RGB 1998 Movers Report -- June 2, 1998 version

Note: this report was suppressed by RGB Chairman Edward Hochman in that it shows what most NYC residents already know: rents are out-of-control. This report uses 1996 data as a comparison to recent movers while the report officially released by the RGB, dated August 6th, uses 1997 registration data and omits the 1996 data. As such, the conclusions reached by the later report show a less dramatic increase in rents. RGB tenant members Ken Rosenfeld and David Pagan brought a suit to force the RGB to release this report.

Neither report takes into account other factors undermining tenant protections. The number of units deregulated from "high income/high rent" pale in comparison with the wholesale and government-sanctioned dismantling of the registration system, which is fundamental to the rent regulatory system. Although it is true that changes to the law removed meaningul penalties for failure to register in 1993 and failure to pay the registration fee in 1997, what really matters is that the state agency, Division of Housing and Community Renewal (DHCR) simply does not require owners to register. There can not be regulation if you decide not to keep track of the buildings. In 1994, the DHCR rent registration database contained nearly 18,000 rent regulated buildings (not units) just in Manhattan. By 1996, that figure had dwindled to approximately 14,000. That's not a loss of 4,000 units -- that's buildings.

To:        ALL RGB Members
From:    Edward S. Hochman
Re:        Release Of The Draft Report Which Used 1996 Data

Enclosed in this packet is the "Recent Movers Study," which incorporates the most recent (i.e. 1997) DHCR data. Thus, that report is as Current as possible in its ana1ysis, given the available data.

As members are aware, Messrs. Rosenfeld and Pagan sued the RGB to compel the release of the original draft which had used older, less reliable 1996 data. Indeed, Justice York for reasons which are open to speculation ordered the "1996" report released prior to the "1997" report. I objected to this ruling for a number of reasons, not the least of which was that I thought it was poor public policy for any agency to release two conflicting reports on the same matter, especially when in but a few days a far more accurate report would supersede the earlier, less reliable one. As analogies, I cannot imagine any wisdom in the FBI issuing two conflicting sets of crime statistics, the Federal Reserve Board issuing two conflicting sets of inflation numbers, the Center for Disease Control issuing two conflicting sets of infection rates, HUD issuing two conflicting sets of housing statistics, the Census Bureau issuing two conflicting sets of population data, HPD issuing two conflicting Housing Vacancy Survey studies, etc.

For this and other reasons, the Corporation Counsel has appealed Justice York's decision.

While I am confident Justice York's decision would be readily overturned on appeal (as was his previous one), prudence dictates that the RGB and Corporation Counsel bring this matter to any reasonably acceptable conclusion.

Now that the finalized, accurate "1997" report has been released to the public, I have fewer qualms about releasing the less accurate "1996" draft report. While I think it is somewhat inane for any court to order a draft report to be released along with a modified, final report on that same subject, in order to bring this law suit to a conclusion I am willing to do so

Thus, enclosed is a copy of the "1996" draft report. Note that the release of this 1996" draft actually obviates the last remaining reason for attempting to satisfy Justice York's recent ruling by holding a meeting on August 18th, but I think we would be wise to proceed with that hearing anyway.

Thus, despite my reservations about setting any precedents by releasing both a draft and a final report on the same topic, at this juncture both the "1996" draft and the "1997" final reports are equally open to public inspection

Again, please be prompt for the August 18th meeting, and note again that it will be conducted in far stricter accordance with Roberts Rules of Order than have been many prior RGB meetings.

STAFF
Executive Director Douglas Hillstrom
Research Associates Andrew McLaughlin, John Choe, Anita Visser
Public Information Cecille Latty
Office Manager Leon Klein
Research Assistant Karen Destorel

NYC RENT GUIDELINES BOARD
51 CHAMBERS ST. SUITE 202
NEW YORK, NY 10007
(212)385-2934 FAX: (212)385-2554
nycrgb@aol.com . www.nycrgb.com

This report was originally intended to be an analysis of the impacts of the Rent Regulation Reform Act of 1997, and in particular the vacancy "bonus" provisions of the Act. The lack of 1997 rent registration data, the unavailability of comparable data for previous years, and insufficient time (partly due to an overwhelming response to the Recent Mover Survey) have made our most ambitious initial goal untenable, and this study cannot and does not attempt to estimate the direct impacts of the Rent Regulation Reform Act of 1997. Even so, this survey does provide the Board with important information regarding the current economic condition of the residential real estate market, as mandated by law.

