Establishes rent adjustments; repealer

Summary of provisions

Bill sections 4 through 6 amend the New York City Rent Stabilization Law of 1969, making changes in the structure and functioning of the New York City Rent Guidelines Board and renaming it the New York City Rent Board; repealing the 20 percent or more statutory vacancy bonus enacted in 1997 and allowing the rent board to adopt a vacancy allowance of up to 5 percent, to be collected no more than once annually; repealing the lease renewal provisions of rent stabilization and replacing them with statutory tenancy protections; and suspending the Maximum Base Rent program, the fuel and labor pass alongs for rent controlled apartments and placing them under the jurisdiction of the rent board.

Bill sections 8 through 11 amend the Emergency Tenant Protection Act of 1974, making changes in the structure and functioning of the suburban Rent Guidelines Boards in the "three counties" of Nassau, Rockland and Westchester and renaming them the Rent Boards; repealing the 20 percent or more statutory vacancy bonus enacted in 1997 and allowing the rent board to adopt a vacancy allowance of up to 5 percent, to be collected no more than once annually; repealing the lease renewal provisions of the ETPA and replacing them with statutory tenancy protections; and suspending the current method for setting rent adjustments under state rent control and placing rent-controlled apartments in Westchester and Nassau Counties under the jurisdiction of the county rent boards.

Bill section 1 is the title of the bill.

Bill section 2 is legislative findings.

Bill section 3 amends paragraph 1 of subdivision b of section 26-509 to add a new paragraph 10 which is to read: Notwithstanding any

provisions of paragraphs one and six of this subdivision to the contrary, effective January first, 2009, a two year renewal lease shall not be a prerequisite for a tenant to be eligible for a rent exemption under this subdivision who otherwise qualifies for such rent exemption. A rent exemption order shall no longer contain a provision giving notice that a tenant must enter into a two year renewal lease for continued eligibility for a rent exemption under this subdivision.

Bill section 4 amends section 26-510 of the administrative code of the city of New York (NYC Rent Stabilization Law of 1969):

*The nine members of the NYC Rent Board are appointed by the mayor upon advice and consent of the City Council, instead of the mayor alone.

*The composition of the rent board is changed from two tenant, two landlord, and five public members to three tenant, three landlord, and three public members.

*Changes the requirements for public members of the rent board: in addition to five years experience in finance, economics or housing, public members can have five years experience in public service, philanthropy, social services, urban planning, architecture, social sciences, or service with not-for-profit organizations..

*Eliminates prohibition on membership by officers of landlord or tenant organizations..

*Prohibits persons who own or manage rent-stabilized properties or more than two non-stabilized apartments from serving on rent board.

*Deletes provision that chair serves at the pleasure of the mayor.

*Provides for all rent board members to serve two-year terms.

*Adds and clarifies factors that rent board must. consider, including changes in value of residential rental housing, profitability of ownership of rental housing, and increases or decreases in net operating income.

*Prohibits consideration of debt service payments, capital expenditures and depreciation as operating costs.

*Prohibits consideration of a price index of operating costs.

*Requires rent board to consider value of unsalaried labor performed by landlords or members of their immediate family.

*Requires all landlords of apartments subject to rent stabilization or rent control to submit annual income and expense reports to rent board; landlords who fail to submit I&E reports are barred from applying for or collecting any rent adjustment to which the landlord might otherwise be entitled for the next calendar year.

*Requires rent board annually to require a sample of landlords to make available their books and records for examination and requires rent board to consider analysis of such sample; exempts such information

from Freedom of Information Law; requires rent board to make aggregate data from I&E submissions and analysis available to the public:

1 moves deadline for rent board vote from July 1 to October 1

2 requires rent board to adopt annual findings; if the board adopts an annual rent adjustment, such adjustment applies to all controlled and stabilized apartments effective January 1 of each year

3 allows rent board to adopt a vacancy allowance of up to 5 percent for new leases on vacant apartments, not to be collected more than onetime in any calendar year requires rent board to disseminate widely its annual order

*Increases per diem compensation for rent board members from $100 to $150 and for chair from $125 to $175.

*Requires chair to obtain consent of four or more other rent board members in order to hire consultants.

