Date: Mon, 07 Apr 1997 10:36:07 -0400
Subject: Landlords Predict Rent Hikes Up To 51%


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             LANDLORDS PREDICT RENT HIKES UP TO 51%

A new housing study, commissioned by the Rent Stabilization
Association (RSA), a landlord group, finds that if rent regulations
were abolished, rents in stabilized apartment buildings would
rise by up to 51% on the Upper West Side and 13% citywide. 

Although serious questions are being raised regarding the assumptions 
and methodology of the study where the purpose was ostensibly to 
allay fears of even greater rent increases, the study as portrayed 
by the major news outlets, may have justifiably fueled the fears of
many tenants.

But even in an effort to remain credible, the study may have actually
substantially understated the impact of rent increases -- especially 
in the outer boroughs -- if NYC rent regulations are allowed to expire 
on June 15th. However, even if the figures quoted by the landlord study 
prove to be accurate, tenants across the city are expressing fears of 
inability to absorb the new rent demands and the ensuing evictions that 
would occur on a scale not seen in 25 years.

Much of this public hysteria has been fed by the mainstream media's
emphasis on the Pataki/Bruno call for the end of rent regulations 
altogether. And this study, as it was released to the media, feeds 
the notion advanced by many Democrat politicians that Republicans 
alone are responsible for the threat to NYC tenants' homes. It's almost 
as if the landlords and the Democratic leadership want the public to 
believe that Republicans alone hold the keys in this crisis and that 
Democrats have no responsibility.

Even the New York Times, long a friend of landlords, had a rare honest 
moment when it stated, "Combatants on all sides are out to harness
people's fears, trying to put the mounting panic to their best political
use." Indeed, Governor Pataki tried to stake out a middle ground
knowing he will be up for re-election in 1998 when many tenants' leases
expire, but according to published reports, he continues to favor ending
of tenant protections. And even Rudolph Guiliani, with a 60% favorable
rating in the polls and with no need to sully himself in the rent wars, is
now pandering to tenant interests after three years of dismantling
the little protections offered by HPD and hitting tenants hard with
unwarranted Rent Guidelines Board increases.

In the last week, statement after statement has come from Democratic
politicians stating that tenants must "now set their sites" on Republican
Senate Majority Leader Joseph Bruno. However, many tenants are
recognizing that the key player is Assembly Speaker Sheldon
Silver who can decide the real question in this fight: not whether or
not rent regulations will continue to exist, but how much will the
Democrats allow the system to be further weakened and undermined.

But that seems not to be the question of the day as tenants find themselves
dodging a virtual "pissing contest" by Bruno, Silver, Pataki, Guiliani,
the landlords and the media as to who can stir up the most panic.
When the laws get renewed -- as they will -- after the staring contests and
multiple one- or two-day emergency extensions are all over, all the players,
including those who will claim to our savior (i.e., Silver) will hope tenants
breath a big sigh of relief that "Rent Control is Saved!" and ignore
once again that the system will most likely be further weakened and
undermined.

Tenants should be aware that in 1993 the pick-axe of Vacancy Decontrol
came in at the very last minute when the Democrats capitulated. Indeed,
according to reports we've received, one of the most damaging sections
of the 1993 "reform" bill -- the passing along of apartment improvements
at 1/40th the cost -- was not even a Republican demand; it was given to the
landlords on a Silver platter by the Democrats!

The Landlord Playbook

According to the study, rent increases by neighborhood would be:

   * 51% on the Upper West Side
   * 30% on the Upper East Side
   * 30% in Greenwich Village
   * 21% in Chelsea
   * 16% in Stuyvesant/Turtle Bay
   * 10% in the Lower East Side/Chinatown
   * 5% in Central Harlem, East Harlem, Morningside Heights, and
     Washington Heights/Inwood

Outside of Manhattan, the report predicts that rents would rise
8%, with increases ranging from 0% in Staten Island to 19%
in certain Queens neighborhoods.

  "The author of the study argues that the fear of large rent increases 
  following deregulation is "ill-founded" since this "ignores the 
  power of the marketplace to adjust supply and demand in ways that 
  take account of many factors including the income level of 
  tenants, housing alternatives, quality and condition of apartments 
  and their locations." The study maintains that rent regulation has 
  caused substantial deterioration of housing in New York City and 
  wrongly subsidizes higher income households not in need.

