FINDING SEVEN DHCR AND THE ADMINISTRATION HAVE MADE VIRTUALLY NO EFFORTS TO CHANGE THE STRUCTURE OF THE LAWS DHCR IS CHARGED WITH ADMINISTERING NOR HAVE THEY MAINTAINED THAT ADDITIONAL FUNDS WOULD IMPROVE THE AGENCY'S PERFORMANCE. IN ADDITION TO ITS MANY OTHER PROBLEMS. DHCR HAS BEEN HINDERED IN ITS ADMINISTRATION OF THE RENT LAWS BY DELAYING THE ADOPTION OF A NEW BASIC CODE OF REGULATIONS FOR ALMOST TWO YEARS. The State's rent regulation laws are of vital interest not only to tenants and landlords but should be to DHCR, the agency which must administer them, as well. The laws impose duties and mandates upon the agency and to a great degree dictate the specific actions DHCR must take in its day-to-day operations. If particular statutory requirements pose burdens in carrying out the Division's general mandates, DHCR officials are in a unique position to identify those obstacles and suggest legislation which could eliminate them. DHCR staff who work with the State's rent regulatory laws on a daily basis have a unique and valuable vantage point from which to suggest positive changes which would improve the system and make its provisions fairer and easier to deal with for both owners and tenants alike. In order to propose bills to modify rent laws, DHCR must get the Administration to support its proposals and then work to get them enacted into law. When it comes to landlord/tenant laws, however, both the Administration and DHCR have chosen to remain largely absent from the legislative arena. Too Hot to Handle? During the 1987 legislative session which is now drawing to a close, DHCR and the Administration did not submit a single proposal to the Legislature dealing with any aspect of the rent regulatory system. Previous years have seen little more activity. In 1985, DHCR and the Administration submitted a handful of bills dealing with rent regulation statutes and then made virtually no efforts to get any of them enacted into law. In 1986, DHCR actually withdrew the most comprehensive proposal it had submitted the previous year, a bill to make uniform a number of penalties and procedures which DHCR must now administer in different ways depending upon whether an apartment is rent stabilized or rent controlled. The bill had the potential for making DHCR's enforcement of the rent regulatory laws easier by standardizing various enforcement actions used by the agency. In 1986, DHCR hired three consultants, (in addition to the consultant discussed earlier who dealt with other issues) and used their work product to propose a comprehensive set of recommendations to the Governor to consolidate and strengthen the State's rent regulation laws. Five months after the report's transmittal to the Governor, however, the Administration has not endorsed or repudiated any of its recommendations or indicated any timetable for doing so. We are not aware of whether the proposals are in fact being considered at all. Why have DHCR and the Administration chosen to play such a limited role in seeking legislative changes in the rent regulatory system which DHCR administers? In a recent interview with Dave Hepp of public television's Inside Albany, Commissioner Eimicke said the Governor had focused his energies on pushing for more money to build housing but had not played an active role in seeking legislation to reform the rent regulation system because of the difficulty of getting such legislation passed. From the telecast: Commissioner Eimicke: You only have so much capital and if it's clear from the outset that you're not going to get anywhere, I don't think it's practical, I would never advise him [the Governor] and I haven't advised him to jump into a situation when there's no hope of success. Dave Hepp: Doesn't a situation like that really call for spending some capital and being a leader? The situation is terrible, right? I mean you just told me that on a scale of one to ten, the housing situation in New York is a three. Commissioner Eimicke: Right, and I also told you that rent regulation had very little to do with that housing crisis. It's a very marginal impact. So it's a wrong place to focus your energies and in fact, the Governor [has] focused his energies where it should be, which was getting money for housing. There is no doubt that the development of programs to increase the supply of affordable housing is tremendously important and that the Administration has been active in recent years in developing a number of important initiatives to meet that goal. The functioning of the rent regulation system, however, also has a tremendously important effect on the lives of millions of New Yorkers. The committees thus found Commissioner Eimicke's advocacy of a position of non-involvement by the Governor in issues affecting the rent system disturbing. Landlord/tenant legislation, particularly legislation involving the rent regulation system, is among the most politically volatile subjects which the Legislature must consider. But while Commissioner Eimicke may believe that sitting on the sidelines makes the most sense politically, it is reasonable to conclude that such a strategy may also contribute to the continuing inequities and inefficiencies of the rent regulation system. DHCR and the Administration are in a unique position to push for changes in the State's rent regulation laws for two reasons. First, as was noted earlier, DHCR officials and staff are the parties best equipped to know what statutory changes would improve the efficiency of the agency. Given the problems documented in this report, the importance of enacting such changes cannot be overestimated. Second, given the fact that the Assembly and Senate are usually at odds on issues of rent regulation (the Assembly seeking to increase tenant protections and the Senate seeking to lessen the restrictions on owners which those protections necessitate), the Governor is in a unique position to bring the two sides together and use his office to support changes in the system which might benefit all concerned. These twin opportunities for enacting positive changes in the rent regulation system have remained largely unutilized by DHCR and the Administration. Perhaps partly as a result, the statutes DHCR administers have seen little change since 1983. Sufficient Funds to do the Job? Other than its underlying statutory authority, the major limiting factor on DHCR's ability to administer the rent program is the amount of money it is given to run the system. DHCR and the Administration have not expressed dissatisfaction with the more than $60 million the Legislature has provided to DHCR thus far. The Administration has proposed providing DHCR with less in its executive budgets than the agency requested initially. The Legislature in turn at various times has both cut the Administration's proposed