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Fighting the good fight against rent regs.

We well understand the less than optimistic tone of the recent New York Times editorial on the rent regulations.

Those who support the rent laws behave as if they will never accept reality and acknowledge that the rent laws are unfair and jeopardize the continued viability of the city's privately owned, affordable, rental housing stock. They also ignore the fact that the major beneficiaries of the rent laws are no longer primarily the needy, and that the laws cause the city to lose millions of dollars a year in real estate taxes.

As well, the politics of the rent laws seemingly dictate that owners, tenants and the city will be saddled with these regulations forever.

But, I believe those of us in the affordable rental multi-family business have to be optimistic, and have to continue to remember that the goal of a market economy in rental housing is worth struggling for. Moreover, without expecting miracles, these are several reasons right now for some hope. There is, for example, a bill in the state legislature proposing to decontrol higher-rent apartments and to remove rent law protections from families earning more than $100,000 a year, and there are several such bills in the City Council.

In addition, there are court suits challenging aspects of the rent laws, including one attacking the methodology of the New York Rent Guidelines Board. The board's tenant bias is apparent to all who own and operate rental housing, and its recent 3 percent and 5 percent rent increase authorization for one- and two-year leases, respectively, ignores higher operating costs, including 11 percent higher taxes and 18 percent higher water and sewer levies.

The unfairness of the board's 1992-93 guidelines, I think, are related to the inequity of the board's membership. The sevenmember board is supposed to consist of representatives of the government, owners, tenants and the public, but it's the perception of myself and others that the two public members, in effect, are advocates for tenant groups. This distorts the balance that is supposed to exist on the board, and, perhaps, explains why the board adopts policies that push many owners of older, affordable rental housing to the financial edge.

In another court action, the U.S. Supreme Court left open the door to judicial remedy at the federal constitutional level though it rejected a suit brought by California owners against a rent control ordinance. The court decision was based on technical grounds. The suit had alleged a violation of the Fifth Amendment-- the so-called "taking" prohibition -- and the Supreme Court's action allows it to consider a suit in which the "taking" issue is correctly raised.

We think actions in court to restrict the reach of rent laws and to overturn them are an excellent industry strategy and a positive sign on the part of the industry, and we also become optimistic whenever action by legislators and/or the media raise questions about the validity of the rent laws. Last year, there were several such media actions. In the spring of |91, shortly after the rent laws were extended, The Times ran an article in its "Week in Review" section with a headline that asked the question: "Leading the Sacred Cow of Rent Control to Slaughter?" The article cited the various contending rent law issues, and the fact that rent regulations had been extended in New York despite evidencce that a 5 percent vacancy rate exists. The industry brought a suit based on the grounds that, indeed, a 5 percent vacancy rate or better existed, and that the state therefore should have begun to dismantle the rent laws.

In a similar vein, about a year ago, a New York Law Journal article asked, "Rent Regulation: Is It Approaching Its Twilight Time in New York City?" And one of the thrusts of this article was that the Resolution Trust Corporation had assumed the authority to breach the rent laws under its federal mandate of earning the highest return on properties it acquired from failed banking institutions.

Increasingly, responsible voices are raising valid issues involving the ability of the state's rent regulatory structure to establish a climate for rental housing that is equitable, and which encourages maintenance and creation of a decent rental housing market. A few months ago, addressing BRAB's Annual Meeting, New York State Director of Housing Angelo J. Aponte acknowledged that the Division of Housing and Community Renewal simply does not have the personnel to carry out its rent law tasks in a timely fashion. He pointed out that the agency now has a staff of 600, and needs more income and a staff or 1,200 to run efficiently.

In effect, I believe, Commissioner Aponte's candid comments mean there will continue to be lengthy delays in issuance of hardship and MCI rent increases, and that therefore abandonment of middle- and low-income rental housing will continue to rise.

In a recent talk, respected market observer, builder Daniel Rose, chairman of Rose Associates, points out that between 1974 and 1984 apartment buildings containing more than 300,000 structurally sound rental units were abandoned by their owners. For the most part, Rose judges, the rental housing that is abandoned is what would be available to shelter the poor and homeless. Obviously, this is housing the city can not do without. Currently, according to the Citizens Housing and Planning Council in a recent article in this newspaper, the city is managing 40,000 units of occupied, middle- and low-rent in rem apartments. This costs the city some $200 million a year. But in addition, CHPC judged, another 50,000 units of privately owned, low-income multifamily housing were in imminent danger of being abandoned because of higher taxes and the impact of water metering.

We hope that the media, legislators and courts will continue to deal with rent-law regulation. Our message to them should continue to be that the way to create an adequate supply of viable, decent, affordable rental housing in New York City is to change the climate under which it operates. One of the ways is to at least begin to start to establish a free masket for this product.

The BRAB, Ruben Klein President, is the largest owner-industry organization in the Bronx. BRAB represents more than a 1,000 owners of 2,000 buildings housing over 150,000 residents. It offers members a full range of services, including labor negotiations and representation, informative seminars and periodic newsletters. Over the years, BRAB has participated with other city organizations in bringing and defending all necessary lawsuits.

Ruben Klein, President Bronx Realty Advisory Board
COPYRIGHT 1992 Hagedorn Publication
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:rent regulations
Author:Klein, Ruben
Publication:Real Estate Weekly
Date:Jul 15, 1992
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