  "According to the author, although regulated rents may be low,
  "tenants are only getting their money's worth" since regulation
  has resulted in deterioration of the housing stock. Following
  deregulation, substantial upgrading of the stock will occur.
  Tenants will "forego some other expenditures to pay higher rents
  following improvements" but "many units will see little or no
  increase [in rent] and a full range of affordable housing will be
  available for families at every income level."

  "The study attempts to estimate the impact of deregulation on the
  New York City and New York State economy. It predicts that
  deregulation will stimulate economic activity, creating jobs and
  additional tax revenue."

However one needs only to look at the effects of Vacancy Decontrol in
New York City the last time this "grand experiment" was tried in the
1971-1974 period. Evictions and harassment became so commonplace
that it was the Republicans themselves who reinstated rent regulation with
the 1974 Emergency Tenant Protection Act.

According to a knowledgeable source, RSA leaders have stated privately
that this time they will do away with protections "little by little".
Although the specter is being raised of the complete and sudden end of
rent controls, the real strategy appears, from both sides of the political
aisle, to be something much more subtle and nefarious.

The complete text of the study can be obtained on TenantNet at:
http://tenant.net

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Date: Wed, 16 Apr 1997 11:21:19 -0400
Subject: Guiliani Westside Town Meeting needs tenants 4/16 at 8 PM


     GUILIANI TOWN MEETING ON WESTSIDE TONIGHT APRIL 16 AT 8:00 PM

Mayor Rudolph Giulliani is having a surprise Town Hall Meeting on the Upper
Westside tonight, April 16 at 8:00 p.m. at Jasa-Jewish Association for
Services for the Aged, 40 West 68th Street. 

We've heard that this is his first Westside Town Meeting since becoming
Mayor and we've also heard that he doesn't want to be bothered with any
questions about the possible weakening of rent regulations -- which is
exaclty why you should go and ask him.

In his three years as Mayor, Guiliani has appointed a slew of investment
bankers to the Rent Guidelines Board who, according to RGB insiders, jumped
to Guiliani's demand that the increases for rent stabilizied tenants should
be more than warranted and exceed the costs of living and costs of
operating buildings. This year, with all tenant attention on Albany,
insiders fear Guiliani will allow even greater increases for stabilized rents.

Guiliani also decimated any enforcement at the NYC Department of Housing
Preservation and Development (HPD) where tenants find it near impossible to
get inspectors to come to their buildings. (See the report on HPD allowing
massive landlord fraud on TenantNet).

Guiliani worked hand-in-hand with notorious landlord buddy Council Speaker
Peter Vallone to institute Vacancy Decontrol in 1994. Earlier this week
Guiliani and Vallone went to Albany to "lobby" for tenants. Most insiders
believe the trip was really to ensure the laws would be further weakened.

And in yesterday's New York Times,  one article stated, "But Democratic
officials said Mr.Giuliani could have immense influence over the talks by
publicly cajoling Republican Senators to break with Mr.Bruno. Privately,
several accused him of using today's trip to create an impression of
action, without really doing anything. 'If Ed Koch has been Mayor, he'd be
pulling no punches,' said one top Democrat official, speaking on condition
of anonymity. 'He'd create enough of a problem where Senators would have to
go to the leader and say, 'Get this guy off my back.'"

According to one source, it was just last weekend that Guiliani stated that
State Senator Guy Velella (R. Bronx & Westchester) was "a hero" for voting
against rent regulations in the Senate on the first vote on the rent laws
extensions held on April 7th.

Against this backdrop, Guiliani plans to speak at Tenant Lobby Day, May
20th in Albany, but many tenant leaders are aghast at this development and
wonder whether there was any sanity with those who asked Rudy to tag along
-- only so he could look good in November without exerting any meaningful
and substantive effort.

###

-----------------------------------------------------------------------
The Tenant Network for Residential Tenants
  TenantNet:              http://tenant.net
  NYTenants Interactive:  http://nytenant.net
  NYTenants Express:      http://members.aol.com/nytenant
  email:                  
  NYtenants Discussion List: email to  and in 
  the body of the message put "subscribe nytenants".
Information from TenantNet is from experienced non-attorney tenant 
activists and is not considered legal advice.