It is important to note that this study ONLY analyzes rents, changes in rent, and other characteristics of rental apartment units vacated and reoccupied since June 15, 1997. Only about 12% of all rental units (one in eight) have had a vacancy since June 1997. Thus, the 88% of apartments which have had no change in tenancy after the passage of the Act have not been affected at all, and the conditions of these units are not analyzed in this study. The full impact of the Rent Regulation Reform Act of 1997 will not be felt for some years, as apartments become vacant and are reoccupied.

The findings of the report can be summarized briefly. First, it is clear that the Rent Regulation Reform Act (and other preexisting aspects of the Rent Stabilization Law, such as "1/40th increases") and a strong local economy, have resulted in substantial increases in rent for vacant units. Rents on vacancy have risen sharply, particularly in Manhattan. The substantial rise in rents for vacant units will widen the disparity between rents paid by long-time renters and recent movers, at least in the short run.

Second, it is apparent that the increases actually occurring under the law exceed the anticipated impacts of "vacancy decontrol." In a paper written by Edgar O. Olsen in November 1997, he estimated that if vacancy decontrol were enacted, the median percentage increase in rent for a stabilized apartment from 1996 to 1998 would be 4.4% citywide and 15.8% in Manhattan. This study finds increases of 17% and 26% respectively, substantially higher than estimated by Olsen. Whether the discrepancy is due to faults in the Olsen study or a dramatic rebound in the local economy we cannot say at this time.

Finally this report shows that "luxury decontrol" is occurring quickly in Manhattan, if not elsewhere. We estimate that 8,400 vacant units have been deregulated in the past year (i.e. June 1997 through May 1998).

Initially, RGB staff considered three methods for surveying the target population; renters who moved to a dwelling in New York City after June 15, 1997. All of these tenants' lease terms would be under the provisions of the 1997 Rent Regulation Reform Act.

The three methods evaluated by RGB staff on the basis of cost, coverage and representativeness were:

For a better understanding of the terms used in the following sections, see Terms and Definitions, page 8

The first method, Random Digit Dialing (RDD) employs live operators with computer-assisted telephone calls to a given universe or population. Using this method, the 'universe' was defined as New York City' residents who had telephones in the 212 or 718 area codes, nearly all New York City households.

The target population, renters who moved from June 15, 1997 to March 1998, is a fairly small subset of the larger population of New York City. About l0% of all New York City residents move on average each year (about 272,000 households). Because the study was to cover only renters who had moved in the eight months after the 1997 Rent Regulation Reform Act passed, this further reduced the number of movers to 180,000 households. Roughly 80% of these movers are typically renters (about 150,000 households). Thus, the target population ultimately eligible for the survey was computed to he about 5.4% of all New York City households.

A crucial factor in determining the cost of RDD is the incidence rate, or the percentage of times a contact is expected to reach someone eligible to take the survey. Because the target population was only 5.4% of all NYC households (i.e. recent movers), only 1 in 18 calls would be applicable without accounting for people who refuse to participate. Assuming a 50% cooperation rate, only about 1 in 36 calls were likely to result in a usable survey. Then, adding follow-up contacts, over 38,000 calls would need to be made to achieve the final required sample of 1,070 completed surveys.

Although RDD is the most thorough method in terms of coverage and representativeness (few households have no telephone and unlisted numbers are not excluded) the extremely low incidence rate made using Random Digit Dialing costly and time prohibitive.

The second method considered by RGB staff, a Telephone Survey using a purchased list of recent movers, involved procuring such a list from a professional list broker, then performing the survey with live operators and computer assisted data tracking. The advantage of this method over RDD was that a targeted list would contain only people who moved to a New York City address during the given period, raising the incidence rate to roughly 80%' That is, 4 out of 5 calls to names on the list would reach households moving during the desired time period. Again, figuring a 50% cooperation rate, 2 out of 5 calls would be expected to result in completed surveys.

While several list brokers compiled lists of recently moved New York City residents with over 125,000 names from which to draw a sample, two problems came to light. First, few of the lists contained telephone numbers and those that did were prohibitively expensive. Second, when the sources for the lists were examined, the results did not appear to be representative enough to make reliable estimates about the larger population. Typical sources included credit bureaus, mail order catalogs, voter and auto registration, deeds, and magazine subscriptions. Despite the variety of sources, many recently moved residents would not appear on these lists, and results would have been duly biased.

