[music]

Protesters: Shame on you. Shame on you. Shame on you. Shame on you. Shame on you. Shame on you.

Brian Lehrer: That's the sound of unhappy tenants shouting, "Shame on you," at the usually raucous Rent Guidelines Board meeting, where they voted for preliminary rent increases of up to 7% on Tuesday night as captured and tweeted by city and state reporter, Annie McDonough, there, that audio. Even Mayor Adams weighed in via a statement afterwards, saying 7% for rent-stabilized apartments would be too much, and called on the board to strike the right balance and settle on a lower number. Of course, inflation has hit landlords as well as tenants, and this will be the second year in a row of increases on the high side if these go through. To talk more about this and to take your calls, we're joined by David Brand, the housing reporter for WNYC and Gothamist. Hi, David.

David Brand: Hey, Brian.

Brian Lehrer: Listeners, we do want to hear from you. Tenant or landlord, what does an increase of up to 7% on a two-year lease mean to you? Over the edge or too little too late? Some are even saying what would be the right number, what would be fair to everybody since the government sets this number for the rent-stabilized apartments in the city. 212-433-WNYC, 212-433-9692. David, can we start with a basic stat? What percentage of all rental units in New York City are rent-stabilized?

David Brand: About half of them, so there is about a million rent-stabilized units and about 2.4 million people living in those, so it's a huge, huge number.

Brian Lehrer: The board hears from tenants and landlords, and each side makes a case for higher or lower increases, and then they issue ranges within which they will come up with a final determination next month. I'm giving that headline number, up to 7% for two-year leases. In more detail, what are the ranges?

David Brand: On one-year leases, it's 2% to 5%, and on two-year leases, 4% to 7%. They're not bound by those numbers, but traditionally, they do arrive at the final vote in June at somewhere in that range.

Brian Lehrer: These are preliminary, as I said, but they usually land in the middle of their range. Last month, they said landlords would need increases of roughly 5% to 8% for one-year leases, and 6-something% to almost 16% for two-year leases to meet landlords' operating expense increases in this era of inflation. What happened between then and now as they move along this process?

David Brand: That 16% number was pretty eye-popping and drove a lot of media coverage. That's based on a very specific statistic. That is what it would take to maintain what they call net operating income for landlords of 100% rent-stabilized buildings. Most rent-stabilized apartments aren't in 100% rent-stabilized buildings. Net operating income is essentially profit minus mortgage cost. That's just one data point that they consider, but because it was such a high number, it drove a lot of coverage. I think, also, it was somewhat misleading.

They also consider the impact on tenants, who are-- More than half of rent-stabilized tenants are paying more than 30% of their income on rent, which makes them rent-burdened according to federal guidelines. A huge number are paying more than half their income on rent. Inflation is hitting tenants hard. It's also hitting landlords hard because costs are going up. That was just one data point that they considered, but because it was so eye-popping, I think it got a lot of attention.

Brian Lehrer: That chanting that we played a little of is from after they adjourned and the protesters were on stage, but chanting was going on throughout the meeting, right?

David Brand: Yes, and you said in your intro that these typically raucous meetings bring out a lot of tenant advocates, tenants themselves, in this case, five councilmembers, who joined in with the demonstrators and went on stage. There's always demonstrations. I think that was definitely tempered during COVID, when these were taking place remotely, and even then, some of the members would patch in through Zoom, and the tenant reps, because there's two tenant reps, two landlord reps, and then five theoretically impartial members on the board, they would be joined by demonstrators. There's always this kind of rowdy atmosphere.

You can understand it because this is a really important decision. It literally affects how much people are going to pay to live in their homes, to live in New York City. People going on stage, the councilmembers going on stage and interrupting the proceedings, that was definitely ratcheting things up. The board did take a small recess to let some of the demonstrations continue. It also meant you couldn't hear everything that was going on. I was watching the stream, messaging with people I knew who were there, and I was like, "This is what I think I heard. Did you hear it?" They were like, "I couldn't hear that at all." It definitely made things a little more challenging.

Brian Lehrer: Before we take some calls from landlords and rent-stabilized tenants, let's take a caller who lives in a market-rate apartment, who wants to weigh in on this. Gary in Harlem, you're on WNYC. Hi, Gary.