Date: Sat, 19 Apr 1997 14:18:01 -0400
Subject: Dispelling Disinformation About Rent Controls (part 1 of 2)


DISPELLING DISINFORMATION ABOUT RENT CONTROLS (part 1 of 2)

by Timothy L. Collins

This memorandum was drafted to assist those involved in the
current debate over the extension of New York's rent laws. The
analysis is based upon a personal review of hundreds of studies,
reports and surveys generated by government, industry, tenant and
academic experts over the past thirty years.

INTRODUCTION

New York landlords and their advocates have spent millions of
dollars over the past two decades on lobbyists, campaign
contributions and advertising - all aimed at ending or
discrediting rent regulations. Industry advocates, including the
Real Estate Board PAC, the Rent Stabilization Association PAC and
the Neighborhood Preservation Political Action Fund contributed a
total of $401,605 to legislative incumbents and campaign
committees just before the last round of rent law renewals in
1993. Nearly 90% of those contributions went to Republicans. In
the 1994 and 1996 election cycles, Senate Republicans received
$883,925 from real estate industry PACs. Most of these funds go
to legislators who do not have a single rent regulated
constituent in their districts.

In my seven years with the New York City Rent Guidelines Board
landlord organizations such as the Rent Stabilization Association
and the Community Housing Improvement Program spent hundreds of
thousands of dollars on studies which invariably concluded that
rent and eviction protections are bad public policies. Notably,
research funded by non-profit organizations, academic
institutions or government agencies produced findings that were
starkly at odds with the conclusions of the landlords groups.
Unfortunately, due to limited funding and marketing efforts the
results of these non-partisan efforts rarely received public
notice. As a result, the hard facts about the experience of New
York and other cities with rent regulations have been overwhelmed
by a well engineered public relations effort by the landlords.
Today, the myths and rhetoric generated by the landlords' effort
to persuade the public of the evils of rent regulation are
routinely and uncritically echoed in the local media. The purpose
of this brief memorandum is to identify and correct some of the
unfounded assumptions about rent regulations.

HISTORY

Contrary to a common perception that rent controls are a vestige
of New Deal liberalism government, correction of market imbalances
is a practice that is over 500 years old. Medieval theologians
developed the concept of a "just price" for the necessities of
life and persuaded the English Parliament to regulate the price
of bread, meat, lodgings and other staples of life for centuries.
In the American colonies similar laws followed the English
tradition. Many of those laws continued long after the American
Revolution. In fact, New Jersey enacted a statute regulating the
amounts Innkeepers could charge for food and lodging just ten
months before it ratified the U.S. Constitution. Throughout the
19th and 20th centuries various price regulations were challenged
and upheld as constitutional exercises of government's power to
protect public health and welfare.

Even if rent and price controls are within our historical
experience and national traditions, hasn't the "free market"
addressed our housing needs throughout most of that history?

The sad fact is that free markets in New York City have rarely
produced an adequate supply of decent and affordable housing. The
horrors of open market housing were well documented by Jacob Riis
in the nineteenth century. (See Jacob Riis' "How the Other 
Half Lives" on TenantNet) Rising rents and evictions led to
extreme public unrest, rent strikes and mass protests at the turn
of the twentieth century and into the 1920's when the City first
experimented with rent controls. The Rent Laws of 1920 lapsed in
1929 because a growing economy led to a building boom which
reduced the need for controls. During the Depression of the
1930's poverty forced many families to double up. Overcrowding,
along with a deflationary economy kept rents in check. When state
officials met to revise the State's Multiple Dwelling Law in
1946, they noted that a housing shortage began to appear as early
as 1936 but that the Depression had forced many families to
double up which concealed the shortage.

The Emergence and Demise of Rent Control

During World War II rent and eviction protections were
reactivated as part of a national price control program. While
demand for apartments was strong, building construction was
stalled due to the diversion of resources to the war effort.
After the war housing construction rose dramatically. The fact
that over two million rental units remained under strict rent
controls had no measurable impact on the development of new
housing. The Rent Control system initiated during the war now
governs only 71,000 housing units. Since 1971, rent controlled
apartments in three to five unit buildings have been deregulated
upon vacancy. Rent controlled apartments in buildings with six or
more units which are vacated now fall under rent stabilization.
Consequently, over 700,000 pre-war apartments which were formerly
subject to rent control are now under rent stabilization.

Rent Stabilization

By the end of the 1960's rising construction costs and zoning
changes slowed the production of new housing. Strong demand for
rental units and a low vacancy rate caused a sharp rise in rents
throughout the uncontrolled housing stock. Complaints flooded the
City's Housing and Development Administration - mostly from
middle class residents of newer and higher priced post-war
apartments. In 1969 rent stabilization was established to protect
about 400,000 households living in these uncontrolled apartments.
The stabilized stock has since grown with the influx of vacated
rent controlled units.