A sample drawn from a commercial list would be likely to have significant coverage error, which occurs when the original list does not include all elements of the population researchers wish to study. In addition, the expense of purchasing a list and employing a computer assisted telephone surveying service rendered this method untenable, though the incidence rate would have been greatly improved.

Finally, RGB staff considered the mail survey method. Because of the coverage problem identified above, the prospect of performing a mail survey using a list from a broker was rejected. In searching out an alternative list of recent movers, RGB staff obtained a complete list of addresses of recently occupied apartments drawn from a list of customers with utility subscriptions. Names were not included. The list proved to have very little coverage error because it contained all households who subscribed to utility service by individual contract within the RGB's targeted period.

Having obtained a reliable list of recent movers, staff considered various mail survey methods. The multiple contact method was chosen, which uses 4 to 7 strategically worded and timed mailings and stamped return envelopes expected to garner high response rates (about 50- 60%) from the general population.

The bulk of the expense using the multiple contact method is comprised of mailing costs. First class mail is used in order for the mailings to be received according to schedule and for staff to retrieve undelivered mail. Nevertheless staff calculated that a mail survey based on the afore-mentioned list and performed using the multiple contact method would meet the RGB's criteria--thorough coverage and representativeness, at the lowest cost.

RGB staff sent out four timed mailings over five weeks in the Spring of 1998 to a starting sample of 8,200 households drawn from the utility customer list (more on the sample sizes below). The mailings included the following:

Finally, staff followed up with individual letters to respondents who returned surveys with incomplete or unclear data.

The sample size, or the number of complete, usable surveys required for reliable survey results, was 1,070 for the Recent Mover Survey. This number is determined first by the size of the overall population to be studied. In this study, the population size (the 180,000 households, or the 'universe' that we expect to have moved in New York City between June 15, 1997 and March 1998) is large enough to be only weakly related to the sample size.[1] The number is also determined by the desired level of confidence and precision of the estimates to be found. Staff chose the 95% confidence level +/- 3%. (See below for further explanation of confidence intervals).

The starting sample is the number of surveys selected randomly from the master list or universe. RGB staff arrived at this number, 8,200, by making assumptions about what would happen during the survey process and deliberating backwards from the required sample size, 1,070. RGB staff assumed that 10% of the starting sample would be undelivered mail; 10% would be incomplete or unusable surveys, 20% would be owners and thus ineligible for the survey; and finally a very conservative response rate of 20% was figured in. Using these assumptions, staff computed a starting sample of 8,200 initial surveys to garner a final sample of 1,070 complete usable surveys. The sampling from a list had approximately 173,000 addresses from which a random sample of 8,200 addresses were drawn.

The questionnaire used in the Recent Mover Survey (see Appendix), was designed with the goals of brevity and clarity and with a visual style that is shown to produce high response rates in survey methodology research. The Recent Mover Survey contained a total of seventeen questions.

Two long-established housing surveys, the Housing and Vacancy Survey (HVS) performed by the Census Bureau in New York City, and the Rental Housing Mail Survey used by the U.S. Department of Housing and Urban Development (HUD) in performing Fair Market Rent studies, were used as models for several of the questions in the RGB survey. These survey questions have been honed to obtain information about housing in a way that produces clear and accurate results.

The look of the survey, placement of questions on the page, and type style were designed according to recommendations of survey research experts. While the survey did contain some sensitive questions that were essential to the study, such as the amount people pay in rent, security deposits and up- front fees. RGB staff decided not to include questions about race or income which tend to discourage response, even in an anonymous survey.

RGB staff considered several methods to make provision for Spanish and Cantonese speakers in the survey, the two most predominant languages spoken after English in New York City. Staff decided to include request cards in the survey mailing and to provide a Cantonese or Spanish survey to all who requested them.

A version of the survey was also available on the RGB web site for sample households to fill out on line. The web address for the survey was not advertised to other visitors to the web site so only sample households with valid ID numbers could participate.

