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Apt. owners outraged at RGB proposals.

Apartment house owners and their representatives were flabbergasted by last week's Rent Guidelines Board proposals of 2 percent and 4 percent rises respectively for one and two-year leases beginning on Oct. 1, the lowest proposals in 25 years. The vacancy allowances continue last year's split pattern.

Owners expressed disgust at the token vacancy allowances, which are 5 percent on rents up to $499.99; 3 percent on rents $500 to $999.99; and nothing for apartments renting for more than that.

Last year's guidelines, which are currently in effect for new leases, are 3 percent for one year leases, 5 percent for two year leases and the same vacancy allowances.

Rent guidelines for hotels, lodging houses and Sec. 248 SRO's for one year leases are proposed at 2 percent, while rooming house unit rents increases are proposed at 3 percent.

In June, after two days of public hearings, the board will vote on the guidelines, which will affect nearly one million apartments. Rents are set separately for the city's rent controlled housing stock.

Owners pointed to a 14 percent vacancy and collection problem, high water meter charges, lead paint abatement and real estate taxes as areas the nine member board barely considered in their deliberations. Additionally, the new chairperson and Mayor Rudolf Guiliani's only appointment, attorney Edward Hochman - who resides in a rent stabilized apartment - took office a mere four days before the May 9th meeting.

The legislature and City Council have already decontrolled apartments renting for $2,000 or more upon vacancy, while those renting for that number or more where the occupants make $250,000 per year in each of two years will be decontrolled upon the expiration of the current lease.

According to Timothy L. Collins, executive director of the RGB, in 1990, 90 percent of the registered rents were reported collected while in 1991, 85 percent were collected. The latest data available for 1992 shows 86 percent being collected, a number Community Housing Improvement Program Executive Director Dan Margulies should be closer to 2 to 4 percent.

Collins blames the lack of collections on tenant incomes declining dramatically and an increase in unemployment.

Some apartment owners are collecting a preferential rent, which is less than the allowed guideline rent for the apartment. But in more and more cases, owners just aren't getting the money because tenants don't pay and have learned to play the court system for a free apartment.

Although they are supposed to require it, to the ever increasing dismay of owners, most judges do not order rent to be paid into escrow and many tenants skip out months later before any money can actually be collected. But the Housing Court issue is not one the RGB will consider.

The Rent Stabilization Association's president, Joseph Strasburg, said he was very frustrated by the proposals as well as the tenor of the guidelines board.

"Tell me how a 2 percent or 4 percent increase [can help an owner meet costs] where you are talking about a $400 a month rent?," he asked. "What is 8 dollars going to do, especially when it costs the city $450 to $475 to run a unit and the city doesn't have to worry about water, sewer, insurance or real property taxes? We say this year in and year out. At this rate the city will end up running the properties."

Margulies agreed, pointing to record-setting in rem vestings. "We don't have to threaten abandonment, we are setting new records," Margulies added. We can only hope with a little time to consider, the RGB will change thier minds on the guidelines."

Ruben Klein, president of the Bronx Realty Advisory Board and a partner in the law firm of Klein & Keenan, opposes the determination of the RGB as being biased and injurious to a housing industry that has already suffered decades of low guidelines.

"The proposed rent guidelines increases are an insult to owner and tenant alike," he said. "The results, particularly in view of the new added burdens of lead paint regulations, can only mean more in rems, more abandonment, more home-less as well as further loss to the city's tax base."

While the original Brooklyn in rem filing consisted of over 8,000 properties, the final vesting is expected to be around 800. This is still a significant number, since the last vesting in October of 1992 consisted of 288 parcels, down from 473 the year before and down again from 625 in 1990. There were 225 vested in 1988 and 378 in 1988, said In Rem Section Chief Gary Marton last year. The exact number in the Brooklyn filing could not be obtaine, as the unit was moving its offices. The Bronx properties are next on the city's list to vest from the hands of private owners.

The RSA would like to see at least a minimum dollar infusion below a certain rent level as was done before former Mayor David Dinkins took office. Strasburg was equally upset by the lack of a vacancy increase on rentals of $1,000 or more because he said the RGB is deeming them luxury units when the elected officials have already defined luxury at $2,000 rentals.

"Why even pose a cap on vacancy when it doesn't hurt tenants in place?," wondered Strasburg.

RGB owner representative Harold A. Lubell, a partner with Robinson Silverman Pearce Aronsohn & Berman, said he thinks the proposed guidelines are horrible and was particularly distressed at the attitude about the vacancy allowance. "You would think that a vacancy allowance that does not affect a tenant in place would be agreeable," he said. This would allow owners to catch up on the years of double digit inflation and small guideline increases.

Margulies emphasized that owners need to attend the hearings this year. The RGB was responding to an extremely low price index in spite of the fact that the income and expense analysis provided to the RGB shows expenses climbing much more steeply, he said.

Steven Spinola, president of the Real Estate Board of New York said, "Obviously, it's an outrageous proposal and doesn't come close to representing the true cost to owners." Spinola pointed to the "leftover board" and hoped some common sense would come into play before they have to vote in June.

"We still believe there should be vacancy allowances even for apartments renting for $1,000," he added. "It would be wonderful if we could pass along taxes and water bills. It would be a fairer system and encourage people to conserve and have tenants have part of the constituency that worries about taxes. It would make sense and give tenants the ability to care more about their homes."

East Village owner Laurence Guttman observed, "Landlords never feel they get enough and tenants always feel it's too much." He was distressed, however, that the issue of water meters and water charges was not emphasized and agreed with Spinola, suggesting a pass-along over current frontage charges be made to tenants.

Coming from the City Council, where if a member made a proposal they voted for it, Strasburg said he was shocked to see guidelines board members making motions and seconding items favorable to owners and then not even voting for them.

"They denigrate themselves by doing these things," he said. Nevertheless, RSA will request meetings with all the members to present the owners' viewpoints.

The RGB currently consists of Hochman as chair; Lubell and Stroock, Stroock & Lavan partner Joseph L. Forstadt as owners representatives; public members Hilda Blanco, Augustin Rivera, Jane Stanicki and Barbara Gordon-Espejo; and tenant members Leslie Holmes and Kenneth Rosenfeld.

Public hearings will be held at One Police Plaza on June 14 from 1 p.m. to 10 p.m. and on June 15 from 6 p.m. to 10 p.m. Those interested in hotel guidelines will be heard on June 15 from 1 p.m. to 5 p.m. The vote will take place on June 20th.
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Title Annotation:New York, New York Rent Guidelines Board vacancy allowance increases
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:May 18, 1994
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