In 1971 the state adopted vacancy decontrol for both rent
controlled and rent stabilized apartments. Rising rents and
complaints that owners were harassing tenants out of regulated
apartments to take advantage of vacancy decontrol led to a
reestablishment of rent stabilization coverage for vacant units
in 1974. In 1971 the State adopted a law which prevents the City
from adopting rent controls that are stricter than those already
in effect. Since then, the City has been deprived of home rule
over rent regulations.

The rent stabilization system was adopted to ensure reasonable
rents for everyone. That is, it was designed to restore fair
bargaining relations between owners and tenants - whether those
tenants are rich or poor. Although it clearly benefits low income
tenants, it was never intended to serve as a social welfare
system. The much repeated criticism that rent regulations were
primarily intended to protect poor people raises a convenient
straw man for the critics of rent controls to knock down. While
concern was expressed for those on fixed incomes and for the
displacement of long term City residents, the main objective
contained in the legislative declaration was to relieve tenants
of the burden of "abnormal" rents which had been driven up by the
housing shortage.

In 1993 with the passage of the so called Rent Reform Act, the
state imposed a means test on a very small group of exceptionally
affluent tenants. Tenants who earn over $250,000 for two
consecutive years and who pay more than $2,000 in monthly rent
are subject to decontrol. The state also imposed vacancy
decontrol on apartments with rents that exceed $2,000 per month.
Although these changes were supposed to effect less than one
percent of the housing stock, they have disrupted the lives of
thousands of tenants who must now file income verification forms
every year. Many tenants who earn far less than $250,000 have
been deregulated because forms are returned a few days late or
are lost in the mail or by the DHCR. Many owners have illegally
increased rents beyond $2,000 just to escape coverage under the
rent laws. Administratively, the luxury decontrol provisions have
been a costly nightmare. At best they benefit a few wealthy
owners of upscale buildings who have no particular need for such
increases.

Notably, tenants who earn more that $250,000 and reside in
apartments renting for less than $2,000 per month remain
protected by rent regulations. Why is this so? When the rent laws
were revisited in 1993 there was a widespread recognition that
the housing shortage did not effect the luxury market. That is,
those who can afford to shop for high rent apartments (above
$2,000) have plenty of options. By continuing protections for all
tenants in lower rent units where housing remains scarce, the
legislature reaffirmed the anti-profiteering goals of the system.

Once you go below $2,000 housing becomes scarce. According to the
City's triennial Housing and Vacancy Survey the vacancy rate for
apartments with monthly rentals above $1,250 declined from 4.47%
in 1993 to only 2.5% in 1996. Therefore, a lowering of the
threshold for "luxury" apartments which are decontrolled upon
vacancy (to say $1,500) would erode protections for many middle
income families who now face a tight rental market.

HOW WOULD DEREGULATION WORK?

There are three ways to terminate existing the rent laws.

Vacancy Rates Exceed 5%

Both rent control and rent stabilization exist because of a
housing shortage which is measured through periodic vacancy
surveys (usually in three year intervals). If the vacancy rate
rises above 5% rent stabilization will automatically terminate
after a public hearing. In most cases, that would mean that rents
would go to market once existing leases expire. Landlords would
have no obligation to offer renewal leases. If they did offer
leases, they could increase rents as much as they want and they
would be free to rewrite any terms in the new leases. If the
vacancy rate rises above 5% rent control does not automatically
terminate but local authorities are required to implement a plan
for "orderly decontrol".

Currently only 4% of housing units are vacant and available for
rent. Very few of these vacant units are affordable to middle
income households.

The Laws "Sunset" by Legislative Inaction

The state Emergency Tenant Protection Act expires periodically
and must be renewed prior to each expiration. The ETPA is now
scheduled to expire on June 15, 1997. About one million
apartments are covered by this law. If the law sunsets, landlords
will have total control over rent levels and lease terms as
existing leases expire.

The State Affirmatively Ends Renewal of Local Laws

About 30,000 rent stabilized apartments are governed solely by
the local Rent Stabilization Law. Also, some 71,000 apartments
are protected under the local rent control law. These laws were
just renewed by the City for three more years. If, however, the
state decides to amend the 1962 enabling legislation which
permits local regulation of these apartments, those protections
could also fall.

