Rent law hailed as owner victory.

In a great victory for the city's rental property owners, Mayor Rudolf Giuliani will be signing the new luxury decontrol measures passed by the City Council last week. While the elected officials finally recognized rent stabilization is basically a subsidy for wealthy tenants, what the Council members failed to do, however, was to help those 20 unit and under buildings that are most likely to end up in rem.

Owner organizations vowed these low income buildings will become the subject of their next lobbying efforts.

The new measure decontrols upon vacancy those units that are renting for $2,000 on or after April 1, 1994. The law passed by the State legislature limited that criteria to only apartments that had reached the $2,000 mark on Oct. 1, 1993 and did not take into account any apartments that reached that rent after that date.

Apartment renters who are paying $2,000 per month or more and whose income reaches a threshold of $250,000 per year for two years in a row, will have their rents decontrolled upon the expiration of the current lease.

Tenants will not have to furnish copies of income tax filings to owners, but under the State law, as administered by the Division of Housing and Community Renewal (DHCR), will merely have to sign an affidavit that can later be contested by the owner, while the tenant can also contest any decision. Those forms are already available.

Estimates range from 1,200 to 1,500 as the number of apartments that will be affected by the new city law, which was passed 28 to 14 by the Council.

Joseph Strasburg, president of the Rent Stabilization Association, observed that symbolically, this is a very important step.

"It recognizes the law is so imperfect that its time to tinker with it," he said. "And even those Council Members who opposed the law on a 'purity' basis, were saying, 'We haven't helped the small owners.' We're saying we're going to go back to those who voted against it and say, 'You said we need to help small property owners and know let's work on achieving that goal.'"

The Community Housing Improvement Program's Executive Director, Dan Margulies, said the change made by the Council was incremental from what the state legislature has already done. "It wasn't all the industry deserved, but they could have just continued business as usual without any changes, so we continued the forward progress made last summer."

Strasburg said the interesting part of the debate was that there was significant support from the minority community, who realized that there is something wrong with rent regulation because rich people shouldn't be supported. "Those members fought for change," lauded Strasburg, "but it was the white Liberals of Manhattan who were fighting the fight of 50 years ago."

A housing emergency was declared at the time of World War II and the City Council reaffirmed that emergency last week, together with the fact that there is a five percent vacancy rate ongoing today. Owners groups use the same information to show that luxury rentals have a much higher vacancy rating and question the survey itself.

Even New York State Assembly Speaker Sheldon Silver of Manhattan was lobbying against the decontrol measures by making calls, Strasburg added. Of the Manhattan Council Members, who represent most of the luxury buildings, only Antonio Pagan supported the changes.

As for the relief for small owners, neither deregulating 20-unit and under buildings upon vacancy or the 25 percent vacancy increase proposed by a group of members came to a full vote of the Council. "There is great fear of the unknown because tenant advocates said if you allow people to increase rents by 25 percent, you would remove the affordable housing," said Strasburg.

But RSA and CHIP will be exploring relief mechanisms such as property tax and other credits to throw some of the subsidy onto the government and take it away from the small business property owners.

Attorney Gary Rosenberg, managing partner of the law firm of Rosenberg & Estis, noted the way the state statute was written, a lot of wealthy tenants whose rents were just under $2,000 escaped deregulation. "The City Council recognizes that not all people residing in apartments in the City of New York require the protections of the Rent Control and Rent Stabilization Laws," he said.

Margulies noted there was still a flaw in the current timing because theoretically if someone signed a lease last week it would be stabilized, but if it was rented this week it would be decontrolled.

William W. Koeppel, a partner in Koeppel & Koeppel, who owns several luxury apartment houses, is upset that owners who did nothing to improve the units to get the higher rents will obtain what he deems "an economic windfall," while he had to install items like Sub Zero refrigerators and ceramic tile floors to boost his rents to those levels.

Margulies said once an apartment is into that rent range, the owners have to put the amenities in anyway. "If you made the improvements to push the rents over market it made no sense, but they will not get that money without improvements. You can't look at any of this in isolation."

Koeppel also believes the new law will allow the city to reassess the upper crust cooperative and condominium buildings based on the concept of market rents. This would mean higher taxes for those who can afford to pay more, he said, and smaller tax bills for the rest of the city properties.

But Paul Korngold, a tax certiorari partner with Tuchman, Katz, Schwartz, Gellis & Korngold, said "With respect to co-ops and condominiums, it is far from clear that the de-regulation of luxury units means the assessor can use market rents in determining the valuation of these buildings. The Greentrees decision certainly sets a standard for rent regulated apartments being the comparable measure of value."

The values of rental apartment buildings, however, with many apartments fitting the new criteria, will eventually go up, said Serdar Elmali, assistant vice president of Appraisal Advisory Group. "Because now we are looking at a higher income, this means a higher value," he said. "That would have a substantial effect on the value of the buildings and in anticipation, people would be more willing to purchase these buildings because the income would be higher in the future."

Arnold Goldstein, managing partner of Samson Management and chairman of the RSA board of directors, noted these are luxury decontrol provisions. "They provide additional income in the buildings that will go toward improving the conditions. The bottom line gets heavier and the Dept. of Finance comes in and finds new taxes."

The bill passed last week expires on April 1, 1997.