*Makes conforming changes to hotel stabilization provisions, repeals obsolete provisions.

*Gives rent board subpoena power:

1 prohibits rent board from adopting rent adjustments based on rent level or number of units in building

2 provides for transitional rent. adjustments for period of transition from lease renewal to statutory tenancy

3 prohibits landlords from collecting rent adjustments if hazardous violations exist on the property.

Bill section 5 repeals subdivision administrative code of the city of New York (NYS Rent Stabilization Law of 1969, statutory vacancy bonus). Bill section 6 amends section 26-511 of the administrative code of the City of New York (Rent Stabilization Law of 1969):

1 provides for statutory tenancy protections for all stabilized apartments, prohibiting eviction based on the lack of a lease.

2 prohibits lease renewals for any renewal which would commence on or after January 1, 2009.

3 requires landlords to offer new tenants a vacancy lease, for a term to end of December 31 of the year in which it commences.

4 requires landlords to serve new tenants with a copy of the Notice of Rights and Duties of Owners and Tenants as promulgated by DHCR.

5 requires statutory tenants to give landlords one month's notice of intention to vacate; provides for tenant to be liable for one month's rent if tenant fails to give such notice.

6 provides for transitional rent adjustments for leases that expire after January 1, 2009.

Bill section 7 amends section 26-405 of the administrative code of the city of New York (city rent control law):

1 suspends the Maximum Base Rent program, as well as the fuel cost pass along and the labor pass-along, for rent controlled apartments as of January 1, 2009.

2 provides for the rent board to set annual rent adjustment, if any, for rent controlled apartments, effective January 1 of each year; prohibits consideration of the fact that apartments are subject to rent control in determining rent adjustment.

3 establishes maximum rent as of January 1, 2009 as the maximum collectible rent in effect on December 31, 2008 plus the fuel cost pass-along in effect on that date.

4 requires landlord to certify annually that all rent-impairing violations and at least 80 percent of all other violations have been corrected.

5 prohibits establishment of rent adjustments more than once annually.

6 preserves right of landlord to establish initial stabilized rent for rent controlled units that become vacant, subject to tenant challenge. Bill section 8 amends section 4 of section 4 of chapter 576 of the laws of 1974 (Emergency Tenant Protection Act of 1974):

*The nine members of the county Rent Boards are appointed by the County Executives upon advice and consent of the County Legislatures, instead of the Division of Housing and Community Renewal upon recommendation of the County Legislatures.

*The composition of the county rent boards is changed from two tenant, two landlord, and five public members to three tenant, three landlord, and three public members.

*Changes the requirements for public members of the county rent boards: in addition to five years experience in finance, economics or housing, public members can have five years experience in public service, philanthropy, social services, urban planning, architecture, social sciences, or service with not-for-profit organizations.

*Eliminates prohibition on county rent board membership by officers of landlord or tenant organizations.

*Prohibits persons who own or manage ETPA properties or more than two non-ETPA apartments from serving on a county rent board.

*Increases per diem compensation for county rent board members from $100 to $150; and for the chair from $125 to $175.

*Gives administrative powers to chairs of county rent boards, requires chair to obtain consent of four or more other county rent board members in order to hire consultants.

*Requires county to pay per diem compensation to county rent board members. Provides fox all county rent board members to serve two-year terms.

*Adds and clarifies factors that county rent boards must consider, including changes in value of residential rental housing, profitability of ownership of rental housing and increases or decreases in net operating income.

*Prohibits consideration of debt service payments, capital expenditures and depreciation as operating costs.

*Prohibits consideration of a price index of operating costs.

*Requires county rent boards to consider value of unsalaried labor Performed by landlords or members of their immediate family.

*Requires all landlords of apartments subject to ETPA or state rent control to submit annual income and expense reports to county rent boards; landlords who fail to submit I&E reports are barred from applying for or collecting any rent adjustment to which the landlord might otherwise be entitled for the next calendar year.

*Requires county rent boards annually to require a sample of landlords to make available their books and records for examination and requires county rent boards to consider analysis of such sample; exempts such information from Freedom of Information Law; requires county rent boards to make aggregate data from I&E submissions and analysis available to the public:

1 moves deadline for rent board vote from July 1 to October 1.