Gary: Hi there. Can you hear me?

Brian Lehrer: I can hear you.

Gary: Brian?

Brian Lehrer: Yes.

Gary: Oh, very good. Love your show. You're a national resource, at least for the city. Listen, so I'm in market-rate, everybody's talking about rent-stabilized. There is no cap at all on market-rate apartments, and I just got hit with a 14% increase. I'm 72 years old. I'm on a fixed income. my wife is as well. I've got type 2 diabetes.

In the past, I've been able to talk to the landlord, and we've been able to negotiate a little bit on my rent. Part of that had to do is they had a major code violation here, and they didn't want me to rat them out, so they played with me. They fixed that, and now there seems to be nothing to control them. I talked to them three times in the last six weeks, and they came back and said, "We're not negotiating this year."

Where does that leave me? I know there was some kind of rule, they were trying to pass something in the current budget that did put some control over market cap, but I don't have any idea [crosstalk]--

Brian Lehrer: That failed in the New York State budget negotiations, what they called good-cause eviction, which would, to some degree, cap market-rate apartment rent increases, but that failed to get through in Albany. Gary, I'm curious if your landlord gave you any rationale for why they're raising the rent 14% this year.

Gary: No, they didn't come back at me with that at all. Like I say, in the past, they've been reasonable, and I've been able to discuss it with them, and I've kept it at a reasonable rate, and it hasn't been crazy. Look, the CPI is only 6% this year, so it's twice that, and more than twice that. Now, for what they're doing for rent-stabilized, it's three or four times that.

Brian Lehrer: Yes, the CPI, the consumer price index, so your rent increases more than twice the inflation rate. Gary, thank you for adding that to the conversation.

David Brand, our housing reporter, can you put that into some context? We're debating rent increases for rent-stabilized apartments of up to 7% if you signed a two-year lease, and that's being met with such outrage, but what's the context of the comparison to market rents and how they're going up in the city? Does that context matter at all?

David Brand: I think it was a great question you raised, did the landlord offer any justification for that increase? Gary was able to negotiate in the past. It sounds like, this time, the property owner said, "No negotiations. This is the number. Take it or leave it." I don't think he really has that many options unless he continues to try to negotiate, which is tough.

You mentioned the good-cause eviction legislation that gets framed as capping rents. It would instead allow tenants to challenge a rent increase and for the landlord to then justify it. The landlord could say, "Well, I installed a new boiler," or, "I did major renovations, and so that's going to be reflected in your rent." Might say, "Inflation is causing heating costs to go up or fuel costs or insurance costs," which are rising across the board.

Yes, 14%, that's a big number, and there's a real impact to that to renters. In the context of rent-stabilized apartments versus market-rate, there's an argument that the landlord groups will [unintelligible 00:09:27] say, "Well, because our revenues are capped on rent-stabilized apartments, we are forced to jack up rents on market-rate apartments because that's our only opportunity to either make a profit or to reinvest in a building." Then there's landlords, of course, who just say, "Well, I see the market trends. I know Harlem is a hot neighborhood. I can raise this rent, take it or leave it. If you don't take it, somebody else will."

Brian Lehrer: Marianne in Brooklyn, you're on WNYC. Hi, Marian.

David Brand: Hi, good morning. I'm calling because one of the things that I've noticed with the rent increases is that when the landlords don't get the increase they request, they sometimes check on this thing called MCI, Major Capital Improvement increase. They never talk about that when they talked about the rent increases that they're requesting and the tenants in these apartments, they have to pay for that MCI increase for the duration of their tenancy.

Brian Lehrer: Right. That's an ongoing controversy in a city for years and years. MCI, Major Capital Improvement, it's usually a one-time expense for the landlord. It's a legal justification to increase the rent, but that increase doesn't just last until that expense, whatever improvement they did to the place is paid off. That rent increase can last forever. David, that's right on the facts, correct?

David Brand: Yes. It used to be, they could pass on the cost a lot higher, so they could raise rents, I think up to 15%, based on these Major Capital Improvements in the past. In 2019, there were new tenant protection laws passed that limited that increase to 2%, which is very controversial among the landlord groups who say this is how we pay for investment in our properties, and now we don't even have that option anymore. Of course, that also led to a lot of fudged receipts and saying, "Well, I did this project. Here's the invoice for it. I get to raise rents by a large amount now." Still controversial.

