Towers and Tenements: Smoke and Mirrors

Village Voice, April 30, 1997
Dr. Charles de Seve has the gift of finding a silver lining where most others see only a cloud. While tenants were downright gloomy after learning of deSeve's much hyped March report predicting steep rent hikes if state politicians scrap rent laws, de Seve found the sunny side.

The Washington, D. C.based economist, who has made a career out of massaging numbers for major industries, was hired by landlords to study the economic effects of rent deregulation. He predicted that after an initial rent rise averaging 14 per cent citywide -- with spikes as high as 50 per cent in some Manhattan areas -- landlords would certainly sink $4 billion into improving apartments. That, de Seve predicted, would spur another $5.3 billion in "net new economic activity." Never mind that de Seve's forecast is shunned by those who know the market; one source who is friendly to landlords called de Seve's report "totally unrealistic,' and added, "It doesn't help the owners to put out such ridiculous numbers." The Washington economist apparently remains undaunted.

But de Seve, who runs the American Economics Group, isn't always such an optimist. While people across the country were lauding last year's decision by the federal Food and Drug Administration to curb cigarette ads aimed at teens, de Seve was lamenting it. In his 1996 study, paid for by the Tobacco Institute, de Seve predicted that the price of not pandering to teens with tobacco included a job loss ranging from 31,807 to 92,501 in advertising, printing and publishing, entertainment, and apparel. In dollars, de Seve calculated such a move would cost somewhere between $777 million and $2.3 billion in business, and up to $7.9 billion in "lost economic output" for the country. De Seve did not consider advantages such as saving lives or the economic benefits of reduced health care costs.

And while de Seve dubbed rent regulations a "perverse subsidy in his March report, he apparently found nothing untoward about advocating for state tax breaks for New York's hard-pressed harness track operators. In 1987, the industry hired de Seve to analyze their business; he concludcd that the horses were being savaged by the state's own Lotto and Off-Track-Betting parlors. The harness industry used de Seve's data to push for continuing a tax-break package then worth $11 million a year.

De Seve, who has also worked as a consultant to the gambling industry -- including dog racing in West Virginia and casinos in Kansas City -- did not return calls.

Rent Rising

Presuming that Albany does not scrap rent stabilization altogether, tenants can reasonably expect rent hikes ranging from 1.6 to 2.5 for one-year leases and 2.2 to 4.5 per cent for two-year leases beginning this fall. Those parameters were presented Monday at the city's Rent Guidelines Board, which each year sets the rate of rent hikes for rent-stabilized apartments and single-room occupancy hotels.

The hikes are based in part on annual studies of the real estate market done by the RGB's staff. On Monday, it presented the Price Index of Opcrating Costs, which measures a range of landlord expenses, everything from taxes to toilet seats, to determine the cost of running apartment buildings. This year, it rose 2.4 per cent.

The RGB begins a series of public hearings on the hikes next week. Its final vote is June 23 -- the hikes take effect in October.