NYC Public Advocate Mark Green
writing toGovernor Pataki and Senator D'Amato

April 23, 1997

Hon. George Pataki
State of New York
Capitol Building
Albany, New York 12224

Hon. Alfonse D'Amato
United States Senate
The Capitol
Washington, DC 20510

Dear Governor Pataki and Senator D'Amato:

The 2.4 million residents of New York State's rent-regulated housing are looking to you to display strong, effective leadership in the current battle over renewal of New York State's rent regulation laws by persuading your downstate Republican Senate colleagues, who on April 7th voted against a motion to discharge the rent regulation extender bill from committee, to change their position to favor supporting extension of the current regulation law.

I know that the tenant constituents of Republican Senators Dean Skelos, Michael Tully, Nick Spano, Guy Velella, and Serphin Maltese were very disappointed when their elected representatives voted against keeping their housing affordable. Since a yes vote by just three more Senators would have changed the outcome, your active intervention could have led to a different result. It still can.

The issue is not just rent control but who controls Joe Bruno and the Republican Party. Since it's widely known that you two chose Bruno and run the party, New Yorkers will and should hold you accountable if your agents destroy rent regulations.

Will your party continue to comply with ideological extremism or take a more moderate path by protecting people when the free market fails to function properly?

When it comes to choosing between the mainstream and the extreme, neither of your histories on rent regulation is reassuring. As State Senator, Governor, you voted against extending rent regulation. And, Senator D'Amato, you introduced and led the fight in 1981 for an amendment that would have denied federal housing construction subsidies to any locality with rent control that didn't have vacancy decontrol. Your measure would have immediately denied New York State thousands of new units of affordable housing if we didn't go along. Fortunately, it was never enacted. Now, 16 years later, you have a chance to redeem yourself.

The facts in this issue are clearly on the side of continuing current regulation. Decontrol Would Pressure Middle-Class Renters to Leave NYC.

My staff has analyzed the 1996 NYC Housing and Vacancy Survey, which is prepared for the NYC Department of Housing Preservation and Development. While the median income of households in rent-stabilized apartments is only $25,300, those who care about the stability of our neighborhoods should consider that approximately 294,000 stabilized- apartments are occupied by tenants with household incomes of between $25,000 and $49,999 (29% of rent-stabilized apartments). Another 177,000 rent-stabilized apartments are occupied by people with a household income of $50,000 to $100,000 (18% of rent-stabilized apartments).

Most of these solidly middle-class renters are hard-working people who do not benefit from property tax deductions. And because they do not own their residences, many of them have the option of quickly moving out of NYC if their rents rise to the high levels predicted in the Rent Stabilization Association's chilling analysis made public last month. Middle-class families with children who are concerned about overcrowding in the NYC public schools would be especially tempted to depart. We cannot afford to lose them.

Many middle-class renters are particularly worried about the proposal of Senator Serphin Maltese and others to expand so- called "luxury" decontrol to households with incomes of $100,000 or greater. Thousands of tenant households -- especially households with two (modest) income-earners -- are approaching this cut-off; all it would take is a good new job offer or a nice raise and, instead of staying and continuing to contribute to their NYC neighborhoods, they would be gone.

Decontrol Would Especially Harm Children and the Elderly The number of children living in rent-regulated housing is huge -- approximately 564,000. Some 210,000 of these children are under the age of six.

So a household in, say, Queens now paying a typical rent of $1,000 a month would have to come up with nearly $2,400 a year extra, according to the increases projected in the Rent Stabilization Association study. If the family has a few kids, tough choices would have to be made.

Elderly households (65 or older) occupy some 15% of New York City's rent-stabilized apartments. The total number of units with elderly households: 152,200. Although the Housing and Vacancy survey does not contain statistical break-outs of the incomes of elderly occupants of rent-stabilized housing, other sources reveal that one-person senior households spend 47% of their income on rent and two-person senior households spend 45%.

As for rent-controlled (as opposed to rent-stabilized) housing, which tends to have the lowest rents and which is under intense attack for supposed abuses such as allowing apartments to be "inherited" by grandchildren and even more distant relations, fully 62% of the remaining 70,500 rent- controlled apartments are leased by persons who are 65 years or older and the median age of occupants of rent-controlled housing is 70. Although the New York City Council and the Mayor extended rent control to April 2000, Albany negotiations and agreements over extension of rent- stabilization in previous years have also included rent control.

In any event, as occupants age and enter nursing homes or pass away, the rent-controlled sector is already withering without government intervention to hasten it; the data shows that the number of rent-controlled apartments fell 18.2% between 1991 and 1993 and the new data we have analyzed shows an even greater decline -- 30% -- from 1993 to 1996. Indeed, the total number of rent-controlled apartments has fallen by 75% from its peak of 285,000 in 1981.

