DHCR Recommends 3.8% MBR for ’98-’99
By Jenny Laurie

The state Division of Housing and Community Renewal recently announced a preliminary Maximum Base Rent factor of 3.8% for the 1998/1999 cycle.

This is great news for rent-controlled tenants, because it means that the state housing agency has decided to follow the fiercely disputed New York City law enacted in the fall of 1997. (The state will also follow the 3% factor for 1996/97, which landlords had unsuccessfully challenged in court.) Thanks to this decision, about half the rent-controlled tenants in the MBR system will not have to pay the entire 7.5% rent increase in both 1998 and 1999.

The DHCR will hold a hearing on the 3.8% increase on June 17.

The MBR factor determines the increase for the theoretical ceiling rent for tenants covered by rent control (those who have lived continuously in their apartments since 1971, in buildings built before 1947). The factor raises the ceiling rent by the amount the state calculates owners’ costs have gone up, and ensures them an 8.5% return on capital value. Rent-controlled tenants pay a 7.5% rent increase (called their Maximum Collectible Rent) each year until their MCR reaches their MBR. After it reaches the ceiling, the rent they pay will only go up by the MBR factor.

The 1998/99 factor measures landlords’ costs in the years between 1995 and 1997. For tenants whose rent had reached the ceiling in 1995—about half the tenants in the system—this new decision means that their rent will go up 3% for 1996, nothing in 1997, 3.8% for 1998 and nothing in 1999. The other half will continue to pay the 7.5% in each year, because their MCR is far below their MBR.

Local Law 73, passed in September 1997, requires the state to use a modernized version of the formula that determines the factor. Litigation and lobbying over the issue has been continuous since early 1996, when DHCR—using this version of the formula—announced that the 1996/97 MBR factor would be 3%.

Last March 27, a State Supreme Court judge in Kingston rejected a lawsuit by landlord groups requesting that the agency use an older, outdated formula, which would have resulted in a 32.4% MBR factor for 1996/97. Following that decision, rent-controlled tenants, at the urging of Met Council activist Paula Glatzer and others, called upon Governor Pataki to urge that the lower MBR factor be used.

The issue is so hotly fought over because so much is at stake. Landlords sued over the use of the modern formula in early 1996 after the state had been using it for several years; they protested only when DHCR set the MBR factor at 3%, after years of double-digit increases. High MBR factors allow owners to get very high increases from rent-controlled tenants, most of whom are elderly and on fixed incomes (median age of 70; median income of $12,000 per year). If the increase forces tenants to move, then the vacancy allows the owners to either get much higher rents from the first rent-stabilized tenant or to decontrol the apartment completely.

Tenants were able to persuade the City Council and the mayor, in a campaign initiated by Stanley Panesoff of the Community Training and Resource Center, to pass Local Law 73 after the owners won the second round of the court battle—and tenants received notices telling them that the 1996/97 factor would be 32.4% and that many of them owed hundreds or thousands of dollars in back rent. The city Department for the Aging supported the law because the Senior Citizen Rent Increase Exemption program subsidizes 17,000 controlled tenants and the 32.4% increase would have cost the city millions in tax abatements to owners.

Maximum Base Rent Public Hearing

Wednesday, June 17 10 a.m. to 4 p.m.
Adam Clayton Powell, Jr. State Office Building
163 West 125th Street, 2nd floor, Art Gallery

The New York State Division of Housing and Community Renewal will conduct a public hearing in order to set the MBR factor for rent-controlled tenants for the 1998-99 cycle.

To pre-register, call the office of Edward Blanco, Bureau Chief for Rent Control, at (718) 262-4816. You can also call this number to get the DHCR report on the 3.8% recommended MBR factor for 98/99.

Every rent-controlled tenant should plan to attend and testify. In this, an election year, rent-controlled tenants must let the state housing agency know how vital it is to keep the low MBR and to use the modern MBR formula called for in Local Law 73 of 1997.

For more information, call Jenny at Met Council, (212) 693-0553.