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Brian Lehrer: Brian Lehrer on WNYC. Now we'll look at a proposed rent hike that could affect roughly a million New Yorkers later this year. Last week, New York City's Rent Guidelines Board held their annual meeting to begin deciding how much landlords can increase rent prices on the city's rent-stabilized units. Here's the range they came up with. Anywhere from 1.75% to 4.25% on new one-year leases and 4.75% to 7.75% on two-year leases. Now, while this initial vote is non-binding, the actions of the Rent Guidelines Board have become a major issue in this year's mayoral race, as several Democratic candidates are promising rent freezes for rent-stabilized units on the campaign trail, and others are not.

Hundreds of tenants and advocates filled the LaGuardia Community College auditorium, where the vote was held to call for a rent freeze. Then there's the news coming out of Washington, which could throw a wrench in all of this. President Donald Trump released his budget plan, containing a 40% cut to rental assistance programs. Those don't affect rent stabilization increases necessarily. They're a different category of apartment, but another one now facing the city. Joining me now to get into the weeds of these developments and to take some of your calls if you might be affected as a tenant or a landlord or anyone else, is David Brand, housing reporter for WNYC and Gothamist. Hey, David.

David Brand: Hey, Brian.

Brian Lehrer: Rent stabilization first. By way of background, remind us how big is the system in the city, at this point, after decades of partial deregulation?

David Brand: I think this segment actually fits the theme of the show so far, I guess, because we're talking about another way prices will be rising, at least for tenants in New York City. The rent-stabilized system is huge. It affects tenants in about 1 million apartments across the city. That's about 2.2 or 2.3 million people, and all of the owners of their buildings, of course. Also has an impact on tenants who don't live in rent-stabilized apartments because a lot of buildings contain apartments that are rent-stabilized and apartments that aren't, that are market rate.

Sometimes you'll see landlords might raise the price on market-rate apartments to offset not being able to do that on rent-stabilized apartments. Yes, it really has a huge impact, so that means the Rent Guidelines Board, this nine-member panel of experts appointed by the mayor that sets the percentage each year that landlords can legally raise prices on rent-stabilized apartments, they have a major responsibility.

Brian Lehrer: Listeners, we've got the phones open for both tenants and landlords looking to weigh in on the issue of hiking rents on rent-stabilized apartments in New York City. Are you living in one of the million units under the jurisdiction of the Rent Guidelines Board? 212-433-WNYC. Do you own one of these units and want to give your side of the story as a landlord? 212-433-9692. We'll also take your questions for David Brand, housing reporter here at WNYC in Gotham. Just call or text us at 212-433-WNYC, 212-433-9692.

You can call about the federal rental assistance proposed cuts as well. 212-433-9692, call or text. To a lot of people, these numbers sound high, David. On the rent stabilization proposed increases, over 4% on a one-year lease. It might come in that high. Almost 8% on a two-year lease. That's high compared to a lot of recent years, isn't it?

David Brand: Definitely. I mean, it is also relative to the tenant. The majority of tenants in rent-stabilized apartments in New York City are lower-income. The median income for tenants in rent-stabilized apartments is $60,000, which is way below the area median and the median income in New York City specifically. This is mostly lower-income people, so a 4% rent increase is significant.

What usually happens is the board sets this range around this time, late April, early May, and then in late June, they vote on the final binding increase, and it's always within that range. It's usually not at the higher side. The last three years, they've raised it a combined 9%. It was 3.25, then 3, then 2.75, so that's probably the kind of guideline we might be looking at here. Still significant to a lot of renters.

Brian Lehrer: To a lot of landlords, they might say, "Well, that's still at or below the rate of inflation in this country." I think Chris in Woodside is calling in with some of that argument. Chris, you're on WNYC. Hello.

Chris: Hi. Thank you for taking my call.

Brian Lehrer: You bet.

Chris: My biggest concern right now is that even in the range, the maximum [unintelligible 00:05:32] I can tell you, the RGB never ever votes for the maximum. The maximum one-year lease increase is going to be 4.75, but on the Rent Guidelines Board's own research, the PIOC, price index of operating costs, they've said that the average rent stabilized building costs have gone up 6.3% this past year, so already, we're not going to meet just our change in costs. This is par for the course.

We haven't had a rent raise that has matched or been higher than the change in cost since 2016, based on the Rent Guidelines Board's own research. Over the past 25 years, it's only happened twice, that's happened. It's completely, completely not sustainable. Our buildings are hurting, and you can tell we're scraping the bucket. I'm basically punting costs as much as possible nowadays. It's just incredibly frustrating. Building costs are one of the bigger factors in inflation.

