Higher costs = rent raises.

An annual report issued to the Rent Guidelines Board has calculated rising costs that could translate into higher rents. The report, prepared by RGB, is one of the tools used by the ROB to determine rents for stabilized apartments.

The Price Index of Operating Costs report typically outlines expenses. that comprise a price index of operating costs (PIOC) number. The staff then plugs in the numbers to calculate several commensurate rent increase proposals that theoretically would allow owners to remain whole despite the price increases.

But critics have argued that two of the methods used to calculate the commensurate rents are not reflective of reality, and the board typically ignores those numbers. For instance, one method relies on every lease turning over in one year, while another does not account for increases in the consumer price index.

This year, in an effort to simplify the actual report, it was released to the board on April 25th with merely two overall rent proposals included, with the others available to board members.

These two suggested rent guidelines were calculated at 6 percent for one year leases and 10 percent for two year leases, while another method of calculation brought those numbers up to 8 percent and 12 percent respectively. The first set of numbers were based on owners obtaining vacancy allowances, which the RGB now considers to be under the purview of the state law, the second was without any vacancy increase.

Tenant groups erroneously complained the methodology had changed, and griped the commensurate rent increases would be too high. A tenant rep did not, return a call before deadline.

"It's a tempest in a tea pot," said Jack Freund, executive vice president of the Rent Stabilization Association, the powerful group that represents more than 25,000 owners in the city.

"No matter which of the formulas you look at, you would anticipate rent increases that are significantly higher than last year." said Freund. "It would be irresponsible to the board not to recognize that costs have increased significantly, and we are now on an inflationary trend."

It was the 54.8 percent boost in fuel costs this winter that spurred the jump in the overall PIOC to 7.8 percent. Tenants group leaders argued that fuel costs were already coming down, and would not be as high next winter.

Oddly, but in a catch up way, in years fuel costs have been high, the RGB has typically tempered its rent increases, but in years the fuel costs are low, it has increased rents more.

Last year, the RGB voted for 2 percent increases for one-year leases and 4 percent for two-year-leases. These rent increases are applicable only to the 900,000 rent stabilized tenants in New York City that renew during the period from October 1, 1999 to September 30, 2000. There is also a low rent supplement of $15 for apartments renting for $500 or less and a minimum rent of $215, equivalent to the welfare shelter allowance for one person. New leases signed upon vacancy are also subject to the state-set vacancy formulas.

Any new rent guidelines that are approved in June by the RGB will affect those with leases signed or turning over from October 1, 2000 through September 30, 2001.

Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), a middle market owners group, was among those who testified before the RGB and told the RGB the fuel costs and high PIOC cannot be ignored.

In addition to fuel prices, Margulies said there have been significant increases in operations and maintenance costs. Many contractors, for instance, raised their rates in the last year more dramatically than they did in the mid-1990's because, Margulies noted, "Everyone wants to benefit from the current economic boom.

Along with the 54.8 percent fuel rise, according to the RGB, real estate taxes have risen by 5.2 percent; labor costs by 2.6 percent, utilities have gone up 5.7 percent, contractor services by 4.6 percent, administrative costs 4 percent; insurance costs are up .7 percent; parts and supplies have increased 1.9 percent and replacement costs are up .8 percent.

He also wants the RGB to allow a low-rent supplement because it is still very significant to owners.

According to Housing Vacancy Survey statistics, there are still about 90,000 tenants paying less, than $400 in rent, while a total of 240,000 pay less than $500 a month.

"You can't afford to operate a unit for much less than $400, not counting the mortgage," said Margulies. "Mortgages account for 15 to 20 percent of rents."

Mortgage payments are not counted in the city's Real Property Income and Expense (RPIE) filings. Additionally, while smaller buildings tend to have higher operating expenses per unit, operating numbers are not reported by owners of buildings with assessed values of $80,000 or less or by those with ten units or less. That skews the reports further, Margulies claimed.

"We say it costs $450 a month (to operate a unit), and we recognize the small buildings have higher per month expenses and the lowest operating margins, but most people don't realize we are not even getting the expenses on buildings of ten units or less because they are not required to file [the RPIE]," said Margulies. "Those are small buildings, and 40 percent of stabilized units aren't covered by these I&E reports so the whole process of information gathering overstates the bottom line of small buildings."

One new cost owners will pick up this year is for the new annual lead paint inspection. A consultant conducting these for owners is charging $125 per apartment, Margulies said.

"We are seeing an across the board increase in operating costs that is a trend expected to continue," added Freund.

The RGB was to propose and vote on guidelines on Monday May 8th. They will hold a public meeting on June 6 at the Dept. of City Planning's Spector Hall, 22 Reade Street, from 9 a.m. to 12:30 p.m.

Those interested can testify only at its public hearing on June 15th at The Great Hall at Cooper Union, 7 East 7th Street, with a schedule of 10 a.m. to 12 p.m. for hotels; 1p.m. to 5:30 p.m. for apartments; 7 p.m. to 8 p.m. for hotels and 8 p.m. to 9:30 for apartments.

The final vote will take place at a public meeting to be held from 5 p.m. to 9:30p.m. at the Cooper Union location on Thursday, June 22nd.