For the 13th consecutive year, landlords’ profits on rent-stabilized tenants increased, with property owners on average making $540 from units per month in 2017, according to data published by the city’s Rent Guidelines Board Thursday.
The board released a pair of studies on the expenses and affordability of the city’s nearly one million rent-stabilized apartments during its first meeting of the year, which kicks off the annual months-long process that culminates in a June vote on potential rent hikes.
The 2019 Income and Expense Study shows that landlords’ net operating income, the revenue remaining after operating expenses are paid, grew 0.4 percent from 2016 to 2017—the rise is the 13th increase of profits on rent regulated units in a row, but also the smallest uptick of those consecutive years.
Meanwhile, the cost-to-income ratio for those property owners was 59.3 percent—up by one percent from last year—meaning that on average, owners of rent-stabilized units spent some 59.3 cents out of every dollar of revenue on operating and maintenance costs in 2017, according to the study. In other words, earnings went up slightly, but so did costs.
Yet building-wide, rent collection was 3.8 percent lower than in 2017, with the average collected rent at $1,273, signaling that “the gap between collected and legal rent indicates that building owners are collecting a smaller portion of the maximum legal rent.” That’s a continuing trend that’s worth exploring, said one board member.
“We’re talking about making adjustments to the overall legal rent for rent-stabilized units, if 28 percent of landlords who could collect the legal rent aren’t collecting it, to me, that says something about the market,” said tenant board member Sheila Garcia during Thursday’s review of the reports’ findings. “So if we’re increasing the legal rent and it’s not being collected, then the increases that are impacting a lot of people—the market isn’t calling for that.”
In 2017, rent-stabilized tenants saw a rent-to-income ratio of 36 percent—well above the 30 percent benchmark that the U.S. Department of Housing and Urban Development considers affordable, according to the 2019 Income and Affordability study. Kenny Schaeffer, the chair of the Metropolitan Council on Housing and a housing attorney, pointed to that ratio and landlord’s consistent profits over the last decade to call for rent reductions and said, at the very least, the board should consider a rent freeze over an increase this year.
“A majority of rent-stabilized tenants are not able to afford their apartments, which we already know. That’s the definition of a crisis,” said Schaeffer. “This really shows that landlords are making far too much money and that the guidelines board in the past has been asleep at the wheel.”
Over the last five years under the de Blasio administration, the Rent Guidelines Board has permitted hikes of 1 percent, 0 percent, 0 percent, 1.25 percent and 1.5 percent on one-year leases. (Under the Bloomberg administration, hikes of up to 4.5 percent were approved.)
Elyzabeth Gaumer, an assistant commissioner with the research department of the city’s Department of Housing Preservation and Development, emphasized the board’s need to closely evaluate annual data from the NYC Housing and Vacancy Survey that is “uniquely efficient to describe who the people are who are impacted by this board’s decision” as it mulls potential increases.
“I think it’s very valuable for us in the city to understand that rent stabilization really does serve a lower income and more vulnerable population,” stressed Gaumer. “There’s a lot of debate, not only on this board, but in New York City as a whole on whether rent stabilization is well matched to the need and our data has show that in the last 30 years that rent stabilization does largely serve a population that would otherwise struggle in private, unregulated units.”
With the new Democratic majority in the state legislature, tenants’ rights advocates are pushing for additional major reforms, such as doing away with the preferential rent loophole and vacancy decontrol, which helps push apartments out of rent stabilization after they are vacated. Gov. Andrew Cuomo has even signaled support for reform.
Meanwhile, several pro-landlord groups, including the Rent Stabilization Association and the Real Estate Board of New York, are pushing for what they’re calling “responsible rent reform,” airing ads on TV and rolling out a digital campaign to push their stance to “protect tenants, but also small property owners who are already struggling to maintain their buildings,” they said in a March statement.