N.Y. Lawmakers Take Up Bill to Keep Rent Rules for 6 Years

New York Times, June 20, 1997
ALBANY, N.Y. -- The Legislature approved a set of laws Thursday night to keep the system of rent regulation in place for six years while allowing landlords much larger rent increases for vacant apartments, ending the Capitol's most wrenching struggle in years.

Gov. George Pataki and leaders of the state Senate and Assembly announced an agreement early Sunday morning, hours after the rent laws had expired, but it was not until Thursday afternoon that a bill was ready for passage.

In the interim were four days of grueling, three-way negotiations to settle dozens of details -- with landlords' and tenants' groups trying mightily to win in the bill-drafting what they had not at the negotiating table.

The question that loomed largest for the last two days was how much latitude property owners would have in qualifying for a provision that eliminates rent restrictions on some vacant apartments. Ultimately, Republican lawmakers won provisions that both landlords and tenants say could double or triple the number of apartments deregulated under those rules, though the total will still amount to just a few thousand a year, mostly in Manhattan.

The new laws represent the most significant changes since 1971 in the system that governs rents on 1.1 million apartments, nearly all of them in New York City.

Landlords, who were backed by Pataki and the Republican leaders of the Senate, won the right to substantially larger rent increases for vacant units, at least 20 percent, and the removal of all rent limits on some high-rent apartments and some high-income tenants. They also gained a provision requiring tenants to continue paying rent during court disputes with landlords, and measures making it easier to force tenants out of almost empty buildings to make way for demolition.

But tenants and their allies, led by Democrats in the Assembly, staved off the landlords' effort to alter fundamentally, and eventually eliminate, the half-century-old system that has become a sacrosanct part of New York City's life and politics.

"This is a historic bill, and it really constitutes sweeping change, and yet at the same time protects tenants under a system that they've depended on for 50 years," said Pataki, adding that he expected to sign the bill into law Friday. "I have no doubt that there will be the extremes of both sides who are dissatisfied, but this is a win for the overwhelming majority."

The resolution means that almost all people in rent-stabilized or rent-controlled apartments will be able to keep their rent protections for as long as they keep their homes, and that if they die, their successors will inherit the protections along with the apartments.

The new laws will, however, limit such succession to one generation past the current occupant or, in the future, one generation past the original leaseholder. And they rule out succession by aunts, uncles, nieces, nephews and cousins, who had previously qualified.

Rent-stabilized units will remain rent-stabilized even when they become vacant, unless the rent is $2,000 or more, in which case the owner will be allowed to charge whatever the market will bear. But upon vacancy, landlords will be able to raise rents much more steeply. Until now, the New York City Rent Guidelines Board, which sets the annual rent increases for continuing tenants, has also set a maximum increase for vacant units -- 9 percent this year and 16 percent last year.

The new law allows an increase of at least 20 percent on vacancy. For apartments whose previous tenants lived there for eight years or more, the ceiling will rise an additional six-tenths of 1 percent for each year -- an additional 12 percent if the renter had been there 20 years.

Rent-controlled apartments -- those units in buildings built before 1947 that have been occupied by the same tenants since 1971 or before -- will become rent-stabilized when they become vacant, as has been the case since 1974.

Since 1993, under a provision called luxury decontrol, tenants who earn $250,000 a year or more in two consecutive years, and who pay $2,000 a month or more in rent, lose all rent protections, allowing landlords to charge whatever the market will bear. The new law will lower the income threshold to $175,000, but will not change the rent threshold.

Apartments have also been subject to deregulation when they become vacant if the rent is $2,000 or more, and the new laws will significantly expand that provision.

Landlords are allowed to raise the rents of vacant units by passing on the cost of renovations, at a rate of $1 on the monthly rent for every $40 spent. Now, they will be able to use that provision and the new vacancy allowance to push apartments past the $2,000 rent threshold and qualify for deregulation.

"It's very important," said Steven Spinola, president of the Real Estate Board of New York.

The bill also provides for criminal penalties for landlords who harass tenants, a response to the fear raised by renters that allowing rents to rise steeply when apartments become vacant would prompt owners to force people out.

The Assembly approved the measure 93 to 53, with 88 of the 94 Democrats present voting yes and 47 of the 52 Republicans voting no.

In the Senate, the vote was 88 to 2, with little discussion. The dissenters were Efrain Gonzalez Jr., and David Rosado, Democrats from the Bronx.

During the Assembly's hourlong debate, Vito Lopez, a Brooklyn Democrat who is chairman of the Housing Committee, said he had attended 26 community meetings this year, and "overwhelmingly, the people there asked us to do something and keep this system in place."

Assemblyman John Faso, a Republican from Kinderhook, said, "The government should not set prices of commodities, whether it is bread or widgets or housing."

For state government, the passage of the bill ended a remarkable period of rancor and paralysis that began last December, when Joseph Bruno, the Republican majority leader of the Senate, vowed to do away with regulation within a few years.

Pataki entered the fray on May 11, proposing to eliminate rules from apartments as they become vacant, a system known as vacancy decontrol that would gradually deregulate the entire market. He quickly became the focus of attacks from Democrats and tenants' groups, and after he dropped his vacancy decontrol demand, people in the real estate industry accused him of caving in to political pressure.

To the Democrats who control the Assembly, most of them from New York City, defense of the system was the paramount issue all year. As part of their strategy to beat back first Bruno's and then Pataki's plans, they refused to act on the state budget -- now 80 days overdue, the second latest in history -- or on the governor's proposed overhaul of welfare policy, or on property tax relief that Pataki and the Senate had sought.

Despite the concessions, many Democratic legislators have quietly been calling the outcome a triumph over forces that would have ended the system, but Thursday evening, the Assembly speaker, Sheldon Silver, still refrained from claiming the victory for himself and his colleagues. "It is a tremendous victory for the 2.7 million regulated tenants in the downstate region," he said.

Tenant organizers, who waged an aggressive public-relations campaign against Pataki and Bruno, were less restrained, though they were disappointed by some provisions. The Rent Stabilization Association, the city's largest landlords' group, called the outcome a mixed bag, a combination of needed changes and failed opportunities.

Bruno said it had been worth the trouble. "I think that as time goes on, there will be a recognition that substantial changes were made in a system that is 50-some years old, and more changes will have been made in a positive way, bottom line, for everybody, than ever have been made in 50 years," he said.