Decontrol Would Make Housing Unaffordable for Thousands

The 1996 Housing and Vacancy Survey reveals that a rising proportion of New Yorkers are facing extremely difficult choices of whether to pay the rent or buy new clothes and enough food. The percentage of all renters who pay 40% or more of their income on rent increased from 33% in 1991 to 36% in 1996. At the upper end, the percentage of renters paying an extraordinary 80% or more of their income on rent surged from 12% in 1991 to 16% in 1996.

Looking only at rent-regulated housing, the numbers of people "on the edge" is even higher -- 37% of rent- stabilized tenants are paying 40% or more of their income on housing and 17.4% are paying 80% or more. Tenants solely of rent-controlled housing are in yet worse shape: a disturbing 41%, or about 26,800 households, are paying 40% or more of their income for rent and nearly 10,000 households are at the 80% threshold. So much for the myth of how celebrities are benefitting from rent-controlled apartments.

Vacancy Decontrol Is De Facto Complete Decontrol

Vacancy decontrol, which on Monday you, Senator D'Amato, called "a much more moderate position" than allowing the rent stabilization laws to expire, is not "moderate" at all because it would lead to the very same result as outright elimination of all rent regulation: rents would very soon rise to unaffordable or barely affordable levels for tens of thousands of tenants.

Vacancy decontrol last passed both houses of the Legislature on May 26, 1971. It was hailed as a measure that would lead to a multi-billion dollar housing building program while continuing to offer tenants protection from skyrocketing rents. According to the New York Times of May 6, 1971, "The State's Commissioner of Housing and Community Renewal said yesterday that Governor Rockefeller's proposal to phase out rent control would, in 80 per cent of the cases, increase rents to amounts no higher than those authorized under the city's current law."

Skip ahead three years to the Report on Housing and Rents of the Temporary State Commission on Living Costs and the Economy, chaired by then-Assemblymember Andrew Stein. The Commission found that the actual rent hikes were much worse than predicted:

"Vacancy decontrol has resulted in average rent increases in decontrolled apartments 52% higher than increases recorded in apartments remaining under rent control in New York City. In Nassau vacancy decontrol has resulted in average rent increases of 46%, in Westchester, 45%." In Manhattan, the Commission heard testimony of rent increases averaging 72% upon decontrol.

Increases of such magnitude were the typical experience even though at the time vacancy decontrol took effect, property owners were urged by the Community Housing Improvement Program, a group representing landlords of 250,000 units, to use "moderation" in raising rents.

The Commission also discovered that vacancy decontrol spread quickly once the law was changed. At a rate of 10% a year, some 25% of the regulated sector had been decontrolled in less than three years -- a total of 413,000 dwelling units in New York City were removed from rent control or stabilization. Since there is no reason to believe that there would be a slower erosion rate if vacancy decontrol were adopted in 1997, before long vacancy decontrol would constitute de facto total deregulation, except that it would take a little longer than the four year phase-out Senator Bruno recently suggested.

Hundreds of thousands of decontrolled units over the next few years charging much higher rents could also have an adverse impact on our economy. Already, many major corporations cite New York City's high housing costs as one of the reasons for not locating or expanding here. If vacancy decontrol becomes the law, the higher rents charged in the hundreds of thousands of apartments that would become decontrolled after several years would only enhance the high- cost image of New York as a place to do business. Among other effects, it'd become nearly impossible to attract new management trainees, especially to live in key areas like Manhattan, when already high rents would go up into the stratosphere.

Vacancy Decontrol in 1971-74 Did Not Lead to More Housing Investment

In return for financial pain to tenants, did vacancy decontrol from 1971 to 1974 at least cause owners and developers to build more housing and better maintain existing units? This, after all, was the industry's prediction in 1971 and property owners and developers are making the same prediction today.

The New York Times of May 7, 1971 reported: "A group that represents 500 major builders and owners of buildings in the metropolitan area said yesterday that it would "embark on a multi-billion dollar housing program" in New York City, if Governor Rockefeller's housing proposals [vacancy decontrol] are passed by the Legislature." In a Times essay on May 23, 1971, Charles Urstadt, New York State Commissioner of Housing and Community Renewal, wrote: "...Vacancy decontrol, in combination with the proposal to exempt all future construction from controls, will encourage conventional builders to quadruple the production rate of privately financed units."

And when vacancy decontrol passed a few days later, the press reported that elated landlord and real estate groups issued statements, such as one calling it "the first ray of hope for the housing industry in many years" and predicting that it would "spur wholesale new investment in new construction by private builders."