Brian Lehrer: Here's a landlord calling in. Richard on the Upper East Side, you're on WNYC. Hi, Richard. Thanks for calling.

Richard: Hi, Brian. Huge fan.

Brian Lehrer: Glad you're on.

Richard: I just want to give you a little taste of what being a small landlord in New York City is, and I'm a small landlord in New York City. I just absolutely hate it when people say, "Oh, landlords can charge whatever they want." No, we cannot. There's a market rate. There's a market level. Once you go beyond this market level, you have no takers. I'll give you an example.

I have a brownstone in a very desirable part of Brooklyn, and just as an experiment, I listed one of my vacant apartments, very nice vacant apartment, at $3,200, even though I knew that the market rate was around $2,500, $2,600. For seven days, I will get zero hits, and this almost never happens. I always get 40, 50 hits a day. I kept lowering the price, and I'll get more and more and more hits. Because I didn't want to have another month of vacancy, I just lowered the price to $2,500, and once I did then, I will get 40, 50 people interested in seeing the apartment and I rented it within two days. This is number one thing that-- Yes?

Brian Lehrer: Here's the argument that another side would make, Richard, and that is the market, what the market can bear for that apartment, even perhaps a $2,500, I don't know what kind of an apartment it is, it's so unaffordable for most New Yorkers and that the market favors the landlords generally because there's a housing shortage. It's not an equal playing field, a level playing field between tenants and landlords. Landlords are going to make out better than tenants because the overall playing field is so skewed toward the landlords because there's this chronic housing shortage, supply and demand.

Richard: Okay. Brian, Brian, the market level was such because there are a lot of people who can pay and who will pay because New York City is a very desirable city to live in. I don't see people saying to the grocer, "Hey, you have to keep your prices low. You're not allowed to go over." Nobody tells that to a grocer. I absolutely hate it when people tell me, you made an investment and now we have to be prepared. It's a risky investment, take a loss. Why? There's so many people who want to live in Brooklyn. They're willing to pay the price, and they will pay the price because New York City is an amazing city to live in.

Don't even get me started on housing court. Do you know how hard it is to evict in Brooklyn? You tell me that the power balance has shifted to landlords. Brian, go to a housing court and see what's happening in Brooklyn housing or Brooklyn located 141 living for free. I've been to housing court. It took me months to evict the problem tenants. This power imbalance, sure, you can claim that, but I've been to housing court. The power imbalance, once you have a problem tenant, you have very little recourse.

Brian Lehrer: Richard, I'm going to leave it there. Thank you for putting all that on the table. Call us again. We really appreciate it. We're with David Brand, WNYC and Gothamist housing reporter, as we talk about the proposed rent stabilized rent increases up to 7% for a two-year lease. They'll decide for sure in June. David, what were you thinking as you heard the landlord argument?

David Brand: There is essentially an imbalance because tenants don't have assets that they can draw equity from, that they can get a loan based on. Property owners do. That being said, there are a lot of small property owners who are maybe closer to breaking even than they were in the past. The profits are lower, or they're finding it more challenging to invest in the building. There are many different types of properties, many different types of property owners in New York City. There's huge corporations that own thousands of units, and then there's smaller owners.

Essentially, there is that kind of imbalance because owners own something. They can draw money from it, or even sell if needed, but people need housing, and property owners are the ones who provide it. There are a lot of ideological things at play. You hear from a lot of people who don't even own rent-stabilized buildings, or people who don't rent in rent-stabilized buildings have opinions on this and want to weigh in. That's what makes the rent guidelines board decisions so impactful.

I think right now with housing as probably the biggest issue in our city and in our state and coming off of a state budget where lawmakers did nothing to make it easier to afford housing or to create new housing, there's even more focus on the rent guidelines board decision making right now.

Brian Lehrer: Right. Of course, housing court, which the caller also brought up, of course, tenants' advocates would say, "No, it's not hardly the way that he painted it." There are so many evictions going on now that the eviction moratorium has been lifted, post-pandemic rules. That's a debate for another show.

