Bleak House: Introduction

INTRODUCTION

THE STRUCTURE AND FUNCTION OF NEW YORK'S RENT REGULATION SYSTEM

There are few State services which directly impact upon the lives
of more people in a more crucial way than the services provided
by New York State in administering its rent regulatory system.

Rent regulation laws have existed in various forms in New York
since World War II. The basic purpose of these laws is to protect
tenants from dramatic, oppressive rent increases and unjust
evictions. The Legislature has enacted and periodically renewed
these laws because of the acute housing shortage which has
existed and exists today in the New York City metropolitan area.
This housing shortage has created a market where tenants, without
comprehensive rent regulations, would have no protection against
spiraling rent hikes and could be evicted without cause at any
time.

Rent regulation in New York today operates under two basic
systems. Rent Control, the historically older and more
restrictive form of regulation, affects approximately 218,000
units in the City of New York and 40,000 units in eight counties
outside the City. Rent increases are determined pursuant to
formulas set by the State which generally allow owners to
increase rents by 7 1/2% each year plus additional amounts if
improvements are made to a building. Tenants are protected
against eviction except in certain specified circumstances.

Rent Stabilization was first enacted in 1968 and covers 943,000
units in the City of New York and 80,000 units in municipalities
which have chosen to be covered by its provisions in Nassau,
Westchester and Rockland Counties. Annual rent adjustments are
set by local rent guidelines boards and landlords are entitled to
receive additional rent increases if improvements are made to a
building. As with Rent Control, tenants are protected from
eviction except in certain limited circumstances.

Prior to 1983 the State's rent regulation laws were administered
by several agencies. Rent Control and Rent Stabilization outside
the City of New York were run by the State Division of Housing
and Community Renewal (DHCR). Rent Control in New York City was
administered by the City's Department of Housing Preservation and
Development (HPD). And Rent Stabilization in the City of New
York, by far the largest of the systems, was run by the New York
City Conciliation and Appeals Board, a quasi-governmental body
funded by dues collected by the Rent Stabilization Association, a
landlord trade group.

The Omnibus Housing Act of 1983, (Chapter 403 of the Laws of
1983), made dramatic changes in the State's rent regulation laws,
eliminated the City Housing Department's and the Conciliation and
Appeals Board's roles in the system and centralized rent
administration within DHCR. In approving the Omnibus Housing Act
in July of 1983, the Legislature and the Governor expressed the
hope that the new unified administrative structure established by
the bill would greatly improve the operation of the rent
regulatory system and make its provisions easier to deal with for
both landlords and tenants alike. As Governor Cuomo noted in his
approval memorandum:

     "The public as a whole will be well served by
     administration of all rent control and rent
     stabilization -- for the first time -- under one
     roof."

Upon assuming administration of the rent regulatory system on
April 1, 1984, DHCR inherited a 104,000 case backlog from its
predecessor agencies. An additional backlog was created in the
first months of the agency's administration because of statutory
changes which required landlords to register apartment rents and
services and allowed tenants a limited period of time in which to
challenge the legality of registered rents.


DHCR'S VITAL ROLE

DHCR today, as the sole administrator of the State's rent
regulation laws, is responsible for processing and resolving
tenant complaints and landlord applications covering every aspect
of the rent system. It would be difficult to overestimate the
impact DHCR's work has on the millions of New Yorkers who live in
or own rental housing.

When tenants face harassment from owners who deliberately cut off
vital services or threaten their health and safety, it is DHCR
that is charged with protecting them. When landlords illegally
charge tenants more rent then the law allows, it is DHCR's
responsibility to enforce the laws which prohibit such conduct.
And when tenants need to know what their rights are and whether
they are legally protected from eviction and unaffordable rent
increases, DHCR is the agency charged with providing the answers.

Landlords must apply for approval from DHCR to receive many types
of rent increases, some of which are essential for the continued
viability of their businesses. And they must depend on DHCR to
resolve complaints made against them by tenants in a fair and
consistent way.

DHCR, in short, is mandated by law to play a critical role in
ensuring that citizens of the state have decent, safe and
affordable places to live.


