RGB proposes rent increases at 2% and 4%.

The Rent Guidelines Board (RGB) has proposed increases of two percent on one-year leases and four percent on two-year leases for those rent stabilized tenants that sign new leases which begin October 1, 1998 and thereafter.

A low-rent supplement of $15 has also been proposed for apartments renting for $400 or less. If enacted, the low-rent supplement would, like last year, not apply to new leases signed upon vacancy, which would, however, receive the appropriate state statutory allowance under the law passed in 1997.

Proposed initial rent stabilized guidelines for formerly rent controlled units are the same as last year's, which were either an increase 40 percent above the Maximum Base Rent, plus the appropriate fuel adjustment; or 50 percent above the Maximum Collectible Rent plus the fuel adjustment, whichever is greater.

A zero increase was proposed for all five hotel categories.

The loft building proposals are 1.5 percent for a one-year lease and 3 percent for a two-year lease.

"They are talking about renewing the lowest guidelines in history in the hottest real estate market in a decade," said Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), an owner's group. "They couldn't be giving tenants a bigger gift at owners' expense. If they look at their neighbor who just moved in, they see they have a wild bargain. The Rent Guidelines Board is saying, 'Them that gots, keeps.' They are emphasizing that the policy of the city is to protect the tenants in place."

The state-enacted vacancy increases are a minimum $100 rise, or 20 percent upon vacancy for two-year leases on apartments renting under $300. If the previous rent was between $300 and $500, the vacancy bonus is 20 percent or $100, whichever is greater. If the lease is for one year, the vacancy bonus is 20 percent, minus the difference between the one- and two-year guidelines increases.

If the tenant was in place without a vacancy increase for more than eight years, an additional .6 percent is added for each year since the last vacancy allowance.

Tenants do not believe any increase is necessary, since the price index of operating costs (PIOC), a market basket compilation, only increased .1 percent, primarily due to the mild winter and steady, low fuel prices.

But owners worry about the proposed 4 percent increase in water rates this July. In 1970, water rates were roughly 2 percent of operating costs, while fuel comprised 6 to 7 percent of total costs, said Margulies.

Water makes up 5 percent of the market basket, and the Rent Stabilization Association feels it is under-weighted. Fuel oil, on the other hand, makes up 10 percent, but water is included in a category with electricity, gas, steam and telephone.

Jack Freund, executive vice president of the Rent Stabilization Association (RSA), said "While we are pleased the board recognized the price index was underestimated, we still believe they have not taken into account all the cost increases owners face."

Each year, the staff at the RGB compares operating costs to the year before, but Margulies said it is not re-weighted in a statistically accurate manner.

One of the trends is that while fuel still makes up 6 to 7 percent of the cost of operations, water costs are almost as high in many buildings, but the PIOC only adjusts from the year before, and the basket compilation has not been thoroughly and statistically rethought going back to the initial rent stabilization beginnings in 1969.

If two identical units, one in an apartment with a private bath, and the other in a hotel, both started with rent of $60 a month in 1968, the difference amounts to over $45,000 per unit, complained Adrien Tiemann, an SRO owner in Manhattan who leads Property Owning Women (POW!) and Homeowners Against Rent Kontrols (HARK). "We haven't had any raises and our expenses have gone up. The PIOC doesn't account for the expenses small building owners face," Tiemann said.

Tiemann said SRO and hotel owners also don't show up for the hearings because they are not always aware of when they take place and feel it would be a futile exercise.

Margulies said most of the operating costs are still attributable to the City of New York for property taxes, water and sewer, which make up about 20 percent of every rent dollar. "The biggest cost of operating in the City of New York is the City of New York," he said.

While small buildings have great difficulty in keeping up with expenses, that is also true in general of outer borough owners, where rents haven't risen anywhere near the pace of those in even small Manhattan buildings, nor gone up as much as expenses, and there is little turnover.

"Their rent has been essentially frozen, and despite the Rent Guidelines Board counting on vacancies to make it up to owners, two percent and four percent increases don't cut it," said Margulies. "The Board has traditionally relied on turnover to provide the catch-up and ignored the reality that when people have a really good deal, they don't move, or the turnover is in the highest rent apartment, which doesn't really bring up the overall income of the building."

Recognizing that inflation is low, but a lot of catch-up is necessary, Margulies said CHIP is seeking increases of 4 percent and 8 percent.

"We have to make up the lost income," he said. "If you chose to compare income and expenses to 1986 or 1969 when rent stabilization started, we are not doing as well now as we were then."

Another meeting of the Rent Guidelines board takes place on June 2nd from 9 a.m. to 3 p.m. at 22 Reade Street, and while observable, no testimony from the public is permitted.

The key public hearings all take place at Brooklyn Borough Hall's courtroom at 209 Joralemon Street on Tuesday, June 16th from 1 to 10 p.m. for apartments; and Thursday, June 18th from 2 p.m. to 7 p.m. for SRO's and hotels. The final vote will take place Monday, June 22nd from 5 to 10 p.m.

The guidelines will be in effect for rent stabilized leases that begin on October 1, 1998. Check out the RGB's web site at www.nycrgb.com for other information.

Those owners that want to testify should call the RGB at [phone] to sign up.