Varying interpretations of these laws by government lawyers and
state courts could result in an earlier or later termination.
Complex issues such as the funding and function of the State
Division of Housing and Community Renewal's Office of Rent
Administration which enforces the rent laws would have to be
worked out.

HOW DOES RENT REGULATION HELP TENANTS?

Fair Bargaining between Tenants and Owners

The City's housing shortage places tenants at a bargaining
disadvantage when it comes to rent levels and lease renewals.
Under rent regulations landlord's cannot evict tenants unless
they prove in court that a tenant has violated a condition of the
tenancy. In the absence of rent regulations landlords could
simply refuse to renew a lease without any explanation at all.
Eviction protections would not work if landlords could force
tenants out through large rent hikes. Similarly, rent protections
would offer little protection if landlords were free to evict
tenants at will.

Reasonable Rents

There is ample evidence that New York's rent regulations provide
critically needed protection against unreasonable rent increases.
According to the City's 1996 Housing and Vacancy Survey, the
average income of rent stabilized households is only $21,600 per
year. The average income of rent controlled households is only
$12,408 per year. Among the ranks of protected tenants are a
relative handful of the City's rich and famous. By the last
available count only about 4% of rent stabilized households
earned $100,000 or more per year. Less than 1% of rent controlled
households earned $100,000 or more per year.

Compared to other high rent cities (Los Angeles, Boston, San
Francisco and Washington D.C.) middle and low income tenants in
New York benefit substantially from rent regulations. According
to a 1991 study by the Citizens Budget Commission, a typical rent
regulated tenant who earned less than $100,000 per year paid a
little less for rent as a proportion of income than did similar
tenants living in another high rent cities. For example, rent
regulated New Yorkers earning between $10,000 and $15,000 per
year devoted about 38.9% of their incomes to rent payments.
Tenants in the same income group in other high rent cities spent
48.5% of their incomes on rent. Notably, a typical New York
tenant who earned more than $100,000 per year faced virtually the
same rent burden experienced by their counterparts in other high
rent cities. In New York those earning over $100,000 per year
spent 9.5% of their incomes on rent. In other high rent cities
those earning over $100,000 spent 9.4% of their incomes on rent.
Thus, in terms of relative rent burdens rent regulations do a
better job of protecting low and middle income tenants than high
income tenants and high income tenants in New York do not have
unusually low rent burdens.

That is not to say that rent regulations have afforded middle and
low income tenants overly generous protections. The city wide
average rent burden for all income groups has grown dramatically
over the years. In 1970 the average New York tenant devoted only
20% of their income to rent. As of last count in 1993, over 31%
of tenant earnings go to the landlord. Evictions for non-payment
of rent are nearly twice as high as they were twenty eight years
ago - rising from about 13,000 in 1969 to nearly 25,000 in 1994.

Overcrowding is another indicator of the bargaining leverage
exerted by landlords. In 1984 only 7.7% of rental units were
considered overcrowded (having more than one person per room). By
1996 overcrowding had risen to 10.3%. If economic growth were to
stimulate a rise in new household formation - and a corresponding
decrease in overcrowding - the City's overall vacancy rate of 4%
could fall precipitously leaving starkly few housing options for
new households.

In a nation where the richest 2% of the population has more
wealth than the bottom 90%, no responsible citizen or legislator
can ignore the income effects of dramatic changes in public
policies such as rent regulation. Approximately 25,000
individuals, corporations and partnerships own rent regulated
apartment buildings in the City. If deregulation were to cause
only a 15% increase in rents, the total transfer of wealth from
tenants to owners would be approximately 6 billion dollars in the
first five years of deregulation. About 12% or some 3,000 of
these owners own fully 77% of the City's residential rental units
and would reap the bulk of this transfer. In short, ending rent
regulation would result in a massive transfer of wealth from
largely poor and middle income households to some of the richest
people on the planet.

Protection against Arbitrary Evictions

Nearly 300,000 non-payment petitions for evictions are filed in
New York City's courts every year. Of these about 100,000 remain
unresolved before a hearing is scheduled. About 25,000 end up in
actual evictions. Often tenants withhold rents to get owners to
make repairs. There are over three million housing code
violations of record outstanding in the City so the need to
withhold rents to secure repairs is widespread.