The response rate for the Rental Housing Survey was 47%. The response rate or the proportion of people in a particular sample who participate in the survey, is calculated by subtracting the number of people/households known to be ineligible from the starting sample and dividing the result by the number of surveys received. The Recent Mover Survey response rate is as follows:

Starting Sample	8,200
Undelivered Mail	-551
Number of Owners[2]	-1,558
Total eligible for survey	6,091
Surveys Returned:	6,091
divided by 6,091 = Response rate of 47%

The final sample, or number of completed usable surveys received by RGB staff for the Recent Mover Survey is 2,223. This number is arrived at by cleansing unusable or incomplete surveys from the total returned. There were 497 surveys rejected because respondents moved before the Rent Act was passed, and 141 surveys were rejected because they had too few complete questions or provided unclear responses.

Surveys Returned:	2,861
Unusable, moved before Rent Act passed:	- 497
Unusable, incomplete/unclear data:	- 141
Final Sample	2,223

The sample of 2,223 surveys is more than double the number required (1,070) for making statistically reliable estimates about the target population. The final sample of 2,223 surveys means that RGB's results are even more reliable than results that would be drawn from our required sample of 1,070 surveys (see Confidence Intervals below). This occurs because the closer one moves from a survey, (asking a subset of people to get answers about a larger group) to a census (asking everyone) the more accurate the results, provided the survey returns are not biased.

English Survey:	2,185
Spanish Survey:	21
Internet Survey:	13
Cantonese Survey:	4
Total:	2,223

Confidence intervals are a measure of reliability of estimates found in a study. Once staff received survey returns, the following confidence intervals were calculated for median rent figures. By the end of the survey, 2,223 surveys, more than double the required amount of l 070, were received and analyzable. Based on the final sample size of 2,223 we can say that 95% of the time, the true median rent figure will be within the given range of observations below. Estimates found for subgroups, such as the median rent for stabilized tenants in Brooklyn, will have less precision, i.e. the true figure will be found in a larger range, because there are fewer observations to draw from. The receipt of many more than expected surveys has the effect of making the confidence intervals tighter, or simply, makes study estimates more reliable.

Location	Median Rents	Range of Observations that contains true median (9% confidence interval):
City	$804	$800-$850
Bronx	$600	$590-$625
Brooklyn	$700	$675-$700
Manhattan	$1,325	$1,285-$1,400
Queens	$750	$725-$750

Three existing databases, the Housing and Vacancy Survey (HVS) and two Division of Housing and Community Renewal (DHCR) databases of stabilized Buildings and Apartment units provide data to compare with the Recent Movers Study throughout this report. All of these databases are from 1996.

The HVS, performed by the Census Bureau every three years in New York City collects comprehensive information about both the regulated and non- regulated housing sectors. The HVS includes information on income demographics and detailed conditions of housing. RGB staff primarily used the HVS for comparisons in the non-stabilized sector; but also to provide a check for information in the stabilized sector. Additionally, information such as turnover rates, tenant income levels and the number of stabilized units in each borough was derived from this source.

The DHCR Building and Apartment Databases are constructed from information gathered from registration forms landlords of stabilized buildings are required to file with New York State each year. These databases, merged by RGB staff into one, provide detailed information about stabilized buildings, apartment units and the tenants that occupy them. RGB Staff was able to link each stabilized household that answered the survey to the DHCR database by address to make longitudinal comparisons of the same units from 1996 to 1998. DHCR data is used throughout the report for comparison to Recent Movers Survey data regarding stabilized units and the rent stabilized sector.

The median is the observation at which half of all observations are above and half below. Median rents are used throughout the report in favor of mean average rents. Staff decided on the median because median rent figures tend to provide a more accurate picture of typical rents in New York City. A median is characterized by its position in a list of numbers, it is the observation at the 50th percentile, or halfway between the top and the bottom figure in a list. Thus, when reporting rents in a city with very high and very low rents such as New York, the median is far less skewed than the mean average figure, which is pulled by "outliers" or unusually extreme figures.

To further clarify what is meant by "rent" in this study, survey recipients were asked, "What is the monthly rent for this apartment (house)? (Total rent charged by landlord, including any government assistance payments)." This question was designed to find the total monthly amount the landlord charges in rent for the apartment not what tenants who receive assistance actually pay out of pocket.

The median rent paid by all households moving between June 15, i997 and March 1995 in New York City is $804 per month. Half of the monthly rents observed in this study were above $804 and half were below. The median rent for all stabilized households is $750, while tenants in non-regulated housing units paid $950.

