“When the State Assembly says they want to strengthen rent regulations, they mean make the law even less rational,” according to Dan Margulies, Executive Director of Associated Builders and Owners of Greater New York, in a release issued today.
“The Assembly has done a great job of manipulating the debate by using the word strengthen as if that’s a good thing,” Margulies added. “It’s time to focus on what they really want.”
What the Assembly wants:
Raise the income and rent thresholds for decontrolling apartments from $175,000 and $2,000 to $300,000 and $3,000.
What this means:
Currently, a landlord can petition the state to deregulate an occupied unit if the tenant household has a legal rent of $2,000 or more and earned more than $175,000 a year in both of the last two years. In other words, if the tenant made $200,000 and paid $1,000 they could not be deregulated. They have to meet both thresholds.
The Assembly has already passed a bill (A2674) that says if someone made $500,000 and paid $2,000 rent, they could not be deregulated. Their income would be more than high enough, but their rent would be too low. This is not what you would expect from the same people who wanted to apply a ‘millionaire’s tax’ to anyone making over $250,000.
What the Assembly wants:
They want to limit vacancy rent increases to once a year.
What this means:
Currently, owners are entitled to a vacancy rent increase whenever an apartment turns over. This is supposed to compensate landlords for artificially low regulated rents on other units, the cost of preparing an apartment for a new rental, any lost rent until the unit is re-rented, possible broker’s commissions and similar turnover expenses. The Assembly bill would limit the increase to once a year, so if an owner painted a $1,000 a month apartment at a cost of $1,000 in January and had to paint it again for $1,000 in October because the tenant moved out, and couldn’t get a new tenant moved in until December, losing two months’ rent, he would still get no increase in rent.
What the Assembly wants:
They want to make Major Capital Improvement (MCI) rent increases temporary.
What this means:
Currently, if an owner invests in a new boiler or roof he is allowed to add 1/84th of the cost to the rent, divided by the number of rooms. For example, if a new boiler cost $84,000 and the building has 200 rooms, the rent could be increased $5 per month per room, or $15 a month for a three room apartment. The increase is permanent.
The Assembly bill would make the increase a temporary surcharge that ended after seven years (84 months). The problem with this is that owners generally have to borrow money for an $84,000 boiler and this leaves them stuck for the interest. Also, the statute allows for annual increases in rents to be set by the Rent Guidelines Board based on increases in operating expenses. The Board isn’t supposed to consider capital expenses, because the existing MCI provisions compensate owners for those. Unfortunately, the Assembly bill ignored that fact. Ultimately, if an owner can’t make money on capital improvements, he will put them off and patch what he has as long as possible. In the case of boilers, that means more breakdowns in winter and more cold nights for tenants. That’s some tenant protection plan.