Brian Lehrer: Chris, thank you for weighing in. David, is it possible for you, as a housing reporter, to fact-check the numbers, because this is in the political sector, right? The market is one thing. This is a rent increase that will be set by the political sector. They say, in good faith, the members of the Rent Guidelines Board, appointed by the mayor, that they take into account landlord costs, tenant costs, and what's fair to both sides. Then we hear the arguments from both sides, where neither side thinks that the Rent Guidelines Board is fair to them. How do we know reality?

David Brand: Yes, it's hard. To take a step back, the Rent Guidelines Board is setting these increases for tenants in a million apartments. There's basically two types of buildings that they're looking at here. These are buildings built before 1973 with six units or more. I would call these traditionally rent-stabilized apartments. These are older buildings. There's no doubt some of them are deteriorating and do need ongoing maintenance.

Then there's another category of more recently constructed buildings, including a lot of those beautiful high rises on the Greenpoint Waterfront, Long Island City, or East Harlem, where these are built in exchange and receiving tax breaks or city financing. In exchange for that, they will keep units rent-stabilized. Right away, you're looking at these two classes of buildings. Then you're looking at buildings in different boroughs. Buildings where the landlords were very responsible in keeping up with maintenance for years.

Other buildings where the owners purchase them with the goal, prior to laws changing in 2019, of raising rents and deregulating buildings or deregulating apartments so they were no longer rent stabilized. That option was off the table once laws changed in Albany in 2019, so suddenly, those owners are overleveraged. They have more debt than they expected because they're not able to raise their revenue. Let's step back to what Chris was saying, though. He is correct that the Rent Guidelines Board. They consider these reports created by staff who found that expenses have increased by 6.3% over the past year. That includes fuel, insurance, property taxes.

At the same time, they found in a different report that revenues for landlords also increased by 12%. Part of the reason for that is because the state came through with a lot of assistance for tenants who were behind on their rent during the COVID pandemic. There was the eviction moratorium. A lot of people were out of work. Some people had stopped paying their rent for other reasons and have since resumed, or the state came through with grants to make up that payment, so that helped landlords, too.

If I could just make one more point on that.

Brian Lehrer: Oh, yes. Go ahead.

David Brand: Owners would say that those overall numbers on the revenue increasing masks serious problems in a specific subset of buildings, especially with 100% rent-stabilized units, where they're not able to make money other ways, so those buildings, in many cases, are deteriorating.

Brian Lehrer: Couple of texts. Listener writes, "I keep old leases and recently looked into how my rent compared to inflation. My rent-stabilized apartment is almost exactly on pace with inflation since 1992." Another listener writes, "Here's the thing for landlord costs increasing. If landlords can't afford the building, they have a saleable asset. Renters have no recourse if their costs go up." Here's an interesting proposal that certainly the Rent Guidelines Board is not required to take into account. David, listener writes, "Is there any way to tie the minimum wage to rent-stabilized rent increases?

If the point of rent stabilization is to help combat the city's housing crisis by making sure some units remain affordable,-" I think that's a quote from their official mission statement, if I'm not mistaken, "-shouldn't it only go up in conjunction with wages? If rents are going up 2.75%, wages should, as well. Otherwise, where are renters going to magically find this money?" To your knowledge, as a longtime housing reporter, has anybody ever proposed tying rent increases to wage increases and trying to make a political thing of it?

David Brand: I haven't heard that tied to wage increases specifically. Though one of the things that the Rent Guidelines Board considers is wages and unemployment. They found unemployment ticked up slightly in New York City. They're using that to say tenants are struggling more now than previously. There are so many different ideas people have, though, for what would be better or different than the Rent Guidelines Board. You mentioned inflation. Inflation does include housing and shelter costs, so tying that to-- I don't know, it gets complicated.

You talk about tying the rent increase to an index that already includes housing costs, the Social Security cost-of-living adjustment. The listener mentioned minimum wage increases. To do it in a more standardized way that doesn't rely on nine people, considering a lot of information and the politics around all of this that you mentioned, really having an effect. I think it's unlikely that this is going to change in the near future.

Brian Lehrer: Let's take one more call. Edward in Manhattan, you're on WNYC. Hello Edward?

Edward: Yes, Hi. I am a part owner, along with a few partners, in about a dozen small apartment buildings. These are buildings that are frequently called walk-ups or 25-footers because there'd be typically eight to a block in a typical Manhattan block. In the past, prior to 2019, when an apartment, a rent-stabilized apartment-- By the way, all of these buildings are rent-stabilized because they all fall into that category of six or more units.

In the past, when an apartment would become vacant, we would make an investment, fix up the apartment, and often these apartments had been occupied for 20, 30, 40 years. When they become vacant, we'd make an investment in the apartment, fix it up, and the old law allowed us to increase the monthly rent by 1/40th of the amount that we invested, so we could earn a decent return on money that we put into fixing up apartments.