Rents in the boroughs portray the typical divergence between the amount people pay in rent in Manhattan and what they pay in the outer boroughs. Median rent for all newly occupied households in Manhattan is $1,325 per month, far outpacing the median rent in Queens ($750) and Brooklyn ($700), and more than double that in the Bronx ($600).

Within Manhattan itself, rents are evidence of the tale of two boroughs often seen when comparing data from Upper Manhattan and lower Manhattan. These two areas of the borough are divided by 96th Street on the East Side, and 110th Street on the West Side of Central Park. Median rent in Upper Manhattan is $650, on a par with rent in the outer boroughs, while median rent in Lower Manhattan, or the Core is $1,500 per month, Over double the typical rent in the Northern part of the island. The variance between rents across the City shows that the cost of renting to new households in Lower Manhattan requires a much higher level of household income than the cost of renting a typical unit in Upper Manhattan or any of the outer boroughs in 1998. Using the typical affordability of 30% of income, the typical new renter in the Manhattan Core would have to make at least $60,000 per year.

In the stabilized sector rents showed slightly less variance between the City's boroughs. Stabilized rents were highest in Manhattan at $1,100 per month, followed by Queens ($721), Brooklyn ($660), and the Bronx ($600). Again, the median lower Manhattan stabilized rent $1,200 per month, far outpaced that observed in the northern part of the borough ($625).

Not surprisingly, non-regulated, or "free market" rents showed the most variance from one borough to another. Median non-regulated rent for recent movers in Manhattan weighed in at $1,625 per month. The next lowest monthly rent appeared in Queens at $750 -- less than half the Manhattan amount. The remaining rents were also less than half the Manhattan amount. Non-regulated rents were $729 per month in Brooklyn followed by $598 in the Bronx. Finally, contrasting the two parts of Manhattan, median market rent in Upper Manhattan was $713 per month, less than half the rent a newly arrived tenant in Lower Manhattan typically paid -- $1,800.

As the variation between Manhattan rents illustrates, discussing rents at even the borough level is sometimes too diffuse to gain a clear understanding of the cost of housing in New York City's diverse neighborhoods. The desirability of small localities within the City can change rapidly, and rents quickly correspond to neighborhood population shifts. Because of the high number of responses, this study was able to pinpoint median monthly rents in many City neighborhoods by zip code area. Reporting rents by zip code areas is perhaps most informative to City residents as zip codes correlate well with commonly known neighborhoods. In Manhattan, by combining some adjoining zip codes into neighborhood areas, nearly every neighborhood produced a median rent.

At the zip code level, Manhattan neighborhoods once again show a large contrast in monthly rent figures when comparing those in Upper and Lower Manhattan. The lowest neighborhood rent comes from the East and Central Harlem area at $569, while the highest rent comes from the rapidly gentrifying tip of Manhattan. the area incorporating the financial District, Battery Park City and Church Street, which reported a monthly rent of $2,300. The four neighborhoods in Upper Manhattan showed median monthly rents that ranged from $569 to $800 in the Morningside Heights area. Of the neighborhoods in the Core, eight had rent from $1,000 to $1,499; seven from $1,500 to $2,000 and one, Manhattan's aforementioned 'tip' had rent surpassing $2,000.

The lowest monthly neighborhood rent observed in the study, $568, comes from the Highbridge area of the Bronx. In the outer boroughs, eleven neighborhoods had rents ranging from Highbridge's $568 to $780 in Murray Hill, Queens. Only two neighborhoods. both in Brooklyn, approached Manhattan median rent levels, Park Slope at $1,000 per month and Brooklyn Heights at $1,239.

How much did the 1997 Rent Regulation Reform Act contribute to the amount of rent a typical new occupant of a stabilized unit would pay? Until 1997 data is available. we cannot make absolute inferences regarding the effect of the Act on rent levels, but we can compare stabilized rents from 1996 to 1998 in the same units. Although some of the overall increase found in this period was due to Rent Guideline increases, an additional tenancy before the Act, a Major Capital Improvement, or apartment refurbishment, the majority of the increase can probably be attributed to bonuses associated with a recent vacancy, after the 1997 Rent Act.

