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.
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?
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.
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.
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.
With that, I fell down a four-year, seventeen-source rabbit hole:
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:
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)
New York Observer guest editorial (May 14, 2014; peach font)
New York Daily News (June 11, 2014; emerald 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)
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?
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.]
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).
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.
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.]