rent regulation appropriations and added to them. DHCR officials on a number of occasions have said privately and to the media that they could do a better job with additional funds, but at the same time have both failed to spend monies appropriated by the Legislature and consistently maintained in official public statements that existing budgets have provided them with sufficient resources to run the system. A number of examples are illustrative. As was noted earlier, the Legislature provided a special $350,000 appropriation to DHCR in April of 1986 to hire additional attorneys and support personnel for the Enforcement Bureau. DHCR waited six months before even requesting authorization to utilize the funds and by February of 1987 had not yet spent any of them. The Executive Deficiency Budget passed in March of 1987 contained a cut of $593,000 from the FY'86-'87 appropriation originally provided by the Legislature to run the rent administration program. (The Deficiency Budget is annually submitted by the Administration at the conclusion of the April-March fiscal year in order to bring appropriated funds in line with actual expenditures.) When asked at budget hearings in February of 1987 whether the proposed DHCR rent administration budget for the fiscal year beginning April 1, 1987 was adequate to allow DHCR to properly run the rent regulation program, Commissioner Eimicke responded that the budget was "very tight" but that, "I'm confident we can manage within the resources we have." A letter from Assemblyman Grannis to the Governor in March of 1987 asking if any of the serious DHCR administrative problems which had been revealed at the Assembly's hearings could be remedied with additional funds elicited no response. The preceding chronology of budget statements and actions reveals one of two things: either the Division has enough money to do its job properly and statements to the contrary are merely excuses for the agency's poor performance, or the Administration and DHCR, in official public pronouncements, are not being completely forthright about the agency's needs. If the former is true, DHCR will have to look to changes other than additional appropriations to improve its operations. If the latter, the Administration and the agency should let the Legislature know how much is needed to get DHCR's house in order. Quiet grumblings, and unsubstantiated claims from DHCR officials about the need for more money without a consistent public position on the need for additional funds will never get DHCR the money it needs to properly operate the system. As with the statutes DHCR administers, the Administration and the agency should act forcefully to seek the funds they need in the budget process, or stop complaining that more money would help each time another agency failure is exposed. The New York City Rent Stabilization Code -- Almost Two Years In The Making DHCR has faced additional difficulties because until May 1st, 1987, it did not have an updated Code of administrative regulations defining the specific rules landlords and tenants must follow in dealing with the rent regulatory system. The Omnibus Housing Act of 1983 retained the requirement that the Rent Stabilization Association (RSA), a landlord trade group, promulgate amendments to the New York City Rent Stabilization Code. The Code is the body of administrative regulations which define the provisions of the New York City Rent Stabilization Law. The pre-1983 system for amending the Code, left in place at the insistence of the Senate majority in the Omnibus Housing Act, authorized the RSA to amend the code subject to the approval of the City's Housing Department (HPD). In 1984, the RSA submitted a proposed set of Code amendments to implement the changes made by the Omnibus Housing Act. The proposed revisions, however, were so blatantly biased in favor of the real estate industry and contrary to law that the City rejected them outright. The Legislature then enacted legislation which transferred the authority to promulgate Code amendments jointly to DHCR and HPD. The Governor vetoed this legislation because it did not provide DHCR with the sole authority to amend the Code. The following year, legislation was passed which eliminated HPD's official involvement. DHCR finally got sole authority to promulgate changes in the Code on August 2nd, 1985. The Legislature and public had hoped and expected that the updated regulations would be adopted shortly thereafter. DHCR had known for months that it would be given the authority to promulgate Code amendments and was well aware that its constituents were facing great difficulties in dealing with an outdated Code which did not reflect the current Rent Stabilization Law. Inexplicably, DHCR waited over eight months before submitting a draft Code for public comment. During public hearings in April of 1986, Commissioner Eimicke promised that the new Code would be adopted "within 45 days." DHCR instead waited another full year before adopting the final version of the Code. which became effective May 1st, 1987. Why the long wait? Part of the reason may have been that waiting made the most sense politically. Both tenants and owners raised vigorous objections to every Code draft circulated by DHCR. But over time, the political storms engendered by the new Code grew quieter as advocacy organizations became numbed by months of delays. By the time the Code was finally adopted, the initial protests from owners and tenants, while still keenly felt, had ceased to be a major issue for either the media or the Legislature and DHCR could finally adopt its Code without major political cost. The absence of an updated Code has contributed to the chaos of the rent system because neither tenants, owners or DHCR have had a consistent set of rules to go by in seeking to comply with the statutory requirements of the Rent Stabilization Law. But while the new Code may eliminate some of these difficulties, many of its substantive provisions may also impose new administrative burdens on DHCR. This is because the Code attempts to resolve many of the difficult policy issues DHCR was required to grapple with by authorizing the agency to decide a number of types of issues on a case-by-case basis within broad, discretionary standards. The agency will be given new authority to set rents, determine whether apartments are subject to regulation, authorize the modification of required services, authorize new terms in tenants' leases and decide apartment succession rights cases with fewer specific standards, in many cases, than were provided in previous versions of the Code. Given the difficulties DHCR experiences in adjudicating its already large caseload, the agency's ability to effectively administer these new grants of authority remains a matter of great concern.