2 requires rent board to adopt annual findings; if the board adopts an annual rent adjustment, such adjustment applies to all controlled and stabilized apartments in the county effective January 1 of each yeas.

3 allows rent board to adopt a vacancy allowance of up to 5 percent for new leases on vacant apartments, not to be collected more than one time in any calendar year.

*Requires county rent boards to disseminate widely their annual orders: provides for current rent adjustments to apply to municipalities that opt into ETPA subsequent. to establishment of annual rent adjustments. 2 gives county rent boards subpoena power.

*prohibits county rent boards from adopting rent adjustments based on rent level or number of units in building:

1 prohibits landlords from collecting rent adjustments if hazardous violations exist on the property.

2 authorizes county rent boards to seek funding from any government source to establish their own offices and hire their own staff. The Division of Housing and Community Renewal continues to be required to provide staff assistance to the county rent boards, at its expense. Bill section 9 repeals subdivision (a-1) of section 10 of Section 4 of

chapter 576 of the laws of 1974 (Emergency Tenant Protection Act of 1974, statutory vacancy bonus).

Bill section 10 amends section 10 of Section 4 of chapter 576 of the laws of 1974 (Emergency Tenant Protection Act of 1974):

1 provides for statutory tenancy protections for all ETPA apartments, Prohibiting eviction based on the lack of a lease.

2 prohibits lease renewals for any renewal which would commence on or after January 1, 2009.

3 requires landlords to offer new tenants a vacancy lease, for a term to end on December 31 of the year in which it commences.

4 requires landlords to serve new tenants with a copy of the Notice of Rights and Duties of Owners and Tenants as promulgated by DHCR.

5 requires statutory tenants to give landlords one month's notice of intention to vacate, provides for tenant to be liable for one month's rent if tenant fails to give such notice.

6 provides for transitional rent adjustments for leases that expire after January 1, 2009.

Bill section 11 amends Section 10-A of section 4 of chapter 576 of the laws of 1974 by adding a new closing paragraph which states that notwithstanding any provisions of this section or section 226-b of the real property law to the contrary, any tenant of a housing accommodation covered by the provisions of this act shall be entitled to the benefits of section 226-b of the real property law relating to the right to sublease or assign even if the tenant does not have a written lease.

Bill Section 12 amends section 4 of chapter 274 of the laws of 1946, the emergency housing rent control law (state rent control):

1 suspends the current method of adjusting rents for rent controlled apartments in Nassau County as of January 1, 2009.

2 provides for the county rent board to set annual rent adjustments, if any, for rent controlled apartments, effective January 1 of each year; prohibits consideration of the fact that apartments are subject to rent control in determining rent adjustment.

3 establishes maximum rent as of January 1,2009, as the maximum collectible rent in effect on December 31, 2008.

4 prohibits, establishment of rent adjustments more than once annually.

5 preserves right of landlord to establish initial ETPA rent for rent controlled units that become vacant, subject to tenant challenge.

Bill section 13 states that any reference in Chapter. 576 of the laws of 1974, constituting the emergency tenant protection act of 1974, the administrative code of the city of New York, section 421-c of the real

property tax law or section 286 of the multiple dwelling law to "rent guidelines board" shall be deemed to refer to the rent board as provided in this act. Any reference in chapter 576 of the laws of 1974, constituting the emergency tenant protection act of 1974, or in the administrative code of the city of New York to "rent guidelines" shall be deemed to refer to rent adjustments as provided in this act.

Bill section 14 is a separability clause, providing for the remaining provisions of the bill to remain in full force in case any provision is found to be invalid or unconstitutional by a court.

Bill section 15 provides for the bill to become effective immediately; provides for the methodological and procedural changes made by sections 3, 5, 6, 7, 9 and 10 above to become operational October 1, 2008.

