What you should know about vacancy decontrol.

As the decision on New York City rent controls nears, the Rent Stabilization Association (RSA) has recently released a report on the issue of vacancy decontrol in an attempt to separate fact from fiction on this controversial topic.

According to RSA, "Vacancy decontrol is a way to transition from rent regulation to a normal market - but only after a tenant decides to leave an apartment. Vacancy decontrol is not a new concept. It has been in effect in many sectors of New York City's housing market for years without any negative consequences. For example, vacancy decontrol has been in effect for rent controlled units which achieve fair market rents upon vacancy, for rent regulated apartments in cooperative buildings and for apartments where tax exemption or abatement benefits expire. Vacancy decontrol, as currently applied, has returned apartments to the market without evictions, harassment or other dislocations. Any reports to the contrary are exaggerated attempts to frighten tenants."

The New York Times, New York Post, Daily News and Newsday have each called for some form of vacancy decontrol on their editorial pages.

"Mr. Bruno (Republican Senate Majority Leader] and Mr. Silver (Democratic Assembly Speaker) should work... to develop a plan for gradual decontrol with a final, certain date at which rent regulations would be eliminated entirely. The first stage of gradual decontrol could include dropping all regulations on units as they become vacant," said an editorial in The New York Times on December 8, 1996

Despite the positive current experience, opponents of vacancy decontrol allege that there were negative consequences associated with the vacancy decontrol permitted between 1971 and 1974, based on the report of the Stein Commission. However, according to RSA, these allegations are not supported by the report itself, which "reached conclusions based on a political agenda, and not the facts."

In a May, 1997 New York Times column, Elizabeth Kolbert wrote that Andrew Stein, the head of the commission, "acknowledges that he got a big boost by so publicly attacking deregulation, immediately becoming the darling of millions of aggrieved tenants."

The following, according to RSA, clarifies what really happened during the vacancy decontrol period of 1971-74:

Myth: Vacancy decontrol in 1997 would simply be a repeat of the 1971 experience.

Fact: Current economic conditions are very different today than those that existed in 1971. The early Seventies were marked by severe inflationary factors including large increases in oil and property taxes which resulted in a Federal price freeze in 1971. Today, inflationary pressures are low and are expected to remain low, reducing pressure for increased rents.

In 1971, the gap between regulated and free market rents was very large because of the large number of rent controlled units which rented at half the rate of market rentals. Today, most regulated apartments are rent stabilized and are much closer to market rents. In fact, a study commissioned by the City projects that under vacancy decontrol, rents will only rise by 4 percent city-wide. In some areas, like Brooklyn, there will be no rent increase at all.

Myth: Vacancy decontrol led to widespread harassment.

Fact: The Stein Commission report specifically said that it could find no evidence of harassment. The report stated "No conclusive data was available to document any increase in harassment (page 83, Report Number One)." In fact, the number of harassment complaints actually dropped from 2,040 in 1970, prior to decontrol, to 1,292 in 1973 (an insignificant number in a city with over 1.6 million regulated apartments at that time). It nevertheless recommended repeal of vacancy decontrol based solely on fears of potential harassment.

"But he (Stein) also acknowledged that it was, from the very beginning, a political document," reported The New York Times on May 5, 1997.

Myth: More than 400,000 tenants lost their homes as a result of vacancy decontrol.

Fact: There is no evidence that anyone lost their home as a result of vacancy decontrol. By definition, vacancy decontrol occurred only when an apartment was voluntarily vacated, and even the Stem Commission could find no evidence of harassment. In fact, rather than being forced out of their apartments, it appears that tenants were increasingly holding on to their apartments. According to the Stein Commission, turnover rates during the period of decontrol averaged less than 10 percent per year. According to City reports, the turnover rates prior to 1971 were much higher - nearly 19 percent in 1968 and 14 percent in 1970.

Myth: Vacancy decontrol resulted in large and unreasonable rent increases.

Fact: The majority of apartments affected by vacancy decontrol were rent controlled apartments which had been granted only one 15 percent rent increase in as many as 30 years. In the late 1960's, the City had commissioned a report from the Rand Corporation which demonstrated that these controlled apartments suffered from a severe "rent gap" between the collected rents and the rents needed to maintain and operate the buildings.

The Stein Commission found that the highest increases in rents were only 16 percent higher than owners would have been entitled to collect legally under the then recently enacted Maximum Base Rent system. Rent increases for stabilized apartments which became vacancy decontrolled were even more moderate: two thirds of these apartments had lower rents than they would have been entitled to under stabilization increases, and 10 percent experienced no increase or a drop in rent. These moderate levels of increase for stabilized apartments were likely the result of increased competition from decontrolled apartments.

"There may be a rational argument for decontrol," admitted Andrew Stein, head of the original 1974 Stein Commission report, speaking in May 1997 with Elizabeth Kolbert of The New York Times.

Myth: Vacancy decontrol did not result in new construction.

Fact: The Stein Commission report found that there was a huge increase in residential construction in 1972, after vacancy decontrol was enacted. While the report attempts to explain this in terms of changes in interest rates, it is clear that construction plummeted after rent stabilization was enacted in 1969 and rebounded in 1972 after vacancy decontrol was instituted.

Myth: Vacancy decontrol did not result in housing improvements.

Fact: An analysis by the New York State Urban Development Corporation found that the value of permits for additions and alterations increased by more than 80 percent during the vacancy decontrol period. The Stein Commission reported a decline. However, the Stein report discounted improvements which it felt would have been carried out without decontrol, such as government-mandated incinerator conversions, ignoring the fact that owners would not have had the funds to make those improvements were it not for additional rent revenues from decontrol.

By another measure, better suited to the individual apartment improvements which could be expected under vacancy decontrol, the Stein Commission found that the sale of appliances increased significantly during vacancy decontrol. But this finding was also discounted by the Commission as applying only to luxury units.

"As for the report's dramatic conclusion that vacancy decontrol was a 'failed' policy with 'no beneficial side effects,' Mr. Stein came just short of disclaiming it," reported The New York Times on May 5, 1997.