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Owners outraged.

Owners outraged

Property owners in New York City are outraged at the rent increases proposed last week by the Rent Guidelines Board (RGB) which would eliminate the vacancy allowance and permit increases of only 3 percent for a one-year lease and 6 percent for two-year leases.

Owners and owner group representatives fear that the lack of a vacancy allowance, coupled with the low increases, will not provide enough cash flow to cover the costs of running apartment buildings and will lead to further abandonment of privately-owned rental housing.

Additionally, the Rent Stabilization Association (RSA) is challenging the legality of the vacancy rate survey that was used by the RGB to determine that there is still a housing emergency, the first step in setting rent guidelines.

While the lawsuit makes its way through the court system, owners are still facing the RGB's latest decision. Joseph L. Forstadt, the Stroock, Stroock & Lavan partner who is an owner member of the RGB, said "the deck is stacked against the owners." Mayor David N. Dinkins has changed the nature of the board by his appointments, Forstadt said, and added to the public members people who are decidedly pro-tenant.

"The makeup has changed from the professional financial analysts and investment bankers, who have a grasp of the economics of rental housing, to the people who the mayor has appointed who are more attuned to the political concerns than the economic concerns," Forstadt said. "They have an emotional attachment to the causes and complaints of the tenant advocates and have not addressed the economic picture which the board is charged with."

Forstadt called the proposed rates a "compromise to the lowest common denominator without regard to the economics. The result will be a further erosion of our housing stock."

He and attorney, Harold Lubell, the other owner member, did not vote in favor of these rates. "The key consideration in this vote was the elimination of the vacancy allowance which for the first time in my memory has been eliminated," Forstadt said. "It's just another smack in the face of owners." Forstadt said he hopes that the public will cry out against this judgment and pressure will be brought on the city that not only its housing stock, but its very tax base, is at issue. "The heart of the city's revenue making ability is the property tax," he said. "If owners can't pay, we will lose the tax base."

Steven Spinola, president of the Real Estate Board of New York (REBNY), called the proposed guidelines "outrageous," "They didn't even begin to take into consideration the higher costs of running the residential apartments," he said. If they do not change that position, Spinola warned, the city will find itself owning a lot of buildings.

The alternative, Forstadt noted, is that the owner pays the taxes but reduces the maintenance. "It will be harder for owners to maintain the buildings and the loser, in the final analysis, is the tenant," Forstadt said.

The vacancy allowance helps the owner bring up his long depressed rent, Forstadt said, as well as help pay for painting and refurbishing the apartment when the tenant moves out. "Now he won't even have that extra money. It's unrealistic and, if the objective is to protect the housing stock, they are doing everything to do other wise."

Roberta Bernstein, the president of Small Property Owners of New York, said the guidelines are a joke. "The reality is that the guidelines are of more benefit to high-priced apartments," she said. "Now more than ever, the low rent affordable apartments are in danger." Historically, she said owners were able to receive a decent rent on other apartments to subsidize the lower rentals.

"But now we're not getting the rent," Bernstein said. "The rental from each apartment should at least pay for the basic maintenance of the apartment and they're not doing that. Owners need this increase desperately. for those of us renting over $700, we find that the vacancy rate is over 10 percent. Where we have low movement is in the low end and below and that's where it is critical to get those increases."

Rubin Klein, president of the Bronx Realty Advisory Board said, "we are in the most serious situation where we may lose many properties with the increases in water and sewer charges and property taxes at a time when there are many inequities, particularly in collecting our money under rent control, getting it from the courts and meeting our costs."

Klein said the city does not wait as long as they used to to file In Rem actions to take over buildings for nonpayment of property taxes, water and sewer charges. But he believes the city will stop taking over buildings if they have more than they can handle.

Rubin Pikus, president of Milbrook Properties, Ltd., said "the city is giving us an 18.5 percent water increase and increase in real estate taxes on top of the mid-year rise, and these guidelines are like a taking of our properties. That's like stealing from us. They are asking us to be the provider of free housing."

Thomas Viertel, chairman of the Council for Owner Occupied Housing (COOH), and Ivy Properties, Ltd., said the guidelines are clearly going to put enormous pressure on the cooperatives. "Coupled with the tax increases, its going to have sweeping negative effects." COOH's members are many of the co-op sponsors and most still own occupied units.

"They collect rent and have to pay maintenance charges and the rents are being held down by low guidelines," Viertel noted. "It's just another way the rent control laws work to force a private form of subsidy. The same government says we're going to raise taxes dramatically but we're not going to let you cover the rents. They are making owners pay for tax increases without regard to his costs."

Spinola said, "If you combine the water charges and the higher taxes we are putting a great deal of property at risk. We are pushing the tenants to have the worst landlord of all -- the City of New York."

Forstadt noted that the city itself is not bound by the RGB guidelines and can set whatever rent they want at the buildings which they are running. The city also has no debt service or taxes to pay, Forstadt added. "Housing provided by the government is surely not as attractive as private housing," he said, adding that the city does not maintain its own units properly, either.

Dan Margulies, executive director of Community Housing Improvement Program (CHIP), said the bottom line on these increases is that there will be less property tax collected next year.

Timothy L. Collins, executive director of the RGB, said the proposed guidelines will be officially published and followed by a public comment period. He said there will be all day hearings on June 18 and June 20, and then a final meeting on June 24 at Police Plaza in the evening when the vote will be taken.

John Gilbert III, president of the RSA, said the lawsuit, filed in State Supreme Court last week, is based on the fact that the city did not comply with the four requirements to determine an emergency housing situation. "They didn't do a study on housing conditions; they didn't come forth with a study that proved there was a five percent or less vacancy factor; the information was not timely delivered to the City Council; and hey didn't determine that the vacancy rate was below five percent and would continue to exist," he said.
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Title Annotation:Rent Guidelines Board proposes 3-6% rent increases
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:May 15, 1991
Previous Article:Experts predict doom if Dinkins' taxes pass.
Next Article:Hotels for sale: 'get 'em while they're hot.'

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