COMPLAINTS OF A MISSION FAILED

Growing numbers of complaints from a wide range of tenants,
owners and legislators that the Division was failing to fulfill
its legal mandate prompted the Assembly Housing and Oversight,
Analysis and Investigations Committees to undertake an
investigation of DHCR's administration of the rent regulatory
system.* The investigation was undertaken for three basic
reasons.

First, a consensus seemed to have developed among almost everyone
who dealt with the system that something was fundamentally wrong
with the way it was working. Chaos and disarray seemed to be the
order of the day in dealing with DHCR and, almost three years
after the agency's takeover of the system, the problems seemed to
be getting worse rather than better.

Second, Assemblyman Jerrold Nadler (D-L Manhattan), in October of
1986, charged that not only was the agency chaotic, it was
systematically violating the rent regulatory laws as well.
Assemblyman Nadler called for an investigation of the agency's
administration of the rent regulatory system and the-joint
committees undertook to review a number of the charges made by
the Assemblyman.

Third, the response from DHCR Commissioner William B. Eimicke and
other officials to the growing crescendo of criticism about how
the agency was functioning strongly suggested that increased
oversight from the Legislature was necessary. DHCR's public and
private portrayals of its operations increasingly took on the
characteristics of an Alice in Wonderland fantasy. For them,
nothing was wrong at DHCR and the thousands of tenants, owners
and legislators who thought so just did not understand what was
going on. Everyone in the Administration seemed quite satisfied
with the job the agency was doing and did not see any need to
take action to improve the situation.


THE INVESTIGATION

During a five-month investigation which included two days of
public hearings, the committees heard testimony and received
letters and phone calls from more than two hundred tenants,
landlords, legislators, attorneys and social service providers
documenting thousands of specific interactions with DHCR. The
testimony and evidence touched upon virtually every aspect of
DHCR's case-processing system.

A more detailed investigation was made of the internal
functioning of one of DHCR's most important units, the Columbus
Circle office where the "case backlog" is processed. This
investigation, which included testimony under oath from four
state rent examiners responsible for processing cases and the
Director, Deputy Director and a former supervisor of the backlog
unit, provided a disturbing glimpse into the internal operations
of the agency. Based upon the testimony received from the
Division's managers and from tenants, landlords and other persons
who deal with DHCR on a day to day basis, it became clear that
the operations of the Columbus Circle office were typical of the
operations of the agency's rent regulation program as a whole.

The conclusions of this report are based on the sworn testimony
of witnesses who appeared at the Assembly's public hearings, on
the hundreds of phone calls and letters the committees received
during the last several months from tenants, owners and others
who did not testify at the hearings and a staff review of
documents, memoranda, and reports from both inside and outside
DHCR about how the rent system is working. The investigation was
limited to DHCR's administration of the rent regulation program
and did not examine the other housing programs run by the agency.


WHAT THE PUBLIC HAS A RIGHT TO EXPECT FROM DHCR

There is no doubt that DHCR has a difficult job. Running the
State's rent regulatory system involves dealing with what has
been not so jokingly referred to as one of the most passionate
relationships in New York life -- the relationship between
tenants and landlords. The Legislature and the public cannot
expect to be happy with every decision DHCR makes or agree with
every task the Division performs. But they have a right to expect
and an obligation to demand that the agency operate in a lawful
and organized manner.

DHCR should communicate with its constituent groups forthrightly,
apply its standards uniformly and manage itself efficiently. If
changes are needed in the laws DHCR administers or the agency
needs more resources to do its job properly, it should vigorously
pursue them. And it must always operate with the knowledge that
it exists to serve and protect the public and that when it is
failing in that duty it is failing to uphold the mandate it was
established to carry out.

The investigation described and the findings detailed in the
succeeding pages were made with these standards of behavior in
mind. It is our hope that the results of the investigation will
lead the Administration to take a long hard look at DHCR, make
the changes necessary to improve its functioning and in the end,
result in an improved quality of life for the millions of New
Yorkers whose futures in large part depend on the continued
viability of New York's rental housing.


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*  Assemblywoman Rhoda Jacobs was the Chairperson of the Assembly
Oversight, Analysis and Investigations Committee during the time
this investigation was conducted. The Committee is now chaired by
Assemblyman Brian Murtaugh.