City Council Cuts MBR Increase
Votes to Stop 32% Rent Hike; Landlords Threaten Suit

by Deborah Schutt and William Rowen

On September 30, Mayor Rudolph Giuliani signed into law a bill that overturns the state Division of Housing and Community Renewal’s decision to raise the maximum rent for rent-controlled apartments by 32.4 percent. The City Council had passed it by a 43-1 vote on Sept. 18.

The bill, Intro 1037-A, affects the formula used to increase the Maximum Base Rent, the ceiling rent for rent-controlled apartments. Landlords are now allowed to raise rents by 7.5 percent a year until the MBR is reached. DHCR set the 1996-97 MBR factor at 32.4 percent on August 12, after an upstate appeals court upheld claims by landlords that the 3 percent increase set in 1995 was too low.

However, the new law faces an uncertain future. Landlords have vowed to sue the city to overturn it, on the grounds that the state’s 1971 Urstadt Law prohibits the city from adopting stricter rent regulations than the state’s. (That law's sponsor, Charles Urstadt, is now a well-known real-estate industry spokesperson who advised Governor George Pataki on rent- regulation issues.)

It is also unknown whether DHCR will heed the law and rescind the Orders of Eligibility for the 32.4% MBR factor that it sent to the affected tenants on September 12. If the Pataki Administration and DHCR ignore or defy the new law, on October 1, rent-controlled tenants would be faced with increases retroactive to January 1, 1996.

"Tenants who did not pay the full 7.5 percent increase in 1996 and again in 1997 because their MCR (Maximum Collectible Rent) had already reached the MBR will be affected by this change," said Jenny Laurie, executive director of Met Council.

Candidates Jump In

As soon as DHCR had their Aug. 12 hearing on the revised MBR, the wheels began to turn everywhere to find a way to stop them from changing the 3 percent MBR factor. West Side Assemblymember Scott Stringer and Manhattan Borough President candidate C. Virginia Fields announced their interest in introducing legislation. Council Speaker Peter Vallone (D-Queens) and Mayor Giuliani -- neither of whom are normally pro-tenant -- drafted a bill and quickly scheduled the required Council hearing.

On Sept. 5, about 200 tenants attended a Council Housing Committee hearing on the bill, as 36 other Councilmembers signed on to it. The bill lowered the MBR factor indirectly, by requiring DHCR to use the tax-law formula it used to set the 3 percent increase rather than the one the landlords wanted.

About 100 tenants, tenant advocates, and elected officials testified in support. Many tenants expressed concern about losing their homes by having to choose between paying their rent or being able to go to the doctor or buy food. Several brought up the difference between the 7.5 percent annual increases rent- controlled tenants receive and the lower ones rent-stabilized tenants get, which have generally been between 2 and 4 percent in recent years.

Some complained that during his campaign to weaken rent regulations, Pataki had consistently promised that seniors would be protected, and they felt the Governor had lied to them.

Stanley Panesoff of the Community Training and Resource Center, a city-wide group that trains tenants and landlords on how to improve their housing, stated that the DHCR’s 32.4 percent MBR increase was calculated unlawfully, even under the Appellate Division’s ruling supporting the landlords’ claims.

Among the elected officials that testified for the bill were Fields, Stringer, Assemblymember Richard Gottfried and State Senator Franz Leichter (all Manhattan Democrats). They contended that Intro 1037-A would clarify the original intention of the rent-control law, and reiterated concerns that many rent- controlled tenants would not be in a position to afford such large rent increases and retroactive payments, as most are elderly and live on fixed incomes.

Some landlords, including the Rent Stabilization Association and the Community Housing Improvement Program, testified against the bill on the grounds that it violated the Urstadt Law, which was enacted in 1971 to prevent the city from interfering with Governor Nelson Rockefeller’s vacancy-decontrol law. If Intro 1037-A were passed, the landlord groups proclaimed, they would sue the City Council immediately.

Met Council Rips MBR System

Met Council board member Bill Rowen testified that the entire MBR system is unjust because it rewards landlords for accepting higher assessments and tax rates, a "tax pass-along." He pointed out that because of this, many rent-controlled tenants paid the full 7.5 percent maximum MCR every year, instead of the lower rate paid by rent-stabilized tenants, whose formula does not allow bonus rent increases based on assessment and tax hikes.

Rowen also warned that DHCR would be setting the 1998-99 MBR factor in a few months, which could wipe out most of the relief that the Council bill gave. He said that it was the MBR system itself that was the problem, and that in times of low inflation and low operating costs for landlords, rent-controlled tenants should enjoy small rent increases. He said that the MBR portion of the rent-control law and the fuel and labor pass-alongs should be superseded by adopting the system of rent adjustments used for rent-stabilized apartments.

On Sept. 17, the Met Council Board of Directors unanimously voted in favor of this position. It is preparing legislation to make this change while retaining all the superior protections that the rent-control law contains.

Council and Mayor Act

On Sept. 17, the Housing and Buildings Committee approved Intro 1037-A by a 7-1 vote. The only opposition came from Minority Leader Thomas Ognibene (R-Queens), who argued, with questionable relevance, that the city should increase the meager benefits given to seniors who fought in two world wars instead of giving them to people who recently immigrated here. Some tenants in the crowd said that Ognibene’s comments were a thinly veiled attempt to pit the two groups against each other.

The full Council was scheduled to vote on Sept. 30 -- but this would have been too late for the bill to go into effect in time to affect the MBR hikes ordered for October 1. Giuliani, responding to a request from Speaker Vallone and feeling pressure from rent-controlled tenants, sent a message of necessity to the Council, permitting an earlier vote.

On Sept. 18, the Council passed the bill by 43-1, with Ognibene the only dissenter. The Mayor held his required hearing and signed it on Sept. 30. It became effective immediately, in time to reverse the MBR increases that were due the next day.

To receive regular updates from Met Council on this issue and others affecting rent-controlled tenants, call (212) 693-0553.