‘Pay Poor Tax Of $15’ RGB Proposes Another Hit on the City’s Poorest Tenants
By Steven Wishnia

Despite its own figures showing that landlords costs’ increased by only 0.1% last year, the Rent Guidelines Board voted May 7 to support continued rent increases for 700,000 of the city’s rent-stabilized apartments.

After the board had rejected several previous proposals, chairman Edward Hochman, eager to go home, urged it to suggest continuing last year’s guidelines “just to have something on the table.” The preliminary guidelines approved by a 6-2 vote include a 2% increase on a one-year lease, 4% on a two-year lease, and a $15 surcharge on apartments renting for $400 or less. Tenant representatives Kenneth Rosenfeld and David Pagan dissented; afterwards, Rosenfeld called the proposed increase “disgusting, especially as an excuse to end the meeting.”

The RGB will set its final guidelines on June 22. Unless it votes a higher rate, the surcharge on vacant apartments will be the 20% set by the 1997 state law.

Tenant groups plan to focus on trying to eliminate the “poor tax” low-rent surcharge, which the RGB has imposed for the last four years. In the last six years, said Rosenfeld, the number of apartments renting for $400 or less has dropped by 60%. “Haven’t these people paid enough?” asked Rosenfeld. “What are we trying to do, drive them out of the city?” “Yes,” shouted someone in the audience.

The board’s two landlord representatives both argued that there’s no evidence that most of the tenants paying under $400 were poor. (According to the 1993 federal Housing and Vacancy Survey, 80% of them made under $20,000 a year, and one-third were paying more than half their income in rent.)

The rejected proposals ranged from new landlord member Vincent Castellano’s move for massive increases on low-rent apartments to Rosenfeld’s bid for a rent freeze. Rosenfeld argued that the board has granted rent increases averaging 26% over the last three years,while tenants’ incomes went up only 1% and landlords’ operating costs rose by 0.1% last year, according to RGB figures.

“Given the absolute crisis that most of the people in the city are facing, the fairest thing is a rent freeze,” he said. The board turned it down 6-2, with only Pagan joining him.

Other preliminary guidelines include increases of 1.5% and 3% for loft tenants renewing their leases, approved 5-3; and no increase for SRO hotels; also approved 5-3. The board also voted 6-2 for a preliminary fair-market rent guideline for vacated rent-controlled apartments of 40% over the old maximum base rent or 50% over the old maximum collectable rent, whichever is greater. (This guideline is used to determine whether a new tenant moving into those apartments can challenge the rent increase as excessive; as very few tenants ever contest such increases, it’s one of the most arcane areas of rent-regulation policy.)

Much of the intensity that has marked RGB meetings in the past—hundreds of angry, chanting tenants facing off with smaller numbers of belligerent small landlords—was absent. Only about 50 people, mostly tenant supporters, showed up. The 1997 Albany deal to renew the rent laws eliminated one of the main areas of contention, by allowing landlords vacancy increases bigger than any ever set by the RGB.

“The law took a lot of the steam out,” says David Pagan.

The 1997 law, by adding a 20% minimum vacancy surcharge to the already existing loopholes of apartment-renovation increases and weak state enforcement against illegal overcharges, has moved the city close to a “decontrol-recontrol” system like San Francisco’s. There, landlords can charge whatever they can get for vacant apartments, but face strict limits on how much they can raise rents on tenants in place.

Shifting the brunt of rent increases to vacant apartments has several political advantages. Landlords who own enough apartments to take advantage of turnover can collect massive increases; most tenants don’t have to face the consequences until they want to move (although landlords have a strong incentive to oust them, especially the elderly); and politicians don’t have to face the anger of tenants threatened with large across-the-board increases. The new law also benefits Mayor Giuliani, who has drawn heat for dictating large vacancy increases to the RGB in the past, especially the 9% surcharge in 1996. Now, with 20% vacancy increases enshrined in state law, responsibility is out of the mayor’s hands.

Unlike the last three years, there appeared to be little pressure on the board from the Mayor. In fact, says Rosenfeld, Giuliani’s indifference to the process this year bordered on contempt. One seat remains vacant, and the full board did not meet until April 28, nine days before the vote on the preliminary guidelines. “The new members have no idea what’s going on,” he said, adding that Giuliani’s delays in filling vacant seats showed “an incredible lack of concern for the process and disrespect for the public.”

If the Mayor is showing contempt for the process, his choice of Vincent Castellano for the vacant landlord seat demonstrates it. Castellano, a radio talk-show host, seems to exist in a Reaganoid anecdotal reality, where rent-controlled tenants paying $26 a month in Greenwich Village typify the way the system works as much as welfare mothers who drive Cadillacs and buy caviar with food stamps.

“The first priority is the health of the local real-estate industry,” he declared, calling it “unconscionable” that 125,000 tenants still pay less than $400 a month. He then went into a spiel about how rent-stabilized tenants can avoid ever paying any increases by some unspecified “abuse of the lease-renewal process,” apparently by not returning lease-renewal forms. “This man is a joke,” shouted a heckler.

Castellano differs with the conventional real-estate wisdom in one key area: He believes that large vacancy increases are bad policy, as they create “rent skewing”; he’d rather see large increases on tenants in place. His proposal for massive increases on low-rent apartments—$150 a month on apartments renting for $100 or less, $100 on the $100-$300 range, and $50 on $300-$400 units—even made Harold Lubell, the other landlord representative, wince. Lubell abstained, and it lost 6-1.

While one seat on the board remains empty, it is unlikely that the June session will see a new vacancy-increase scheme. Ken Rosenfeld counts four solid votes against such a proposal: himself, Pagan, and public members Agustin Rivera and Bartholomew Carmody. Rivera may also prefer lower increases on renewal leases, he adds.

Both of the two new public members are accountants, but Carmody is considered more sympathetic to tenants than Edward Weinstein. Both are reluctant to grant increases too far over the Consumer Price Index, says Pagan. However, Weinstein strongly supported the low-rent surcharge, and suggested at one point that he favored completely decontrolling vacant rent-controlled apartments.

Weinstein refused to talk to Tenant.