Why rent control isn’t always all it’s cracked up to be
Many New Yorkers think of rent control as an unbelievably cushy deal, the Holy Grail of living arrangements. No wonder then that back in the 1990s, locals grew incensed when it emerged that the actress Mia Farrow was living in an 11-room apartment at Central Park West and paying a mere $2,900 a month for the palatial digs.
Extreme celebrity case notwithstanding, rent regulation was initially intended to help low- and middle-income New Yorkers hack it in one of the world’s most expensive cities, and it still does that for many: An estimated 1 million units throughout the five boroughs are stabilized. But rent control follows its own set of metrics that determine increases in rent, and the city’s dwindling number of rent-controlled tenants say that the policies originally created to help them are now strangling them financially.
How does rent control work?
First, some background on rent control: Distinct from rent stabilization, which places stricter caps on how much rent can be raised at lease renewal (see our insider’s guide to rent stabilization for more info), rent control involves periodic hikes that have proven to be too much for many tenants.
According to the city’s Rent Guidelines Board, about 27,000 rent-controlled apartments remain in New York; because the program applies to properties built prior to 1947, and requires tenants to have resided in their apartments continuously since 1971, many of the locals in rent-controlled units are now elderly. Rent stabilized apartments, on the other hand, are found in buildings of six or more units built between 1947 and 1974, or in properties where developers received tax breaks for doing extensive renovations. With almost 1 million rent-stabilized apartments out there, a wide range of New Yorkers live in them--some without their knowledge. (You can find out if your place is stabilized by looking up your unit's rental history.)
Though coveted, it's possible to move into a stabilized unit, but those who want to pass on their apartments to family members will have a tough go of it. Succession rights are rather labyrinthine, and mandate that to inherit a rent-controlled apartment, relatives must live with the tenant for at least two years prior to his or her vacating.
But whether it’s worth it to go through the hassle of succeeding a relative is debatable, given the frequent rent increases leveled against tenants. Rent-controlled units are under state, rather than city control, and New York’s Division of Housing and Community Renewal (DHCR) has instituted annual rent increases on these homes of 7.5 percent. In late 2015, however, the DHCR announced an increase of up to 9.6 percent over the next two years, prompting outrage on the part of housing advocacy groups, according to the New York Times. (By contrast, rent-stabilized tenants saw no increase on one-year leases, and a two percent increase on two-year leases.)
One of those groups, the Metropolitan Council on Housing, notes that these increases, which are based on what the DHCR sets as the maximum landlords can charge and is upped every two years, present major hardships for rent-controlled tenants. Many of these New Yorkers are retirees on fixed incomes, the median of which is only $22,200. (On that income, even a one-bedroom with a monthly rent of $1000—the price of some apartments in a recent Times story about Donald Trump's long-ago battle with rent-controlled tenants in a Central Park South building—would be tough to afford.)
Justin Brasch, a landlord/tenant and leasing attorney, calls the formula used to calculate the rent increases “antiquated,” and points out how differently tenants in rent-stabilized units are treated. “Stabilizations go before the Rent Guidelines Board, with tenant advocates and landlord advocates getting together to decide what is fair,” he says. “Rent control is an entirely different system, and rent control tenants are in such a difficult situation.”
Meet the rent-controlled
Lucy Levy has lived in her Greenwich Village apartment since the 1950s, having grown up there and taken over the lease after her parents died, and she says she has seen a $1200 increase in her monthly rent in recent years. Now in her 60s, Levy says she’s fortunate to still be working, unlike many of her fellow tenants, but is nevertheless unsure how long she’ll be able to keep up with the rent hikes: “I had hope I’d be able to live out my life here, but who knows?” she says.
According to Levy, rent control's biggest perks are better protection against eviction, as well as against rent increases if there are violations in the building. As for the latter, she points out that this is wholly under the domain of the landlord, who can apply to the DHCR every two years for increases if the building is violation-free; they can also apply when they make upgrades to the property. State Assembly member Linda Rosenthal, a Democrat who represents the Upper West Side and parts of Hell’s Kitchen—and many rent-controlled constituents—confirms this. "If a landlord hasn't repaired violations, they're not entitled to apply for an increase. And sometimes if there's only one tenant left, they're too lazy to apply," she says. "But in most cases, they do apply.
“So all the squawking about how we don’t get increases is under the landlord’s power,” Levy says. And when increases do come, she adds, “most people don’t realize how significant they are.”
Another disadvantage, Levy says, comes when landlords fix or remodel rent-controlled properties. A Major Capital Improvement (MCI), for example, which is an upgrade that impacts the whole building, like a new roof or boiler, leads to permanent rent increases.