Most owners find that they can increase profits by cutting back
on maintenance. Free market rents will not resolve this problem
because buildings with high maintenance deficiencies usually
house tenants who cannot afford rent increases. It is well
established that income limits have a greater influence over rent
collections in low income neighborhoods than do rent regulations.
That is why the tenure protections secured by rent regulations
are so important to low income tenants. Without such protections
low and middle income tenants who assert their right to safe and
habitable housing will encounter owners who simply discontinue
their tenancies by refusing to renew their leases. To be sure,
the statutory defense of "retaliatory eviction" will survive
deregulation. Nonetheless, that defense is very difficult to
prove and most owners know how to defeat it. In the final
analysis, deregulation will have a dramatic chilling effect on
tenants who would otherwise have the strength to stand up to
landlords who try to squeeze every dime from their buildings.

(continued in part 2 -- see next message)

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  email:                  
  NYtenants Discussion List: email to  and in 
  the body of the message put "subscribe nytenants".
Information from TenantNet is from experienced non-attorney tenant 
activists and is not considered legal advice.





Date: Sat, 19 Apr 1997 14:25:59 -0400
Subject: Dispelling Disinformation About Rent Controls (part 2 of 2)


DISPELLING DISINFORMATION ABOUT RENT CONTROLS (part 2 of 2)

by Timothy L. Collins
    (see below for information on the author)

This memorandum was drafted to assist those involved in the
current debate over the extension of New York's rent laws. The
analysis is based upon a personal review of hundreds of studies,
reports and surveys generated by government, industry, tenant and
academic experts over the past thirty years.

    (see part 1 for the first part of this article)


DOES RENT REGULATION HURT OWNERS?

According to data analyzed by the New York City Rent Guidelines
Board in 1993, rent increases have kept pace with the cost of
operation for over three decades. About seven in ten regulated
apartments are located in pre-war buildings. In 1967 it cost a
typical landlord approximately 65 to 70 cents of each rent dollar
to run a rent regulated pre-war building, leaving 30 to 35 cents
of each dollar for mortgage payments, improvements and profit. By
1991 that operating cost figure remained largely the same at 64
to 70 cents. The changing composition of the post-war stock (with
over one in three post war units having been converted to co-ops)
makes a similar comparison difficult. Nonetheless, there is no
evidence that these newer units lost any income as a result of
rent regulation. In the years since that 1993 study was
undertaken landlords have seen their net operating incomes rise
substantially. In short, the rental increases afforded by rent
regulation have been sufficient to preserve landlord profits and
landlords are better off today than when rent stabilization first
began.

Notwithstanding the availability of rent increases, many
buildings in low income areas have experienced very significant
problems meeting operating costs. The root cause of this housing
distress is well documented: rising property taxes along with
rent collection losses resulting from steadily declining tenant
incomes and inadequate shelter allowances. If tenants cannot
afford existing rents - even at controlled levels - owners cannot
pay their bills. The decline in the value of shelter allowances
given to public assistance recipients has greatly compounded this
problem. Today a family of four is entitled to only $312 for
monthly rent. If low income tenants could afford the rents
landlords are already allowed to charge, housing distress in New
York City would virtually disappear. Landlord's are well aware of
this.

The results of a survey of over 300 landlords conducted by the
Rent Guidelines Board in 1994 is highly instructive. When asked
"what single city initiative would most improve building
profitability" 40% favored lower property taxes and lower water
and sewer charges; 30% favored establishing a more efficient
housing court; and only 25% favored higher rents.

DO RENT REGULATIONS PIT TENANTS AGAINST ONE ANOTHER 
AND AGAINST CO-OP SHAREHOLDERS?

A common criticism of rent regulation is that it increases rent
inequities among tenants leading to a sense of unfairness. In
fact, such inequities exist in both rent regulated and
unregulated buildings. Several studies show that rent "skewing"
occurs wherever long term tenancies exist. Naturally landlords
often give preferable treatment to long term stable rent payers
over more transient tenants. There is strong evidence that rent
regulation promotes long term tenancies and this explains most of
the rent skewing that occurs in rent regulated buildings. One
study by the Rent Guidelines Board in 1994 found that the annual
"discount" given for long term tenants is virtually identical in
both rent regulated and unregulated buildings. Only the fact that
rent protected households typically occupy units about three to
four years longer than unregulated households accounts for the
deeper overall discount they receive. In short, except for
promoting long term tenancies, New York's rent regulation system
mimics open market patterns of longevity discounts quite
effectively.

