Rent Guidelines Board Limits Hikes To 3% In Contentious Final Hearing

Owners of New York City's approximately 1 million rent-stabilized apartments will be allowed to raise rents by up to 3% later this year after a razor-thin vote of the Rent Guidelines Board Wednesday night.

The meeting began with the board members struggling to be heard over tenant advocate groups who arrived to voice their dissatisfaction with proposed hikes. Chants of "rent rollback" drowned out the members' microphones.

"I am voting for this knowing that this is the lowest we were able to secure for tenants," Genesis Aquino, a tenant member of the Rent Guidelines Board, said onstage at the meeting, held in Hunter College's Assembly Hall. "Even though the costs of operating these buildings is increasing, in reality, they are not putting that money in the apartments. If they were putting that money in those apartments, they would not be living like they are living today."

Landlord groups said plummeting net operating income, increasing expenses and difficulty maintaining apartments justified much larger rent increases, while tenant advocates said increased cost of living and poor apartment conditions necessitated barring any hike.

Landlord members suggested a 5% increase for one year and a 7% increase for two years, which was voted down by public and tenant members of the RGB. Tenant members then asked for a 0% increase, which landlord and public members voted down.

RGB Chair Nestor Davidson then introduced Proposal 23 over the crowd's chanting and whistling: a 3% increase for one-year leases and for two-year leases a 2.75% increase for the first year and a 3.2% increase in the second year. The measure passed by a 5-4 vote roughly an hour after the meeting began.

"Finding the right balance is never easy, but I believe the board has done so this year — as evidenced by affirmative votes from both tenant and public representatives," Mayor Eric Adams said in a statement shortly after the RGB's final vote. "We also know that the real solution to the affordable housing crisis requires building more housing — that means getting New York City the tools we need to build the housing New Yorkers deserve. That is why we continue to fight for state action on affordable housing incentives, office conversions, and other key priorities."

The new adjustments will be effective for leases starting on or after Oct. 1. 

Roughly 69% of NYC residents rent rather than own the apartments they live in, per the RGB's most recent annual report, which looked at 2021 data. Roughly 2.3 million rental units exist in the city, 44% of which are rent-stabilized. That figure includes units in luxury housing that are income-restricted as part of the 421-a tax abatement program.

Affordability remained a key issue for tenants, with RGB data showing the problem has worsened over the last 15 years. In 2008, 50.1% of renters spent a third of their income or more on rent, and in 2021, that number was 54.1%. New Yorkers spending more than 50% of their income on rent also increased in that period, rising from 26.9% to 30.1%. 

“Landlords have been indisputably wildly overcompensated over the last 31 years due to this board’s decisions,” Adán Soltren, a tenant member of the RGB, said onstage in response to Davidson’s proposed increase. “When the data is abundantly clear that we can’t absorb higher rents? Someone please make it make sense, because the math is not mathing.”

Landlord groups also questioned the logic of the RGB. Its own study showed expenses for landlords had grown enough to necessitate increases more than twice what was ultimately approved, they said. Landlord representatives onstage were drowned out by the vocal group of tenant advocates in the auditorium.

Landlord advocates said in the aftermath of the vote that its theater was unproductive for both tenants and landlords.

“Every year, we see the same drama unfold, and nothing ever changes,” Jay Martin, executive director of the Community Housing Improvement Program, said in a statement. “The RGB puts data out there which is largely ignored, tenant advocates and politicians scream and shout, and rent-stabilized housing gets defunded. If we continue on this trajectory, there won’t be any rent-stabilized housing left for people to live in.”

The RGB’s study found that the chances a supply of housing will come online in the near future — a phenomenon that would alleviate the city’s housing crisis — are low. Multifamily developers rushed to file before 421-a expired last year, but applications have fallen off a cliff since the expiration of the tax break.

While the number of approved new housing permits rose by just shy of 8% in 2022, permits decreased by 45.3% in the first quarter of this year. City agencies haven't been able to step in and fill the gap: Housing construction starts sponsored by the city's Department of Housing Preservation and Development and the Housing Development Corp. also fell by 47.7% in 2022.

Meanwhile, landlords of existing rent-stabilized housing argue that they need to raise rents to cover operating costs and upgrades. Approximately 8.8% of buildings containing stabilized units were classified as distressed by the RGB, up from 6.5% last year.

Corporate ownership of rent-stabilized units has increased over the last decade, an analysis of HPD data from nonprofit JustFix found. Landlords who own 50 units or fewer control 8% of the city's rent-stabilized housing, while those who own fewer than 10 units have just 1% of the market. 

Landlord groups have warned that mom-and-pop owners of rent-stabilized buildings would suffer the most if they can't raise rents enough to cover expenses.

Ann Korchak, president of the Small Property Owners of New York and a rent-stabilized landlord, said the 3% adjustment won't cover the increase in property taxes she has had to pay in recent years.

“I was listening in to the hearing. It was so loud that I couldn't hear what the final vote was,” Korchak told Bisnow. “This long period of low increases that we can never dig out of, while these increases can help, it’s not enough. My rent-regulated units, they’re still not going to be covering the base operating expenses."

The RGB announced in May that it was considering increases ranging from 2% to 5% for one-year leases and between 4% and 7% for two-year leases. The announcement led to protests by tenants in subsequent public hearings.

The demonstrations were disruptive enough that the RGB changed venues and issued a warning that items capable of making loud noises, like the drums that appeared at prior meetings, wouldn't be permitted inside the venue. At a public hearing prior to the final vote, videos showed a line of New Yorkers who had arrived to testify wrapped around the block of St. Francis College in Downtown Brooklyn, with 130 people still waiting in line two hours into the hearing.

Elected representatives at city and state levels spoke out against increases prior to the vote, with City Council Member Chi Ossé, who represents part of Brooklyn, calling the proposed hikes “unaffordable and unacceptable.” State Assemblywoman Phara Souffrant Forrest joined tenants advocating rent rollbacks.

Adams previously issued a statement saying that although he sympathized with the challenges landlords face with the cost of building maintenance, a 7% increase was “beyond what renters can afford and what I feel is appropriate this year.” 

Scott Mollen, a partner at Herrick Feinstein who served on the Rent Guidelines Board in the late 1970s and became chair of the board under Mayor Ed Koch, told Bisnow ahead of the vote that elected officials never used to get involved in these decisions, adding that the gulf between what tenants and landlords are asking for has widened.

“Landlord-tenant issues in New York City have always brought out very strong, passionate feelings,” he said. “I don't think I've ever seen major landlord organizations or major tenant organizations ever say that the Rent Guidelines Board has reached a fair resolution.”