It never happened. The Stein Commission concluded: "Vacancy decontrol has neither stimulated new building construction, stopped abandonment, spurred renovation nor has it brought substantial new money into the City's housing stock. It has led to tenant insecurity over tenure and harassment." In fact, the Commission's analysis concluded, "City-wide the monthly average of dollar amount investment decreased during every month since vacancy decontrol. Without adjusting for inflation, the percentage of investment in 1971 (after vacancy decontrol), 1972 and 1973 dropped from the 1969 levels to 80.46%, 80.1% and 92.9%, respectively. Adjusting for inflation, investment dropped to 70.06%, 66.57% and 68.16%, respectively, during the same period. This represents a 30% decrease in major renovations since vacancy decontrol."

Analysis also showed that "every borough in New York City suffered a reduction in the number of building permits issued, Manhattan showing the greatest decline of 45%... The total decrease is 40.09%." The Commission also was unable to find any evidence that vacancy decontrol had encouraged production of new housing or that it led to a reduction in abandonment; "actually, the percentage of uncollected taxes has risen," the Commission concluded.

Decontrol Could Lead to More Housing Deterioration

Decontrol, whether instituted over four years or a little more gradually through vacancy decontrol, will make it much more difficult for tenants to press for building improvements. One often-overlooked effect of an apartment losing regulated status is that the tenant is no longer legally entitled to renewal leases. So tenants who complain to the landlord or to the authorities about persistent lack of heat and hot water, falling plaster or broken front doors may find themselves without renewal leases. Forget about withholding the rent to force the landlord to make repairs. Rent strikes will be a thing of the past.

But as any lawyer who represents tenants can tell you, it has often been only tenant pressure that has forced owners to improve their properties -- to install the long-delayed replacement boiler, to replace the leaky roof. And harassment and the fear of harassment would discourage tenants from speaking up and getting improvements.

Again, the 1971-1974 experience is instructive. The Stein Commission heard harrowing testimony from decontrolled tenants who had experienced overt and subtle harassment. "Many tenant leaders have complained to the Commission that they were singled out by their landlords for exorbitant rent increases or for the refusal to renew a lease because that person became involved in the tenant organization. Other tenants have called and spoken with the Commission but refused to testify, citing fear of landlord reprisals." And, "Tenants still living in controlled units reported groundless lawsuits and reductions in essential services." These were the Commission's findings, even though the 1971 vacancy decontrol law provided for stiff penalties for landlords whose tenants prove they were forced to leave their apartments due to harassment.

The other arguments frequently heard against extending the Emergency Tenant Protection Act are also readily dispatched: if rent regulation has indeed been a major cause of housing abandonment, as its opponents claim, then what caused the wholesale abandonment and deterioration that afflicted cities like St. Louis, Detroit, Chicago, and Cleveland, where rents have not been regulated? Why does abandonment and deterioration seem to occur only in lower-income neighborhoods? Is it because tenants are barely able to pay regulated rents and a big problem most landlords confront is inability to collect the full rent roll?

As for the argument that so many property owners are having a difficult time making ends meet and have deferred capital improvements because they don't have enough money: major capital improvement increases are approved by the State Division of Housing and Community Renewal (DHCR) all the time and they continue to be collected even after the improvement has been paid for. And landlords always have the option of filing a petition with DHCR for a hardship rent increase. Of course, given the generous increases consistently approved by the NYC Rent Guidelines Board, there should be no need for hardship increases by owners who have competently managed their properties.

Ultimately, the solution to New York's continuing housing emergency is to expand supply by building tens of thousands of new affordable units. But contrary to another popular myth, rent-regulation is not the reason why so little new housing has recently been constructed. Since rent regulation does not cover non-subsidized housing erected since 1974, it logically can't be blamed for discouraging or preventing new units from being built. New York's extremely high construction costs are the real culprit. Especially within New York City, everything involved in building housing costs more, from land to concrete.

So I urge you and your colleagues to help end the housing shortage by coming up with new ways to greatly expand the number of units of housing being constructed. One possibility worth considering would be new measures to help reduce the high cost of residential construction. The Legislature should also help spur creation of new sources of funding for affordable housing, perhaps through increased guaranteed investments by public pension plans in affordable housing development.

When the supply of housing increases sufficiently, market forces will finally come into play, and the need for rent regulation will disappear. But until that day, your obligation is to protect the millions of your constituents who are depending on rent regulation to keep an affordable roof over their heads. Instead of your silence or ambiguity on this great issue, would you pick up the phone and call Senator Bruno?


Mark Green

cc: Senator Joe Bruno