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MBR hearings underscore rent-control problems.

MBR hearings underscore rent-control problems

Hearings held last week to discuss the calculation of the Maximum Base Rent (MBR) for rent-controlled apartments highlighted the problems between apartment house owners and those tenants still in possession.

Hearings are held every two years by the Division of Housing and Community Renewal (DHCR) to determine the increases in rent for the occupants of New York City apartments who, as one official put it, are a "dying breed."

Rent-controlled apartments that have not had a new tenant since before July 1, 1971 can be in the same building with rent-stabilized apartments as well as in those buildings which have turned cooperative under non-eviction plans.

A spokesperson for DHCR said as of 1990 there were approximately 120,000 apartments remaining under control.

Over 51 state municipalities have rent control including Albany and Buffalo, Nassau and Westchester counties. Rent control was instituted when the end of World War II brought a housing shortage and rising rents as servicemen returned to marry and create their own households.

The Maximum Base Rent factor, used to calculate rent raises, is simply "unreasonable," said John J. Gilbert III, the president of the Rent Stabilization Association who appeared at the hearings.

Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), said the factor that is proposed for the next two years is 10.8 percent. While this factor applies to the Maximum Base Rent every two years, owners can collect by law a maximum of 7.5 percent each year with a two-year raise of no more than 15 percent.

If the apartment's Maximum Collectible Rent (MCR) is at the MBR now, and DHCR adopts 10.8 percent, Margulies explained, the owner would be able to get a 7.5 percent increase in 1992 and a 3.3 percent increase in 1993, which makes up the 10.8 percent. If the MBR factor was determined to be 18 percent, however, the owner could get 7.5 percent the first year but only 7.5 percent in the second year because the rise can only be up to 15 percent over two years.

The tenant actually pays an MCR that can be lower than the MBR if the MBR goes over the 15 percent.

Gilbert says owners will have gotten by on an average of less than 5 percent increase for each of the last four years. "Compare the 10.8 adjustment factor to what the Rent Guidelines Board has estimated has happened in stabilized apartments - which is a 16.2 percent raise - and it's for many of the same buildings," Gilbert noted.

The small rental increase is compounded for most owners, Gilbert said, because the rent levels of rent-controlled apartments are 30 percent less than those in stabilized apartments. "7.5 percent of 200 bucks isn't a heck of a lot of money," he added.

Owners Must Fix Violations

What makes the situation even more complicated, and why Gilbert calls the MBR system "a jalopy without an engine," is that owners must also "qualify" for the increases and do not get them as a matter of right, as do the stabilized owners.

Owners must obtain Violation Certification that all rent-impairing violations and 80 percent of all non rent-impairing violations are cleared, corrected or abated. The owner also has to file a form certifying that they made payments and or incurred obligations to pay at least 90 percent of the expense allowance for the operation and maintenance of the building, and that they will continue to maintain all essential service. There is also a fee of $15 per year or $30 for the two-year cycle, per apartment before the order is issued authorizing the owner to calculate the MCR's and MBR's for each rent-controlled apartment.

Gilbert said because owners have to qualify for the raises, the MBR system has a "built-in bias" so that smaller buildings cannot qualify.

Small owner Steven Weisz agrees. Even if you cure 80 percent of the violations required to qualify, he noted, it hard to get an HPD inspector to come to the building to cancel the violations. "Now you pay to expedite the inspector, so they will come out within 60 days," he said. "Otherwise, if you wait for the regular cycle of inspectors, you wait three years."

Roz Post, a spokesperson for HPD, said because the state cut $4 million from the agency's budget and 66 inspector positions were lost, there is now a fee for a property owner to get any inspector. "If for a given reason, someone wants to make sure the violations are removed, they must go the code enforcement bureau, and pay to have the inspector come out," he said.

It costs the owner, Gilbert said, $135 dollars to get the inspection by HPD expedited. The problem, he said, is, "Will they put or more violation once they are there?"

Filling out the paper work is also a very hard process. Weisz said. "It takes you a day to fill out forms," he said. "On one hand, it's meant to be fair but its very difficult especially for smaller owner to pay staff."

Weisz, who owns small buildings in Park Slope, believes the MBR should have perhaps the same criteria as major capital improvement (MCI).

"They give the rental tenant a chance to challenge the finding," he suggested.
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Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Maximum Base Rent
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Nov 13, 1991
Words:889
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