DHCR Proposes 4.3% MBR Factor
by Jenny LaurieOn January 5, the state Division of Housing and Community Renewal held a hearing on the proposed MBR factor of 4.3% for 2000/01. While tenant advocates and elected officials who testified were relieved that the factor was that low, rent-controlled tenants argued for a freeze on rents. Most of the city’s remaining rent-controlled tenants are elderly people living on fixed incomes.
“Rent-controlled tenants, being retired, deserve a time of respite and tranquility,” testified Tom Siracuse, a tenant leader from the West Side, after describing the constant hassles that tenants had to go through every time they wanted even a simple repair. “With landlords costs increasing less than 1% in the last year, 4.3% is too high.”
“I don’t think they deserve any increases,” agreed Belle Feldman, tenant leader from London Terrace Gardens, a 10-building complex in Chelsea, “not when you see what they are getting from conversions in our building to high-rent, deregulated apartments, or commercial units.”
For the third time, the DHCR has proposed a Maximum Base Rent factor that is relatively low and is in keeping with the City Council law that altered the 1996/97 MBR factor and required the agency to change the formula used to set it. Landlords have sued over the change, and the DHCR warns tenants that the lower MBR increases are not necessarily permanent.
The city once had over a million rent-controlled apartments, but there are now only about 50,000 to 60,000 left. These apartments were placed under vacancy decontrol in 1971, so they became rent-stabilized or completely deregulated when the current tenants leave. Only tenants (or their successors) who have lived continuously since 1971 in buildings built before 1947 are covered by rent control.
Rent increases for these apartments are only allowed when the landlord applies to the DHCR through the laborious and arcane Maximum Base Rent System. Instituted in 1970 by the City Council when almost all apartments were rent-controlled, the MBR system allotted each apartment a “base rent” (actually a ceiling rent) according to the landlord’s expenses, the income from any commercial units, and an 8.5% return on capital value. Tenants pay something called the Maximum Collectible Rent, which goes up by 7.5% every year until the ceiling rent is reached.
Once the MBR ceiling rent is reached, the rent paid by the tenant only goes up when the MBR rent goes up. The MBR is raised once every two years by a factor determined by the DHCR using a mandated formula. The Jan. 5 hearing was the agency’s way of gathering public comment on the proposal for a 4.3% factor for 2000-01.
While most tenants paid a 7.5% increase every year when the MBR system began, today, according to information given at the hearing, almost all rent-controlled apartments are at their maximum base rents. This means that with low MBR factors, tenants pay only the factor over the two years as a rent increase, amounts that are much more in keeping with increases in landlords’ costs.
The factors are lower now than they were before 1996 because the old formula regularly produced double-digit factors. The City Council changed the way the factor was calculated that year, after DHCR proposed a 1996-97 factor of over 30%. The new formula reduced it to 3%.
With most rent-controlled apartments at their maximum, the lower MBR factors are critical in keeping housing affordable. The 1996 Housing & Vacancy Survey showed that tenants in the city’s 70,000 rent-controlled apartments had a median income of $12,000 and a median age of 70. The next survey due out, the 1999 HVS, will undoubtedly show far fewer rent-controlled apartments.
Having held its hearing, the DHCR will soon promulgate the factor and mail notices to the owners of about 12,000 buildings, letting them know what they can get in increases from their rent-controlled tenants for the next two years.