To ascertain the typical stabilized rent increase from 1996 to 1998, staff first matched the address of each stabilized household that returned a usable survey to the same apartment in DHCR's 1996 database of all registered stabilized units in New York City. Staff then computed the increases in rent for each apartment using the rents registered with DHCR in April 1996 and the amount movers paid in the same units one to two years later. The median percent increase in stabilized rents from 1996 to 1998 was 17%, (i.e., half of units had increases of more than 17%, half increased less). By borough, the median increase was 26% in Manhattan, 13% in Brooklyn and Queens, and 8% in the Bronx. The Lower Manhattan median rent increase is 28% while upper Manhattan's is half that amount (14%).

While we cannot say precisely what amount of the 17% increase is due as a direct result of increases associated with vacancy allowed by the 1997 Rent Act, we know that the Rent Guidelines, adjusted to fit the period studied, are 2.4% for one year leases and 3.9% for two year. Even considering the other reasons listed above that can generate a rent increase, the 1997 Rent Regulation Reform Act's new vacancy bonus along with the 1/40th rule have clearly made a contribution to rent increases seen in all boroughs, and especially the 26% median increase seen in Manhattan.

[chart 1] "Monthly Rents for Recent Movers are Highest in Manhattan Neighborhoods, 1997-1998"

The 1997 Rent Regulation Reform Act was predicted to have many impact on both the rent-stabilized and market housing sectors. One of the most debated outcomes of the new law was the number of stabilized units that would become deregulated. This study estimates that 4.6% of all newly occupied stabilized units were deregulated in our eight month study period. These units were stabilized at various rent levels in 1996. By 1998 a vacancy or in some cases two vacancies raised the rent above S2,000, the upper limit for rent in stabilized units according to the Act. Nearly all of these units, (more than 90%), were in Manhattan. A total of 12.1% of recently occupied apartments in Manhattan moved from stabilization to deregulation during the time period of this study.

Where did deregulation occur at the neighborhood level? The largest concentrations of deregulated apartments were in the 10016 (Murray Hill) and 10021 (Lenox Hill) zip codes in Manhattan. The Upper West Side (10024), Lincoln-Ansonia 10023), Gracie (10028) and Yorkville (10128) in the Upper East Side had moderate concentrations of destabilized units. The remaining destabilized units were distributed around Lower Manhattan neighborhoods with a small percentage of the total in Brooklyn Heights (11201) in Brooklyn.

What does this mean in terms of real numbers of dwelling units leaving the rent Stabilization system? To estimate these figures staff used the average turnover rate for stabilized apartments, about 12%. This turnover rate is conservative because tenants that occupy higher rent apartments (i.e., those with rents near $2000 and most likely to become deregulated) typically have much higher turnover rates than the overall stabilized apartment turnover rate. In addition, the number of apartments deregulated in 1997 through petition by owners (i.e., occupied apartments), was included. Using these assumptions, across the city, roughly 5,500 units became deregulated in a period of 8 months. Approximately 5,300 the of units that became deregulated were in Manhattan. Extrapolating those figures to a full year, we estimate that about 8,400 units will be deregulated in the first full year after the passage of the Rent Regulation Reform Act of 1997 and roughly 8,000 of these will be in Manhattan. Clearly there has been an explosion in the rate at which apartments are being de-stabilized. The New York State Division of Housing and Community Renewal has estimated that 2,150 vacant units were deregulated in the first two years after the "luxury decontrol" provisions became law, in 1993. Thus, the rate" at which units were being de-stabilized was roughly 1,000 per year. As explained above, it appears that vacancy destabilization bas now mushroomed to 8,000 or more units per year.

The notion of affordable rents in New York City and what is happening to them in both the "free market" and the stabilized sector is a topic closely watched by all constituents in the housing arena. Staff used the most recent data for median income in stabilized households (1995) to calculate an affordable rent for the typical stabilized tenant. In that year the median income of households in stabilized dwelling units was $25,300. The benchmark for housing affordability is a 30% rent-to-income ratio. In other words, a household should have to pay no more than 30% of its income on rent for the housing to he "affordable." Thus the typical stabilized household in 1995 could afford a monthly rent of $633 or less. In that year, 48% or roughly half of all stabilized apartments in our sample would have been considered affordable to this hypothetical household.

In 1998, a good estimate of median income in stabilized households, adjusted only for inflation, would be $26,979. Using this income as a measure, the typical stabilized household in 1998 could afford a monthly rent of $674 or less. The percentage of stabilized rents affordable to a household with this income is 37%, slightly more than one-third of stabilized rents. Thus, from 1996 to 1998, there was a decrease of more than 10 percentage points in the number of affordable stabilized apartments.