So do smaller changes, like new appliances: Levy cites a new stove that had to be installed in her home back in 1996, which she calculates has actually cost her nearly $3000 due to corresponding raises in rent. Increases, she says, are contingent upon several factors, including operation and maintenance; when improvements and updates are made, the building's value goes up, and so does the rent. To avoid increases based on remodels and new fixtures, “a lot of tenants just buy their own appliances if they have the money for it,” Levy says, adding out-of-pocket expenses to already-skyrocketing rents. The Met Council points out that rent increases for MCIs mean that tenants continue paying for improvements long after they’ve been completed.
And often, rent controlled units don’t receive much in the way of remodels, Brasch says. “Most of these are older apartments that haven’t been renovated since 1971,” he says. “People are not living in the lap of luxury, even if they’re in a fancy building. The apartments themselves are old and tired and run down.”
Brasch himself lived in a rent-controlled unit until 2003, but it came with a cost: a protracted legal battle with a landlord who tried to contest his succession rights. Brasch originally moved into the unit, which was then rented by his grandfather, after graduating college in 1987. After his grandfather entered a nursing home four years later, Brasch took over the lease.
“I should have had no problem succeeding, but I did,” he says. The landlord took him to court, claiming there was no evidence Brasch in fact had been living there with his grandfather. “We were locked in this ugly battle, and that’s one of the ways I ended up in this business. My lawyer was only adequate, and I felt I could do a better job, so I decided to help tenants.”
And tenants like herself could use the support, Levy says: “People say rent control tenants don’t get increases, which is phooey. We are the whipping boy of rent regulation.” The perception remains, though, that rent control tenants are incredibly fortunate—this Naked Apartments article refers to them as "blessed," and calls the passing down of units "NYC's own perverse form of nepotism."
Advocating for better legislation
Part of the difficulty in fighting for more moderate rent increases is that so many rent control tenants are senior citizens, and lack the resources for a drawn-out battle. “There’s a hearing every two years to talk about the increases, and we go and offer testimony and speak to legislators, but many of us aren’t able to come out because of infirmities,” Levy says. “It’s hard to get anything done.”
Rosenthal says improving rent control policy is a priority. Having grown up in a rent-controlled unit, on 93rd Street and Amsterdam, the issue is close to her heart. “We couldn’t have lived in the city otherwise,” she says of her family.
When she was younger, rent control was a reasonable deal, Rosenthal recalls, “but now seniors have lived there for forty or fifty years, and their rents are higher than their neighbors who are rent-stabilized.”
She echoes Levy’s assertion that those affected lack political power, and adds that much of the problem stems from the DHCR using an “antiquated formula that very few people even understand” to calculate the rent increases.
The only way to effect real change, she says, is through legislation, which poses another problem. The New York State Senate has a Republican majority, and according to Rosenthal, many Republicans accept campaign contributions from developers and landlords, a disincentive from voting for pro-tenant policies. (Campaign contributions are a matter of public record, and can be explored in detail here.) She adds that many of the Senate Republicans don’t have rent control tenants in their districts, so the issue is far from urgent in their view.
Last year, for instance, the New York State Senate passed a bill nicknamed "Big Ugly" for its many disparate and unwieldy elements, as well as the controversy it provoked among legislators. According to the Daily News, the bill extended rent regulation laws and raised the rate at which rent is de-controlled by $200; tenant advocates were unsatisifed, but Cuomo said that "the deal was the best they could get from the landlord-backed Senate Republicans."
Real estate industry representatives, for their part, oppose further government involvement in rent regulation. In an article about the "Big Ugly" bill, the Wall Street Journal quoted Steven Spinola, then the president of the Real Estate Board of New York, who said that “If you ultimately own a piece of property, it’s your property," meaning that landlords' rights should trump those of tenants, regardless of how long they've resided there. And the Small Property Owners of New York, a landlord advocacy group, points out on its website that landlords help to boost the local economy by hiring contractors for building and renovating; the organization says that stricter regulations harm both property owners and tenants.
The Rent Stabilization Association, a trade assocation for the residential housing industry, concurs that increasing regulations has wide-ranging consequences. The RSA began broadcasting an ad last month that takes aim at Mayor de Blasio's affordable housing plan and last year's freeze on rents for stabilized apartments. Though not focused on rent-controlled units, the ad reflects the RSA's point of view that strict limits on rent hikes hurt workers as well as property owners, because lower rental income limits landlords' ability to hire painters, plumbers, and contractors to make repairs to units.
Meanwhile, Rosenthal has proposed a bill that would change the way rent increases are calculated. Landlords would be permitted to raise rent by whichever is the lesser of two options: 7.5 percent, or the average of the past five years of increases set by the Rent Guidelines Board.
“They really need this,” Rosenthal says of rent-controlled tenants. She mentions elderly constituents who have been forced to go back to work, take in roommates, or borrow money to stay in the homes where they’ve resided for decades.
Brasch agrees with Rosenthal’s assertion that there should be some way to reduce the increases in rent. “For most of these tenants it’s a real hardship,” he says. “They want to live in a decent place, and they’re entitled to that.”
**This story originally ran on April 20, 2016**
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