Who's on the Rent Stabilization Board and Rent Guidelines Board, as it's called? You mentioned that they're divided between tenants and landlords. Is it 50/50? Who appoints them? How do they reach a majority vote on anything?

David Brand: There's nine members appointed by the mayor. Two of them are landlord representatives. In this case, two landlord attorneys, and then two of them are tenant representatives. One is an organizer, and another is a tenant lawyer. Then there are five, they're called public members. These are theoretically not nonpartisan, but are weighing the interests of everyone involved here, and they are economists or housing and land use experts.

Brian Lehrer: Of course, there are the two sides in this debate, rent increases are too much for tenants, and landlords want to charge more for these below-market units, and they say inflation is up. On the tenant side, they also say inflation is up. There was that new study, and I wonder, David since it's gotten some publicity on this station and elsewhere if the rent guidelines board discussed this explicitly at the meeting this week? There's that new study that said, "Half of New Yorkers have trouble meeting the cost of food, shelter, health care, and transportation." Mayor Adams didn't say no to increases, but people unable to afford even stabilized rents can end up costing the city and other ways. How do you read the mayor's response? Was that study, which as I say, it's been getting some publicity here and other media, did it come up?

David Brand: They didn't reference that study specifically, but in a previous meeting, they went over the impact of inflation and the pandemic economic recovery on tenants. Some of the data I think that went into that study was also raised to show that there's been an imbalanced recovery, economic recovery, and a lot of people are still hurting, and a lot of people have been struggling to afford housing and basic needs for a long time, so that definitely plays into their thinking.

Adam's statement after the vote, politically strategic. He could pick on the highest number and say, no, that's too high, with also acknowledging that or saying basically should be some type of increase, but maybe it should be in the middle of those ranges.

A response to that statement was, well, you pick the board. You control the board. You influence the board. That's a perception of the Rent Guidelines Board too. I think depending on the mayor and depending on the members, that there's truth to that.

I talked to a couple of past board chairs from previous administrations yesterday, and they said, no there was no City Hall influence. Once we were selected for the board, appointed to the board, we were trusted to make the decisions that the mayor will generally pick people who share his, and it's always been his, ideology.

Then I think in other administrations there was a more explicit role that the City Hall would try to play. De Blasio would come out publicly and say there should be a rent freeze. During his administration there were the only rent freezes ever enacted by the board.

Brian Lehrer: We're up against the clock, but I want to get one more caller in here because Pilar and East Harlem is one of those people who actually did storm the stage after the vote the other night. Pilar, you're on WNYC. We have a minute for you.

Pilar: Hey, good evening. I mean, good morning. I was one who stormed the stage. I'm part of the Rent Justice Coalition, which is a coalition of tenants' organizations and legal service providers. We have been for years pushing for rent-freeze, rent rollback. The data has been very clear that landlords have been profiting. As a tenant advocate who's been doing this for eight years, we don't have enough time to talk about all the violent harm landlords have caused my tenants, especially marginalized.

The landlords have never opened their books up and they spend a lot of money on attorneys who cost-- One of the landlord reps is an attorney. He's a landlord attorney. I don't know specifically how much he charges, but I'm pretty sure he's not going to work for free, like how we do. Again, I personally, as a tenant advocate, as a tenant, as a leader in this city, we haven't really [unintelligible 00:22:40] especially mental health crisis that's going to continue to happen.

We saw that with the gentleman who passed away, the homeless man. Again, if landlords are broke, open the books. If landlords are dealing with hardship, they have access, like the gentleman mentioned to get assistance, stop buying more buildings. They keep buying buildings yet being broke.

Brian Lehrer: Pilar, thank you very much. David, 20 seconds to, one of the points she makes, are landlords required to show their books in individual cases or enmasse in any way for the rent guidelines board?

David Brand: There's a study that the Rent Guidelines Board considers, and that's where that 16% number came from. It's landlords submitting their costs when it comes to insurance and property taxes and heating and fuel to the board. That's the extent that they're sharing information and opening their books and that's where Rent Guidelines Board gets a lot of the data from.

Brian Lehrer: WNYC and Gothamist Housing Reporter, David Brand. David, thanks so much.

David Brand: Thanks a lot, Brian.

Copyright © 2023 New York Public Radio. All rights reserved. Visit our website terms of use at www.wnyc.org for further information.

New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.