Another way to examine what has happened to stabilized rents since the Rent Act passed in 1997 is to compare what percentage of the stock of stabilized units fell into given rent categories each year, and how the percentage has changed. The table on the next page shows rent level categories in 1996 and 1998, for the sample of units in our study.

In 1996, about 40% of rents were under $600, solidly in the affordable range for an average income tenant. By 1998 only 20% of rents were under $600, a loss of half of low and affordable rents. Moderate rents, between $600 and $999, increased slightly from 44% to 51% of stabilized rents. High rents, from $1,000 to $1,999, increased sharply, from 14% to 23% of all stabilized rents. Finally, rents over $2,000, the amount at which a stabilized unit becomes deregulated, nearly tripled from 2.1% in 1996 to 6.2% of stabilized rents in 1998.

The small increase in moderate rent levels is a positive turn of events for households who can afford up to $1,000 per month on rent. However, the large decrease in low and affordable rents matched with the sharp acceleration in the percentage of rents $1,000 and over, shows that many stabilized apartments are moving out of reach of low and low- t0-moderate income households. Households that do not win the competition for moderately priced housing may have to consider rents that are in the most rapidly increasing rent category--above $1000.

Before the Rent Regulation Reform Act was passed in the summer of 1997, several studies were undertaken by noted academics to estimate the impact of various deregulatory schemes on rent levels. Some of the studies attempted to gauge the impacts of total deregulation (e.g. de Seve, Pollakowski). Others looked at the the effects of vacancy decontrol (e.g. Olsen).

In conjunction with a conference co-sponsored by the Rent Guidelines Board and the New York University School of Law Center for Real Estate & Urban Policy in May 1997, a paper was commissioned from Edgar O. Olsen. Professor Olsen, a pioneer in the study of housing markets using econometric analysis, was charged with assessing the probable impacts of vacancy decontrol on rent levels. At the time the study was commissioned, it appeared that vacancy decontrol was a likely outcome of the policy debate over rent regulation in the State Legislature.

Professor' Olsen was able to present his first results in May 1997 and a final paper was prepared using more sophisticated analytical techniques in November 1997. In his paper, Olsen looks at the probable short term impact of vacancy decontrol (i.e., vacancy destabilization). Specifically, he compares existing rents in 1996, as measured by the 1996 Housing and Vacancy Survey, to rents which would result from vacancy decontrol over the next two years. He found that

The anticipated median increase in rent found by Dr. Olsen was 4.4% for the City as a whole and 15.8% in Manhattan.

This RGB study uses a comparable time period (April 1996 to the present) and the same statistics (i.e. The median increase in rent) but has the distinct advantage of being able to compare actual rent registration data in 1996 with actual rents paid in 1997/1998. Our finding that the median increase in rent was 17% (and 26% in Manhattan) is surprising. Given that vacancy decontrol would have put no limit on rents (on a vacancy) while the 1997 Reform Act does impose some caps, one would think that an analysis of Vacancy Decontrol would have yielded higher figures.

Before the Rent Reform Act was passed in the summer of 1997, several other studies looked at the possible impacts of the outright abolition of rent regulations. One such study, undertaken by Charles de Seve of the American Economics Group, found that if regulations were to end, the citywide average rent increase would be 13% and the increase in Manhattan would be 22%.[4] These findings more closely approximate ours; however, the reforms in the rent laws made by the state legislature fell well short of total deregulation.

A natural question: Why did the econometric models so seriously underestimate the extent of rent increases? One obvious answer is that econometric models are imperfect, and are made more imperfect by the heterogeneity of this City's housing stock. In general, the models attempted to compare the stabilized stock with the City's unregulated stock. These two housing sectors are very different in terms of location and other characteristics. Although the studies attempted to compensate for these differences, it may be that the comparison is simply not possible.

Another flaw in the studies is that they used early to mid-1996 rent levels to forecast the rents in 1998. The city's economy, although recovering, was hardly robust in 1996. Clearly, a substantial recovery has put added pressures on rents.

There probably are other factors at work. A comparison of the various econometric studies undertaken before the Rent Reform Act was passed with this study is an interesting project which staff may pursue in greater detail.