Deregulation will not cure these inequities in a way that
satisfies those who now feel that they pay more than their
neighbors. If rent regulation ends rents are likely to go up for
nearly everyone. The fact that your neighbor's rent goes up 25%
while your rent goes up only 10% is not likely to provide much
comfort.

Critics of rent regulation have referred to the lengthy tenure of
rent regulated tenants as "housing gridlock". Tenant advocates
see long term tenancies as providing neighborhood stability. In a
City where more than 2 in 3 households are renters and families
have fewer home ownership options, the presence of long term
tenancies is not surprising nor particularly undesirable.

Shareholders in co-ops often resent the fact that some - though
hardly a majority - of rent regulated tenants in their buildings
pay less rent than they pay in maintenance charges. The
comparison between rents and maintenance can be misleading.
First, most co-ops have sizable underlying mortgages which
reflects the ownership interest of the shareholders. That
mortgage is paid off by rents and maintenance charges. While the
co-op corporation gains a larger equity interest in the property
as such mortgages are retired - adding to the value of each share
- tenants do not benefit from this. Second, shareholders are
permitted to take income tax deductions for that part of their
maintenance charges which go to mortgage interest and property
taxes. This means that co-op shareholders see a good portion
(often 10-20%) of their maintenance returned at tax time. Tenants
get no such discount.

Rent increases for tenants - especially rent controlled and low
rent stabilized tenants - generally exceed increases in annual co-
op maintenance charges. Also, as tenants vacate their apartments
those units may be sold or rented at market. In sum, upon serious
reflection most co-op shareholders realize that they are not
treated unfairly by their rent regulated neighbors. As with all
things, there are some exceptional cases. Those cases can be
addressed through modest adjustments within the present system.

HAVE RENT REGULATIONS HURT THE CITY'S HOUSING STOCK?

New Construction

The presence of rent regulations has never affected new housing
starts in the City because new housing was always exempted from
controls. In fact, New York's biggest housing booms occurred
during the 1920's, and during the period from 1947 through 1966 -
a time when stringent rent controls covered most of the existing
apartments.

In an owner sponsored study examining, in part, the effects of
moderate rent regulations on new housing construction, economist
Anthony Downs found that "repeated studies of temperate rent
controls in the United States provide no persuasive evidence that
such controls significantly reduce new construction here."
Opponents of rent regulation often blame rent regulations for all
negative events in housing markets. This can be highly
misleading. For example, among the several New Jersey cities that
adopted rent controls in the early 1970's by 1977 new apartment
construction fell by 52%. In New Jersey cities without rent
controls, new apartment construction fell by 88% over the same
period.

Some analysts have suggested that deregulation will increase the
demand for new housing as middle income families are deprived of
"bargain" apartments. These arguments fail to consider two
critical facts: First, their is no guarantee that such families
will shop for new housing in the five boroughs and a loss of
middle income families would be a disaster for New York. Second,
rent increases will cause a decline in tenant savings making it
very difficult for many middle class families to save up a down
payment for a new home or co-op and thereby depressing demand for
new housing.

Abandonment

The factors which cause housing abandonment have been the subject
of multiple studies and reports focusing on local and national
markets. The most thorough investigation of the relationship
between rent control and housing abandonment was undertaken by
Professor Peter Marcuse of Columbia University in 1981. Professor
Marcuse concluded that "[t]he substantial evidence available from
national as well as local studies suggests that there is no
correlation between rent control and abandonment. Rent control is
neither a necessary nor a sufficient explanation of abandonment.
Abandonment takes place, and as severely, in cities without rent
control as in cities with it." Very few economists who have
studied the actual workings of New York's housing markets have
concluded that rent regulations reduce new construction or cause
abandonment. Anyone familiar with the sources of housing distress
readily understands this. Poverty, joblessness, redlining by
lending institutions and excessive property taxation in low
income areas are primary factors which cause abandonment.

The views of professional economists on this subject are often
grossly mischaracterized by the press. The common misconception
that economists universally oppose rent controls appears to find
its source in a survey reported in 1984 where economists were
asked, among other things, if they agreed with the proposition
that "a ceiling on rents reduces the quantity and quality of
housing available" [Frey, Pommerehne, Schnieder and Gilbert,
Consensus and Dissension Among Economists: An Empirical Inquiry,
74 Am. Econ. Rev. 986 (1984)] Of the American economists
responding 77% "generally agreed" and 19% "agreed with
provisions". One has to wonder how anyone could reasonably
disagree with such a statement; A rent "ceiling" would be a
drastic measure which would certainly have dramatic market
consequences.