Brian Lehrer: Meaning after 40 months, three years, and a little, you get it back, and then after that, it's profit. Right?

Edward: That's one way to look at it, but we would just look at it as an annualized return on the capital investment that we'd make in the apartment to fix it up. Under the new law, we're no longer allowed to earn any reasonable return. I think when you work it out, it comes out to about 3% or 4%, or 5%. We can earn that in the risk-free market and treasuries, or whatever. We no longer fix up apartments, and we no longer rent them out. We just warehouse them, keep them vacant, waiting for the legislature to change the laws again, because if we rent it out, we'd have to do it at the stabilized rent, which is a fraction of the market rent.

Brian Lehrer: We have another caller who we're not going to get to, but I'll reference him saying, there's a rent-stabilized apartment in his building that, after the previous tenant left, the landlord isn't even renting out.

Edward: Of course not. There are thousands of apartments like that. There are thousands of those that are not being rented out. We won't rent them out because the stabilized rent won't allow us to earn a decent return on that apartment, and we'd be stuck with that tenant indefinitely, maybe for another 30 years. It's better to leave it vacant and wait for the legislature to change the law than it is to rent it out for $800 or $1,000 or whatever it is and wait for one more year [unintelligible 00:15:08] vacates.

Brian Lehrer: One quick follow-up question. You referred to yourself, I think, as a small, small landlord. Sometimes it comes up that there should be different standards for maybe people like you, as compared to the big corporate landlords who own hundreds and hundreds, maybe even thousands of apartments, and are going to make money almost no matter what. Would you separate rules for you? [crosstalk] Would you be in favor of having different rules for small rather than large corporate landlords?

Speaker D: Well, I think buildings that fall into this category of walk-ups are sometimes called tenements, called 25-footers; these buildings have between eight and 16 apartments, typically a store or two, in the ground floor. You see them all over Manhattan and some of the other boroughs, but very standardized type of building. They are subject to the exact same laws that buildings built under Mitchell-Lama in the '60s, in the '70s, in the '80s that have 200, 300, and 400 units in them. These are obviously a separate class of buildings. Right now, you have hundreds, if not thousands, of apartments sitting vacant in these buildings. Whereas we used to fix them up under the old law, it really paid to fix it.

Brian Lehrer: Edward, I'm going to leave it there. Thank you very much for your call. We appreciate it. David, there may be tenants listening to his story and their heads exploding, saying, "No, I hear him, but a lot of landlords are just warehousing apartments until they can get rent stabilization off their backs. They're warehousing them until they can make a killing or until they can use them as Airbnbs or whatever."

David Brand: Very few topics motivate, especially, I think, tenants in New York City, or maybe infuriate people, more than the idea of empty affordable apartments or empty rent-stabilized apartments. I hear what Ed is saying, especially if a tenant has been living there for a long time, the tenant moves out, their rent is still going to be low or relatively low because it was just subject to small percentage increases over time. In many cases, there are pretty low-priced apartments that the owners say it's just not worth it for them to put it back on the market because the repairs might cost a lot, and they're not going to make that much money off of it. That is what leads to these empty warehouse apartments.

Brian Lehrer: Before you go, briefly, the other story that I referenced in the intro, a proposed cut, a very large proposed cut, 40%, I think the number is, to the federal rental assistance program. What's that?

David Brand: Yes, this is pretty huge. The Trump skinny budget proposal, which it's not binding, it goes to Congress, Congress will negotiate on the housing budget, so doesn't necessarily mean this is happening. They're proposing that massive cut to federal rental assistance, specifically the Section 8 program, which is a voucher program for low-income tenants. The money goes directly to the landlord it houses in New York City, 100,000 households, many of them families. There's a huge waiting list for this assistance.

The Trump administration is also proposing not just cutting that funding, but getting the federal government really out of the rental assistance game altogether and instead issuing block grants to cities or states to then distribute as they see fit. Welfare funds can lead to all sorts of problems depending on the state, and a lot of that money not actually making it to the people most in need.

Brian Lehrer: This is like what they're talking about potentially with Medicaid cuts as well, another kind of potential federal cutback from helping people who are low-income in the United States. If they cut the total dollar amount for rental assistance and then just make it a block grant to the states, then what they're doing is putting the burden on Albany and putting the burden on Trenton and putting the burden on Hartford, et cetera, et cetera, right?

David Brand: That's right, yes. Sates like these, which have Democratic lawmakers in power who see the importance of rental assistance programs, they might set up a rental assistance program that works for people even though they're going to have way less money than the federal government would provide otherwise. I don't know if that would be the case in states where the leadership wants less entitlements and less benefits for people.

Brian Lehrer: WNYC and Gothamist housing reporter, David Brand. Always on it. David, thank you very much.

David Brand: Thanks a lot, Brian.

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