IMPORTANT: This survey should be completed by the person or persons who have lived in this apartment (house) for the longest period of time UNLESS a person who moved in afterwards triggered a new lease and/or a rent increase. In this case the new person should fill out the survey.

8. What is the length of lease on this apartment (house) -- that is the total time from when the lease began until it will expire?

9. What improvements were made to the apartment before you moved in? (Check all that apply.)

11. What fees did you pay when renting this apartment (house) not including security deposit? (Check all that apply)

12. Was the advertised rent for this apartment different from the rent you ended up paying?

13. Are you (or your roommate/relative) the primary tenant - that is, the person renting from the owner of this building (house)?

16. Was the "Rent Stabilization Rider" attached to your lease? (The rider describes the rights and obligations of tenants and owners under the Rent Stabilization Law and informs a rent stabilized tenant signing a vacancy lease of the legal regulated rent in effect immediately prior to the vacancy).

17. Please describe your apartment BUILDING (house). (Please check one box from each column).

1. For studies of smaller groups, the size of the population is a preeminant factor in determining sample size. Sample size varies little when studying groups over 100,000 people.

2. Source: 1996 Housing and Vacancy Survey. Average percentage of movers who are owners is 19% per year.

3. "The Impact of Vacancy Decontrol in New York City. The First Estimates from the 1996 Housng and Vacancy Survey" by Edger 0. Olsen, November. 1997. page 17.

4. "The Effect of Deregulation on Rents and Economic Activity in New York City" by Charles W. De Seve. American Economics Group, March 1997. This study was commissioned by the Rent Stabilization Association of New York City, Inc.

Median: the 50th percentile or the observation where half of the observations are above and half are below;

Recent Movers: households which moved to a vacant apartment in New York City between June 15, 1997 and March 1998; (about 180,000 households)*

Target Population: renters who moved June 15, 1997 to March 1998; (about 150,000 households)*

Incidence Rate: the percentage of contacts in Random Digit Dialing which can reach someone eligible for the survey: in this study 5.4% or 1 in 18 contacts;

Sampling Frame: actual list of persons/households from which a sample is drawn, (attempts to reach members of Universe/Population) —utility subscription list of 173,000 households;

Starting Sample: smaller number of people to be drawn from Frame to receive survey (8,200 households). Size determined by these assumptions:

Sample/Final Sample: set of respondents selected from a larger population for the purpose of a survey (1,070 complete usable surveys) Size determined by :

Monthly Rents for Recent Movers
are Highest in Manhattan Neighborhoods, 1997-1998
(Median Monthly Rents for Units Occupied after June 15, 1997 by Zip Code or Combined Zip Code Area)

Low and Affordable Rents Decreased from 1996-98
While Moderate and High Rents Rose
(Rent Distribution of Stabilized Apartments 1996-98)

* Of the 6.2% of units with rents exceeding $2,000 in 1998, 1.5% are still stabilized because they are subject to a housing program or the landlord has not yet petitioned for deregulation. The remainder, 4.7%, are deregulated units.

Source: 1998 Recent Movers Survey, Rent Guidelines Board and 1996 Division of Housing and Community Renewal Buildings and Apartments database.

Manhattan
10033 10034 10040	$670
10031 10032 10039	$625
10026 10027	$800
10025	$1,225
10029 10030 10035 10037	$569
10024	$1,550
10023	$1,799
10019	$1,575
10001 10018 10036	$1,100
10011	$1,210
10014	$1,495
10012 10013	$1,587
10004 10005 10006 10007 10038 10280	$2,300
10128	$1,572
10028	$1,283
10021	$1,450
10017 10022	$1,755
10010 10016	$1,575
10003	$1,225
10009	$1,000
Bronx
10452	$568
10468	$600
10467	$650
10458	$592
Queens
11103	$750
11373	$750
11355	$780
*Brooklyn*
11209	$775
11201	$1,239
11215	$1,000
11230	$725
11226	$600

Rent Distribution	Units 96	Units 98	Percent Change
$ 1 - $ 499	23,000	6,000	-73%
$ 500 - $ 599	24,000	18,000	-27%
$ 600 - $ 699	22,000	24,000	+11%
$ 700 - $ 799	14,000	17,000	+24%
$ 800 - $ 999	16,000	18,000	+17%
$1000 - $1499	12,000	19,000	+56%
$1500 - $1999	4,000	8,000	+83%
>$2000*	2,000	7,000	+195%