Nonetheless, the consensus on the effects of a rent ceiling
hardly proves that economists are united in opposition to
moderate rent regulations which allow adjustments in rents to
compensate for increases in operating costs and which exempt new
construction from coverage. This is the case with New York's rent
laws.

Housing Quality

Most analysts who criticize rent regulations as causing a decline
in housing quality fail to examine the fact that most regulatory
systems allow generous rent adjustments for building wide capital
improvements and improvements to individual apartments. New
York's rent laws allow 1/40th of the cost of improvements made to
individual apartments (usually done after a vacancy occurs) to be
passed on in monthly rent increases. That increase stays with the
apartment forever. Consequently, an owner who invests $400 in a
refrigerator is entitled to a $10 per month rent increase
forever. By the eighth year the refrigerator is in use the tenant
will have paid the owner $960 for it. Owners are allowed to
charge 1/84th the cost of capital improvements. Thus, an
investment of $10,000 in a new boiler will yield twice that much
over a 14 year period. These incentives have supported the
massive upgrading in heating systems and weather proofing (such
as double pane windows) which occurred during the 1980's.

Buildings suffer from chronic neglect in poorer communities where
the income base of tenants simply cannot support rent increases
for major improvements. In these buildings, the struggle is for
day to day minimal maintenance.

Studies of the effects of rent regulations on housing quality
are, at best, inconclusive. This is not surprising since each
regulatory system provides varying incentives for repairs and
improvements and disincentives for neglect. One of the most
powerful tools for housing improvement has been the linking of
rent increases to the removal of housing code violations.
Unfortunately, the 1971 law which requires the removal of 100% of
serious violations and 80% of all others in the rent controlled
stock has been undermined by cutbacks in housing code inspectors
and administrative inaction.

DO RENT REGULATIONS HURT THE CITY'S ECONOMY?

To be sure, increased rents would cause a flood of billions of
dollars into the hands of landlords and a portion of that
increase would go to City property tax collectors. But every
dollar that goes to a landlord is a dollar that a tenant will not
have to spend in the local economy or to place into a savings
account. Thus, while landlords may reap the gains of rent
increases, local merchants and service providers would experience
a corresponding loss of income as consumer spending by tenants
declines. Sales taxes and other local tax revenues would suffer,
local jobs may be lost and the character of New York's
neighborhoods would change. There is a good deal of evidence
indicating that new businesses already shy away from New York
because the City's high rents produce high wage demands. On
balance, there is no credible evidence that a dollar in a
landlord's pocket produces a greater economic benefit for the
community than a dollar in a tenant's pocket.

It is simply myopic to assume that a transfer of wealth from
tenants to owners will increase the overall wealth of the City.
All of the studies sponsored by landlord organizations fail to
credibly analyze the impact of rent increases on the disposable
incomes of tenants and the implications this has for the economy
at large.

CONCLUSION

Without practical arguments to support ending rent regulations,
we are left with a stark ideological dispute: Does the ownership
of property give landlords a moral claim to take advantage of a
housing shortage by unrestricted rent increases and evictions?
The answer lies in centuries old customs, well established
constitutional norms and democratic ethics. It is a resounding
"No!". Rent and price controls rest on a time honored principle
that public authorities may intervene in markets driven by
scarcity to ensure fairness in bargaining relations. This anti-
profiteering purpose is well documented in the legislative
history of New York's rent laws. Whether you are rich or poor you
should be allowed to rent an apartment that is worth $1,000 for
$1,000. Unless we are prepared to abdicate our democratic
birthright to a handful of conservative ideologues who believe
that property rights should override all other public values,
there is no practical or ethical reason to depart from the goal
of fair rents for everyone.

[end]

About the Author

Timothy L. Collins is a Partner in the law firm of Collins & Dobkin.
>From 1994 to 1995 he was an Assistant Attorney General in the Real 
Estate Financing Bureau, from 1987 to 1994 he was Executive Director 
& Counsel to the New York City Rent Guidelines Board, and from 1985 
to 1987 he was an Assistant Counsel in the Office of Rent and
Housing Maintenance of the New York City Department of Housing 
Preservation and Development


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