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Rent proposals are mixed bag.

The Rent Guidelines Board proposed a jumble of new rent increases last Thursday that would provide relief for those low-rent apartments that become vacant, but would not help those owners whose apartments rent for $400 or more. The proposed increases for one and two-year renewals is one and two percent respectively, and could become the lowest guidelines ever proposed.

"It's a mixed bag," said Dan Margulies, executive director of the Community Housing Improvement Program, CHIP, an owner's group that represents primarily owners of middle market apartments. "The one and two percent increases that will affect most apartments are the lowest guidelines in history for the third year in a row," he said. "The low rent supplement that continues for the second year is still sorely needed and appreciated, and they were reasonable with the vacancy guideline by recognizing in most areas of the city there are effective market caps and the economy has rents under its own form of control."

The problem, Margulies explained, is if you have a $400 apartment, you will get a $4 increase on a one-year lease and an $8 dollar increase on a two-year lease, "and that is not acceptable."

Agreed Frank Ricci, director of government affairs for the Rent Stabilization Association that represents 25,000 owners, "While the board recognized there is a problem with low rent apartments, and the board did something positive, if the rent is $400 or more and renewing a lease, you will be getting no increase whatsoever."

Ricci pointed to the city's costs of close to $500 a month per unit to maintain their apartments, "and that's without property taxes, mortgages or insurance payments," he added.

The vacancy proposals create a melange of rules that are bound to create confusion and mix-ups by depending on the rents of the highest comparable apartment, as they do in Westchester, or instead taking a 15 percent increase or going to $400, whichever is highest. "If your apartment that became vacant rented for $200," explained Margulies, "and your highest comparable rent was $375, you could go to $400. If the apartment that became vacant was $500 and the highest comparable was $850, you could go to $850. The third option is 15 percent, so if you had a $900 apartment and the highest comparable was $975, 15 percent would bring you up to $1,035."

One item of confusion surrounds the application of the guideline increase. "In a case where you were applying a percentage, it has always been the practice that you take the percentage and combine it and apply it to the base rent," said Margulies. "In that case you would be taking the 15 percent plus the one or two percent and therefore combine them to the 16 percent or 17 percent and apply that to the original rent."

But it is not clear how to apply the guideline if you were going to the highest comparable or minimum. "Presumably that will be clarified in the final language, should they approve it in June," said Margulies.

"That's a very good question," said Mark Ahasic, the new counsel and executive director of the Rent Guidelines Board. Ahasic did not come up with an answer before deadline.

Gary M. Rosenberg, Rosenberg & Estis, who represents predominately owners, said "Generally, the total increase would be the comparable, and not the percentage, but it would depend on how they write it." Since it's a menu, he worried, the RGB may decide the owner just gets the comparable rent. But since the comparable would have been set in the past, Rosenberg continued, "the rent on the new apartment should be the comparable plus the one or two year guidelines increase. But nobody ever said the Guidelines Board is fair," Rosenberg added.

While the RSA is not happy about the guidelines board proposals, Ricci noted, "We have a month and a half to make our arguments."

These proposals are subject to hearings beginning at June 19th from 1 p.m. to 9 p.m. for apartments and on June 22nd at 1 p.m. for hotels and SROs, while testimony over apartments will be heard beginning at 6 p.m. The final meeting that will lead to a vote is on June 26th from 5 p.m. to 10 p.m.

All hearings take place at One Police Plaza and owner groups urged members to attend as many of the meetings as possible. This year, co-op owners will also be joining the apartment owners, since many co-ops now own the rent stabilized apartments in their buildings after acquiring them from sponsors and lenders.

Rent Guidelines Board's Proposed Increases:

* Hotels and SRO's: 2 percent increase.

* Lofts: 1 percent for one-year lease or 2 percent for two-year lease

* Apartments renting for $400 or more: Renewal guidelines: 1 percent for one-year lease: 2 percent for two-year lease

* Apartments Renting Under $400: Renewal guidelines: 4 percent for one year lease: 8.5 percent for two year lease plus $15 in either case

* The vacancy guideline is the highest of three possibilities:

1. The equivalent of the highest rent for a comparable apartment in the building up to $1,000; 2. 15 percent; 3. $400.
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Title Annotation:Rent Guidelines Board
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:May 10, 1995
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