates of interest), and (d) over-all supply of housing accommodations and over-all vacancy rates,

2.     Relevant data from the current and projected cost of living indices for the affected area, and

3.     Such other data as may be made available to it.

Those these factors are intriguing, and can be quantified (and the Rent Guidelines Board commissions annual research on these topics, for instance income and expenses, housing supply), in fact they guarantee food fights, because:

1. There is no stated goal.  What is the purpose of collecting information?  What is the Rent Guidelines Board’s goal?  Is the RGB trying to approximate market rents, to have Net Operating Income (NOI) rise with inflation, to enable owners to maintain and upgrade their properties to market quality (most don’t, because they cannot afford to), to promote new affordable housing (as if anyone would be foolish enough to develop new Rent Stabilized housing).

clueless_as_if

You are a snob and a half!

2. Insofar as goals are implicit, they are contradictory.  The first set of data seems to want the ‘residential real estate industry’ to be healthy; the second seems to want residents to have affordable cost of living.

RGB chair Rachel Godsil [said] the RGB’s job was to prevent “unjust, unreasonable, and oppressive rents.”  

‘Oppressive’ is a value judgment that betrays its speaker’s prejudices.

rachel_godsil

Godsil believes that your biases are implicit, and she can find them for you

She added that it was their job to “protect tenants” and “ensure owners.”

3. Nothing is means-tested.  ‘Cost of living’ varies by who you are, where you live, how much you make, and what you like to spend it on.  How is this supposed to be evaluated?  Are the income-verification police going to be poking into renters’ finances?  (Under the system, they do not.)

[Continued tomorrow in Part 2.]

PDF Printer    Send article as PDF