Existing law

2009-2010: S.5566 Died in housing, Construction and Community Development Committee

Justification

The Rent Guidelines Board scheme was designed by the real estate industry itself, in collaboration with the administration of Mayor John Lindsay, in the months leading up to enactment of the New York City Rent Stabilization Law of 1969, and later extended to Westchester, Nassau and Rockland Counties in the Emergency Tenant Protection Act of 1974. The RSL was a failed experiment in "industry self-regulation," under which the RSL was administered by the Rent Stabilization Association - until the State Legislature severed the RSA from this role in the 1980s, at which point the RSA became the mere trade association we know today.

As with other landlord-favorable features of the RSL, the Rent Guidelines Board was designed to make sure that landlords did not have to open their books; thus the invention of the one-sided Price Index of Operating Costs, which measures price changes in items that landlords typically purchase to operate their buildings. Apart from the fact that the Price Index looks at price changes instead of expenditures, its results are misleading in that the "cost" numbers are not compared to increases in landlord income. Thus, viewed by itself, the Price Index always released a few days before the RGB vote - seems to justify rent increases that often are not needed or just.

For example, in 2008 the RGB staff produced a Price Index that seemed to show that landlord's operating costs went up almost. 6 percent; but the RGB staff also produced an income and Expense study that showed that landlords' Net Operating incomes (the amount left after payment of all costs of operation and maintenance) went up almost. 9 percent.

According to this I&E study, landlords of rent stabilized properties had an average Net Operating Income of 37 percent - meaning they spent 63 cents of every dollar of income on running their buildings, leaving 37 cents far debt service and profit.

The RSL's reliance on lease renewals as the form of tenure protection, instead of the superior statutory tenancy system under rent control, was designed to make tenants uncertain of their right to remain in their homes without fear of arbitrary eviction.

The qualifications for the five "public" members were chosen to ensure that the public members (who constitute a majority) are sympathetic to landlords, Thus the setup for the annual charade: the two tenant members vote against the rent adjustments because they are too high, the two landlord members vote no because they are too low, and the five public members "compromise" somewhere in the middle. Thus the Mayor can Proclaim, "Both sides are unhappy, so we must be doing something right," and pretend that the process is not political

When the State Legislature extended rent and eviction protections to post-1947 buildings in the Emergency Tenant. Protection Act of 1974, the design of the suburban Rent Guidelines Boards was cloned from the RSL, with some small variations.

The Rent Board Reform Act of 2008 is intended to even the playing field, impose a more trustworthy methodology, and simplify the system both in terms of administrative.burdens and public comprehension. To begin with, the bill eliminates the word "guidelines," a euphemism for rent increase.

By eliminating lease renewals as the form of tenure protection, this bill ends an entire category of administrative dispute, No longer will the NYS Division of Housing and Community Renewal or the courts have to rule on tenant complaints of non-renewal or landlord claims that the tenant has failed to renew on a timely basis and therefore should be evicted.

By the same token, by having rent adjustments go into effect on the same date for all affected apartments, rather than over a 24-month period, will make for much less confusion on the part of tenants, landlords, elected officials, and the public.

The bill establishes a methodology whereby the rent boards will consider current Income and Expenditure data, thus providing for the most accurate picture of the state of the rental housing market and submarkets, and the condition of the residential real estate industry, in the affected jurisdictions.

Requiring City Council confirmation of the Mayor's appointees to the New York City Rent Board provides for a system of checks and balances so essential to our democracy. Removing the state Division of Housing and Community Renewal from its current role in choosing members of the boards, and assigning this responsibility to the County Executives, subject to confirmation by the County Legislatures, is only logical. The enforcement agency should have no role in choosing the persons who make decisions about rent adjustments that the agency must enforce.

Finally, ending the obsolete and punitive current system of adjusting rents for rent-controlled apartments and placing this dwindling housing stock under the jurisdiction of the New York City, Nassau and Westchester Rent Boards, will provide overdue relief for hard-pressed tenants of these apartments, who have much lower incomes and pay much

higher rent increases than their rent-stabilized neighbors. This change also greatly simplifies and streamlines the entire rent board regulation system.

The rent guidelines board system is overdue for reform, The Reform Act of 2008 will achieve this necessary reform.Rent Board

Legislative history

New Bill.

Fiscal implications

To be determined.

Local fiscal implications

To be determined.

Effective date

This act shall take effect immediately.